Discrimination in loan approvals widespread.
In recent years newspaper reports have exposed lender discrimination against African-Americans an other minority groups in mortgages and other home loans. By a roughly 2-to-1 margin, this discrimination appears even when their incomes are similar to those of white applicants.
In response, bankers and conservative economists have tried to discredit the reports. According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. The Wall Street Journal, they "have spent considerable time and money during the last few years" mounting a campaign to debunk de·bunk
tr.v. de·bunked, de·bunk·ing, de·bunks
To expose or ridicule the falseness, sham, or exaggerated claims of: debunk a supposed miracle drug. the idea that racism exists in the country's lending practices.
But new studies by the Federal Reserve Bank show the newspaper reports were essentially correct.
The issue arose in the press with The Atlanta Journal-Constitution's pioneering Pulitzer Prize Pulitzer Prize
Any of a series of annual prizes awarded by Columbia University for outstanding public service and achievement in American journalism, letters, and music. Fellowships are also awarded. series in 1988, followed by a Detroit Free Press The Detroit Free Press is the largest daily newspaper in Detroit, Michigan, USA. It is sometimes informally referred to as the "Freep". Some still refer to it locally as "The Friendly" -- a slogan from an ad campaign in the '70s. series on lending in middleclass black neighborhoods, continued with a national Wall Street Journal survey in 1992 which it updated in 1995, and The Washington Post's prize-winning 1993 series. Similar reports began appearing in many papers like the Pittsburgh PostGazette, Dallas Morning News and Cincinnati Enquirer En`quir´er
n. 1. See Inquirer.
Noun 1. enquirer - someone who asks a question
asker, inquirer, querier, questioner in 1994, based on annual surveys by federal bank regulators under the Home Mortgage Disclosure Act
The major problem with all this, say bankers and conservative economists, is that family income is only one of several factors considered by banks to determine in applicant's creditworthiness Creditworthiness
The condition in which the risk of default on a debt obligation by that entity is deemed low.
Eligibility of an individual or firm to borrow money. , as pointed out by David Andrew Price Andrew Price (April 2, 1854 - February 5, 1909) was a U.S. Representative from Louisiana.
Born on Chatsworth plantation, near Franklin, St. Mary Parish, Louisiana, Price attended various private schools. , an attorney with the conservative Washington Legal Foundation The Washington Legal Foundation is a nonprofit legal organization founded in 1977. Their stated goal is "to defend and promote the principles of freedom and justice". The organization usually takes the side of businesses fighting against governmental regulation and for a , writing in Forbes MediaCritic (Summer 1995). Other common factors are payment-income ratios, amount of down payment, work or employment history and credit history, including episodes of slow payments and bankruptcy.
Price notes that there are no checks and balances on interpreting statistics by news reporters and editors, especially when the newspaper itself has done the research design, data collection and statistical analysis.
"Much reporting on statistics suggests that the writers put too much stock in their ability to eyeball See eyeballs and eyeball driven. a study and decide whether it makes sense," he wrote. "Few, if any, of these reporters seem to have consulted an econometrics expert, so it is little wonder that they present fairly crude correlations as proof."
This is what Stephen Hess decries as "social science journalism Science journalism is a relatively new branch of journalism, which uses the art of reporting to convey information about science topics to a public forum. The communication of scientific knowledge through mass media requires a special relationship between the world of science and " in his book "The Washington Reporters." "Journalism and social science are not the same," Hess says. "The tools of research are different; so, too, are the standards of evidence, the framework of theory, and the criteria of judgment."
Meanwhile, The Wall Street Journal reported in July on a new Federal Reserve Bank study that showed that, even with similar credit histories, white mortgage applicants were only half as likely to be rejected for loans as were black or Hispanic applicants. But the Fed found that blacks and Hispanics with outstanding credit histories were about as likely as whites with comparable records to get bank approvals for mortgages, the Journal reported.
This study represents a research advance, in that by using credit history and other new factors, it adds to the mounting evidence of discrimination. But how much has not been made clear.
It also involved a re-examination by the Federal Reserve in Chicago of a study made public in 1992 by the Boston Fed, one that has sparked much debate in banking and economics circles. Critics faulted the Boston study for omitting the condition of the property to be mortgaged, and other factors used by lenders. Employment stability in the applicant's field was included. rather than the applicant's occupation itself, as were past bankruptcies and delinquent consumer payments to indicate credit history.
Defenders say these indicators were supported by statistical regressions, mathematical tests of significance or reliably performed on computers to shore up a rigid analysis of data. Few other than Statisticians Statisticians or people who made notable contributions to the theories of statistics, or related aspects of probability, or machine learning: A to E
Instead, journalists often have to rely on the "garbage-in" approach, and such indicators might well be input problems. This is because a research analyst's input includes the assumptions made about the validity of the raw data, along with sufficiency and accuracy of the data. For instance. do an applicant's past credit problems count with lenders as much as current financial troubles do in deciding whether to extend credit? No, says David Horne of the Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation (FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000. in a FDIC FDIC
See: Federal Deposit Insurance Corporation
See Federal Deposit Insurance Corporation (FDIC). Banking Review article last year; the study didn't look at credit problems the way lenders do.
"The timing of credit problems is important." he wrote. "Current problems are given much more weight. And that just wasn't captured [in the study]."
However, the Journal's story -- while citing the earlier study, critical reaction to the new one and the legislative implications -- failed to suggest how the debate over the basic Boston study could affect the new study's import. For example:
Using the same 1990 data from the Boston area. the Chicago Fed study also concluded that different races with similar credit histories, overdue 60 days or longer on one or more debts. had different application outcomes. with only 9 percent of the whites disapproved compared with 18 percent of the blacks and Hispanics.
Moreover. it also found "a cultural affinity between white lending officers and white applicants and a cultural gap between white loan officers and marginal minority applicants" in approving or rejecting marginal applications, William C. Hunter, research director at the Chicago Fed, said this cultural gap appeared to explain the discriminatory treatment more than racial bias did.
The St. Louis Post-Dispatch The St. Louis Post-Dispatch is the only major city-wide newspaper in St. Louis, Missouri. Although written to serve Greater St. Louis, the Post-Dispatch is one of the largest newspapers in the region, and is available and read as far west as Springfield, Missouri. , in an Aug. 17, editorial, condemned that notion as an attempt "to sugarcoat sug·ar·coat
tr.v. sug·ar·coat·ed, sug·ar·coat·ing, sug·ar·coats
1. To cause to seem more appealing or pleasant: a sentimental treatment that sugercoats a harsh reality.
2. this discrimination ... by thinking up new ways to justify such bias. The cultural affinity argument amounts to political correctness on the right. Its aim is to make racially biased behavior seem both acceptable and normal."
But as the FDIC's Horne had observed, just one of the 70 banks covered by the study was responsible for almost half of the minorities' rejections. That bank was minority owned.
Only The New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Times reported Horne's published views. The reporter, Peter Passell, has a doctorate in economics and taught at Columbia University before the Times hired him.