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An Overlooked Factor in Banks’ Lending to Minorities

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Abstract

In the second quarter of 2022, the homeownership rate for white households was 75 percent, compared to 45 percent for Black households and 48 percent for Hispanic households. One reason for these differences, virtually unchanged in the last few decades, is uneven access to credit. Studies have documented that minorities are more likely to be denied credit, pay higher rates, be charged higher fees, and face longer turnaround times compared to similar non-minority borrowers. In this post, which is based on a related Staff Report, we show that banks vary substantially in their lending to minorities, and we document an overlooked factor in this difference—the inequality aversion of banks’ stakeholders.

Suggested Citation

  • Matteo Crosignani & Hanh Le, 2024. "An Overlooked Factor in Banks’ Lending to Minorities," Liberty Street Economics 20240110, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:97557
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    More about this item

    Keywords

    inflation; inflation expectations; markups; market power; euro area; supply chain; inequality;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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