IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/26035.html
   My bibliography  Save this paper

Banks, insurance companies, and discrimination

Author

Listed:
  • Block, Walter
  • Snow, Nicholas
  • Stringham, Edward

Abstract

This article examines some of the reasons why banks and insurance companies have been accused of discrimination, and shows that this is by and large a false accusation. Economic analysis demonstrates that racial discrimination is not a profit-maximizing strategy. Actually, unwise public policies are actually precluding many consumers from the market.

Suggested Citation

  • Block, Walter & Snow, Nicholas & Stringham, Edward, 2008. "Banks, insurance companies, and discrimination," MPRA Paper 26035, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:26035
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/26035/1/MPRA_paper_26035.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Harrison, Glenn W, 1998. "Mortgage Lending in Boston: A Reconsideration of the Evidence," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 29-38, January.
    2. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, October.
    3. Calomiris, Charles W & Kahn, Charles M & Longhofer, Stanley D, 1994. "Housing-Finance Intervention and Private Incentives: Helping Minorities and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 634-674, August.
    4. Kerwin Kofi Charles & Erik Hurst, 2002. "The Transition To Home Ownership And The Black-White Wealth Gap," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 281-297, May.
    5. Robert F. Phillips & Robert P. Trost & Anthony M.J. Yezer, 1994. "Bias in estimates of discrimination and default in mortgage lending: the effects of simultaneity and self-selection," Proceedings, Federal Reserve Bank of Philadelphia, pages 197-222.
    6. Day, Theodore E & Liebowitz, S J, 1998. "Mortgage Lending to Minorities: Where's the Bias?," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 3-28, January.
    7. Luigi Buzzacchi & Tommaso Valletti, 2005. "Strategic Price Discrimination in Compulsory Insurance Markets," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 30(1), pages 71-97, June.
    8. Geoffrey M. B. Tootell, 1993. "Defaults, denials, and discrimination in mortgage lending," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 45-51.
    9. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
    10. Michael Ferguson & Stephen Peters, 1997. "Cultural Affinity and Lending Discrimination: The Impact of Underwriting Errors and Credit Risk Distribution on Applicant Denial Rates," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 153-168, February.
    11. Ferguson, Michael F & Peters, Stephen R, 1995. "What Constitutes Evidence of Discrimination in Lending?," Journal of Finance, American Finance Association, vol. 50(2), pages 739-748, June.
    12. Roback, Jennifer, 1986. "The Political Economy of Segregation: The Case of Segregated Streetcars," The Journal of Economic History, Cambridge University Press, vol. 46(4), pages 893-917, December.
    13. Harold Black & Breck Robinson & Robert Schweitzer, 2001. "Do lenders discriminate against low-income borrowers?," The Review of Black Political Economy, Springer;National Economic Association, vol. 28(4), pages 73-94, June.
    14. Lynn E. Browne & Geoffrey M. B. Tootell, 1995. "Mortgage lending in Boston: a response to the critics," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 53-78.
    15. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
    16. HAROLD Black & M. Collins & Ken Cyree, 1997. "Do Black-Owned Banks Discriminate against Black Borrowers?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 11(1), pages 189-204, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter J Boettke & Daniel J. Smith & Nicholas A. Snow, 2011. "Been There Done That: The Political Economy of Déjà Vu," Chapters, in: Steven Kates (ed.), The Global Financial Crisis, chapter 1, Edward Elgar Publishing.
    2. Walter BLOCK, 2015. "On Slavery and Libertarianism," Journal of Economic and Social Thought, KSP Journals, vol. 2(3), pages 161-174, September.
    3. Ken B. Cyree & Drew B. Winters, 2023. "Investigating bank lending discrimination in the US using CRA-rated banks’ HMDA loan data," Public Choice, Springer, vol. 197(3), pages 371-395, December.
    4. Marta Ostrowska, 2021. "Does new technology put an end to policyholder risk declaration? The impact of digitalisation on insurance relationships," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(4), pages 573-592, October.
    5. repec:ksp:journ3:v:1:y:2015:i:3:p:161-174 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stanley D. Longhofer & Stephen R. Peters, 1998. "Self-selection and discrimination in credit markets," Working Papers (Old Series) 9809, Federal Reserve Bank of Cleveland.
    2. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 1-27, October.
    3. Song Han, 2001. "On the Economics of Discrimination in Credit Markets," Finance and Economics Discussion Series 2002-02, Board of Governors of the Federal Reserve System (U.S.).
    4. Douglas D. Evanoff & Lewis M. Segal, 1996. "CRA and fair lending regulations: resulting trends in mortgage lending," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 20(Nov), pages 19-46.
    5. Song Han, 2004. "Discrimination in Lending: Theory and Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 29(1), pages 5-46, July.
    6. Stanley D. Longhofer & Stephen R. Peters, 1998. "Beneath the rhetoric: clarifying the debate on mortgage lending discrimination," Economic Review, Federal Reserve Bank of Cleveland, vol. 34(Q IV), pages 2-13.
    7. Stephen L. Ross, 2005. "The Continuing Practice and Impact of Discrimination," Working papers 2005-19, University of Connecticut, Department of Economics, revised Jul 2006.
    8. David G. Blanchflower & Phillip B. Levine & David J. Zimmerman, 2003. "Discrimination in the Small-Business Credit Market," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 930-943, November.
    9. Dawkins, Mark C., 2002. "Simultaneity bias in mortgage lending: A test of simultaneous equations models on bank-specific data," Journal of Banking & Finance, Elsevier, vol. 26(8), pages 1593-1613, August.
    10. Stanley D. Longhofer, 1996. "Cultural affinity and mortgage discrimination," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 12-24.
    11. Ken Cyree & Keith Harvey & Michael Melton, 2004. "Bank Lending to Native American Applicants: An Investigation of Mortgage Flows and Government Guarantee Programs on Native American Lands," Journal of Financial Services Research, Springer;Western Finance Association, vol. 26(1), pages 29-54, August.
    12. Paul S. Calem & Stanley D. Longhofer, 2000. "Anatomy of a fair-lending exam: the uses and limitations of statistics," Working Papers (Old Series) 0003R, Federal Reserve Bank of Cleveland.
    13. Yan Zhang, 2013. "Fair Lending Analysis of Mortgage Pricing: Does Underwriting Matter?," The Journal of Real Estate Finance and Economics, Springer, vol. 46(1), pages 131-151, January.
    14. Judith Clarke & Nilanjana Roy & Marsha Courchane, 2009. "On the robustness of racial discrimination findings in mortgage lending studies," Applied Economics, Taylor & Francis Journals, vol. 41(18), pages 2279-2297.
    15. Cullen Goenner, 2010. "Discrimination and Mortgage Lending in Boston: The Effects of Model Uncertainty," The Journal of Real Estate Finance and Economics, Springer, vol. 40(3), pages 260-285, April.
    16. Judith Robinson, 2002. "Race, Gender, and Familial Status: Discrimination in One US Mortgage Lending Market," Feminist Economics, Taylor & Francis Journals, vol. 8(2), pages 63-85.
    17. Black, Harold A. & Robinson, Breck L. & Schweitzer, Robert L., 2001. "Comparing lending decisions of minority-owned and White-owned banks: Is there discrimination in mortgage lending?," Review of Financial Economics, Elsevier, vol. 10(1), pages 23-39.
    18. Raphael Bostic, 2003. "A Test of Cultural Affinity in Home Mortgage Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 23(2), pages 89-112, April.
    19. Paul S. Calem & Stanley D. Longhofer, 2000. "Anatomy of a fair-lending exam: the uses and limitations of statistics," Finance and Economics Discussion Series 2000-15, Board of Governors of the Federal Reserve System (U.S.).
    20. Harold A. Black & Breck L. Robinson & Robert L. Schweitzer, 2001. "Comparing lending decisions of minority‐owned and White‐owned banks," Review of Financial Economics, John Wiley & Sons, vol. 10(1), pages 23-39, March.

    More about this item

    Keywords

    redlining; financial regulation; unintended consequences;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:26035. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.