Search Results
Showing results 1 to 10 of approximately 29.
(refine search)
Working Paper
How Much Does Racial Bias Affect Mortgage Lending? Evidence from Human and Algorithmic Credit Decisions
We assess racial discrimination in mortgage approvals using new data on mortgage applications. Minority applicants tend to have significantly lower credit scores, higher leverage, and are less likely than white applicants to receive algorithmic approval from race-blind government automated underwriting systems (AUS). Observable applicant- risk factors explain most of the racial disparities in lender denials. Further, we exploit the AUS data to show there are risk factors we do not directly observe, and our analysis indicates that these factors explain at least some of the residual 1-2 ...
Working Paper
Social Externalities of Bank Enforcement Actions: The Case of Minority Lending
This paper studies the role banking supervision plays in improving access to credit for minorities by investigating how enforcement decisions and orders (EDOs) affect the bank borrower base. We find that, after an EDO's termination, banks significantly increase residential mortgage lending to minorities, even when the enforcement order is not issued for violations of fair lending laws. Our findings suggest that improvements in banks' internal credit assessment and compliance due to the enforcement process are associated with the expansion in lending to minority borrowers. Our findings ...
Working Paper
Consumer Demand and Credit Supply as Barriers to Growth for Black-Owned Startups
We formulate a framework showing that differences in capital returns and capital intensity between groups of firms can identify relative differences in consumer demand and credit constraints. Using micro-data on Black- and White-owned startups, we find robust evidence that Black-owned startups have lower capital returns, implying that Black-owned startups face lower consumer demand due to race. In contrast, we find mixed evidence of tighter credit constraints due to race. We further show that differences in capital returns are persistent over time, whereas capital intensity differences are ...
Working Paper
The Effects of Racial Segregation on Intergenerational Mobility: Evidence from Historical Railroad Placement
This paper provides new evidence on the causal impacts of citywide racial segregation on intergenerational mobility. We use an instrumental variable approach that relies on plausibly exogenous variation in segregation due to the arrangement of railroad tracks in the 19th century. Our analysis finds that higher segregation reduces upward mobility for Black children from households across the income distribution and White children from low-income households. Moreover, segregation lowers academic achievement while increasing incarceration and teenage birth rates. An analysis of mechanisms shows ...
Periodic Essay
Reflections from Loretta J. Mester
I struggled with whether or not I should send out a message after the Atlanta attack. On the one hand, I believe such a heinous act requires condemnation and a public statement that I, and the institution I lead, are committed to championing diversity, equity, inclusion, and economic opportunity. It would be wrong to just look away. On the other hand, reacting only by going on record as being against atrocious acts like this feels too much like resigned acceptance that this is the way things are. Social responsibility requires us to act. The hard question is what can be done to reduce the ...
Journal Article
Age Discrimination and Age Stereotypes in Job Ads
Studies suggest that employers discriminate against older workers in hiring, responding less favorably to equally qualified job applicants who are older. Employers may also limit hiring of older workers by including age stereotypes in job ads that signal a preference for younger workers. Evidence from an experimental study shows that older workers are less likely to apply to job advertisements that contain language with ageist stereotypes. The results indicate that this impact is comparable to the direct effects of employer age discrimination in hiring decisions.
Working Paper
Does Differential Treatment Translate to Differential Outcomes for Minority Borrowers? Evidence from Matching a Field Experiment to Loan-Level Data
This paper provides evidence on the relationship between differential treatment of minority borrowers and their mortgage market outcomes. Using data from a field experiment that identifies differential treatment matched to real borrower transactions in the Home Mortgage Disclosure Act (HMDA) data, we estimate difference-in-difference models between African American and white borrowers across lending institutions that display varying degrees of differential treatment. Our results show that African Americans are more likely to be in a high-cost (subprime) loan when borrowing from lenders that ...
Discussion Paper
Fair lending analysis of credit cards
This paper discusses some of the key fair lending risks that can arise in various stages of the marketing, acquisition, and management of credit card accounts, and the analysis that can be employed to manage such risks. The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B prohibit discrimination in all aspects of credit transactions and include specific provisions relating to processes that employ credit scoring models. This paper discusses some of the areas of credit card operations that may be assessed in an effort to manage the risk of noncompliance with fair lending ...
Report
Applications or Approvals: What Drives Racial Disparities in the Paycheck Protection Program?
We use the 2020 Small Business Credit Survey to study the sources of racial disparities in use of the Paycheck Protection Program (PPP). Black-owned firms are 8.9 percentage points less likely than observably similar white-owned firms to receive PPP loans. About 55 percent of this take-up disparity is attributable to a disparity in application propensity, while the remainder is attributable to a disparity in approval rates. The finding in prior research that Black-owned PPP recipients are less likely than white-owned recipients to borrow from banks and more likely to borrow from fintech ...
Working Paper
Technological Innovation and Discrimination in Household Finance
Technology has changed how discrimination manifests itself in financial services. Replacing human discretion with algorithms in decision-making roles reduces taste-based discrimination, and new modeling techniques have expanded access to financial services to households who were previously excluded from these markets. However, algorithms can exhibit bias from human involvement in the development process, and their opacity and complexity can facilitate statistical discrimination inconsistent with antidiscrimination laws in several aspects of financial services provision, including advertising, ...