On Lending “Disparities” in the Twin Cities

by Alex Stenback on February 13, 2009

I’ve tried to avoid commenting on this Racial Disparities in Twin Cities Lending study that is making the press rounds, but since I’ve gotten at least a dozen emails on it, here it is.

The study takes a few dozen pages to say:

“Lenders are substantially more likely to deny loans to people of color, regardless of their income.”

To which I will only say:

This study and the data it uses, taken from HMDA, does not account for credit quality (among other factors), and when we are talking about credit, income is very beside the point.

Credit is not about can you.  It is about do you. There is a difference, and too few people understand this.

If you make $10,000 per year and pay your debts as agreed, people will lend you money.  If you make a million dollars a year and don’t pay your debts as agreed, you will pay cash for things.

Now, am I willing to believe that there are some racial disparities in lending?  Sure.  But to make this claim without a study that takes into account all of the variables in every lending decision gets us exactly nowhere.

{ 1 comment… read it below or add one }

Sean February 14, 2009 at 1:15 pm

Thank you, Alex, for making an important point, and shame on Professor Myron Orfield for ascribing base motives to others in order to publicize his inadequate study.

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