Discrimination in Lending

This research examines the practice of discrimination in bank lending in relation to racial minorities. One purpose of this examination is to establish that such discrimination occurs. A second purpose is to consider such discrimination within the context of the social science theories that may offer explanations for the practice of discrimination in lending against racial minorities.

Establishing the Existence of Discrimination

in Lending Against Racial Minorities

Discrimination in the extension of credit is volatile issue in the United States (Smith 65). Although federal government efforts to end such discrimination have been pursued for two decades, critics contend that much work is still required (Foust 43).

Discrimination in lending is a part of the larger problem of housing discrimination. Discrimination exists in the United States with respect to a variety of factors. The most publicized form of discrimination is that associated with racial and ethnic background. Such discrimination is also based at times on age, sexual preference, behavior, and other factors.

The means by which discrimination is applied to lending vary. Overt refusal to lend money to an individual because of racial or ethnic background is not only illegal in the United States, it is also relatively rare. Such legal prohibitions are often circumvented in a number of ways, however, such as

. . .
against minority population groups that were restricted to living within specific sections of urban areas. The CRA, the Fair Housing Act, the Community Development Act, and the HMDA should have eliminated discrimination from financing. That charges of the existence of such discrimination persist in the 1990s is evidence either that the legislation has not been effectively enforced, or the problem is misunderstood by some parties (Smith 65; Foust 43; Becker 18). The premise upon which the CRA is based was a Congressional finding that banks and thrifts have a continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered. This finding stemmed from the view that, as society represented by government has granted these institutions special privileges (charters to do business, deposit insurance, and access to the Federal Reserve discount window), these institutions have an obligation to serve the public, particularly that segment of the public in the communities in which the institutions are chartered. The CRA, thus, was intended to encourage lenders to continually communicate with the members of their local communities about the credit needs of the community, and to h
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Some common words found in the essay are:
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Approximate Word count = 2066
Approximate Pages = 8 (250 words per page)

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