Stakeholders' aversion to inequality and bank lending to minorities

Arbeitspapier

We find that banks differ in their propensity to lend to minorities based on their stakeholders' aversion to inequality. Using mortgage application data collected under the Home Mortgage Disclosure Act, we document a large and persistent cross-sectional variation in banks' propensity to lend to minorities. Inequality-averse banks have a higher propensity to lend to borrowers in high-minority areas and, within census tracts, to non-white borrowers compared to other banks. This higher propensity (i) is not explained by selection of applicants, (ii) allows these banks to retain and attract their inequality-averse stakeholders, and (iii) does not predict worse ex-post loan performance.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 1079

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination ; Money Supply; Credit; Money Multipliers
• Subject: inequality aversion ; mortgage lending ; minority borrowers ; racial discrimination

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Crosignani, Matteo ; Le, Hanh
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2023

Further information

• DOI: doi:10.59576/sr.1079
• Handle: http://hdl.handle.net/10419/284039
• Last update: 10.03.2025, 11:43 AM CET