I’m reading this new book by economist Thomas Sowell — The Housing Boom and Bust.
He writes that "the idea that lenders would be offended by receiving monthly mortgage payment checks in the mail from blacks should at least give us pause. It should also be noted that a substantial majority of both blacks and whites had their mortgage applications approved."
Lenders are in business to make money. If they can make money lending to blacks, they will.
Statistical differences between groups are common and they can’t all be accounted for by discrimination.
To fight this alleged discrimination, lawmakers imposed a lowering of lending standards across the board to people of all races, thus preparing the ground for the housing boom and bust.
The Community Reinvestment Act of 1977 came to mean that regulators would impose quotas on lending and lenders had to find "innovative or flexible standards" to meet those quotas.
Banks are federally regulated. They need government permission to many things that other businesses can do on their own. Banks had to meet a "satisfactory" rating for lending to minorities to diversify into selling investment securities or affiliating with insurance firms.
In 1993, the Department of Housing and Urban Development (HUD) began bringing lawsuits against lenders who declined a higher percentage of black applicants than whites. Lenders responded rationally by lowering their down payment and income requirements.
