Blacks face discrimination in lending...

[Volpone]

This guy has an economics blog talking about how, in "peer to peer lending", blacks are 25-35% less likely to get a loan. And when they do, they get charged a higher interest rate.

But here's the kicker: statistically blacks are more likely to default on their loans, so in reality, lenders should discriminate against them even more.

...Looking at data from Prosper, Devin Pope of Wharton and Justin Sydnor of Case Western Reserve University found that a listing with a picture of a black person was 25 to 35 percent less likely to get funded than a listing with a white person with similar a profile. And when a black person did get funding, the interest rate charged was about 0.6 to 0.8 percent higher. ...

Just like the subprime market, the lenders would be offering higher rates to poor credit risks in order to protect against not getting their money back. What this means is that when you adjust for risk, the returns on high interest rates loans should be equal to the returns on the average loan.

Most studies don't have access to loan performance data, but luckily Prosper allows researchers to tap in. And it turns out that the risk-adjusted return on loans to blacks was lower than the average return.

I found the implications here quite astonishing. Lenders, in some ways, aren't being "racist" enough. Given the higher propensity for loans to blacks to default on Prosper, lenders should be charging higher rates. ...

So it would appear that not extending credit to black people isn't discriminatory--it's just good business.

Discuss.

 

[starguard]

I wonder how's Obama's credit! :hmmm:

 

[Volpone]

I'm sad. If I ran with this story over at WF, Lt Mewa would've made it a 27 page juggernaut by now.









Granted, 25 pages of it would be Lt Mewa spam, but it would be a juggernaut nonetheless.

 

[ctmelvital]

What do you want people to say? There's just not enough crazies over here and the ones we have are white nationalists or something and would want to see even more discrimination than would be justifiable by the sheer economics.

Apart from that - interesting article but just don't really know what to say. I'm not doing peer-to-peer lending, the article's research is probably solid and I don't see any kind of reasonable angle to attack it. I'm just too much of a reasonable guy, I guess. :ramen:

 

[Volpone]

Yeah. I'm just missing Mewa a little.









Geez. I never thought I'd hear myself saying that.

 

[Kitty]

Just ask for the thread to be spammed. Youll get better results.

 

[Ramen]

I'm sad. If I ran with this story over at WF, Lt Mewa would've made it a 27 page juggernaut by now.









Granted, 25 pages of it would be Lt Mewa spam, but it would be a juggernaut nonetheless.

I would've helped stoke the flames by arguing that blacks would get better lending terms if they had jobs.