The Color of Credit: Mortgage Discrimination, Research Methodology, and Fair-Lending Enforcement

The authors have prepared the best summary available of the economic and statistical evidence regarding potential racial discrimination in approving mortgages. This book is a replacement for approximately two file drawers of published and unpublished studies that I have collected for approximately five years.

It has its limitations though. Most of all, it is a specialized monograph for a specialist audience. Even though it is aimed at influencing the behavior of the banking industry, most managers and policymakers in that industry will find this volume tough going.

Second, the authors seem to have the opinion that the financial industry rather actively seeks to avoid lending to certain minority groups. This seems naive, in that there are lots of laws that make such policies risky and also because the industry has invested heavily in compliance managers and employee training to resolve such problems. The industry may not be perfect but it is not actively avoiding its responsibility for equitable lending policies. I don't think their perspective mars their analysis but I do think that the same outcome could have been produced with a less accusatory tone.

Third, the policy recommendations offered may not be as workable as the authors imply, since the data requirements for implementing their proposed statistical tests would actually be quite demanding and perhaps beyond the legal authority of the banking regulators.

Nonetheless, this is a very valuable book because it is the first to make an authoritative stab at consolidating the economic knowledge about a very difficult topic. If you're just trained as a generalist in this topic, the policy chapters will still be useful but you'll need to pass the book along to a colleague specializing in economic and statistical research to gain full value from both the critique and the recommendations for new statistical tests.