From: thf2@ellis.uchicago.edu (Mmmm... Purple)
Subject: Re: Mortgage bias
Reply-To: thf2@midway.uchicago.edu
Organization: University of Chicago Computing Organizations
Date: Fri, 6 Nov 1992 15:55:37 GMT

In article <92311.071436KRB104@psuvm.psu.edu> <KRB104@psuvm.psu.edu> writes:
>In article <1992Nov5.214143.10826@midway.uchicago.edu>, thf2@ellis.uchicago.edu
>(Mmmm... Purple) says:
>>In article <92302.070117KRB104@psuvm.psu.edu> KRB104@psuvm.psu.edu writes:
>>>
>>>  In a Federal Reserve Bank of Boston study, rejection disparities were found
>>>to be prevalent among lenders in its region, EVEN WHEN FACTORS OTHER THAN
>>>INCOME (like collateral available and credit history) are considered.
>>
>>You say other factors than income are considered, but I don't see them
>>considered in that stats below.  For that matter, I wasn't aware that
>>income was a binary variable ("low" or "high").  What was the cutoff?
>>Do banks really judge $49,999 incomes differently from $50,000 incomes
>>if $50K was the cutoff?
>>
>    Obviously someone with an elementary knowledge of statistics.  

Ad hominem.  And an incorrect one at that.

>Using binary
>or trinary classifications for a variable is well accepted in statistics.  

Yes, it is.  It just isn't well accepted in banking.  Which is what we're
modelling, no?  

>This
>is a minor point which really doens't get to the crux of the matter being
>discussed.  Obviously you haven't heard of logistic models which treat binary
>variables as the dependent variables in analysis, this is a widely used tech-
>nique

But banks don't use income as a binary variable, they use it as a continuous
variable.

>>>I think this study shuts those people up.  What they found was that
>>>among highincome applicants, 9.7% of whites were rejected, 13.6% of Asians,
>>>19.l8% of Hispanics, and 23.2% of blacks.    Among low income applicants,
>>>31.5% of whites, 20.2% of Asians, 37.1% of Hispanics and 48.2% of Blacks.
>>>The overall rate was 14.2% of whites, 12.8% of Asians, 21.4% of Hispanics and
>>>33.6% of blacks (these numbers are for 1990).
>>
>>Are you arguing that white bankers discriminate against whites in favor
>>of Asians?  Sounds kind of counterintuitive.
>>
>  I do not see what Mr. Frank is speaking of.  For the low income class, Asians
>have a statistically different rejection rate, while for the upper income the
>result does not appear to be significant.  Sociologically, it is known that
>Asians tend to pool their money to get ahead, and this is more prevalent in
>the lower income levels.  Do whites do this?  Blacks?  

So, wait, what you're saying is that there are factors *other than race*
not considered by the study that might explain the difference in percentages?

Then how can you conclude that the practices of the mortgage industry are
racist, when, by your own admission, there are other factors involved not
considered by the study?  Why is it that the study is good enough to
explain the differences between white applicants and black applicants, but
not white applicants and Asian applicants?  

If there's information in the study that explains this, please, tell us.

>I do not think this
>study is bogus.  In earlier studies that have been posted to this network, Mr.
>Frank has stated that the studies were flawed because assets and credit history
>were not taken into account.  Well this one does

Where???  All I see is "high/low income" and "race."

>, so Mr. Frank comes up with
>something totally bogus to try to discredit this study (income not being a
>binary variable).  Then he states that it can't be discrimination because
>asians come out better then Whites, which the data does not clearly say.  What
>the data clearly shows is that Blacks are being rejected at a far greater rate
>then whites gfiven the same credit history and assets, and the differences are
>vastly significant ACROSS THE BOARD.  Mr. Frank there is discrimination in this
>industry, something this industry knows and wants to correct but hasn't.  If
>there wasn't, why does the justice department have a separate department that
>looks in to this?  

Why does the Justice Department have an antitrust division suing innocent
Las Vegas movie theater owners? (U.S. v Syufy Enterprises, 903 F2d 659 (9th
Cir 1990))

I'm not saying there isn't discrimination in the industry.  I'm just saying
that this study doesn't come close to proving it, unless it incorporates
much more data than you've exhibited so far.  Your reticence in presenting
more than what is, indeed, bogus data, over a series of five or six posts
makes me increasingly skeptical.

>If there was no discrimination, there would be no need for
>this department and Mr. Frank should be yelling about wasted tax dollars.
>  There is no such thing as a perfect study, anyone can sit in their ivory
>tower and criticize, especially when they only have an elementary knowledge
>about the statistics involved.  If Mr. Frank, or anyone else knows of a perfect
>study let the world know, because it would be world wide news.  This study is
>good becasue it takes things into account that other studies haven't.

Nu?  Show us the things you claim it takes into account.
-- 
ted frank                     | thf2@ellis.uchicago.edu 
also at quibeaux@uchicago.edu | standard disclaimers | void where prohibited
the university of chicago law school, chicago, illinois 60637