Article:
Peter P. Swire, The Persistent Problem of Lending Discrimination: A Law and Economics Analysis, 73 TEX. L. REV. 787 (1995).
 

Abstract:
In this article, Professor Swire takes on the ‘economists’ puzzle’ of lending discrimination—why new lenders do not enter the market and profit from the good loans that existing lenders refuse to make. He suggests a number of solutions. First, the economists’ definition of discrimination is much narrower than current law—economists do not count profit-maximizing behavior by lenders and borrowers as discrimination even when otherwise similar borrowers are treated differently based solely on race. Second, a range of empirical evidence supports the view that illegal discrimination persists. Third, other economic theories developed in literature on employment discrimination can explain continuing lending discrimination today, especially when considered against the history of persuasive, government-encouraged discrimination in lending markets. In light of these explanations, Swire considers appropriate remedies under fair lending laws and discusses how non-economic theories strengthen the case for government efforts to remedy historical and continuing lending discrimination.