The Class. I had heard about this optional class since I had started graduate school and I finally met all the qualifications to get in. I had completed four courses in statistics and two courses in constitutional law. There were only 8 of us in the class. Our professor was nationally known, had published extensively, and was often invited to both national and international conferences to speak and lead discussions.
The first day of class we introduced ourselves and then received a massive 40 page syllabus. We were assigned to read 8 books and numerous articles. Our entire grade was based upon a semester-long project which required a paper at the end. We had to give weekly updates to the professor and our other classmates on our semester-long project. We also had to work very closely with the professor as he guided us and worked with us on the projects. I was a bit intimidated yet very excited by the class to say the least. I was finally going to carry out some substantively important research. We were paired up for our semester long project. Paul had been in a couple of classes with me. I believed that he and I would be a good team.
After answering questions about the syllabus during the next class, the professor indicated that prior to the class he had found four institutions, two banks and two savings and loans in our city that were willing to allow his students to do this type of research. This was going to be a very busy and enlightening class. Our assignment was with a local bank.
We met with Mr. Tower, a young African-American, who was the CEO of the bank. The bank, under various names, had been in business since the 1930s. We introduced ourselves at our first meeting with him.
“I spoke to your professor and he indicated that you two were well qualified to conduct this research and help our bank. As you know, I have been CEO for two years and I would like to find out the history of housing or mortgage lending by our bank. In particular, I want to know if there is a history of discrimination in housing loans made by our bank and what caused it.”
He looked at us and said, “This is a lot of responsibility on you and your professor, but it is something that must happen at our bank. Here is a packet of more than 500 pages that includes all of the bank procedures and state and federal legal requirements that our loan officers follow when making decisions about housing loans. It also includes past procedures and requirements and when they were changed. You will have complete access to housing loan data, except for the names of the customers. You will be able to conduct confidential interviews with all of our current and past housing loan officers and, for that matter, anyone at the bank. That includes me.”
As we left the bank, Paul said, “Wow, how did we get this opportunity?”
“I guess we asked for it,” I nervously responded.
Paul and I got to work immediately. We first wanted to see if there actually was discrimination in housing loans at the bank. We looked at the data over time since 1937 when the bank was started. After three weeks of looking at the data in many different ways, our statistical analyses indicated that there was a significant and large difference in housing loans based upon race. We then had to find out why this existed. We spent the next 5 weeks pouring over the loan rules and regulations and interviewing all of the loan officers, both current and past, if they were available. We looked at the years that some of the loan rules and regulations had changed. Our initial look at the data and information did not seem to help us.
Our professor went over the data with us and suggested that we speak to the other classmates. The next week we met daily with our other classmates to discuss what we were finding. The students looking at the savings and loans institutions had sufficiently different rules compared to a bank. Paul and I decided that they were not that helpful to us. The other two students, Mark and Shelly, were working with a bank that was only a couple of years old and they had come to the conclusion after several lengthy and complicated statistical analyses that there was no significant difference in home loans based on race. With the agreement of our professor, they began helping us.
We had been reading extensively about the impact of redlining on housing loans and how it discriminated on the basis of race. Redlining had been a practice by banks since 1935. Banks charged higher interest rates to those in housing districts designated as “red.” These “red” districts typically contained houses of lower value and the condition of the houses did not lead one to expect the value to increase over time. Wealthier housing districts designated as “green” or “blue” contained houses of higher value and the condition of the houses lead one to believe the value to increase over time. Those purchasing houses in these higher value districts received lower interest rates on their loans. Districts that were “red” were typically made up of a higher percentage of African-Americans and the effect over time was to increase the number of African-Americans in the “red” districts while the number of African-Americans in “green” or “blue” districts changed very little. The outcome was segregated housing districts. Because credit was more expensive, fewer African American households could afford to own a home or borrow to keep their properties in good condition. Homes in these “red” neighborhoods did not tend to increase in value. These factors have had a long-term impact on the ability of residents in these "red" neighborhoods to accumulate wealth. The Fair Housing Act of 1968, the Equal Credit Opportunity Act of 1974 and the Community Reinvestment Act of 1977 were passed to address discrimination in housing and financial practices.
We decided to look at the data differently. We analyzed housing loans prior to 1977 and housing loans after 1977 made by the bank. Not surprisingly we found dramatic discrimination based on race prior to 1977 and we argued it was because of redlining. After 1977, we found a significant difference in home loans based on race but it was much smaller. We spent the remainder of the semester trying to decide which factors may explain the small difference since 1977. We simply ran out of time and Paul, Shelly, Mark, and I had to write the report and turn it in. We also gave Mr. Tower, the bank CEO a copy of our findings.
Prior to receiving our grades in the class, Mr. Tower called us in. He thanked us so very much for our research on his bank. He said that our research mirrored what the bank’s research team had found as well and that the bank was still looking for institutional factors that may explain the small difference in home loans based on race since 1977. We were very excited to hear that our analysis was validated by the bank’s analysis.
On the last day of class, our professor talked about our research. He was so very pleased. All eight of us received an A in critical race theory.
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