Over the past several decades there has been concern about the creation of "ghettos" of various kinds in urban America - and about the contribution of lending institutions to this process. For inner-city minorities it has often been particularly difficult to get funding for home purchases or to finance business - despite a number of governmental and industry efforts to reverse or offset this situation. Part of this problem sometimes stem from discrimination - including unintentional, but real actions on the part of lenders.
What is the case about?
In 1989, a bomb was dropped on the Boston banking industry when a FED study of neighborhood lending patterns provided evidence of discrimination. Black and Hispanic applicants were failing to meet the credit criteria. A fact confirming this study is the following. The Home Mortgage Disclosure Act of 1974 (HMDA) required that banks submit information on mortgage application denial and acceptance percentages to Federal regulators.
From these data, they also had identified patterns of discrimination. More specifically, researchers, comparing mortgage origination patterns in predominantly black and predominantly white neighborhoods, found significant lower mortgage activity in predominantly black neighborhoods.
Concluding, Richard Syron, president of the Fed, had called to tell Pollard that despite the actions that were made from the BayBank, evidence of racial disparity remained. However, individual bank performance was not studied but there was no reason to think that BayBank would be an exception. So the question was, what (if anything) should he do about it?
Internal Environmental Analysis
vBayBank had a strong regional presence in the suburbs around Boston. In the mid-1980's, it was made up of 11 banks and of a network of 144 branches. Its hallmark was a commitment to customer service and an appeal to local bank loyalty.
vBayBank adopted a common...