Racially tiered credit markets: the impacts of financial inclusion across black and white segregated neighborhoods during the 2000s subprime lending boom and bust

Abstract Financial inclusion advocates push for banks to locate and lend in financially excluded neighborhoods. However, these advocates assume that banks affect all neighborhoods equally and overlook how financial inclusion may become predatory inclusion in black segregated neighborhoods. To address this oversight, the present study investigates whether tiered credit markets persist across black and white segregated neighborhoods after a bank branch opens. Analyzing administrative data from the Federal Deposit Insurance Corporation (FDIC) and the Home Mortgage Disclosure Act (HMDA), I estimate between-within negative binomial regression models to assess whether financial inclusion associates with increases in mortgage originations and decreases in subprime mortgages across black and white segregated neighborhoods during the 2000s subprime lending boom and subsequent housing crisis. The results indicate that financial inclusion’s effects vary across racially segregated neighborhoods and over time, but they do not support predatory inclusion.