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This chapter offers an outline for understanding the key role of race in producing property values in the history of the American property law system. It identifies major developments in the mutually formative relationship between race and property in America that made and remade property interests in America through the processes of 1) dispossessing nonwhites, 2) degrading their homelands, communities, and selves, and 3) limiting their efforts to enter public space and occupy or acquire property within the regime thereby established. First, it describes the use of law to create the two most important forms of property in the colonies and early Republic, both of which acquired value and status as property through white ownership and control– namely, enclosed land and enslaved human beings. Second, it addresses the significant shift in the way that race produced property values after the abolition of slavery, and how the anti-blackness entrenched by the slave trade spurred and organized resistance to Black landownership and property rights more generally. Third, it turns to the way the government, after consolidating the national territory through conquest, drew upon the continuing backlash to abolition and widespread desire for racial segregation to remake the infrastructure and the very commodities on offer on the real estate market through its notorious redlining program and establishment of a major secondary mortgage market. In this way, it seeks to show the structural relation between transformations to the property system during these different historical periods and the evolving role of race in its organization, while providing comprehensive citations, in the style of a handbook, to relevant scholarship and primary materials throughout.

The SBPC found that companies' use of information on credit applicants' education history resulted in ‘educational redlining,’ penalizing borrowers who attended minority-serving institutions. In response to our findings, five United States Senators wrote to a range of companies involved in the collection and use of educational data to demand detailed explanations of this data’s utilization in credit underwriting. These companies' responses only heightened concerns raised in our initial research and revealed additional gaps in fair lending oversight.

Income Share Agreements (ISAs) have been touted as a solution to the recent staggering increases in student debt. That debt crisis is a civil rights crisis. On average, Black Americans have more student debt, which they face against a backdrop of stark disparities in wealth, income, and related metrics. Although the U.S. is desperately in need of solutions for the student debt crisis — and the accompanying racial and ethnic disparities — features of existing ISAs threaten to exacerbate, not mitigate, inequalities. ISAs are essentially educational loans that students agree to pay back using a percentage of their future income. ISAs come in a variety of forms — including differences in terms and conditions, the parties offering them, and the quality and types of educational programs funded. In the abstract, these arrangements could be an interesting alternative to the existing student loan regime. However, while existing programs are not equal in terms of benefits and risks, there is evidence that some variations of ISAs are being used to further new iterations of a classic American tragedy: targeting minority communities for exploitative and predatory products. And even in the more benign forms of ISAs, some features used to set terms and conditions — such as school- or major-based distinctions — risk unnecessarily perpetuating disparities adverse to historically underserved groups. This article assesses ISAs under core anti-discrimination frameworks such as traditional disparate treatment and impact, as well as reverse redlining. Although this article focuses on the Equal Credit Opportunity Act (ECOA) — the primary federal statute prohibiting discrimination in credit transactions — it also highlights other anti-discrimination statutes that may apply to ISAs, including state and local fair lending and public accommodations laws.

This article reviews housing policies from presidential candidates in the 2020 election cycle. The article first evaluates common themes in the proposed housing policies, and then reviews specific policies in the areas of: fair housing; housing development funding; home buyer and renter assistance; landlord-tenant; zoning reform; addressing the legacy of redlining; housing vouchers; homelessness; fair lending; rural communities housing policies; tribal communities housing policies; climate resilience and housing policy; and existing public housing policy.

Airbnb’s structure, design, and algorithm create a website architecture that allows user discrimination to prevent minority hosts from realizing the same economic benefits from short-term rental platforms as white hosts, a phenomenon this Article refers to as ‘redliking.’ For hosts with an extra couch, spare room, or unused home, Airbnb provides an opportunity to create new income streams and increase wealth. Airbnb encourages prospective guests to view host photographs and personal information when considering potential accommodations, thereby inviting bias, both implicit and overt, to permeate transactions. This bias has financial consequences. Empirical research on host earning rates found that white hosts earn significantly more than their minority counterparts, even when controlling for location, size, and amenities. Airbnb’s algorithm augments the effects and propensity of individual user bias, creating a system wherein race neutral variables serve as proxies for discrimination. Contemporary redliking parallels historic inequality related to housing wealth. In the early twentieth century, redlining maps were used to justify withholding investments from Black communities. Today, redliking continues the practice of directing wealth to white communities, reinforces systemic real property barriers by depriving minority hosts of important revenue streams, and exacerbates the racial wealth gap. This Article examines the liability of websites like Airbnb for discrimination experienced by minority short-term rental hosts. The ability of anti-discrimination laws originally enacted to abolish redlining and protect minority consumers to combat redliking is complicated by the fact that sites like Airbnb serve multiple purposes; while guests use the platform to identify and book lodging, hosts use the site to advertise available accommodations. Looking to judicial interpretation of online speech and platform operator liability, this Article proposes two approaches – a general function test and a fragmented function test – to determine website liability for discrimination against short-term rental hosts. Noting the limitations of the existing anti-discrimination legal framework, this Article argues that eradicating redliking requires incorporating lessons on platform design from behavioral economics as well as eliminating opportunities for website algorithms to amplify and operationalize user discrimination.

Recent research demonstrates that land use choices, which date back to a century ago still powerfully shape the current development patterns. With advances in digitization, scholars have started studying the long-term effects of historic federal placed-based policies. One such area that has drawn attention from the housing and real estate community is “redlining,” designated by the Home Owners’ Loan Corporation in 1930s. Scholarly evidence suggest that neighborhoods graded poorly decades ago still face challenges in access to mortgage credit, homeownership rate, and housing value. However, the literature is not clear about the mechanisms through which the placed based policy in the past affects the current neighborhood performance. In this paper, we unravel one of these mechanisms. We argue that redlining has shaped the geography of housing segregation, not just that of racial segregation, by delineating the predominant location of single family and multi-family stock. We then hypothesize that these built environment effects persist even while redlining-related racial segregation diminished over time. Specifically, we explore how and why poorly-graded multi-family neighborhoods became locked in a continued cycle of impoverishment, with continued under-resourced and underinvested housing stock. We test this idea for ten U.S. cities for which digitized maps and 1930-2010 census data are available. By instrumenting the geography of housing segregation through the redlining policy, we find the connection between redlining policy and contemporary neighborhood outcomes in local housing markets with a mechanism identified.

Society is waking up to surveillance capitalism, the influence of digital advertising platforms on democracy, and discriminatory algorithms. However, academics have yet to emphasize the civil rights and consumer harm that results from ad-targeting for inferior and harmful versions of essential consumer goods and services. This Article aims to fill that gap. It analyzes how reverse redlining — predatory and discriminatory targeting for harmful products — occurs through segmentation, targeting, and ad-delivery. Providers of inferior social welfare products leverage these tools to manipulate low-income people and consumers of color to buy their products at a staggering efficiency and scale. The advertising platforms often play a role in reverse redlining through the process of optimizing the delivery of advertisements for particular audiences and amplifying advertisers’ message through look-alike tools. Using the for-profit education industry as a case study, this Article decodes the technology, considers legal challenges to the harms that result, and proposes strengthening civil rights and consumer protections. For-profit education offers a paradigmatic example of an inferior social welfare product, because its higher price points and worse outcomes indicate that for-profit colleges and universities (“FPCUs”) can hardly compete for students without manipulative advertising. This Article offers new evidence of the ways for-profit universities identify consumers, leverage advertising platforms to find those consumers, and manipulate them to purchase a poor product, harming hundreds of thousands of consumers. Civil rights, consumer protection, and privacy laws each offer avenues to redress the harms that result, but a patchwork legal regime built in a different era makes redress difficult. In conclusion, the article builds on the foundation of civil rights protections for social welfare products like housing, employment services, and credit to propose new laws to limit the reverse redlining of predatory products. Specifically, it recommends banning targeting, amplification, and ad-delivery optimization, increased transparency, clarified platform liability, and an updated civil rights regime. This social welfare product approach is designed to address First Amendment concerns and to be narrowly tailored to allow for beneficial uses of the technology.

Over the next decade, autonomous vehicles (AVs) will become increasingly prevalent throughout the United States (U.S.), transforming the nation’s transportation landscape. However, there is no guarantee that the potential benefits offered by AVs will be fully realized or that AV providers will serve the public interest in addition to their bottom line. The Federal, State, and Local Governments in the U.S., for the most part, have not effectively prepared for the inevitable arrival of AVs. Therefore, when our team assessed the current AV regulatory environment, we identified under-regulation at the federal level, a mix of disconnected regulations at the state and municipal levels, and a set of diverse stakeholders across all levels of government who are uncertain of the path forward. To produce the greatest impact, we chose to focus our analysis on the municipal-level governance for several reasons. First, municipalities have been the driving force for innovation and experimentation in AV testing and pilots. Second, the real thought leadership on AV regulation has occurred mainly at the municipal level, as federal and state regulations have provided the base upon which municipal regulations are layered. Third, municipal governments have faced the highest amount of uncertainty and risk surrounding AV implementation. To arrive at a prioritized set of recommendations local governments and AV providers, we used a proprietary “4P Framework,” which assigns equal weighting and consideration to (1) People, (2) Profit, (3) Planet, and (4) Possibility. After a thorough evaluation of these criteria, we focused on six key recommendations: - 1. Implementing A Flexible Curb-use Model with Dynamic Pricing; - 2. Creating an AV Piloting Checklist; - 3. Appling Geofencing to Urban Core; - 4. Prohibiting Digita Redlining; - 5. Defining Clear Rules of Data Ownership, Use, and Retention; and - 6. Taxing Low-Occupancy/“Zombie” Cars. Although we arrive at a set of effective practices recommendations for municipalities to consider, the value of these series of articles is in guiding the development of AV regulation holistically rather than prescribing specific recommendations. As such, municipalities should use this report as a starting point and determine appropriate policies based on the context of their specific situation, adapting the effective practices to best align to their policy goals.

Data mining techniques can be used to locate statistical outliers that are incorrectly characterized as evidence of unlawful conduct. Using home mortgage loan data made publicly available by financial regulators, a simple data mining exercise finds that approximately three percent of all lender-MSA pairs (or approximately seven to nine percent of all lending institutions) flagged as having redlined minority neighborhoods is attributable to a failure to correct for the multiple hypothesis testing problem. The false positive rate does not fully explain, however, the estimated high frequency of statistical redlining. Three possible models of information disclosure by regulatory agencies are considered: (1) full information, (2) no information, and (3) limited information. Under a limited information model, litigation serves to correctly implement statistical hypothesis testing: a plaintiff must formulate a hypothesis prior to examination of the data and obtains the information necessary to test this hypothesis only through discovery.

Residual, de facto segregation is among the most enduring barriers to equal opportunity in America. Nearly five decades after the Fair Housing Act of 1968, Blacks and Latinos still tend to live in neighborhoods where the majority of residents are people of color. Such racial segregation is often accompanied by economic segregation. Meanwhile, sociologists, housing law scholars, and poverty law experts have stressed the importance of residential location to the impact of poverty and the potential for upward economic mobility. But an unlikely source of federal housing law—the tax code—may interfere with efforts to promote more integrated communities. This Article argues that federal tax law rewards White-flight and economic segregation and, as a result, may exacerbate the enduring effects of past policies like redlining and exclusionary zoning, while also limiting the effectiveness of non-tax federal programs intended to promote housing choice, such as the Section 8 tenant voucher program. The Article begins by using publicly available data from the Internal Revenue Service and the Department of Housing and Urban Development to map the flow of mortgage interest deduction benefits and the location of low-income housing tax credit properties in a representative city, Philadelphia. Next, the Article uses thought experiments to demonstrate how features of the tax law create monetary incentives to reinforce the segregation patterns reflected in the spatial distribution of these tax-subsidies. Finally, the Article sets forth recommendations for tax policy reforms that would better promote integrated communities.

At issue in Independence Institute v. FEC, No. 16-743, 580 U.S. ____, 137 S. Ct. ____ (U.S. Feb. 27, 2017) (mem.), was whether government may regulate genuine-issue speech with Track 2, non-political-committee disclosure requirements. On January 4, 2017, the author filed an amicus brief in support of Plaintiff-Appellant Independence Institute at the jurisdictional-statement stage. That brief is on the Internet sites of Scotusblog, the Federal Election Commission, and the Center for Competitive Politics, which represented Plaintiff-Appellant. On February 27, 2017, the Supreme Court summarily affirmed the three-judge district-court order holding against Plaintiff-Appellant. This affirms the judgment, not the reasoning, of the three-judge district court. Fusari v. Steinberg, 419 U.S. 379, 391 & n.* (1975) (Burger, C.J., concurring), adopted in Mandel v. Bradley, 432 U.S. 173, 176 (1977). This leaves for another day in the Supreme Court the issue of whether government may regulate genuine-issue speech with Track 2, non-political-committee disclosure requirements. Attached is a copyrighted draft of a supplemental amicus brief that the author would have sought the consent of the parties to file -- as indicated on page 1, footnote 4 -- if the Supreme Court had permitted the appeal to proceed. The redlining in the copyrighted draft indicates changes from the January 4, 2017, amicus brief. For the reasons explained in the brief and the copyrighted draft, government may not regulate genuine-issue speech with Track 2, non-political-committee disclosure requirements.

This paper studies the long-term effects of redlining policies that restricted access to credit in urban communities. For empirical identification, we use a regression discontinuity design that exploits boundaries from maps created by the Home Owners Loan Corporation (HOLC) in 1940. We find that "redlined" neighborhoods have 4.8% lower home prices in 1990 relative to adjacent areas. This finding is robust to the exclusion of boundaries that coincide with the physical features of cities (e.g., rivers, landmarks). Moreover, we show that housing characteristics varied smoothly at the boundaries when the maps were created. Evidence suggests lower property values may be driven by negative externalities associated with fewer owner-occupied homes and more vacant structures. Overall, our results indicate the effects of discriminatory credit rationing can persist decades after such practices are formally discontinued.

Data analytics, particularly the current rhetoric around ‘big data’ tend to be presented as new and innovative, emerging ahistorically to revolutionize modern life. In this article, we situate one branch of ‘big data’ analytics, spatial ‘big data’, through a historical predecessor, geodemographic analysis. Spatial ‘big data’ promises an epistemic break in marketing, a leap from targeting geographic areas to targeting individuals. Yet it inherits characteristics from geodemographics, including an orientation towards and justification through the market, and a process of commodification through the black-boxing of technology. In addition, epistemological problems within geodemographics helped set the stage for the individual orientation in spatial ‘big data’ analytics. As researchers develop sustained critiques of data analytics and its affects on everyday life, it is important to do so with a grounding in the cultural and historical contexts from which data technologies emerged. This article and others (Barnes and Wilson, 2014) begin to detail a critical history of ‘big data’. Spatial ‘big data’ carries over critical issues from geodemographics: its roles in surveillance, redlining, and the production of consumer subjects and geographies. The shared histories and structural logics of spatial ‘big data’ and geodemographics create the space for a continued critique of data analyses’ role in society.

Since its passage in 1977, the Community Reinvestment Act (CRA) has charged federal bank regulators with “encourag[ing]” certain financial institutions “to help meet the credit needs of the local communities in which they are chartered consistent with safe and sound” banking practices. Even before the CRA became law - and ever since - it has become a flashpoint. Depending on your perspective, this simple and somewhat soft directive has led some to charge that it imposes unfair burdens on financial institutions and helped to fuel the subprime mortgage crisis of 2007 and the financial crisis that followed. According to this argument, the CRA forced banks to make risky loans to less-than creditworthy borrowers. Others defend the CRA, arguing that it had little to do with the riskiest subprime lending at the heart of the crisis. Research into the relationship between the mortgage crisis and the CRA generally vindicates those in the camp that believe the CRA had little to do with the risky lending that fueled these crises. At the same time, recent research by the National Bureau of Economic Research attempts to show that the CRA led to riskier lending, particularly in the period 2004-2006, when the mortgage market was overheated. This paper reviews this and other existing research on the subject of the impact of the CRA on subprime lending to assess the role the CRA played in the mortgage crisis of 2007 and the financial crisis that followed. This paper also takes the analysis a step further, and asks what role the CRA played in failing to prevent these crises, particularly their impact on low- and moderate-income communities: i.e., the very communities the law was designed to protect. Based on a review of the best existing evidence, the initial verdict of not guilty - that the CRA did not cause the financial crisis, as some argue - still holds up on appeal. At the same time, as more fully described in this piece, an appreciation for the weaknesses inherent in the law’s structure, when combined with an understanding of the manner in which it was enforced by regulators, lead one to a different conclusion; although the CRA did not cause the crisis, it failed to prevent the very harms it was designed to prevent from befalling the very communities it is supposed to protect. The defects in the CRA that emerge from this review, in total, suggest not that the CRA was too strong, but, rather, too weak. They also point to important reforms that should be put in place to strengthen and fine-tune the CRA to ensure that it can meet its important goal: ensuring that financial institutions meet the needs of low- and moderate-income communities, communities for which access to capital and banking services on fair terms is a necessary condition for economic development, let alone economic survival. Such reforms could include expanding the scope of the CRA to cover more financial institutions, creating a private right of action that would grant private and public litigants an opportunity to enforce the law through the courts, and having regulators enforce the CRA in such a way that will put more pressure on banks to modify more underwater mortgages.

We use a general equilibrium model to study how the market power and organizational form of banks interacts with the coordination problem arising from externalities in economic activity. If externalities are positive, bank market power severely reduces social welfare by exacerbating this coordination problem, especially in marginal economies where individuals may “opt out” of the formal economy. However, this effect of bank market power may be eliminated if banks adopt a cooperative ownership form and increases social welfare if externalities are sufficiently negative. We also show how “redlining” may arise in marginal economies and provide testable predictions and policy implications.

We examine the market structure for real estate brokerage services across six large metropolitan areas, to see whether low-income neighborhoods or neighborhoods where house prices are low are as well served by real estate professionals as higher income or higher price neighborhoods. We collect more than 300,000 real estate listings and compute the Herfindahl-Hirschman Index (HHI) for each zip code neighborhood in each MSA. When we divide neighborhoods based on income, house value, and race, we find no evidence that access is worse in disadvantaged areas; that is, the market structure for brokerage services is at least as competitive in less advantaged neighborhoods. We also analyze market leaders in the six cities and find that some firms specialize in particular market segments, however.

Economists’ principal explanations of the subprime crisis differ from those developed noneconomists in that the latter see it as rooted in the US legacy of racial/ethnic inequality, and especially in racial residential segregation, whereas the former ignore race. This traces this disjuncture to two sources. What is missing in the social science view is attention to the market mechanisms involved in subprime lending; and economists, side, have drawn too tight a boundary for “the economic,” focusing on market mechanisms per se, to the exclusion of the households and community whose resources and outcomes these mechanisms affect. Economists’ extensive empirical studies of racial redlining discrimination in credit markets have, ironically, had the effect of making race analytically invisible. Because of these explanatory lacunae, two defining aspects of the subprime have not been well explained. First, why were borrowers that had previously been from equal access to mortgage credit instead super included in subprime lending? Second, why didn’t the flood of mortgage brokers that accompanied the 2000s housing boom the proportion of minority borrowers who were burdened with costly and ultimately unpayable mortgages? This paper develops a mesoanalysis to answer the first of these questions. This analysis traces the coevolution of banking strategies and client communities, shaped by and reinforcing patterns of racial/ethnic inequality. The second question answered by showing how unequal power relations impacted patterns of subprime Consequences for gender inequality in credit markets are also briefly discussed.

Cooperative financial institutions arose in response to the perceived failure of the conventional banking system to serve marginal communities. Such institutions now enjoy a widespread and growing presence in banking markets across the world. Yet, the costs and benefits of this organizational form remain a theoretical puzzle. We show that the cooperative organizational form overcomes a classic friction associated with bank market power but that whether overcoming this friction is welfare enhancing or not depends critically on the structure of the local economy. We also show how “redlining” may arise in equilibrium. These results lead to a rich set of implications for empirical and policy research.

For decades, several studies have been done on redlining of minority and low income neighborhoods. But, the recent explosion of subprime lending in these communities may have been accompanied by some sort of redlining in reverse — so-called “steering.” Using data for 2005, I estimate probabilistic models of loan approvals jointly for two non-prime mortgage products for riskier borrowers — subprime and FHA loans. The estimates show that, in five of 22 major metropolitan cities (Baltimore, Chicago, Denver, Houston, and Tampa), applications for subprime loans in minority neighborhoods were more likely to be approved than applications for FHA loans, relative to non-minority (white) neighborhoods — suggesting racial steering of subprime mortgage lending across these neighborhoods. Several of these cities have experienced tremendous increases in subprime lending, and subsequently have had high mortgage delinquencies and home foreclosures in predominantly minority neighborhoods.

The United States’ history of racially discriminatory banking, housing, and property policies created a community of black Americans accustomed to exploitative financial services and vulnerable to victimization by subprime lenders. My thesis is that black borrowers are experiencing a new iteration of intentional housing discrimination in the twentieth and twenty-first centuries; lenders identified a vulnerable 'emerging market' of black homeowners and borrowers and knowingly targeted them to receive subprime or predatory loan products when equally situated white borrowers were given superior, prime mortgage products. This Article explores how disparate lending practices coupled with banking deregulation undermined the Congressional push for increased minority homeownership and widened the already burgeoning wealth divide. Millions of borrowers who accepted subprime loans between 1998 and 2006 already have or will lose their homes to foreclosure, resulting in a net loss in homeownership for nearly one million families. Blacks are disproportionately represented among the subprime victims, especially black women. The lending and financial services structure that caused this crisis is complicated by evidence of redlining and of steering blacks into subprime loans, all of which contributed to the present foreclosure crisis. This subprime dilemma merely adds new terminology to a long history of racial discrimination in housing in America. In the end, this Article argues that the search for an understanding of the cumulative events that facilitated the exploitation of blacks by subprime lenders illuminates the institutional and national impediments to reversing the present and future harm of the subprime crisis and to ensuring blacks equal access to one of the benefits of full citizenship - property. First, in Part II, I contend that the disparities in subprime lending experienced by black borrowers and especially by black women result from intentional reverse-redlining and steering by lending institutions, their loan officers, and brokers. Next, in Part III, I consider why blacks and black women are disproportionately victims of subprime mortgages and of predatory lending. Finally, Part IV concludes by discussing the after-effects of subprime and predatory lending and offers possible solutions for rethinking how blacks are to overcome this deeply profound experience with housing discrimination which I suggest made blacks prime subprime victims. It focuses on the property dilemma or rather the dilemma of the landless.

This guide to the Community Reinvestment Act (CRA) is designed to provide community advocates with the basic information and skills they need to challenge bank redlining and promote economic development in their neighborhoods. The Guide includes four sections: the legal structure of the CRA; important information about banks and how to get it; analyzing a bank's CRA records, and participating in the CRA enforcement process.

The newest dimension of the Digital Divide is access to broadband (high-speed) Internet service. Using a comprehensive U.S. data set covering all forms of technology (chiefly DSL and cable modem), I look for evidence of redlining, where broadband carriers avoid areas with high concentrations of poor and minority households. There is little evidence of redlining based on income or on black or Hispanic concentration. There is mixed evidence concerning redlining based on Native American or Asian concentration. Other findings: market size, education, Spanish language use, commuting distance, and Bell presence increase access probability; inner city or rural location decreases access probability.

The article is about how a discourse on community and culture facilitates economic exchanges by lowering transaction costs, especially in poor and marginalized communities. The availability of capital and credit has been deemed to be a necessary component of the economic development process. Yet those who are poor have little collateral or capital base to qualify for credit. In an effort to expand the availability of credit to low income communities on non-discriminatory terms, the Equal Credit Opportunities Act and the Community Reinvestment Act were passed. Although this public law framework has been effective at remedying discriminatory lending, I argue that it has been less effective at correcting lending behavior motivated by economic rationale. Banks continue to be unwilling to lend to certain communities because of the high transaction costs involved in screening, monitoring and enforcing small loans. This pattern has been described by economists as "rational redlining" or "credit rationing." Given the limitations of public lawmaking, I argue that the private law model of immigrant communities, which utilizes community cohesiveness to manage what I call a "community market" for credit, should supplement the public law framework. I argue that where market imperfections pose barriers to entry, a parallel system of private lawmaking in which people "contract back" into community and status relationships can be effective in promoting economic exchanges that cannot be promoted in the open market. In this respect, the article studies the Korean "kye," the Chinese "hui," the Ethiopian "ekub," and the West Indian "esusu," ?- culturally based entities organized wholly outside the formal economy and outside the apparatus of state law. Immigrants who have no resources or credit history as required by conventional banks rely instead on community mechanisms by contributing a set amount into a lending circle, which rotates among members on the basis of need, lottery, or bid. This community market for credit functions only if every member who has already claimed her share of the "pot" does not default by defecting but rather continues to contribute until the final rotation when every member has had a chance to collect. The community's social capital base of social norms, identity, and trust functions, in essence, as the equivalent of economic collateral. This community market is able to maintain its effectiveness only by relying on a number of non-legal measures that lower the screening, monitoring and enforcement costs associated with formal institutional lending. The article thus studies how social capital produces economic capital and concludes by exploring the ways in which the law should react to such entities.