Big banks and major corporations like Yelp, Netflix
and Microsoft announced major investments in black owned banks. Well, black banks have gained an additional $1.5
billion in lending power since the death of George Floyd, created by a $150 million increase in
equity c apital. These banks attempt to help the so-called
banking deserts, or typically minority neighborhoods where brick and mortar banks are far
and few between. You know, in a perfect world, you wouldn't have the
racial wealth gap, and so you wouldn't have the discrimination that created black-owned banks in the
first place. People of color African-Americans in this
conversation were historically barred from accessing financial goods
and financial services. Discrimination is still there, but it just looks
differently. It's not as blatant. It's not just on face value,
but there are other things like credit scores, And the black bank really kind of emerged as a way of
meeting some of those needs. Black owned banks are so critical when it comes to
supporting r acial equity initiatives and the black and
African-American community. Black banks are far from thriving. Americans who identify solely as black or
African-American make up 13.4% of the U.S. population today, but less than one
percent of all FDIC insured banks are considered black owned. Are black banks struggling? Yes, the banks reflects
the community in which they are in. So whatever the struggles are of the community, the
banks have the same struggle because they're enmeshed in that community. They cannot change it unless the community itself
has more wealth. So why are black owned banks key to ending racial
disparity in America? And what do they need to succeed? The history of banking in America is riddled with
incidences of systematic racism. Terms like redlining originate from banking
practices that segregated populations of color by denying loans for housing. While the federal government eventually stepped in
to resolve financial discrimination with legislation like the Fair Housing Act of 1968 and the Community
Reinvestment Act of 1977, experts say that the banking industry still has a
race problem. The country has a race problem, one that is rooted in
wealth and power, which are largely synonymous. Nowhere are decisions about who gains and controls
wealth more concentrated than in the banking and finance sector. We are not far away from the subprime crisis where
Wall Street went to target black and brown communities with their worst loans. The people who were sold a subprime loan could have
been eligible for a prime loan. The financial crisis wiped out about 53% of the
wealth in the black communities, and that's wealth that hasn't been recovered. I think we still see problems that are inherently
baked into how we decide who gets loans or baked into how we invest in community. Redlining is still there. Green lining is still there because most of the
regulations, having been one is focused around the fiduciary duty and the stability of the bank, not
how they act in the community. Accessibility is a big issue. Black neighborhoods have seen a disproportionate
number of bank branch closures compared to white neighborhoods. Between 2010 and 2018, the number of
banks in majority black neighborhoods decreased by 14.6%. The disparity is even starker for major companies
like JPMorgan and Bank of America. JPMorgan decreased its branches in majority black
areas by 22.8%, compared to a net decline of just 0.2% in the rest
of the U.S. For Bank of America, it was 29.1%, compared to 18.4% in non majority black neighborhoods. In total, JPMorgan closed fifty five branches and
Bank of America closed ninety five branches in majority black areas within the
span of eight years. When asked for comment, JPMorgan replied that as
part of their $30 billion commitment to addressing racial equity, they've opened new branches in black,
Hispanic and Latino neighborhoods and offer free financial health and home buying workshops. Bank of America said that 36% of its financial
centers are now located in majority minority neighborhoods, with $1.25 billion invested
in advancing racial equality and economic opportunity. None of us are above having to go to a local bank
once in a while to make deposits to take out cash And it's void. Oftentimes, what we'll see is one of
two things either we will see no availability to liquidity that is that there's no
other place for people of color to actually access their money or. And just as perversely, we'll see higher prices for
that liquidity, that is that we'll see higher interest rates even, you know, in
excess of, say, 20 % or 30% in order to actually access money. Researchers have also shown that discrimination in
loan denial and cost have not declined over the years in spite of regulations that were
designed to prevent them. It is legal because of how we have defined risk
tolerance, our interest rates or charge. It's legal for myself to be charged more than my
white peer. And so I think that discrimination is still there,
but it just looks differently. It's not as blatant. It's not just on face value,
but there are other things like credit scores that people use or geographic location or
asset value of your home. The way that race has been used to provide subsidies for some communities and not other
communities, and the way that discrimination works insidiously has affected so profoundly black
homeownership, which is much lower than white homeownership. Black wealth accumulation, which is 12 to 1, 10 to
1, regardless of income, and that is 100% on account of
these racist credit policies and home ownership. That's where black-owned banks come in. Banks and credit unions must be federally designated
as a minority depository institution by the FDIC to qualify as being black owned. MDIs Must either have 51% or more of their shares
owned by minority individuals or a majority of its board members are
minorities, and the community that it serves is predominantly minority as well. As of 2021, there are 146 minority depository
institutions in America. 20 of them qualify as being black or
African-American owned. It allows people to have a certification and
legitimately, one, signal to the larger community, they are there to
help them; Two, really put some guardrails because these institutions, particularly much like
CDFIs, are designed to serve communities that have been historically overlooked and underserved. So I would say the benefit of that certification is
giving visibility to those folks. And I think it's also kind of elevated the fact that
that institutions and certainly the federal government believes that MDIs have a vital role in
society Besides this designation. Black owned banks work very similarly to traditional
banks. They provide mortgages, loans and insured bank
accounts. What does make them unique is their mission to bring
equality to banking, providing affordable financial services and
education to people that need it the most. When a bank has a branch in a community, people are
more likely to get access to financial institutions and black
banks. Black credit unions are more likely to locate in
black communities. From a business decision, I completely understand if
you follow the negative data that exist about us, why would a bank come? But obviously that's when the
presence of black banks realized "No no no, I don't believe everything I read, and I see that
there's massive home ownership from prior grandparents. I see that people are going to work every day." Black owned banks also support the economic life of
the communities they serve by providing much needed loans for small businesses, nonprofits
and black homebuyers. We found that in the aftermath of the Great
Recession, that black banks on average actually expanded their mortgage credit access at a time in
which arguably many financial institutions were actually
fleeing the lending space. But I think the second part is, you know, we're
beginning to hear anecdotes encouragingly that black banks are beginning to look to develop what
are called special purpose credit facilities. These types of facilities will give more flexibility
to all institutions, but including black banks that will allow them to
provide credit to people who have been demonstrated to have been historically
disadvantaged or communities that have been historically disadvantaged. The number of black owned banks has dwindled
immensely over the years. Are black banks struggling? Yes, the banks reflects the community in which they
are in. So whatever the struggles are of the community, the
banks have the same struggle because they're enmeshed in that community. They cannot change it unless the community itself
has more wealth and has more access and and we have less discrimination
as a society. Between 1888 and 1934, there were 134 black owned
banks to help the black community. Today, there are only 20 black owned banks that
qualify as minority depository institutions, while people who identify as solely
black or African-American make up 13.4% percent of the U.S. population, black owned banks consist of less than
1% of all FDIC insured banks in the United States. I think part of it has to do with the broader trend
in the banking community. That is that overall we're seeing the number of
banks overall declining and assets being concentrated, particularly in your larger global and
more complex financial institutions. Black owned banks still lack the assets needed to
compete against major players. One United bank manages over $650 million in assets
as the biggest black owned bank in America. In comparison, JPMorgan and Bank of America each
managed asset portfolios that are worth well over $2 trillion dollars. So the size of assets really determines what they're
able to do from a lending and investment perspective, which then, of course, drives how innovative they
can be. It talks about leads to margins in the bank and how
many people can show up and what's the staffing look like and all of those kinds of things. And obviously, it's a big regulatory marker that
people look on. There's a stability and health of the institution. To combat these concerns. Several big banks and corporations have invested
heavily in black owned banks following the death of George Floyd. More recently, Microsoft and Truist
Financial backed fdic's new fund to invest in minority owned banks,
each putting in tens of millions of dollars to help its launch With Microsoft's impact investments, we always
evaluate investments on impact first, then risk than return. So really, the driver here is what impact can we
drive? The FDIC and Truist have been critical partners in
driving this forward for mission driven bank. Most experts remain cautiously optimistic about the
recent investments made to black owned banks, but agree that there is still work to be
done. I think every corporation needs to look inside their
own practices and see where they can themselves remedy
some of the historic wrongs that they have done. So it is great news when I hear about big banks and
big corporations saying We're going to donate into black owned banks. A better way to get access would be to look at the
way that their institution has helped propagate has helped perpetuate the racial wealth
gap. And to fix. To repair. To apologize for. But what's most important to the survival and success
of black owned banks is the support and attention from average consumers. I can't imagine that this country would want to lose
and minimize our opportunity to create wealth for ourselves and for the communities around
us. And with the demographic shifts and recognizing that
I call black and brown people the new majority, we're the fastest growing segment of the
population. Maybe take it down to businesses. Black women are the fastest growing entrepreneurs in
this country. Not the same rate, but they're there. So from a quantitative perspective, I think everybody
in this country should begin to care about black communities because we are indeed taking over in a
good way. States have already flipped where black and brown
people are the majority. And so as you think about the long term economic
viability and competition, it's important that we invest.
