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 dollars in lending power since the death of george floyd created by a 150 million dollar increase in equity capital 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 to you wouldn't have the discrimination that created black owned banks in the first place people of color african-americans um in in this conversation um were historically barred from accessing uh financial goods and financial services discrimination is still there but it just looks differently it's not as blatant uh it's not just on face value but there are other things like credit scores and the black bank really kind of emerged um as a way of meeting uh some of those needs blackline banks are so critical um when it comes to you know supporting um racial 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 percent of the us population today but less than one percent of all fdic-insured banks are considered black-owned are black banks struggling yes the banks reflect 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 um 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 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 percent the disparity is even starker for major companies like jp morgan and bank of america jp morgan decreased its branches in majority black areas by 22.8 percent compared to a net decline of just 0.2 percent in the rest of the us for bank of america it was 29.1 percent compared to 18.4 percent in non-majority black neighborhoods in total jp morgan closed 55 branches and bank of america closed 95 branches in majority black areas within the span of eight years when asked for comment jp morgan replied that as part of their 30 billion dollar 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 percent of its financial centers are now located in majority minority neighborhoods with 1.25 billion dollars invested in advancing racial equality and economic opportunity and none of us are above having to to go to a local bank once in a while to make deposits to take out cash in its void oftentimes what we'll see is one of two things either we will see no availability uh to liquidity that is that there's no other place for people of color to actually access their money or uh and just as perversely will see higher prices for that liquidity that is that we'll see uh higher interest rates um even uh you know in excess of say 20 or 30 percent in order to actually access 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 how interest rates are charged 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 uh 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 home ownership which is much lower than right home ownership black
wealth accumulation which is you know 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 guard rails 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 um to those folks and i think it's also kind of elevated uh the fact that that institutions and certainly the federal government believes that mdis have a vital role in in society besides its 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 exists about us why would a bank come but obviously that's when the presence of black banks realize no no i don't believe everything i read and i see that there's massive home ownership from you know 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 non-profits and black home buyers we found that in the aftermath of the great recession that black banks on average actually expanded of their mortgage credit uh 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 um to all institutions but including black banks that will allow them to provide credit um to people who have been demonstrated uh 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 the banks reflect 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 um 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 are 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 one percent 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 con complex on financial institutions black owned banks still lack the assets needed to compete against major players one united bank manages over 650 million dollars in assets as the biggest black owned bank in america in comparison jp morgan and bank of america each manage asset portfolios that are worth well over two 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 the 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 truest 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 impact investments we always evaluate investments on impact first then risk then return so really the driver here is what impact can we drive the fdic and truist have been you know critical partners in driving this forward for mission-driven banks most experts remain cautiously optimistic about the recent investments made to black owned banks but agree that there's 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 and so it is great news when i hear about big banks and big corporations saying we're going to donate into blackburn banks a better uh a better way to get at this 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