Bloomberg Businessweek - USA (2020-08-10)

◼ FINANCE Bloomberg Businessweek August 10, 2020

23

MIKE:

DAN

MEDHURST.

DATA:

COMPANY

FILINGS,

FEDERAL

DEPOSIT

INSURANCE

CORPORATION

THEBOTTOMLINE MorethanhalfofAmerica’sBlack-owned

bankshavedisappearedin thelasttwodecades,anda social

campaignis helpingthosethatremaingainnewcustomers.

lenders can push back against the national giants

that dominate their industry and pull the financial

levers in most Black communities. “The best way to

punish a wicked system within capitalism is to use

capital, your dollar” to show that “systemic racism

is bad for money, it’s bad for business,” says Render,

one-half of the rap duo Run the Jewels.

Render and others are urging consumers and

businessestousetheireconomicpowertobol-

sterBlack-ownedlenders,whichservecommuni-

tiesthatremaindisproportionatelyunderbanked.

Makingthosebanksstrongerandpushingtheindus-

try’sgiantstoboostlendingtoAfricanAmericans

canhelpbegintorectifyanimbalancethathasleft

Blackfamilieswithanaveragenetworththat’sone-

tenththatofWhitefamilies.

Therearesignsthatthemessageis takinghold.

OneUnitedhasaddedmorethan40,000custom-

erssincethebeginningoftheprotestssparkedby

Floyd’sdeath.NetflixInc.pledgedtoshiftasmuch

as$100milliontolendersthatsupporttheBlack

community.Whilethataccountsforlessthan2%

oftheentertainmentgiant’scash,it’sa start.

ThehistoryofBlackbanksintheU.S.goesback

toFreedman’sSavings&TrustCo.,whichwas

charteredbytheU.S.governmentin 1865 toserve

newlyfreedslaveswhoweredeniedbyotherlend-

ers.It collapsedin1874.

Sincethen,manyfinancialinstitutionscater-

ingtoBlackcommunitieshavesufferedthesame

fate,includingCityNationalBankofNewJersey,

whichfailedlastNovember.Incontrast,the“too

bigtofail”lendersthatreceivedgovernmentbail-

outsduringthe 2008 financialcrisiscameintothe

Covid-19crisisridinghighoffofrecordprofits.

Regulationsputinplacetoavoidfuturebailouts

inturnheapedmorecompliancecostsonsmaller

lendersalreadyfacingthinmargins.

CommercialbanksintheU.S.topped$200bil-

lionincollectiveprofitsforthesecondstraightyear

in2019.NoneofthebiggestBlack-ownedbanks

wasabletocrack$5million.Theshrinkingofthe

industryis tiedtostructuralracism,saysMehrsa

Baradaran,a lawprofessorattheUniversityof

CaliforniaatIrvine.Black-ownedbanksarebased

mostlyinlow-andmoderate-income communities,

where they collect small deposits and have fewer

opportunities to profit from making loans. Like

many of their customers, the lenders lack the cap-

ital necessary to grow.

“The fact that Black banks are still serving these

communities is huge, and so they can use all the

help that they can get,” says Baradaran, whose

book The Color of Money influenced Netflix’s

move. The banks provide a crucial alternative to

paydaylendersthatchargehighratesandfees,

she says, and a boost in low-cost deposits could

further that effort.

In mainstream banking, African Americans still

have less access to credit and other banking ser-

vices as legacies of slavery and segregation. Unfair

practices such as redlining, which made it diffi-

cult for Black people to get mortgages in the U.S.

for decades, and the subprime crisis have “clob-

bered” Black communities and worsened the

racial wealth gap, Baradaran says.

The Office of the Comptroller of the Currency

convened a roundtable last month to promote

financial inclusion, comprising representatives

from minority lenders and nonprofits, as well

asCitigroupInc.ChiefExecutiveOfficerMichael

CorbatandJPMorganCo-PresidentGordonSmith.

The#BankBlackmovementoffersapartial rem-

edy, calling on Americans to use their spending

power to create social and economic change. Killer

Mike is one of its biggest advocates. Comedian

Tiffany Haddish is on board, and so are other enter-

tainers, athletes, and community leaders. Kevin

Cohee, CEO of OneUnited, urges everyone—not

just Black people—to join in.

“Are you on the side of being progressive, are

you on the side of justice for all, are you on the

side of equal treatment for everyone?” says Cohee.

“Or are you not?” He hopes prospective customers

will give his bank a chance, even if they only use it

for their secondary accounts to start.

Render points to his single Ju$t, featuring

Pharrell Williams and Zack de la Rocha from

Rage Against the Machine. The song is about not

losing one’s humanity in the pursuit of riches.

“Wall Street is connected to any Black street in

America—and if we don’t look at it that way, then

this country continues to be a giant that’s hob-

bling along on a broken ankle,” Render says. “If

the Black community is strong economically,

the greater community is stronger.” �Lananh

Nguyen, with Jennifer Surane

DATA: COMPANY FILINGS, FEDERAL DEPOSIT INSURANCE CORPORATION

Largest Black-Owned Banks in the U.S.

Bank

OneUnited

Liberty Bank and Trust

Industrial

Broadway Federal

Citizens Trust

Boston

New Orleans

Washington

Los Angeles

Atlanta

City

1982

1972

1934

1947

1921

Est. Assets as of March 31

$656m

624

560

504

444

▼AssetsasofMarch 31

JPMorgan

All Black-owned

banks in the U.S.

$3.1t

$4b