The Decline in Black Banks
Others not on the 2019 list: Capital City Bank & Trust Co. of Atlanta, Independence Federal Savings Bank of Washington. D.C., South Carolina Community Bank of Columbia, South Carolina, First Tuskegee Bank of Tuskegee, Alabama, and Advance Bank of Baltimore.
The declining number of black banks was a motivation for the Let Us Put Our Money Together: The Founding of America’s First Black Bank, written by Timothy Todd, an executive writer with the Federal Reserve Bank of Kansas City.
Todd says developments in the area of black banks have been particularly disconcerting with the number of institutions declining by more than half since 2001.”When you add to this the number of households that are unbanked or underbanked, it really puts a spotlight on questions about the ability of individuals and families to borrow money on fair and appropriate terms for things like financing an education, establishing a business, or buying a home,” he said via email.
Working to Save Our Institutions
The promising news is actions are underway to aid black banks. U.S. Rep. Bobby Rush, D-Illinois, has introduced the Rescue Act for Black and Community Banks. The bill—initiated in January 2019—aims to bring regulatory relief for black banks from Congress, boost wealth-building for black consumers and businesses, and help save black banks from failing.
One group, Bank Black USA, launched a movement requesting that Americans deposit $500 million into black-owned banks by Martin Luther King Jr. Day 2018. Some $50 million was deposited into blank banks in a six-month period, according to the FDIC.
Support might very well be necessary as the business landscape is rugged for black-owned banks. Here’s a stunning statistic: Seven of the 10 largest black-owned banks on the 2019 BE Banks list had lower assets for 2018 than for 2017.
Still, observers say, black banks are still essential as they can serve as an alternative to high-priced options such as payday lenders and check-cashing stores blacks often rely on. And blacks are still more likely to be denied a home loan or small business loan from mainstream banks than whites.
Cunningham says Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) under Section 308. Among its goals, the law called for preserving the number of minority depository institutions and offering technical help to prevent insolvency of institutions. He said the law also was geared to promote and encourage the creation of new minority depository institutions. “An objective review of recent performance based on 308’s standards would lead to the conclusion that the Fed has failed to preserve the number of black-owned depository institutions.”
Furthermore, Cunningham contends black-owned banks today are too small and weak to make a measurable difference in the black community. He claims Boston-based OneUnited Bank, No. 1 on the BE Banks list with assets of around $656 million, is much smaller than banks serving other racial groups. He pointed to Asian-owned East-West Bank based in Pasadena, California, with assets of nearly $40 billion as an example. And, of course, America’s largest bank, New York-based JPMorgan Chase, which caters to multiple races, has assets exceeding $2.7 trillion.
So who should be leading the charge to help these banks survive? Perhaps the Fed or other sources? Todd says despite efforts on multiple fronts, this is an area where meaningful progress has been hard to come by, although there have been some successes.
“I think the stories of many of the earliest bankers are inspirational and I hope others will find them to be as well,” he says. “I hope that this advances the discussion about the important role that banks play in serving their communities, which is perhaps different than how many might think about banking.”