In the summer of 2016, Alton Sterling and Philando Castile, two black men, were shot dead by police. Just a few days later, MTV and BET held a Town Hall exploring ways to address the surge in racially-charged violence. In the town hall, rapper Michael Santiago Render (aka Killer Mike) encouraged the Black community to adopt a different form of protest.
“We can’t go out into the street and start bombing, shooting, and killing,” Mike said. “I encourage none of us to engage in acts of violence. Instead we should to take our warfare to financial institutions.”
His proposal was simple enough: that Black families take a portion of their money and move it to any Black-owned financial institution. The goal was to help Black-owned institutions with an influx of deposits that could be doled out for home loans and small business loans in the communities they serve.
“Larger banks will not float those types of loans — to minorities especially,” Render explained. “I know because I own a small business and I’ve tried to apply for them.”
And with that, the modern #BankBlack movement was born. Over the next five years, Blacks moved a more than $60 million in deposits to Black-owned banks and credit unions.
The Color of Money
For generations, the relationship between banks and Black Americans has been wrought with discrimination — both conscious and unconscious. (Remember redlining?) Most Black Americans say they have felt uncomfortable or unwelcome at one time or another in their interactions with banks.
A Black woman and former Wells Fargo customer who spoke with The Financial Brand on the condition of anonymity, recounted her experience.
“I had done some side work for someone to make a few extra dollars,” she recalled. “There were some things I wanted to buy for my daughter’s birthday that was coming up. They cut me a check — a little over $1,000 — so I took it to the bank to deposit it.”
When she got to the bank, the teller kept looking back and forth between the computer screen and the check in front of her. The teller asked her where she got the check.
“I felt as though as I had done something wrong,” she said. “There was this ugly feeling in my stomach.”
After even more scrutiny, the teller asked the woman to have a seat in the lobby while they verified issuance of the check. A few minutes later, she saw two police officers enter the branch and approach her.
“These cops told me I was under arrest for attempting to pass a bad check,” the woman explained. “I was in disbelief. I was scared, I had no idea where this was coming from.”
Onlookers in the lobby watched as the woman — a wife, mother and member of the local Carpenter’s Union — was taken away in handcuffs.
“I’d been a customer for years, even had an automatic deposit every two weeks,” she said as her voice cracked. “I couldn’t have been thought of as a victim because of the color of my skin. I’ve never been in trouble with the law — before or after that.”
The ensuing two years saw the woman scrambling to clear her name, in and out of court, having to ask friends and co-workers for character references. The woman ultimately left Wells Fargo and switched to a credit union.
“The people in there, they look like and identify with me,” the woman said with a smile in her voice. “If there is ever a need to ask about a check I’ve brought to them, they’re careful to explain their policy and why they’re asking questions. They respect me.”
The woman also decided to move some of her money to a Black-owned bank. “I joined OneUnited,” she said. “There isn’t a branch close to me, but it was important that I show support. When people go there to do a transaction, they’re not looked at as criminals.”
When asked what she thought the #BankBlack movement is and what it represented, she answered, “For me, I can say it meant not having to go through trauma just to deposit a check.”
What is #BankBlack?
Beyond the hashtag, what is the actual experience? How does that experience differ from banks and credit unions that are not Black-owned?
Black-owned banks are classified as minority deposit institutions (MDIs). As defined by the FDIC, an MDI is a depository institution where 51% or more of the stock is owned by one or more “socially and economically disadvantaged individuals.” Institutions are also considered MDIs if a majority of the board of directors is minority and the community the institution serves is predominantly minority.
There are a total of 44 Black-owned banks and credit unions in the United States, 20 of which are Black-owned banks in operation as of the fourth quarter 2020, according to the FDIC minority deposit institution report. An analysis of the products and services at of each of those institutions reveals little difference, if any, in the basic composition of demand deposit products. Minimum balances or the need for a direct deposit accompanied by free online banking and bill pay were all in line with other community banks.
“When I was a little girl and I went to the bank with my dad, I didn’t see anyone that looked like us in there,” Tonya, a small business owner from South Central Los Angeles, told The Financial Brand.
Tonya now banks with OneUnited.
“Now my daughter is able to have that experience when her dad takes her to the bank,” Tonya continued.
“For me, it’s about knowing that my dollars are being invested in Black small businesses that are right here in my community. I like that Black people from this community are on the board making decisions on the communities where they live.”
OneUnited is the largest Black-owned bank in the United States.
In recent years, experts have stressed the important role Black-owned banks play in the Black community. Financial literacy and lending are both critical areas where Black institutions try to pick up the slack when other banking providers shun moderate and low-income communities. At Black-owned banks, mortgage originations to Black American borrowers for owner-occupied mortgages exceeds 75%, whereas other institutions typically hover around 10%.
OneUnited Bank, the largest Black-owned bank in the U.S. by assets, is aggressive about its financial literacy program. Black Americans have developed, over the course of a generation, a distrust in the banking system that basic financial education can address. According to OneUnited’s website, they “embrace the opportunity to improve the overall understanding of banking, home ownership, saving and investing.”
Where Do We Go From Here?
The U.S. House Financial Services Committee conducted a study of the top 44 banks by assets, looking specifically at diversity and financial inclusion. Amongst these institutions, Black Americans represented 12% of the workforce, compared with White Americans at 58%. At the board level, the numbers revealed a wider gap: Black Americans at 11%, with White Americans at 80%. This data might help explain the differences in emphasis on investment in Black communities through home loans and small business lending between Black-owned and non-Black institutions.
Wells Fargo CEO Charlie Scharf came under fire for saying that there is “a very limited pool of Black talent to recruit from.”
Sabrina Lamb, founder and Executive Director of WorldOfMoney.org, a New York-based non-profit that offers extensive financial literacy programs, hopes to change the racial composition of C-suites in the banking industry. She believes that the children that have passed through her program have both the hunger and the knowledge to be tomorrow’s financial leaders.
“Banks can partner with schools in underserved communities; beyond, a one-and-done approach. Invest time, career fairs, human capital, and financial resources where they conduct business.” Lamb said. “The central issue remains one of early exposure and pipeline training. When several World of Money graduates first attended our youth financial education training institute, they did not know Wall Street existed, eligibility requirements, nor how to access opportunities. Thus, after their introduction, mentoring, and visits to financial firms, World of Money moguls have begun careers on Wall Street.”
WorldOfMoney.org has educated over 5,000 youth between the ages of 7 and 18 with an immersive curriculum designed to equip children with the tenets of financial responsibility.
At a time where it seems questionable that more schools are not actively involved in financial education of this type, e.g., home economics courses. It is organizations like Lamb’s that are empowering young minority children with knowledge of what is needed to succeed at becoming tomorrow’s entrepreneurs. In that journey, all roads lead to that visit to a bank to open their first account – the question is, which bank will it be?