What Happened to the Black Banks?
America has half as many Black-owned banks as existed 15 years ago.
Exactly why these banks have disappeared is complex, but Black bankers say the cost of doing business, the financial instability of their communities and counterproductive federal policies have created overwhelming challenges.
“People assume [Black bankers] don’t know what they are doing,” said Alden McDonald, CEO of New Orleans-based Liberty Bank and Trust. “Put yourself in these shoes: We are located in communities in which all of the large banks have moved out of because it’s not profitable for them to do business there.”
The number of Black-owned banks fell 54 percent between 2001 and 2016, according to the Federal Deposit Insurance Corporation.
Historically, these banks have stimulated and revitalized their communities while also financing customers whom major banks have shunned.
“From 1888 to 1934, AfricanAmericans owned more than 130 banks in the U.S., and the number of Black-owned businesses rose from 4,000 to 50,000,” McDonald said at a January ceremony in which the U.S. Treasury Department named an annex the ”Freedman’s Bank building” after the bank Congress incorporated to help “freed” Blacks transition from slavery.
Integration ended that economic boom. Black business districts disappeared as Black consumers spent their dollars elsewhere. Many Black banks, the institutions that extended loans for start-ups and renovations, disappeared as well.
Today, Black banks are struggling to overcome the ripple effects of the Great Recession, in which they suffered more than larger banks. And only a few Black banks qualified for the federal bailouts that major financial institutions gleaned.
“Even though we are now hearing some good news,” FDIC chairman Martin J. Gruenberg said to Black bankers in 2014, “we know that in many of the communities you serve, the pace of recovery is lagging.”
While the number of Black-owned banks plunged from 48 to 22 over the last 15 years, Hispanic banks grew from 31 to 39, such Asian institutions from 69 to 78, and Native American ones from 14 to 18, the FDIC reports. Overall, the number of non-minority banks dropped 37 percent, from 2001 to 2016 — 9,549 to 6,020.
Read more at EBONY