With the rising fees and big CEO salaries of Wall Street’s corporate banking giants, is it time to return to “our” banks?
If you haven’t noticed lately, the country’s financial system has come under intense scrutiny by those who say that greed and unfair practices are contributing to the country’s economic problems. But while corporate giants like Bank of America are posting record profits amid rising public discontent, Black-owned banks that have supported minority and low-income communities for years are struggling to stay afloat. So the question is: should African-Americans return to Black-owned banks?
And although the jury is still out on whether Dr. Martin Luther King would support the various “Occupy” protests occurring around the country, it is clear that he was a fan of supporting Black-owned banks. In his famous “I’ve Been to the Mountaintop” speech King said, “... we've got to strengthen Black institutions. I call upon you to take your money out of the banks downtown and deposit your money in Tri-State Bank ... Put your money there.”
Historically, Black-owned banks were important institutions in the African-American community that provided loans and services to Blacks when white institutions refused. Black banks allowed African-Americans to progress economically by allowing them to obtain loans to purchase homes and start businesses. Today, these banks remain relevant for many of the same reasons, but have been edged out by fierce competition from corporate rivals and economic losses brought on by the recession.
The push behind a Black-owned banking renaissance is a lot more than just a nod to yesteryear. According to the FDIC, Black households are 21.7 percent more likely than whites to be unbanked — meaning without a checking or savings account. Furthermore, nearly 32 percent of Black households more likely to be underbanked — meaning these households have a checking or savings account, but often rely on alternative financial services such as non-bank money orders, non-bank check-cashing services, payday loans, rent-to-own agreements, or pawn shops — services that drain the household and the community of wealth in the long run. Advocates say that a return to reliance upon Black banks can help reverse these figures.
"Black-owned banks in Black communities can even draw the traditionally unbanked poor into the formal economy," said Dr. Brooks Robinson, economist and director of blackeconomics.org. "And [they can] push egregiously exploitative pay-day and check-cashing operations out of business."
Some have criticized the African-American community for not jumping into the Occupy Wall Street movement en masse, but the push for bank reform may give Blacks the jolt they need to join the voices calling for change. A group inspired by the Occupy Wall Street protests called Bank Transfer Day is encouraging all Americans to show their discontent with corporate banks by transferring their accounts to credit unions on Nov. 5, 2011.
Says BTD’s organizer Kristen Christian, "I started this because I felt like many of you do. I was tired — tired of the fee increases, tired of not being able to access my money when I need to, tired of them using what little money I have to oppress my brothers and sisters. So I stood up. I've been shocked at how many people have stood up alongside me ..." While Christian is not an African-American, her sentiments sound eerily similar to what many in the Black community have complained of for decades.
Could a similar strategy work to get African-Americans to switch to Black-owned banks?
For more information on Black banking institutions in your state, check out the Federal Reserve’s list of minority-owned banks.
(Photo: REUTERS/Robert Sorbo)