Due to a recent surge in bank fraud in the United States, significant concerns are being raised about the safety of keeping money in traditional banks. As detailed in (the appropriately titled article) Defrauded Banks May Not Give Your Money Back we’re educated on the numerous issues and challenges victims face in recovering lost funds from their respective banks in cases of fraud. Although many of the problems these individuals are facing have yet to be resolved, their plight has triggered a broader discussion on whether the age of big banks is coming to an end.

This article will provide context for that broader conversation, exploring the implications of existing legislation, the courts’ interpretation of reasonable deadlines for reporting fraud, the ethical considerations of banks’ privacy policies, and the rise of alternative investments as a potential solution.

Legislative and Regulatory Frameworks

The disparity in consumer protections between electronic transactions and check or wire fraud necessitates urgent reform. The Electronic Fund Transfer Act (EFTA) provides robust safeguards for consumers, ensuring prompt reimbursement and clear dispute resolution processes when electronic fraud occurs. In contrast, protections under the Uniform Commercial Code (UCC) and Regulation J for check and wire fraud are significantly weaker. This regulatory gap leaves consumers vulnerable and often entangled in prolonged and complex recovery processes.

The limitations of the UCC and Regulation J are evident in several key areas. Firstly, the UCC, which governs check transactions, imposes a standard of “ordinary care” on banks, which is a relatively low bar. This standard does not compel banks to implement stringent anti-fraud measures or prioritize swift reimbursement for fraud victims. As a result, consumers often face lengthy and burdensome procedures to recover their funds when a fraudulent check is cashed. Additionally, the UCC’s provisions on check fraud liability can be unclear, leading to inconsistent interpretations and enforcement across different jurisdictions.

Regulation J, which oversees the collection and return of checks and electronic funds transfers through the Federal Reserve system, similarly lacks strong consumer protections. Its primary focus is on the operational aspects of interbank transactions rather than directly addressing consumer rights. This regulation does not provide a clear, consumer-friendly framework for resolving disputes or ensuring prompt reimbursement for fraud victims. Consequently, consumers dealing with check or wire fraud may experience delays and frustrations that are uncommon under the EFTA.

The Supreme Court case Cenlar FSB v. Malloy starkly highlighted these deficiencies, demonstrating how existing laws fail to offer adequate protection for consumers against check fraud. In this case, the limitations of the UCC and Regulation J became evident, underscoring the need for legislative changes. Consumers deserve consistent and reliable protections across all types of financial transactions. It is imperative that lawmakers address these regulatory shortcomings, aligning the safeguards for check and wire fraud with those provided under the EFTA. Such reforms would ensure that banks act in their clients’ best interests, offering timely reimbursement for fraudulent losses and enhancing overall consumer trust in the financial system. ¹

Reasonable Reporting Deadlines

Courts and statutes set the standards for what constitutes a reasonable deadline for reporting fraudulent transactions. Under the EFTA, consumers typically have 60 days to report unauthorized transactions. However, this timeframe can be challenging for consumers to meet, often leading to denied claims. The case of *Regents of the University of California v. Public Employment Relations Board*, 485 U.S. 589 (1988), exemplifies the legal complexities in defining these deadlines. Ensuring these deadlines are fair and sufficient is crucial for consumer protection. ²

Professional Responsibility and Privacy Policies

Due to a recent surge in bank fraud in the United States, significant concerns are being raised about the stringent deadlines imposed on consumers for reporting fraudulent transactions. As detailed in (the appropriately titled case) *Regents of the University of California v. Public Employment Relations Board* We are educated on the numerous legal complexities involved in defining these deadlines. Under the Electronic Fund Transfer Act (EFTA), consumers typically have 60 days to report unauthorized transactions. However, this timeframe can be challenging for many to meet, often resulting in denied claims and lost funds. 

Courts and statutes set the standards for what constitutes a reasonable deadline, but the fairness and sufficiency of these deadlines are crucial for effective consumer protection. The rigid 60-day window under the EFTA may not account for various real-life situations that delay a consumer’s ability to detect and report fraud. This opinion piece aims to provide context for that broader conversation, exploring the implications of existing legislation, the courts’ interpretation of reasonable deadlines, the ethical considerations of banking practices, and the potential need for more flexible reporting periods.

Ensuring that these deadlines are fair and sufficient is essential to safeguard consumer rights and trust in the financial system. By reevaluating and possibly extending these reporting periods, lawmakers can better protect consumers, ensuring they are not unfairly penalized for circumstances beyond their control. The current framework highlights the need for legislative reforms that prioritize consumer protection and adaptability in the face of evolving financial fraud tactics. ³

The Rise of Alternative Investments

With the increasing popularity of cryptocurrencies, real estate, and other alternative investments, individuals are exploring new ways to safeguard their assets. Cryptocurrencies like Bitcoin offer decentralized security, while real estate provides tangible value. Other alternatives include precious metals, collectibles, private equity, and digital assets like NFTs. These options are gaining traction as they offer more control and potentially higher returns compared to traditional banking ⁴ platforms like Bitcoin IRA and eToro provide access to the crypto market, offering a decentralized approach to storing wealth, while services like Fundrise and Yieldstreet allow individuals to invest in real estate without the hassle of managing properties, making it accessible to a broader audience.⁵

Traditional banks hold significant power, reinforced by mandatory agreements that consumers must accept. This power dynamic, combined with potential fraud risks, prompts many to consider alternatives. Investments in real estate, cryptocurrencies, and other assets can offer more control and potentially higher returns.

As investing becomes more accessible, and alternatives to traditional banking grow in popularity, the era of big banks may see a decline. People are increasingly likely to shift their savings to investments that offer more control and security, such as credit unions, which may provide better terms and personalized service.

Conclusion

The current regulatory environment inadequately protects consumers against fraud, leading to a potential decline in trust in traditional banks. With the growing accessibility and appeal of alternative investments, the future may see a significant shift away from big banks. As consumers seek to regain control over their finances, investments in real estate, cryptocurrencies, and other alternatives may become the norm. This shift could herald the end of the dominance of traditional banking institutions, paving the way for a more diversified financial landscape.

Sources

1. J.P. Morgan Private Bank. (2024). Alternative investments in 2024: Our advice on what to watch. Retrieved from https://privatebank.jpmorgan.com/nam/en/insights/markets-and-investing/ideas-and-insights/2024-alternatives-outlook-will-macro-trends-pave-the-way-for-future-outperformance ︎
2. Franklin Templeton. (2024). 2024 alternative investment outlook: Challenges create opportunities. Retrieved from https://www.franklintempleton.com/articles/2024/alternatives/2024-alternative-investment-outlook-challenges-create-opportunities ︎
3. NerdWallet. (2024). Best investments right now and where to buy them. Retrieved from https://www.nerdwallet.com/article/investing/the-best-investments-right-now ︎
4. Franklin Templeton. (2024). 2024 alternative investment outlook: Challenges create opportunities. Retrieved from https://www.franklintempleton.com/articles/2024/alternatives/2024-alternative-investment-outlook-challenges-create-opportunities ︎
5. Wall Street Zen. (2024). The 11 best alternative investments in 2024. Retrieved from https://www.wallstreetzen.com/blog/best-alternative-investmentsNerdWallet](https://www.nerdwallet.com/article/investing/alternative-investments). ︎

In a significant move, Wes Moore’s recent pardon of marijuana convictions represents a crucial step toward rectifying past injustices. According to an article published by the Washington Post Moore’s actions highlight the broader implications of cannabis legalization and its historical consequences. ¹

When we discuss laws criminalizing drugs, it is essential to genuinely uphold the belief that these substances are harmful to society. Legalizing cannabis after countless individuals have suffered due to its criminalization necessitates addressing the consequences of those past laws. Celebrating the benefits of legalization without acknowledging the damage done contradicts the original intent of those laws, which were supposedly designed to protect society. Legalizing a drug for recreational use while still punishing those who used it before it was deemed acceptable is hypocritical.

However, Moore’s mistake lies in the fact that pardons do not result in the release of incarcerated individuals. By legalizing cannabis for recreational use, society is effectively stating that its use is not harmful. Therefore, continuing to incarcerate individuals for past use is unjust. Additionally, it’s important to consider the disproportionate impact of these laws on minority populations. It’s unfair to punish someone for using marijuana in the past when it is now recognized for its medicinal benefits. If our understanding of marijuana has evolved to recognize its medicinal uses, incarcerated individuals should be given the benefit of the doubt.

We must avoid sending the message that laws change merely because influential groups decide so, as this undermines the purpose of the laws themselves, which is to protect people. Consistency and fairness are paramount. Despite this oversight, Moore and his administration are undeniably moving in the right direction to rectify some of the historical wrongs caused by the war on drugs, which has devastated families and communities. The only way forward for our society is to adopt a mentality of forgiveness, fairness, and equity for all citizens.

1. Cox, Erin. “Wes Moore’s Marijuana Pardon.” Washington Post, 2024 ︎

The Journey to Freedom

“Juneteenth may mark just one moment in the struggle for emancipation, but the holiday gives us an occasion to reflect on the profound contributions of enslaved Black Americans to the cause of human freedom.” —Jamelle Bouie

January 1, 1863, through the clouds of bloodshed and violence created by the Civil War. President Abraham Lincoln emerged with a document named the Emancipation Proclamation where he penned a clear message to the “rebellious” confederate states declaring all enslaved people in confederate territories to be “forever free.” This landmark document marked a turning point in American history, a powerful statement that the institution of slavery would not endure. However, the road from President Lincoln’s legal declaration to the lived reality of Black people in bondage was long and uneven.

Despite the importance of the Emancipation Declaration’s decree, news of the document and its subsequent effects traveled slowly, often carried by word of mouth or through the underground efforts of abolitionists. In addition, for many confederate states, President Lincoln’s proclamation of freedom was simply not enough and the presence and success of Union forces was essential to enforce the document’s mandate. This meant a delayed and geographically disproportionate experience of freedom for enslaved people. While some enslaved people in areas under early Union control received news relatively quickly, others, particularly those in the Confederacy’s most remote corners, endured a longer wait.

The state of Texas, the Confederacy’s westernmost territory quickly became a symbol of this delayed liberation. Due to geographic isolation and the territory’s fierce loyalty to the Confederacy and its ideals, Texas remained largely untouched by the war’s earlier advancements. As a result, enslaved people in Texas continued to labor under forced servitude for over two years after the Emancipation Proclamation’s issuance.

A Reason to Celebrate

Finally, after extreme toil and strife, General Gordon Granger arrived in Galveston, Texas, backed by a substantial Union force on June 19, 1865. His mission was two-fold, transcending a simple military victory; he carried the weight of liberating the final group of black enslaved people in the confederacy. Bringing forth a surge of hope for a future where black people were no longer enslaved chattel, but truly free individuals.

Black communities in Texas swiftly embraced the news of their freedom, adjusting to the major changes now afforded to them and within a year, organizing celebratory gatherings to commemorate their liberation. Initially held in Black churches, celebrations across Texas served as a powerful reminder of freedom. Over time, Juneteenth observances spread throughout the South, carried by formerly enslaved people and their descendants.

The turn of the 20th century brought forth The Great Migration, a mass movement of Black Americans from the rural South to urban centers across the country. As Black people established themselves in places like Chicago, New York, and Los Angeles, Black southerners shared their Juneteenth traditions with their newfound communities effectively spreading the Juneteenth holiday across the country.

Despite its growing popularity and growing geographical reach, Juneteenth remained a cultural tradition only for over a century. Federal recognition of this paramount day in African American history finally arrived on June 18, 2021 with the passage of the Juneteenth National Independence Day Act.

“The day we were free—everyone was free. Why not make it a paid holiday We deserve that…We want a day that is inclusive to everyone.” —Pharrell Williams

While achieving federal recognition of Juneteenth as a national holiday marks a significant step forward for Black Americans, it would be disingenuous to suggest that liberation from slavery marked the end of the fight for Black freedom.

Continue to Fight the Good Fight

In today’s society, Black Americans have traded the brutality of chattel slavery for the insidious grip of systemic discrimination. As a result, the fight for freedom has evolved into a relentless pursuit for economic empowerment. Through entrepreneurship, homeownership, and generational wealth building, countless individuals within Black communities across the US are actively striving towards the accomplishment of economic freedom.

Though the pursuit of economic freedom for everyone isn’t a monolithic concept, the ultimate goal to not just survive, but thrive and rise is commonplace. The path to achieving this goal varies greatly across the Black community. However, the resounding theme remains the same – to dismantle the economic barriers that have historically held back Black people and create a future of opportunity and self-determination.

So on this Juneteenth it’s important to not only remember and celebrate the past but to continue to fight for the future.

Sources 

• Juneteenth World Wide Celebration, https://www.juneteenth.com.

• Dorazio, Justin. “Systematic Inequality.” Center for American Progress, 21 February 2018, https://www.americanprogress.org/article/systematic-inequality
• “ECONOMIC POLICY.” Black Economic Alliance Foundation, https://foundation.blackeconomicalliance.org/app/uploads/2020/07/Black-Economic-Alli ance-2020-Policy-Summary-and-White-Paper.pdf.

• “The Historical Legacy of Juneteenth.” National Museum of African American History and Culture, https://nmaahc.si.edu/explore/stories/historical-legacy-juneteenth.

• “Home > Exhibits > Featured Documents > The Emancipation Proclamation.” National Archives, 28 January 2022, https://www.archives.gov/exhibits/featured-documents/emancipation-proclamation

• “Juneteenth | History, Meaning, Importance, & Facts.” Britannica, https://www.britannica.com/topic/Juneteenth

And while some Black spaces may be targets for investment, that money is rarely disbursed in an equitable manner. Longtime residents are often deemed unworthy of credit and are left out of the influx of development. They may not be able to keep pace with taxes and other costs that accompany rising values and thus find themselves forced out, victims of gentrification. They are then robbed of the opportunity to build generational wealth.

We are amid a new era of thought around inclusive development. While our cities were purposely built segregated, and our first attempts at fixing this problem resulted in gentrification, over time, it has become apparent that inclusion matters in community development. Just as our cities were purposefully segregated, we need remedies that purposefully correct this injustice and spread wealth-building opportunities today.

One of those remedies is in mission-driven financial institutions devoted to spreading economic access to disadvantaged communities. Black-owned banks, other minority depository institutions (MDIs), and community development financial institutions (CDFIs) have historically served as the mechanism for inclusion. They intentionally serve people the traditional banking sector leaves out. MDIs and CDFIs are among the main tools to fight this country’s racial wealth gap. While they are under-resourced, they nevertheless do impressive work extending credit and opportunity to those who would otherwise be without. Moreover, their deposits and earnings are reinvested in the communities they serve.

To amplify the work of these institutions, a new study examines the mortgage lending of minority depository institutions. The Kresge Foundation supported the National Bankers Association (NBA) with a grant to conduct research. The NBA was started 97 years ago as the Negro Bankers Association and now serves as the trade association for MDIs across ethnic backgrounds. The NBA partnered with Bank Black USA, a grassroots organization dedicated to an inclusive economy, and the Hip Hop Caucus. This national nonprofit uses the power of cultural expression to empower communities that are first and worst impacted by injustice.

The study (which I co-authored), The Social Impact of MDI Mortgage Lending, used Home Mortgage Disclosure Act (HMDA) data to analyze lending and spoke with bank officials to understand the full picture of MDIs serving the neighborhood development needs of communities of color through mortgage lending.

The data showed that:

• MDIs originate a higher share of mortgages to borrowers and communities of color than traditional non-MDI banks.
• MDIs originate more of their mortgages to low- to moderate-income individuals and communities than non-MDI banks.
• MDIs have a lower overall denial rate than their counterparts.

This research not only analyzed HMDA data, but we also spoke with the MDI loan officers, the individuals working to get more credit into communities. They spoke of the creative financial products they employ and the challenges that come with community development finance. They shared that the majority of mortgage lending goes through the secondary market —  loans that are sold to government-sponsored enterprises like Fannie Mae and Freddie Mac.

The banks gain liquidity and transfer risk by selling these loans, allowing them to put out even more capital. However, to be sold, they must meet certain standards for value and risk. Because of these standards, mortgage lending can be restrictive. Our interviewees told us portfolio lending is where they can make the most impact. Portfolio loans stay on the books of a bank and are not resold. Therefore, they can utilize expansive underwriting criteria and look past things such as appraisal values and credit scores, which have discriminatory pasts.

These findings make clear we need to amplify the ability of these banks to make loans. The report details strategies that increase MDI mortgage lending capacity, such as creating a new secondary market for selling portfolio loans. That way, MDIs and CDFIs can move loans off their balance sheet and get more money into the community. Another recommendation is creating loan loss reserves and guarantees for MDI mortgage lending. This mitigates the risk they take, spreading it to philanthropic partners and allowing MDIs to do more of what they do best.

There is a market failure in traditional banking, and Black and Brown communities are underserved. Whether from the government, large banks or philanthropy, these communities need investment. However, capital alone is not enough. We also need to bolster our mechanisms of distribution. MDIs are poised to do just that. They are the front line of inclusive lending. The future of our communities depends on intentional, inclusive financial practices. Strengthening MDIs and CDFIs will rectify past injustices and lay the groundwork for a more equitable and prosperous society.

The COWRIE Initiative, home of BankBlackUSA, is excited to announce the hiring of six more interns. Thanks to the generous donations from individuals, organizations, and institutions, COWRIE offered paid internships to Kennedy Austin, Bryan Bermeo, Jurnee Jessie, Davion McArthur, Jeffery Sims, and Cailynn Winford this summer. These six outstanding people will play an instrumental role in our ongoing operational and programmatic work to make a difference in our communities.

Kennedy Austin is a rising Junior at Paul Quinn College studying finance. Upon graduation, she hopes to work in the Venture Capital space, helping provide capital to Black-owned tech start-ups nationwide. Aside from professional and academic experience, Kennedy is passionate about service within her community. 

Bryan Bermeo is a recent graduate from Brown University where he obtained a B.A. in Economics on the business track. From the southwest side of Chicago and the son of two Ecuadorian immigrant parents, he has a diverse urban spirit and holds a deep regard for the first-generation experience. This summer, Bryan will be focusing on updating GIS data, producing digestible story maps of current resources, and producing blog posts.

Bryan is also interested in projects related to K-12 public education, community building, and immigration activism. In the fall of 2024, he will begin a full-time position as a first-year associate in the Boston Consulting Group’s Chicago office.

Jurnee Jessie is a recent graduate of Howard University with a Bachelor of Arts in International Affairs. While setting her sights on law school in Fall 2025, Jurnee is passionate about giving back to her community. Raised in the Philadelphia suburbs, she actively volunteers at local food pantries and after-school programs, focusing on mentorship and empowering underprivileged youth.

Beyond community service, Jurnee is a dedicated advocate for the arts and enjoys expressing herself through dance. Through her involvement with BankBlackUSA and the Cowrie Initiative, Jurnee is looking forward to contributing to the Capital B Blog with compelling content and expanding the reach of the Black Bank Lists.

Davion McArthur is a recent graduate from Texas State University in San Marcos, Texas with a B.A in Digital Media Innovations with a concentration in multi-media production. With his degree, he aspires to be a design editor so he can contribute what he’s learned to something already existing then move on to create his own designs from the inspirations he’d receive.

Davion believes that through working with BankBlackUSA and COWRIE he can both enhance his skills and assist in making sure that their messages are portrayed in a way everyone will understand and want to understand. He will be working mostly with the design and publications side of projects over this summer.

Jeffrey Sims is a recent graduate with a B.S. in Economics and a minor in Finance, featuring a pre-law concentration from Florida State University. His career aspirations are firmly planted in corporate law, enriched by extensive academic research into business strategy, legal consulting, and corporate governance. This background has equipped him with a robust understanding of economic principles and market behaviors, directing his career goals towards roles in corporate law firms where he can combine legal analysis with advisory duties.

Jeffrey’s interests extend into trial advocacy and specific corporate legal fields such as patent, tax, and corporate law. Committed to justice, equality, and societal improvement, he actively participates in volunteering efforts and leverages his research skills to contribute to legal reforms. In addition to his legal and economic pursuits, Jeffrey is a resident DJ and a promoter for a record label, bringing his passion for music and community engagement together. Currently, he works with BankBlackUSA, supporting their mission of promoting economic empowerment and community growth through financial education and advocacy. Jeffrey is driven by the conviction that ethical legal practices and smart corporate strategies are essential in promoting economic fairness and community growth, aiming for a future where economic and legal frameworks are both equitable and innovative.

Cailynn Winford, a rising sophomore at North Carolina Central University (NCCU) studying Sports Medicine in the Kinesiology Department and is passionate about shaping public discourse around vital social issues, particularly economic justice. Outside of the classroom, she is also a dedicated member of the NCCU golf team.

In Cailynns mind there is no better feeling than a quiet early morning on the golf course. Cailynn aspires to use BlackBankUSA to learn how to make a meaningful impact by sharing knowledge and fostering intellectual growth.

During the mid-twentieth century, the United States segregated cities and excluded Black Americans from wealth building through redlining and exclusionary housing practices. In 1933, the Federal Housing Administration began to subsidize developers who built suburban homes in communities designated for whites only^[1]. Furthermore, they insured loans made for homes in white neighborhoods yet refused to insure mortgages in and near Black neighborhoods – a practice known as redlining^[2]. This capital disparity left drastic effects on the landscape of our country, and resulting racial and economic segregation persists in our communities to this day. These racist policies and systems excluded African Americans from wealth generation. According to The Color of Law^[3] author Richard Rothstein, this state-sponsored system of segregation drove a wedge in the racial wealth gap. African American wealth makes up just 5% of the wealth of white families. Because most families make up their wealth through homeownership, Rothstein says, “this enormous difference is almost entirely attributable to federal housing policy in the twentieth century.” As of 2019, Black household wealth is only 12.7%^[4] the wealth of white households according to the National Advisory Council on Eliminating the Black-White Wealth Gap —  a panel of 10 national experts in economics, history, public policy, and presidential transitions convened by The Center for American Progress.

In 1977, Congress passed the Community Reinvestment Act (CRA)^[5] to ensure that federally insured depository institutions were granting credit in communities where they collected deposits. Along with the Fair Housing Act, this law is the primary legislation created to end redlining. This legislation addresses how banks serve the credit needs of low-to-moderate income (LMI) neighborhoods, as the federal regulators judge performance. Compliance with the CRA is necessary for the banks to apply for new charters, branches, mergers, and acquisitions. Banks are graded on three examination tests: lending, investments, and service. Critics argue that as the primary legislation to end redlining and ensure inclusive finance from banks, CRA enforcement is neither effective nor sufficient. Critics further say that The CRA lacks lending quotas or benchmarks, and nearly every bank receives at least satisfactory ratings by the federal regulators, indicative of weak enforcement.

One of the primary ways large banks fulfill CRA requirements are with investments in Community Development Financial Institutions (CDFIs). [TSW1] CDFIs^[6] are mission driven, financial institutions certified by the US Treasury’s CDFI Fund and are designated to provide credit and financial services to LMI individuals and historically disadvantaged communities. Most Minority Depository Institutions (MDIs) are also CDFIs. In fact, some may argue that MDIs are the original CDFIs given they were created to serve underserved communities of color. CDFIs must direct at least 60% of their financing towards LMI or underserved communities. CDFIs rely on investments from larger commercial banks to provide loans. However, the need for alternative lenders such as CDFIs is evidence of a larger problem—large commercial banks do not meet the credit needs of the LMI neighborhoods that their branches serve. Be it because of lack of financial incentive or the perpetuation of discriminatory policies, this market failure continues to exist.

Banks may not lend in Black neighborhoods because they fail to see their value. Research by Andre Perry, Senior Fellow of the Brookings Institution, illustrates that homes of similar quality in majority Black neighborhoods are worth 23% less ^[7] than their white counterparts, even when controlling for common appraisal criteria such as education, amenities, and crime. Across Black majority neighborhoods, owner-occupied homes are undervalued by $48,000 per home on average, amounting to a cumulative loss in wealth of $156 billion dollars nationwide. This systematic devaluation of Black assets provides evidence that the appraisal methods that banks use have a bias against Black communities.

This bias in appraisals results in lack of credit access. Larger commercial banks by and large do not make small dollar mortgages. The Urban Institute released a report ^[8]on the small dollar mortgage problem, where banks fail to make loans under a certain value. For the purposes of their report, the Urban Institute chose $70,000 as the threshold for small dollar mortgages. For properties valued at $70,000 or less, only 25% of purchases were financed with a traditional mortgage loan product. White homes, valued between $70,000 and $150,000, had nearly 80% financed with a traditional mortgage product. The lack of financing for low-priced homes underscores the challenges and lack of support that LMI individuals may face when home-buying.

This phenomenon is more consequential with a bird’s eye view. Detroit, for example, the nation’s largest majority-Black city. The city of approximately 700,000 people only had around 1,700 mortgages in 2019, with less than a quarter of home purchases financed using traditional mortgage loans. The view gets even more stark when emphasizing racial equity. Detroit’s population is made up of around 80% African American residents, but in 2017, Black applicants had almost the same number of mortgages as white borrowers, who only make up less than 15% of the population. In 2020, African American applicants were denied home purchase loans at twice the rate as white applicants, and some were denied despite having a higher income than approved white applicants.

Black-owned banks have provided financial support to the Black community, especially when the market does not. The Milken Institute reports that on average 70% of minorities do not have a branch in their neighborhood and at the same time, MDI branches are located in census tracts with an average 77% minority population compared to 31% for all FDIC-insured depository institutions.  Black banks are anchored in Black cities or regions and have a strong record of lending in Black neighborhoods to Black borrowers. According to Urban Institute, the share of mortgage originations to Black borrowers ranges from 75% and 100%^[9] of borrowers at Black Banks, while the share of Black borrowers at other types of banks never exceeds 10%. When considering an applicant, Black banks take a more comprehensive approach, taking other factors into consideration rather than a typical credit profile, a practice known as relationship banking.

As bank branches and headquarters are located within the neighborhoods and cities that they lend within, Black banks apply context and community knowledge to lending decisions. Because of this holistic approach to lending, Black banks also provide countercyclical credit access, providing greater access when markets retract, as evidenced by their performance during the Great Recession. Black banks are community banks. The FDIC defines a community bank as banks with less than $10 billion in assets^[10], a category all Black banks fall under. Community banks tend to have a narrower focus and use their deposits to support their primary revenue source of lending within their community. Black banks also tend to be CDFIs, making up the largest contingent of Minority Depository Institutions (MDI) CDFIs at 56%.

Community banks, CDFIs, MDIs, and Black banks make the loans that larger banks typically do not. Large banks, who serve an enlarged proximity, have a wide array of operations and use their deposits for financial products other than typical community reinvestment. Deposits made in large banks often leave the community from which it came, removing the primary role banks are supposed to play – cycling money through a local economy. Taking this one step further, communities served by larger banks may have more trouble getting loans from banks who have other profit-generating operations, and as such, may suffer. Research by Erik Mayer Ph.D, Assistant Professor of Finance at SMU Cox, found exactly that. Communities served by larger banks have reduced access to credit^[11], leading to less economic mobility than communities served by locally-based financial institutions. According to Mayer, as large banks significantly increase their market share in an area, by a standard deviation, upward mobility levels fall by nearly 5%.

Banks have been consolidating for decades, as federal and state regulations have made it easier for larger banks to acquire smaller banks and competition has made it more difficult for small banks to survive. This trend is also true for Black banks. At their height, there were 134 Black-owned banks in the United States. Today, only 19 exist. By comparison, as of February 2021, there were 10,605 financial technology startups in North America, up from 5,800 in 2019. The advantages of Black banks are clear, yet greater public action to support these institutions is still necessary. Several government policies have been crafted since the 1970s to support Black and minority depository institutions, more familiar ones such as the CRA and the CDFI Fund and newer ones like the Community Development Capital Initiative (CDCI) and Emergency Capital Investment Program (ECIP). In 2008 the US Treasury created (CDCI), where the government helped to recapitalize CDFIs through the purchase of preferred equity stakes. The Consolidated Appropriations Act, 2021, created the ECIP that incentivized, through capitalization, LMI community financial institutions to support small businesses and consumers in their respective communities.

“The ECIP program gives us [Black Banks] more capital than we currently have. It is a significant capital building program for our institutions. Because of that the future looks absolutely brilliant. In the next three to five years you should see most Black-owned banks double in size.” – B. Doyle Mitchell Jr. Industrial Bank President and CEO Still, the evidence is clear that these banks, which provide a unique service critical to the equitable development for disadvantaged populations, need and deserve much greater support.

^[1] Gross, T (2017). A ‘Forgotten History’ Of How The U.S. Government Segregated America. NPR. Retrieved on August 30, 2022 from https://www.npr.org/2017/05/03/526655831/a-forgotten-history-of-how-the-u-s-government-segregated-america

^[2] Best, R, MejÍa, E (2022). The Lasting Legacy Of Redlining. FiveThirtyEight. Retrieved on August 30, 2022 from https://projects.fivethirtyeight.com/redlining/

^[3] All Things Considered (2017). ‘The Color Of Law’ Details How U.S Housing Policies Created Segregation. NPR. Retrieved on August 30, 2022 from https://www.npr.org/2017/05/17/528822128/the-color-of-law-details-how-u-s-housing-policies-created-segregation

^[4] Weller, C, Roberts, L (2021). Eliminating the Black-White Wealth Gap Is a Generation Challenge. CAP. Retrieved on August 30, 2022 from https://www.americanprogress.org/article/eliminating-black-white-wealth-gap-generational-challenge/

^[5] NCRC https://ncrc.org/treasureCRA/

^[6] Community Development Financial Institution (CDFI) and Community Development (CD) Bank Resource Directory https://www.occ.gov/topics/consumers-and-communities/community-affairs/resource-directories/cdfi-and-cd-bank/index-cdfi-and-cd-bank-resource-directory.html

^[7] Perry, A , Rothwell, J , Harshbarger, D (2018) The devaluation of assets in Black neighborhoods. Brookings. Retrieved on August 30, 2022 from  https://www.brookings.edu/research/devaluation-of-assets-in-black-neighborhoods/#:~:text=Homes%20of%20similar%20quality%20in,few%20or%20no%20Black%20residents

^[8] Zhu, L , Ballesteros, R (2021) Making FHA Small-Dollar Mortgages More Accessible Could Make Homeownership More Equitable. Urban Institute. Retrieved on August 30, 2022 from https://www.urban.org/urban-wire/making-fha-small-dollar-mortgages-more-accessible-could-make-homeownership-more-equitable

^[9] Neal, M , Walsh, J (2020) The Potential and Limits of Black-Owned Banks. Retrieved on August 30, 2022 from https://www.urban.org/sites/default/files/publication/101849/the20potential20and20limits20of20black-owned20banks.pdf

^[10] FDIC Community Banking Study (2012) Chapter 1 – Defining the Community Bank. Retrieved on August 30, 2022 from https://www.fdic.gov/resources/community-banking/report/2012/2012-cbi-study-1.pdf

^[11] Warren, J (2020) Larger banks Lead to Less Economic Mobility. SMU Cox. Retrieved on August 30, 2022 from https://www.smu.edu/cox/Learning-Culture/Research-Papers/20200201_Erik-Mayer

It has been a while since our last newsletter and we have A LOT of great things to catch you up on. BankBlackUSA is on a roll! If you are short on time here is the TL;DR:

We recently celebrated our six year anniversary. We hired college interns from Brown University, University of Michigan, and UT Arlington. BankBlackUSA website was honored by The Webby Awards and Fast Company. The NBA & BBUSA’s State of Black Banks Report & Next Generation Advisory Council comes out this Fall.

Click here to read the newsletter.

Want to help improve and expand Black-owned banks?nbsp;We’ve partnered with our friends at Co-Created to research different ways our Banks might better serve us. We want to make sure that our Black-owned banks hear from you about your evolving needs. Take this 5-minute survey and enter to win a $300 gift card to a retailer of your choosing!

Click here to take the survey.

The best graphic design of 2022

These visual designs, whether static or interactive, had a social, cultural, or business impact.

The best-designed finance projects of 2022

These banking apps, trading tools, and other products and services used human-centered design to help people manage their money.

18 designs that made a big impact in 2022

These are any design moves, no matter how big or small, that had a major impact.

What are the Innovation By Design Awards?

The 2022 Innovation By Design Awards honor the designers and businesses solving the problems of today and tomorrow. The competition, now in its eighth year, has featured a cross-section of blue-chip companies, scruffy startups, and hungry young talents. It is one of the most sought-after design awards in industry.

The categories are judged by a sterling selection of designers, business leaders, and Fast Company editors. Entries are judged on the key ingredients of innovation: Functionality, originality, beauty, sustainability, depth of user insight, cultural impact, and business impact.

Entrants stand to gain superb exposure on Fast Company: Finalists will appear in the October issue of Fast Company magazine; winners will be celebrated at Fast Company‘s Innovation Festival this Fall, and receive a complimentary pass, and both winners and finalists will be listed in an online directory of the world’s best design-driven companies. See last year’s winners and finalists.

July 9th marks six years since BankBlackUSA was created. We are so excited to see what this next year brings to the work we’re doing. A big thanks to all of our allies and partnerships in this journey. Check out these reflections from a few of our founders.

LaToya Benjamin

For the first 6 years, BBUSA has revolutionized what social justice activism can be. We have developed a sustainable model of cross sector collaborations that address the economic needs within both urban and rural Black communities. We are now providing solutions to industry leaders, communities of interests and families on the value of Black financial institutions, ownership and so much more. The next 10 years will be nothing short of legendary. Congratulations BBUSA Team

Christopher Williams

A digital call to action; to empower our people with SOMETHING in a time of heightened distress; to form a virtual community that delivers tangible tools for improving the lives of others– 6 years ago, 7 of us gathered online to answer that call and 6 years later we continue to expand our community, to sharpen our tools, and to remind us all that we have the power to fight back.

Happy Anniversary BankBlackUSA! Cheers to the BBUSA team, all who have supported us and all who have dedicated their work to supporting Black people!

Stephone Coward II

The last six years have been nothing short of amazing. It has been an incredible honor to be able to work beside my cofounders and for us to take this moment to reflect on how much we have grown. We started off as a group of individuals with questions and now we are a team providing our thoughts and solutions. We went from being a source of truth on where our Black owned banks have been and currently are to now being able to show where they can go.

Ecosystem building and collaboration are at the heart of everything we do. Our love of leveraging data to help people make informed decisions has led us to ongoing partnerships with major universities. We even have more universities who are joining us now! It’s exciting to think about where we are headed next. I’m so proud to be a part of this organization! Join us!

Robert Herring III

Six years ago, driven by a similar purpose, and crowding around the campaign to divest from majority institutions and reallocate those investments into Black owned and run institutions. BankBlackUSA coalesced from the unlikeliest, remote corners of the internet. And the pivot began. Moving your investments is signaling, but where you choose to move them is equally as important; the relationships those institutions have with our communities, the support they have within their vertical, and the products they’re sourced to offer all have vital relevance. So, BankBlackUSA continued its deep dive into the socioeconomics of Blacks in this country, understood where our role was forced to expand, and the fruition of that realization was The COWRIE Initiative.

Today, both stand as effectual tools and apparatuses in the space for fiscal advocacy by: recognizing and challenging our institutions to remain steadfast as allies and conduits for the accrual of Black assets and wealth; by developing strategic, research and scholastic partnerships to further investigate historical trend, present fallout, and generate modern solutions to address systemic, economic lock out; and ultimately, by creating tools and dialogue that promote literacy and autonomous decisions for the individual while strengthening options for moving and sharing as a collective. Here’s to six years strong, and to however many more remain necessary to collect our due, and to create pertinent changes within our communities and how they’re acknowledged in all spaces.

Meet Nate

Nate is a recent graduate from the Chicago suburbs who received his Bachelor’s of Science in Information degree from the University of Michigan’s School of Information in April 2022. He is returning to Michigan in the fall of 2022 to pursue a Master’s of Science in Information degree with a focus in Big Data Analytics. When not focused on work or school, you can catch him watching and following his favorite sports teams and players!

He believes the work that BankBlackUSA and the COWRIE Initiative is doing is very important and he is passionate about using data to highlight crucial issues in America. Nate will be working on data-oriented and product management projects this summer. For example he will help build out our Black Credit Union database and enhance the BankBlackUSA App.

Nik is from the Metro Detroit area and recently graduated from the University of Michigan School of Information. He will be moving to California after his work with BankBlackUSA to become an Associate Product Manager in the Bay Area. Other than work and school, Nik is a huge fan of soccer and his favorite team is Arsenal FC.

Nik was very passionate about his work he did with BankBlackUSA this past year and is excited to continue his project this summer. Nik will be working on data-oriented and product management projects this summer. For example he will help build out our Black Credit Union database and enhance the BankBlackUSA App.