Why Banking Black Is Good For The Black Community


By Robert Stitt

Despite the efforts of such notable benefactors as Fredrick Douglas, the bank would close in 1874, taking with it much of the $57 million that over 100,000 African Americans had deposited. While there was mismanagement, and a number of bad investments took place, the bank’s demise was mostly due to bad luck. After all, the first major U.S. depression started when the Panic of 1873 led to financial devastation throughout the country.

While the Freedman’s Bank may have gone under, the FDIC notes that “there were over 130 African-American owned banks between 1888 and 1934.” Today, there are just 22.

OneUnited Bank is the largest Black-owned bank in America. The CEO of One United is Teri Williams. She notes, “Part of what we realized is there were a lot of Black banks with a great mission, but they didn’t have the economies of scale to invest in new technology.” Yet, she told the Atlanta Black Star that it was not just Black banks that had problems keeping up with the technology, increased federal regulation, and compliance. “There has been a decline in banks in general. There also has been a decline in community banks that were the size of a lot of the Black banks that went out of business.”

Not all Black banks went under, however. OneUnited saw the struggle of several smaller Black banks and rescued them. “We acquired four banks and combined them into one,” Williams explained.

The struggle of minority banks goes beyond issues with technology and the government, though. The biggest problem is public perception. Even though many big banks just went through very rough times and had to be bailed out by the federal government, people still trust them more. “If you ask the Black community, ‘Where do you put your dollars?’ most will say they put it in the larger banks,” Williams says, adding, “It is difficult for black banks to attract dollars from their own community.”

According to Williams, the key to bettering the situation is to improve knowledge in the Black community about the role of the bank. She feels that most Blacks do not understand that the primary purpose of a bank is to recycle money. “What that means is people place deposits into the bank, and the role of the bank is to take those funds to the community, to build wealth or for buying a home. That, in turn, results in additional deposits that go into the bank, and the recycling goes on.”

Instead of investing in their own community, however, Blacks put their dollars in banks that invest outside of the Black community. Maggie Anderson once noted during her TED talk, “In the African-American community, our dollars leave the community in 6 hours.” She accented the tragedy of those numbers by explaining, “If black people were to increase spending within our own community from 2 percent to 10 percent, we would create 1 million new jobs.”

Williams says there is no reason not to invest in a Black bank. Speaking of OneUnited, she states, “Our rates are higher, our fees are lower, and we have 25,000 ATMs where you can get your money for free. So, in fact, we have better services than national banks, and we have more services that are targeted to meet the needs of our community than national banks.”



Community Building