27. Where should I bank?

Here’s today’s listener letter:

Where should I bank? On the one hand, I am lazy. On the other hand, the world is on fire and traditional banks don’t lend to Black and brown people. Help.

Thank you for sending this question in. Where to bank is a tough one. Especially if you are in an entanglement with a bank and all of your accounts are already connected to your other accounts and all of your bills are automatically being drafted from this bank and they have just made it so convenient that all you have to do is open an app and talk to a bot about what you’re trying to do. These days, I don’t think most of us go into an actual branch that often, I think that used to be why the big banks were more convenient because they had the advantage of having many more branches than other non-traditional financial institutions, but even in the day and age when we rarely step inside a bank branch, with the way all of our accounts are set up online, it still can feel more convenient to bank with one of the big banks.

The thing about the big banks, and the traditional banking sector as a whole is that there is a lot of ugly history baked into the DNA of those banks. The harms that those institutions have caused in Black communities as well as Latino and Native American communities are very real and there are still harms being perpetrated today.

So let me give you the overall advice first, and then get into a little bit of detail. My overall advice is to consider putting some of your money, like money you’re setting aside to buy a house or other savings into a community bank of some sort.

Personally, I have been interested in learning more about Black banks, specifically because of the well documented fact that you alluded to in your letter- that traditional banks have a long history of denying loans or offering crappy loans to Black people. More than half of Black Americans are underbanked. I think a lot about Black people who would like to open businesses, or community organizations, or buy a home.

A couple of episodes ago, we talked about book recommendations, that was Episode #25, and one of the books mentioned was Race for Profit by Keeanga-Yamahtta Taylor. This book was a finalist for the Pulitzer Award in 2020 and it is sobering. You may be familiar with the term redlining, it refers to the racist practice of excluding certain communities from home loans. The Federal Housing Administration openly set up racist policies to refuse to insure mortgages to Black buyers and not only that, this part was new information to me, they would only provide funding to white builders who guaranteed that no Black people would be allowed to be a single property in the areas that they were developing. Just wild. This was our government. Not some shady developer. Anyway, in Race for Profit, the author explains how even after redlining was outlawed, the real estate industry continued to exploit the Black community.

While we’re at it, another one of the books mentioned briefly back in Episode 25 was The Color of Money by Mehrsa Baradaran. This is another book with jaw dropping historical information about our country. If I had to give you a one sentence synthesis of the book, I’d say…..Because of racist policies, Black banks just have not been a big engine for Black wealth. Martin Luther King Jr, Malcolm X, W.E.B. DuBois, they all pushed Black banking as a tool for economic power for the Black community and it just has not turned out that way. The book provides a rich examination of exactly what has happened, but suffice it to say, Black banks were set up to alleviate Black poverty but have largely failed because of, well…the same exact policies that led to Black poverty in the first place.

One thing that has happened as many Black banks have struggled is that some are dropping the focus on Black communities and instead becoming community banks in general.

Community development banks are an interesting option for where to bank. Their whole thing is that they are mission driven. They are interested in providing access to underserved populations. As we just learned from The Color of Money, we can’t expect that these banks will change any of the policies that are at the heart of the wealth gap, ok? This is not a policy solution that gets at the root cause of the racial wealth gap, but I do think community banking could provide a bit of relief for the symptoms while we continue to push for policy change.

In your case, I would encourage you to think about putting some of your money into a community development bank. I’ll include a link to a nerdwallet article that has a drop down menu where you can select your state and look at some specific banks that you might be interested in.

If any listeners have already moved some of their money into a community development bank or any other type of CDFI please do get in touch, would love to know about your experience and your reflections on this.

Nerd Wallet on Community Development Financial Institutions to check out in our area
https://www.nerdwallet.com/article/banking/what-is-community-development-financial-institution-cdfi

NPR A Forgotten History of How the US Government Segregated America
https://www.npr.org/2017/05/03/526655831/a-forgotten-history-of-how-the-u-s-government-segregated-america

The Color of Money
https://bookshop.org/books/the-color-of-money-black-banks-and-the-racial-wealth-gap-9780674970953/9780674237476

Race for Profit
https://bookshop.org/books/race-for-profit-how-banks-and-the-real-estate-industry-undermined-black-homeownership/9781469653662

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