The Color of Money: Black Banks and the Racial Wealth Gap

by Mehrsa Baradaran

This problem has been exacerbated since the crisis of 2008, when 93 percent of all bank closings occurred in low-income neighborhoods.

Banking deserts are left vulnerable to high-cost payday lenders, title lenders, and other fringe banks.

The effects of the most recent loss of black wealth were not just in lost homes and bank accounts, but in the resulting loss of social and community capital. From 2003 to 2013, Detroit closed 150 public schools and Chicago closed fifty in 2013 alone, primarily in black and brown neighborhoods. Black unemployment reached a twenty-year high, and black and brown prisoners make up almost 60 percent of the prison population.

“We are calling on all black people to withdraw every dime they have in OneUnited if they don’t resolve this issue,” said one minister. Mayor Thomas M. Menino said during a protest, “You’ve shown the whole country we’re not going to stand for this corporate, greedy individual to take away one of the bedrocks of the city of Boston.”158 In an interview with the Washington Post, another pastor analogized the predicament to the biblical parable of the ungrateful servant. The story concerns a servant whose debt is mercifully forgiven by his creditor, a powerful king. This servant, having just been forgiven, turns around and sends his own debtor to prison for not paying him. The king then severely punishes the servant for his ingratitude. In the analogy, OneUnited was the ungrateful servant who, having received bailout funds from the king (or here the more powerful Treasury Department), had turned around to cruelly foreclose on the nation’s oldest black church. “We forgave the banks and bailed them out, and now they’re coming after the little borrower,” said Pastor Ryan Bell.159 But the bailout was not quite a biblical wiping out of debt. The bank still had to pay back the federal government, and it was struggling to do so while facing heat for having received possibly “unethical” and certainly unearned “special treatment.”160

In interviews, black bankers explained that they try to offer modifications to black churches whenever possible. Jim Sillis of M&F recounted that in 108 years of lending to black churches, the bank had seen only two failures because the bank always tried to work with the church first. Other mainstream banks are not so merciful. Bankruptcy law expert Pamela Foohey’s research revealed that black churches made up around 75 percent of bankrupt congregations over the last decade. This number is astonishing because black churches represent only 21 percent of churches nationwide.

Foohey uncovered a stunning case of discrimination by creditors. Lenders not only charged black churches more for credit, but disproportionately denied their loan modification requests,

pushing these churches toward...

In the 1970s, HBCUs educated 75 to 85 percent of the black population; today only 9 percent of blacks attend them.