In January, I had the honor of attending an event that showcased the history of Black-owned banks in America. A history of which I must admit I was woefully uninformed. The guest speakers were Dr. Bernice King and Ashley Bell. Dr. King is of course the daughter of Martin Luther King Jr, and she is a lawyer, minister, activist, and businesswoman. Mr. Bell, also an accomplished lawyer, has a long history in the financial services sector, including serving as the General Counsel for the National Black Bank Foundation and the $250 million Black Bank Fund. There are likely no better two people to provide such an important history lesson, not to mention a more current framing of the importance of having Black-owned financial institutions. As it turns out, their visit will likely be the first of many to Utah, as it was recently announced Utah will soon be home to the country’s 17th Black-owned bank, Redemption Bank. When this acquisition closes, it will mark the first time Black investors have bought a non-minority-owned bank in the United States, although this deal must still get state and federal regulatory approval. The CEO will be Mr. Bell, and Dr. King will serve as the Senior Vice President of Corporate Strategies and Alliances. Before I jump into some interview questions with Mr. Bell about this acquisition and what it means, allow me to bring you up to speed on some important history that is far from common knowledge.
The history of Black banks in America goes back 158 years with the establishment of the Freeman’s Savings Bank in 1865. This was the first American bank to specifically cater to the needs of Black people, and it had 37 branches, the majority of which were located in the south to provide financial services to recently freed slaves. Prior to the Emancipation in 1863, Black slaves were forbidden from owning property or accumulating wealth, all while they themselves were a wealth generator for white America. In 1860, fully 15% of all white wealth in America was from the ownership of slaves, and in the antebellum south, that number was 50%. There were approximately 3.9 million slaves in the Confederate States in 1860 compared to the free white population of 5.5 million, and those black bodies were used as collateral for thousands of mortgages, loans, and land-ownership deals over the history of slavery in the US. The Freeman’s Savings Bank quickly attracted over 67,000 Black depositors, but mismanagement by its officials, as well as risky investments with little oversight, and other factors led to its collapse in 1874. The failure of Freeman’s Savings Bank wiped out thousands of Black Americans’ wealth, and laid the foundation for decades of mistrust of financial institutions within Black communities.
The first Black-owned bank was the True Reformers Bank, which was chartered in 1888 by Rev. William Washington Browne, but which didn’t open until 1889. The first Black-owned bank to officially open was Capital Savings Bank in October of 1888. Over the next several decades, Black-owned banks opened all over the US, including 134 institutions between 1888 and 1934. At the time of Martin Luther King Jr.’s assassination in 1968, there were 135 Black-owned banks in the US. However, since then, that number has dropped sharply. In 2002, there were 47. Today, there are just 16. The reasons for this dramatic decline are multifold, and I highly recommend the 2017 book The Color Of Money: Black Banks And The Racial Wealth Gap by Mehrsha Bararadaran to go deeper on this topic. It should also be noted that over this period of time the banking sector as a whole has changed dramatically. At its peak there were over 30,000 banks in the United States, while today there are less than 5,000.
With this history in mind, and for so many other reasons that are so powerfully explored in Baradaran's book, it should be of no surprise that studies show that as high as 49% of Black households are underbanked or unbanked altogether. This is in comparison to just 15% of white households. This matters greatly when it comes to wealth creation in Black communities. Not only does The Color of Money capture the historical context, but it also “tells the story of how the wealth gap was created, maintained, and perpetuated.”
There has been much discussion about the racial wealth gap, as there should be. However, what is also needed are concrete actions to close it, and Black-owned financial institutions can play an important role in this. Statistics tell us that the white to Black wealth ratio in the US is 6 to 1, and that the median white household has $189,000 in wealth, while the median Black household has just $24,000. The stats also tell us that the top 400 wealthiest Americans possess more wealth than all 10 million Black households combined.
And there is more. According to a report by the US Federal Reserve, less than half of Black business owners who apply for business loans are successful, and those who do get funded are often denied full financing and may be charged rates up to 10% higher than all other groups. Black business owners are also more likely to be turned down for credit cards, and they may face higher charges for financial services and insurance.While discriminatory and predatory practices are illegal, that doesn't mean it doesn't happen.
It would be an understatement to say that there is a lot of work to do to ensure that Black Americans have access to the financial services they need to thrive. Starting with more Black-owned banks. And with that, on to the interview with Ashley Bell.
Jacki Zehner: Thank you so much for agreeing to talk to me today Ashley. It’s a privilege to be speaking with you at such an exciting time. Before we jump into talking about Redemption Bank, please share a bit about your personal history, especially as it relates to Black-owned banks.
Ashley Bell: I have witnessed and understood the relevance of Black-owned banks operating in the United States my entire childhood and adult life. My family owned banks in North Georgia back when there were well over 130 Black-owned banks. These banks provided a sense of community, and offered a secure place for Black communities to deposit and grow their money. Through the Great Depression and through the detrimental redlining efforts, these Black banks disappeared, along with the money and customers that had grown to depend on these banks for wealth creation. Redemption Bank offers a safe place for all of its customers to generate wealth and secure investments.
I also learned the great significance of Black-owned banks during the pandemic when we (SBA)worked hand in hand with them to help provide the Paycheck Protection Program loans. We know the Black and brown communities were the hardest hit by the pandemic, and the Black-owned banks were critical in helping to keep their communities and customers afloat during the most challenging times imaginable.
I helped to found the National Black Bank Foundation for Black-owned banks to unite, creating a larger threshold to secure large investments, to remain as cornerstone institutions for the Black communities they serve, and to help bridge the racial wealth gap that exists across this country today.
Jacki Zehner: It was surprising to me to learn that the number of Black-owned banks has plummeted significantly to today's numbers. Can you offer an explanation?
Ashley Bell: Black banks (before desegregation) were flourishing and became the staples of Black and underserved communities. These banks provided loans to people and businesses, and supported the local communities to their core. After desegregation, the pool of banks opened up for the Black communities, creating credit elsewhere for Black individuals and businesses. The dollars slipped out of the communities, making it difficult for the Black community bank to survive. I always say that credit is like water; where water flows, things grow. Businesses grow. Communities grow. And in communities where there is a lack of capital, it becomes difficult toscale and grow.
Jacki Zehner: When I first heard you speak in January, you laid out why it was and remains so important to have Black-owned financial institutions. Can you speak to that?
Ashley Bell: In neighborhoods created by discriminatory practices like redlining, Black-owned banks are often the only source for reasonable, fair, and non-predatory lending. And because they practice relationship banking—a system of lending that looks beyond credit score to holistically understand an applicant’s financial situation—they are a vital and singular lifeline for Black entrepreneurs and households.
Jacki Zehner: In this article I provide some statistics about a very big, and persistent, racial wealth gap. I welcome your thoughts on that topic and what needs to happen to eliminate it.
Ashley Bell: Technology is critical in bridging the racial wealth gap that is so prominent across our country. Technology can now be used to make a Black-owned bank an easily accessible, national, digital bank for everyone. Redemption Bank will use state of the art technology to offer services to all minority communities across the United States. Technology makes our community much larger and more connected. We understand our customers and can offer services that will assist in bridging the wealth gap, such as home loans with reasonable terms, small business loans, and much more.
Jacki Zehner: Tell us how Redemption Bank came to be, and how and why you became involved?
Ashley Bell: For all the reasons discussed, we felt it was important to establish the bank in a venue with a robust operating landscape. The State of Utah was particularly inviting for several reasons. Through my role at the White House in co-authoring the Paycheck Protection Program (PPP), I observed the ease and efficiency in originating loans through Utah banks in particular. And it’s no secret that Utah has one of the strongest economies in the country, as well as a friendly regulatory environment for financial institutions.
Last year we became aware of an existing, well-run bank that was available for sale, and we jumped at the chance to make the acquisition. We signed a definitive purchase agreement to purchase Holladay Bank & Trust in the greater Salt Lake City area, and were also able to secure a strong management team from a recently sold, top-performing Utah bank who share our passion for creating a world class bank.
Jacki Zehner: What is your hope for Redemption Bank?
Ashley Bell: First, it is imperative that we retain the existing and talented Holladay Bank & Trust team members and cement the strong customer base that the bank has already established.
The investors and I have an objective of building a highly profitable financial institution that can wisely make credit and banking services available to all, while specifically addressing the needs of minority communities. We’ll offer Small Business Administration (SBA) and other government-guaranteed lending along with traditional loans, syndicate large and high profile loans through other minority depository institutions, provide concierge retail bankingand payment services, and deliver these offerings via state-of-the-art technology.
We will reach out to minorities locally–and ultimately–nationally to ensure that credit is never withheld or abridged for reasons other than the ability to repay. We’ll also actively support minority communities with financial literacy, charitable endeavors, and local recognition.
We hope our performance allows us to act as a beacon to other MDIs as to how they might modify their own operations, enhance earnings, and become a stronger economic influence in their respective service areas.
As we achieve these objectives, we feel we will be moving the dial in broadening the wealth base of minorities across the country.
I want to thank you Ashley Bell for your important work in the field of finance and working to close the racial wealth gap here in the United States. I hope all of you readers will join Ashley and I for an extended conversation on this important topic on LinkedIn Live at the end of this month! Register to be notified by clicking the image below.
Join Ashley Bell and Jacki Zehner for a LinkedIn Live Conversation!August is National Black Business Month, and was created in 2004 byhistorian John William Templeton and engineer Frederick E.Jordan Sr.to bring attention to the needs of more than two million Black-owned businesses operating across America.
Additional reading: Click here for an academic research paper by economists Ellora Derenoncourt, Chi Hyun Kim, Moritz Kuhn, and Moritz Schularick on the racial wealth gap published in 2022 titled "Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020." As NPR states, "This new study adds to a growing body of evidence showing that, despite ostensible progress made since the civil rights movement, when it comes to the most important, bread-and-butter economic issues of income, wealth, and mobility, progress in ending racial inequality is stalling — or even reversing. The study brings into focus the simple math of why — absent radical measures — America won't be seeing true racial equality anytime soon."
* I offer apologies for the incorrect spelling of The Color of Money's author in the newsletter. It has been corrected.
