Reconstruction years (1865-1877) after the Civil War provided opportunities for African Americans to “solidify family ties, create independent religious institutions and economic independence.”
The first two successfully evolved but economic independence evaded most Southern Blacks. The dream of prosperity was fleeting.
“Post Reconstruction [African Americans across the south] had no access to banks,” said Jeff McGruder, chief relationship officer at Citizens Bank in Nashville. “People depended on private lending through churches.”
The churches were overrun with requests for loans to purchase homes or start businesses.
Black-owned banks created by successful black businessmen began opening in other states as early as 1888. The need for a Black-owned bank was finally recognized in 1904 when the One Cent Savings Bank was founded by Nashville residents and businessmen R.H. Boyd, J.C. Napier and Preston Taylor. Today the bank is known as Citizens Savings and Loan and is now the oldest continually Black-owned Bank in America.
“The Boyd family still owns 43% of the business,” McGruder said. “Over the years Black-owned banks were affected by systemic issues.”
Both banking and Black communities thrived, until “systemic racism” within governments and fear from the Ku Klux Klan shut down many banks and slowed the progress of Black-owned businesses, he added.
“You can’t grow a business without a bank,” he said. “Banks are how the business class grows to buy homes.”
Racial problems even affected Black soldiers who fought in World War II. Soldiers were promised low interest bank loans for housing through the FHA/GI Bill, but white banks denied the loans to African Americans who served in the military. If the bank did approve the loan, it wasn’t uncommon the property was located in a redlined area, a section on a map in which federal funds could not be used due to the location and likelihood values would go down.
“There weren’t many Black-owned banks,” McGruder said. “At a white bank Blacks were denied the loan.”
That was due to a practice called redlining, a governmental practice of drawing a red line around communities it wouldn’t support or charged higher interest rates. When Interstates were being built in the 1970s, they put them over or through Black neighborhoods, creating other redline areas, if they weren’t already redlined.
“There were sections like that in North Nashville, Memphis. Chattanooga, Baltimore and other cities throughout the country, including the Natchez area in Franklin,” McGruder said, “Interstate laws passed in the 1970s put Interstates through or over Black backyards rather than around them.”
Citizens Bank is a great example. It’s location on Jefferson Street is one block from Interstate 40, McGruder said.
“There’s no way you can tell me that wasn’t on purpose,” he added. “It destroyed Jefferson Street.”
Franklin resident George Patton was in the banking business for 36 years. He worked in five different banks and worked his way up from cashier to a senior vice president executive position with a seat on a corporate advisory board, but it wasn’t always easy.
Patton recalled that when he and his wife married in 1974 they lived in an apartment for a couple years before trying to purchase a house. He didn’t make enough to save for a down payment, and he made too much to qualify for a government loan.
“It takes time to build equity and not everybody can make enough to build equity,” Patton said.
In 1976 they bought their first home with the help of Pastor Walter Lee Smithson. The interest was 9% but they had their house.
“Had it not been for him as a private investor, we wouldn’t have been able to buy that house,” Patton said.
In 1997, Patton and his wife sold that house for $300,000 and bought a home in another Franklin neighborhood.
“Redlining is real and can be proven,” Patton added. “Some of it still goes on, but not as much as it did. There are so many communities in transition.”
He would know — he worked in a bank loan department where loans went through several levels before being approved.
“A friend home from Vietnam came in for a loan,” Patton said. “I took him to my mentor. He turned my friend down. I felt bad. Not only did he turn him down, he wrote Do Not Lend on his application.”
Patton also told the story of a longtime minority customer with a thriving business in a minority neighborhood and “millions in our bank.” The businessman wanted a loan to upgrade computer software and would give the bank authorization to withdraw the payment from his account each month. The credit department was prepared to deny the loan when the bank president walked by and signed the loan authorization.
“The loan division was profiling,” Patton said. “We could’ve lost one of our largest accounts.”
From 1963 to the mid 1980s federal laws supported middle class growth, except for black and brown people.
In spite of all the road blocks, a Black middle class began emerging in the 1980s and 1990s.
“Despite all that, now we have a strong middle class, but not many Black-owned banks,” McGruder said. “Now things are changing because of what we’ve done in the past.”
Citizens Bank is focusing on the welfare of the average person’s net worth. According to McGruder, the average white person has a net worth of $170,000 and the average African American’s net worth is $17,000. Financial literacy is key. Due to range of the value of land and housing values throughout Middle Tennessee, people can’t live everywhere, but they can learn to manage their money.
McGruder said Citizen’s Bank is starting with middle school program through the Junior Achievement program called Biz-Town.
“We’re adopting schools in our district and busing them to Biz-Town,” he said. “We really have to start with the next generation.”
Another program is Operation Hope. It puts financial experts in bank offices to assist clients who need help with their finances.
Citizens Bank is located at 2013 Jefferson St. in Nashville. The bank serves white and Black customers and always welcomes new accounts.
“The goal of our board is to look like the United Nations,” McGruder said. “The ability to buy a house is the most important thing. Those soldiers [after WWII] bought houses then leveraged their house to start a business. We’re pro first home buyers then pro entrepreneurship. Our bank is trying to focus on [our customer’s] welfare.”
According to the McKinsey Institute for Black Economic Mobility, “Healthy Black-owned businesses could be a critical component for closing the United States black-white wealth gap.”
The gap is projected to cost the economy $1 trillion to $1.5 trillion (in 2018 dollars) per year by 2028.
