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Minority-Owned Banks Play A Real Role In Recovery?
Originally published on Wed September 18, 2013 5:51 pm
MICHEL MARTIN, HOST:
This is TELL ME MORE from NPR News. I'm Michel Martin. Later this hour, we will meet the new Miss America, Nina Davuluri, and we'll find out how she's already gotten a lesson in grace under fire after her Indian-American heritage drew a swarm of haters on the web. It's the first of two conversations we'll have this hour about the interesting politics of beauty right now.
First, though, we're going to talk about another issue that's very close to all of us and that is money. This week marks the 5th anniversary of the collapse of the giant Lehman Brothers investment bank and the financial crisis that followed. The crisis hit economically vulnerable Americans especially hard, including many people of color. As we've been talking about a lot this month about why this happened and what's being done to repair the damage and prevent another calamity, we decided to call two people who've been working on just one piece of this puzzle and they are with us now. Congressman Chaka Fattah is the chairman of the board for the Congressional Black Caucus Foundation, which is hosting its annual legislative conference this weekend. He's a Democrat representing Pennsylvania's 2nd District. He's with us from Capitol Hill. Welcome back, Congressman. Thank you so much for joining us once again.
REPRESENTATIVE CHAKA FATTAH: Well, thank you for having me, and it's a great day to be with you.
MARTIN: Thank you. And here in our studio is Michael Grant. He's president of the National Bankers Association. That's a group that's advocating for minority and women-owned banks since 1927. Welcome to you. Thank you so much for joining us.
MICHAEL GRANT: Thank you, Michel. I'm glad to be here.
MARTIN: So, Congressman, one of the reasons we called you is that the foundation is investing $5 million in five minority-owned banks. You're purchasing $1 million certificates of deposit from each of those banks, and you've made that announcement yesterday, kicking off the group's annual conference in Washington. What do you hope to accomplish with this initiative?
FATTAH: Well, it symbolizes a directional approach of the foundation. I'm the new chair of the board. We have made a commitment to not just focus on one pillar of power in our country, which is public policy or politics, but also to focus on economic development. And so we're taking the foundation's resources and we are - I'm not just rhetorically saying that we support the development of strong, sound financial institutions in the African-American community - but we're investing in them.
So this is a first act, but there'll be many to follow. As part of the Annual Legislative Conference, we're going to have, for the first time, an enterprise pavilion where we're going to showcase procurement opportunities both in the public and private sectors for African-American owned businesses who want to pursue economic opportunities. But all of these things will work together to have the foundation pivot, if you would, to focus on not just advocating for public policy, but acting, taking the initiative, and showing our friends, who want to support the work of the foundation, how they can best do so. That is, that they can follow our lead and invest some resources in the same manner that we are doing.
MARTIN: I think - I haven't forgotten Mr. Grant here, but I think it might be surprising to many people to find out that the Congressional Black Caucus Foundation did not have its money invested in minority-owned banks previously. Why not?
FATTAH: Well, I'm the new chair of the board. I'm newly to the board and this is an action that we're taking in terms of investment. And I don't know that it's fair to say that we didn't have money in African-American-owned banks. The difference is, is that we're making an investment in terms of their capital liquidity that they can now invest. So this is not money sitting in a checking account. This is money that we are investing in the bank that they can now invest in entrepreneurs and can invest in mortgages and in student loans on behalf of their customers in our constituents.
MARTIN: So you're providing this as capital. The banks will hold this capital and then they'll use this capital and they'll turn it over in other ways. They'll, presumably, make small business loans and things of that sort in their areas. So let's - this is a good opportunity to turn to Michael Grant and say, you began your leadership of the association five years ago, just as the financial crisis was beginning. Your timing was either great or terrible, depending on your point of view. Talk a little bit, if you would, about how that affected minority-owned banks and why you think minority-owned banks are important.
GRANT: Well, first of all, you're right. The meltdown - that we call the Wall Street meltdown - had a disproportionate effect on minority banks and the minority community - period. Over 50 percent of the wealth of our community was lost because of the subprime crisis. So when our businesses and our - the customers are going through difficult times, obviously, that's going to be reflected on the balance sheet of the banks. Folks can't always pay their bills on time if they're having money problems themselves.
So it was an incredible time for us, but, you know, African-Americans and other minorities in this country have seen hard times. Since the reconstruction, our banks have come through, you know, two world wars, the Great Depression. We are used to doing more with less. So this really gave us an opportunity to turn inward and to focus and to make ourselves more worthy. We're going to have to be more aggressive about going after customers and making this thing work in spite.
MARTIN: To that end, I need to hear more about what role you think these banks play in the development of these communities because I think some people might argue, you know, what is the need of these institutions. And now that banking is so national, there are so many large, national institutions, people bank, you know, according to convenience.
GRANT: Well, let me just tell you very quickly.
MARTIN: So tell me what role you think they play.
GRANT: Let me just tell you right now. Our banks are part of a subset of community banks. Forty percent of all lending to small businesses in America is done through small community banks, so start there. It's no different for our banks. If you look at minority businesses in our community, you will know who's making those loans. If you go to the churches in our communities, you'll find out who's making them loans. They play a very critical role there at the epicenter of economic development in any of these urban areas.
MARTIN: If you're just joining us, we are talking about the Congressional Black Caucus Foundation's decision to invest $5 million in minority-owned banks. Our guests are Congressman Chaka Fattah. He's the chair of the board of the Congressional Black Caucus Foundation. Just speaking now was Michael Grant, president of the National Bankers Association. That's a group that advocates for minority and women-owned banks. Congressmen, back to you. You know, you have been very vocal about a lot of the economic challenges facing minorities in general, African Americans in particular. The most recent poverty numbers released this week by the Census Bureau show that the poverty rate among African-Americans is, like, 27 percent compared to just under 10 percent, you know, for whites. How does a move like this, this kind of - this investment move address that issue?
FATTAH: Well, first of all, wealth in our country, as you and many of your listeners are aware, is actually generational. That is to say that wealth is accumulated over generations in a family. So when you have a group of people who work for a few hundred years without pay, the idea that we have some challenges with capital or finances or wealth-building is not to be - you know, it is an outcome of that process. But what we have to look at now is that we have to turn inwardly, and that's why the foundation took this action.
It is not just what are others - you know, groups are going to do. But African-Americans now generate over a trillion dollars in income in this country, and we can strengthen our own economic circumstances if we are making smart investments. And first and foremost, we have to bill financial institutions, not individuals, but institutions that are going to be there. So, you know, when you talk about the Industrial Bank of Washington, it's been here for 80 years. So if you want to open up a janitorial firm or a law firm or if you want to build a church or you need a mortgage, these are the types of institutions that, in the past, have played an important role and we believe play a critical role today, and what we're saying as a foundation is we're acting.
Later on today, I'll meet with many other leaders of organizations around the country, and we fully expect that others are going to follow our lead and make investments where appropriate. And we pick five, but there are dozens and dozens - some 30 of these banks across the country. And so this is a symbolic act, and it's not decoupled from our work on the public policy front, you know, creating minority inclusion institutions at the Department of Treasury or FDIC or the Federal Reserve. We want to make sure that these institutions have the same opportunity to compete on the public side, but we also want to act in our own interests, and that's what we're doing.
MARTIN: Speaking of one one's own interest, Mr. Grant, you know, I think a lot of people choose their bank based on convenience - you know, it's down the street or they give, you know, airline miles or, you know, they have better ATMs or the ATM fees are lower, you know, something of that sort. How do you persuade people that these banks are not just kind of a cash drawer, but that they're an economic development vehicle - if they haven't gotten the message already - particularly noting the fact that, you know, according to the Pew Health Group report, Unbanked By Choice, you know, close to 18 percent of African-Americans have no connection to any traditional banking system at all.
GRANT: Well, let me just say this first of all, when you talk about convenience, if you talk to Jewish Americans or Asian Americans or, in Washington, D.C., Ethiopians, about how far they will go to support their own businesses, you realize you're balancing the equation. Sometimes, you may have a little inconvenience, but if it's going to make the community stronger economically, then let's be inconvenienced a little bit.
MARTIN: You think that's enough?
GRANT: I think it is enough.
MARTIN: Congressmen, what about you?
FATTAH: Well, look, I mean, we know, right, for certainty, right, that strengthening these financial institutions is the first step because, for all of us who will sit in our churches on Sunday, most of these churches would have never been constructed. They could not get financing from traditional banks in order to build a lot of the churches that we are sitting in the pews of. So we have to support institutions in the broader society, and we do that enthusiastically. But we also can't, you know, avoid the fact that we have to build institutions that have a sensitivity to the cultural realities and circumstances in our own community.
The reason why women-owned businesses or women-owned financial institutions are working so well is because they take into account some of the particular needs that women may have in terms of interacting in the marketplace. The same is true in the African-American community. This is a community that, even though you cite the poverty rate, and I cite the trillion dollar in income rate, right, there's a wide gap in between. And there are people who are struggling to make it from working-class or apartment renters to become homeowners, which is a critical, you know, milestone in the American pathway, right? Getting a mortgage is very, very important and you want to have a banker that you can have a relationship with. So this is not the be-all and end-all. This is the beginning signal by the foundation that economic empowerment is equally as important as who you can vote for at the ballot box on election day.
MARTIN: Congressman Chaka Fattah is chairman of the board of the Congressional Black Caucus Foundation. That group is having its annual legislative meeting this weekend. We caught up with him on Capitol Hill. Michael Grant is the president of the National Bankers Association. He was kind enough to stop by our Washington, D.C. studios. Thank you both so much for speaking with us.
GRANT: It was a pleasure.
FATTAH: Thank you. Transcript provided by NPR, Copyright NPR.