- There is concern about a racial wealth gap.

- The racial wealth gap is stark.

- The racial wealth gap is tremendous.

- A gap between White and Black America.

- What is the racial wealth gap and why is everyone talking about it?

The racial wealth gap is a measure of wealth and equality between racial groups in the US.

Here's a prime example.

Black families make up 14% of the population, but own only 5% of American wealth, while White households make up 65% of the population, but control 80% of the wealth.

The gap traces back to the 1863 Emancipation Proclamation, which led to freedom for almost four million Black Americans.

By 1860, their labor accounted for 60% of US exports, $200 million a year, but Black Americans received nothing, no land, no money.

Without any money or land, how could newly free Black Americans create wealth?

One way could've been the banking system.

Alexander Hamilton, the father of American banking, said that banking is how wealth is created.

But Black Americans were overwhelmingly excluded from using banks.

So what happens when a community is barred from the mainstream banking system?

They create their own.

(upbeat music) ♪ Yeah ♪ Black banks were supposed to close the racial wealth gap.

So what happened?

For almost 200 years, there have been three unique barriers that have kept Black America from generating the wealth the Black community intended.

Discriminatory lending, housing discrimination, and economic segregation.

First let's talk about discriminatory lending.

Following the Civil War, in the late 1800s, Black Americans had few freedoms or financial options due to legal segregation and black codes.

Black codes were laws that restricted the freedom and movement of Black people and forced them to work for low wages.

If you were Black, a White bank would either bar you from entering, deny your loan, or charge you higher interest rates.

These were common practices of discriminatory lending, and it created a need for financial services that Black-owned banks would aim to provide.

- Black communities found ways to create mutual aid, opportunities, creating unions, and cooperative efforts to make sure that as they were locked out from mainstream financial institutions, they had the systems in place to make sure that their financial needs were met.

- In 1890, one of earliest Black banks was operating in especially hostile territory, the Jim Crow South.

(upbeat music) Alabama's first Black-owned and Black-operated bank, the Alabama Penny Saving's Bank, was founded by Reverend William Pettiford.

Influenced by Booker T. Washington's principles of self-help and racial solidarity, the Alabama Penny Savings Bank lent money to churches and professionals in Birmingham when other banks wouldn't, and it did this during a time when the Alabama legislature was doing everything in its power to deny Black political and economic freedom.

Pettiford partnered with powerful, White bankers in Birmingham who helped with administrative and staff training.

These partnerships were like cheat codes during a time when segregation laws made Black and White relations very difficult.

In 1913, the Penny Savings Bank constructed a five story building that housed not only the bank, but dozens of other Black businesses.

The rent from those businesses provided funding and investment capital, something Black banks serving poor communities struggled to get.

The Alabama Penny Savings Bank faced financial risk unique to Black banks.

A lack of capital or money to invest put Black banks in a risky position.

Not only did segregation laws shrink the number of potential customers, low income customers made smaller deposits and more withdrawals.

This meant one, operations costs were higher, so Black bank owners invested more of their own money to keep the bank stable.

And two, it restricted the revenue and lending capacity, fewer loans meant smaller profits.

Pettiford's partnerships with larger banks meant he had aid during difficult times, and the bank grew significantly under his guidance.

Assets reached over $540,000 by 1913, equivalent to approximately $17.1 million today.

By 1914, the Alabama Penny Savings Bank was the largest and strongest Black bank in the United States.

But no one could be convinced to help the bank after his death.

The bank failed just one year later, causing depositors to lose all their money.

While the Alabama Penny Savings Bank provided an alternative to discriminatory lending, Jim Crow segregation made longterm economic advancement nearly impossible.

The second barrier to building wealth, housing discrimination.

(dramatic music) - One significant driver to the racial wealth gap, as I mentioned before, is going to be home ownership.

Home ownership is a significant driver of wealth whereby every year of home ownership, home owner's gaining about $14,000 in equity.

Conversely, if you don't have access to home ownership, you don't have access to that type of equity and that cushion that you could get from having money saved from home ownership.

- Housing discrimination allows banks to deny home loans to the Black community through a practiced called redlining.

Redlining was the government sponsored practice of denying mortgages and other financial services to segregated Black and Brown neighborhoods.

It's called redlining because bankers literally drew red lines around undesirable communities.

One Black household in a middle class community was enough to make the federal government deny mortgage loans in that area.

As a result, Black families turned to predatory lenders or were shut out from home ownership completely.

- We just keep having to fight battles, but a lot of the things that have happened to Black folks in America were orchestrated, and they were legal, they were systemic.

I mean, it wasn't like it just happened that way.

It was designed to be that way.

- Black banks made it their mission to fight against these policies.

(bright music) Maggie L. Walker was America's first Black female bank founder.

Not only did she organize a Black bank in the segregated South in 1903, she managed to run a successful one in Richmond, Virginia, the former capital of the Confederacy.

It was called Saint Luke Penny Savings Bank.

As a business woman and banker, Walker advocated for Black women's financial independence and the advancement of the Black community.

She famously said- - [Maggie L. Walker] "Let us put our moneys together.

Let us have a bank that will take the nickels and turn them into dollars."

- By 1920, Walker's bank had provided more than 600 mortgages to Black families.

It also created jobs for Black professionals, allowing them to leave the lower paying jobs.

But just because a Black family received a home loan, didn't mean the challenges stopped there.

(bird chirping) In 1925, Dr. Ossian Sweet and his wife, Gladys, bought a home on the edge of Detroit's black bottom slums for $6,000 more than its market value.

But after moving in, a White mob surrounded their home for several days.

They wanted them out.

This story is common.

The fear that a Black family moving near a White neighborhood would tip property values and send the neighborhood into decline was so great that some White home owners were willing to resort to violence.

Once the mob started to damage his property, Sweet fought back and violence broke out.

A White man was shot.

(gun blasts) Sweet was later charged and then surprisingly, acquitted of murder, but the fear of decline is a self-fulfilling prophecy.

When the White upper and middle class leave a community, property values plummet.

Businesses and bankers stop investing and neighborhoods are left under-funded.

Walker's bank continued to provide loans even when it wasn't commercially profitable.

Saint Luke served its community for 100 years, until just before the 2008 financial crisis.

Housing discrimination has continued to make Black home ownership unattainable for many, widening the wealth gap.

The third barrier is the result of decades of lending and housing discrimination, economic segregation.

(dramatic music) Economic segregation is the geographical separation of communities based on race and wealth.

While redlining has now been illegal for over 50 years, you can still see its effects in the form of economic segregation.

If you look at a map of a major US city, you'll see pockets of wealth alongside pockets of poverty in historically segregated communities.

And many of the predominantly Black and Brown neighborhoods are low income with unequal access to education, healthcare, and upward mobility.

- You're seeing communities that don't have wealth as a function of slavery, as a function of Jim Crow, Black culls, massive incarceration, redlining, enter into a different system of financial services products, and so the wealth that they should have, they don't have, and the wealth that they could have they will never have because they're dealing with institutions that are preying upon the poverty.

- Pockets of deep poverty are typically the areas the Black banks serve, but they struggle to turn a profit and create wealth in their under-funded communities.

So what would happen if a low income community was able to support its businesses and entrepreneurs and keep money flowing within that community?

Well, we actually know what that would look like.

In the 1900s, during the height of segregation, three notable pockets of Black wealth existed.

One was in Durham, North Carolina.

During this time, Durham was home to more Black millionaires than any other city in America.

Durham's hey time neighborhood and its Black financial district created a self-sustaining Black Wall Street and was a safe haven from Jim Crow America.

Black-owned businesses and wealthy White partners invested in Black innovation, talent, and enabled the flow of capital in the community.

During a time where there were few options for Black businesses to secure capital, Mechanics and Farmers Bank was the only financial support for small borrowers, like farmers, and laborers in Durham.

M&F and Durham's Black Wall Street managed to keep the Black dollar circulating within its community for decades, and created a thriving Black middle class.

But most Black banks struggled to do this and it's why economic segregation has continued to be a barrier.

Unless every buyer and seller deposits their money into a Black bank, eventually the Black dollar will flow into and grow the mainstream economy, leaving the Black community with scraps.

The catch-22 of Black banking is that the very institutions needed to help communities escape the deep poverty caused by discrimination and segregation inevitably became victims of that same poverty.

In 1958, North Carolina cut a freeway through the heart of Hayti, and Durham's Black Wall Street, along with hundreds of homes and businesses, were destroyed.

And M&F Bank couldn't withstand the decades long decline in Black banking without change.

In 2015, the organization decided to diversify its customer base and market outside the Black community.

Out of the 5,400 FDIC insured financial institutions, only 23 are Black-owned, as of 2018.

If you're Black and you walk into a bank today, there is a chance you could be arrested for trying to withdrawal money from your own account, denied a mortgage, even if you have good credit, or issued predatory loans with high interest rates.

The truth is, Black-owned banks face many of the same challenges today as they did 200 years ago.

But they're not giving up the fight for financial justice.

Modern movements, like Bank Black, championed by celebrities, like rapper, Killer Mike, are revitalizing the push for economic empowerment.

Killer Mike and Andrew Young Junior, and others, co-founded a financial tech company that recently secured a $45 million investment to encourage banking within the Black community and build Black wealth.

An NBA team and the NFL made history when they chose Black banks for loans as high as $35 million.

And One United Bank, the nation's largest and first Black-owned digital bank, is fighting for the 49% of Black households who are un-banked or under-banked, providing loans and financial literacy to low income communities.

Addressing these ongoing issues is crucial to creating a more equitable and inclusive financial system.

So if Black banks alone aren't going to help close the gap, what could?

(bright music) Initiatives, like student load debt forgiveness, which disproportionally affect Black and Brown graduates, and expanding affordable housing programs and other forms of reparations could help close the gap.

- And reparation doesn't have be a boogeyman concept.

It's not all about cash, it's about access.

Access is a form of reparations, right?

- Black banks may not be able to completely solve the racial wealth gap, but they are one important piece of a puzzle in growing Black wealth in America.

- Let's get you into a home, let's get you into that business, let's get you into a bank account, and let's get you started on this journey of economic mobility so that this generation and the next can say, "I'm no longer a victim of these mainstream policies and products."

We are on our way to our freedom.

(upbeat music) ♪ Yeah ♪ (upbeat music) ♪ Freedom ♪ (upbeat music) ♪ That's what we need ♪ (upbeat music) ♪ Freedom, yeah ♪ (upbeat music) ♪ Givin' a little love each and every day ♪ ♪ It's not as hard as some people might say ♪ ♪ 'Cause I've got time and so do you ♪ ♪ I've got time, tell me, well what are we gonna ♪ ♪ Don't you know that peace and love will give us all we ♪