As we witnessed the shooting of Jacob Blake following the murder of George Floyd by police, we are reminded that state sanctioned violence against black men and women is the most painful and most painful way. odious whose white supremacy is maintained, but it is not the only way.
We’ve seen black people being discriminated against when trying to get home or small business loans, and of course we’ve seen black communities disproportionately suffer from COVID-19 infections and mortality, and we know it will take decades to economically recover from the consequences. of this pandemic, just as they are still emerging from the financial ruin of the 2008 foreclosure crisis.
Decades of racist policies within the U.S. banking system and deep disinvestment in our communities have left blacks and Latinos ill-equipped to respond to an economic downturn, further perpetuating poverty and fomenting social inequality.
Acclaimed American writer and civil rights icon James Baldwin said: “Not everything that is faced cannot be changed. But nothing can be changed until it is faced. It’s time for America’s banks to face up to their role in perpetuating white supremacy and righting their wrongs.
We postulate that U.S. financial institutions have not only perpetrated but repeatedly profited from institutionalized and structural racism by denying blacks and Latin Americans opportunities for wealth creation, then taking the wealth away from black and latino communities to maximize their profits. Banks have Targeted black homebuyers with expensive loans – and discriminated against borrowers on the basis of immigration status.
There is no clearer evidence of this than the way banks implemented the Paycheck Protection Program, a CARES Act initiative aimed at small businesses to help them recover from the crisis. economic impact of COVID-19. It is no mystery that banks have shown time and time again that by lending to borrowers belonging to Blacks and Latinos with similar or even better credit profiles, they treat these borrowers differently by asking more questions and demanding more information, which leads to discrimination in lending.
Due to structural racism embedded in the financial system, small black-owned businesses applying for PPP loans received less 2 percent of loans in which a borrower’s race was identified. Small Latino-owned businesses received just 6 percent of these loans. This disparate impact on the relief available to small businesses has led to the closure of 41% of small black-owned businesses, compared to 17% of small white-owned businesses.
Yet although it did not serve small businesses owned by blacks and Latinos, according to the Small business management, in California alone, $ 68 billion in government-guaranteed, zero-risk PPP loans were made by banks, credit unions and other lenders as of June 31, 2020. These loans generated $ 2 billion. PPP fee dollars, more than half of which were earned. by the 30 largest banks doing business in the state. As our communities struggle to get help, banks are helping hand in hand. In addition to making a windfall from PPP loan fees, the six biggest banks pocketed more than $ 32 billion thanks to Trump’s tax cutsbecause their average tax rate fell from 20 to 18 percent. Low income communities have yet to see any benefit.
If banks are serious about uplifting communities, we propose that the fees generated by PPP loan fees be reinvested in economic development programs that benefit Black and Latino communities in addition to ongoing philanthropic banking efforts. Communities need to have a say in how these dollars are used.
Big banks may resist reinvesting these fees, claiming they need them to recover administrative costs. But it is important to remember that the banks chose to participate in the PPP program (it was not an obligation imposed on them) and that their participation allowed them to make risk-free loans (100% guaranteed by the State) and be repaid, all while providing very few P3 loans to blacks and Latin Americans. Additionally, banks have deliberately chosen to prioritize existing customers – who tend to be white and own larger businesses – reinforcing systematic redlining practices that have excluded communities of color for generations. As part of America’s financial infrastructure, it is high time these banks were involved in solutions to inequalities rather than continuing to perpetuate financial crises in communities of color.
We are asking black Americans for bank reparations. As Angela Glover Blackwell and Michael McAfee remind us, American banks have been the “guarantors of racism” – financing the slave trade – for more than two centuries. No other sector has benefited as much from the exploitation of black Americans as the banking sector. Investing the fees collected as part of a government program that provides a full guarantee as well as an income-generating business opportunity for the banks is a small price to pay for a whole history of wrongs.
There are several policies that banks must adopt immediately if they are serious about combating racism. In collaboration with the San Francisco Office of Financial Empowerment, the California Reinvestment Coalition posted a new report describing a model of banking policies that help communities thrive. The solutions we offer include banks accepting reparations for the black community, ending all foreclosures and evictions, suspending loan repayments and commit not to fund the displacement of communities of color.
In addition, PPP fees that are reinvested in communities can and should be used to support efforts that include grants to support Black and Latino small business owners and sole proprietors, support for housing stabilization efforts (including including cash grants for black and Latino families to prevent evictions), and capacity building grants for Black and Latino-led organizations that support affordable housing, eviction advocacy, counseling housing, small businesses and support for micro-businesses.
The secret that businesses don’t want us to know is that America’s banking system is central to creating the conditions that led to the racial and economic inequality we see today.
Banks can do more. They must do more. We demand it.
Nikki Beasley is Executive Director of Richmond Neighborhood Housing Services Inc.
Paulina Gonzalez-Brito is Executive Director of the California Reinvestment Coalition.