Lessons for the #BankBlack Movement from Mehrsa Baradaran's New Book

#BankBlack emerged on Twitter earlier this summer. The hashtag began as an encouragement to those protesting police brutality to move their money to black-owned banks, and is credited with growing the assets of black-owned banks by $6 million over the summer. A search on Twitter shows that the hashtag remains popular, and now is linked with #BlackWealth and #BuyBlack. Indeed, I found one tweet that claims that black-owned banks' assets have grown $20 million over the past 9 months as a result of the broader movement.

The motivation for these three hashtags relates to Professor Mehrsa Baradaran's recently-released (and fantastic) book, The Color of Money: Black Banks and the Racial Wealth Gap. In the book, she chronicles the rise and fall of black-owned banks as a vehicle to grow black wealth and combat predatory practices, such as red-lining, to help underserved, often low-income, predominately black communities. Since its release a couple weeks ago, the book has been reviewed in the Atlantic and the American Banker. Here, I want to highlight a couple of statistics and focus on what Baradaran's analysis suggests about the possibilities for the #BankBlack movement.

Baradaran expertly lays out the history, promise, and eventual failure of many black-owned banks in America. The idea of creating a safe place for black Americans to store their money and receive loans is enticing -- and proved useful for some periods of history. But, as Baradaran explains, black-owned banks live in the broader financial sector, which is home to inter-dependent banks and other financial institutions which also look to the government for help--and which are much more likely to be helped by the government. Living in this environment almost inevitably repeatedly becomes a drain on black-owned banks for a variety of reasons, including the types and amounts of deposits black-owned banks received and the types of loans black-owned banks made. (For example, Baradaran kindly cites my research about lending to black churches and the effects of both black-owned and other banks' foreclosing or threatening to foreclose on church buildings.) The environment also helps divert black households' deposits to white-owned banks, institutions, and households, effectively locking in the failure of many black-owned banks.

To the statistics. The effect of this banking and lending environment, combined with the fact that black Americans pay more for just about everything, makes it extremely difficult for black households to accumulate wealth. As a consequence, at present, the median white family has thirteen times more wealth than the median black family. And it is not that black households do not save. In fact, they save more as a percentage of their annual income than white families -- 11% versus 10%. As Baradaran writes, "[t]he idea of blacks spending frivolously while whites save their pennies is a meaningless, damaging, and sadly persistent stereotype."

What does this all mean for the #BankBlack movement? What history shows, as recounted and analyzed by Baradaran, is that moving money to black-owned banks and shopping at black-owned institutions is a start, but it is not enough. Black households have the ability, and if history is a guide, the incentive to #BankBlack and #BuyBlack. But if #BlackWealth is to increase by their doing so, there also must be fundamental changes such that we no longer expect black communities to create their own economic equality. In giving a nod to the #BankBlack movement, Baradaran likewise notes that black-owned banks likely cannot offer effective self-help. Nonetheless, might this be the point in history when larger changes are possible? Maybe -- and Baradaran ends her book by setting forth a path to meaningful change. To learn more about black-owned banks and the racial wealth gap, I highly recommend the book.