The Asia-Pacific Economic Cooperation (APEC) Transportation Ministerial Meeting: Minority Bank EV Financing Roundtable took place in Detroit on May 15, 2023, and brought together industry leaders, government officials, and experts to discuss financing electric vehicle infrastructure development.
The event was organized by the Asia-Pacific Economic Cooperation (APEC) to be a platform to address key challenges and opportunities in the transportation sector. The meeting laid the foundation for continued cooperation among APEC economies and played a crucial role in advancing this year’s APEC theme of “Creating a Resilient and Sustainable Future for All.”
Offering a potentially stormy outlook, Black Americans could face an economic loss totaling a whopping $132 billion if the U.S. government goes into default for a protracted period.
According to an analysis from Creative Investment Research, the largest financial blow for Black Americans could come from the nation’s housing market totaling $60.9 billion. The findings are from the firm’s Projected Impact of Federal Government Default on Black Americans: Dire Report.
The latest employment data released by the Labor Department on Friday, May 5, shows the U.S. job market growing at a strong pace. Employers added 253,000 jobs in April on a seasonally adjusted basis. The overall unemployment rate also decreased to 3.4 percent, down from 3.5 percent in March, matching the lowest since 1969.
Black unemployment hit a historic low. The unemployment rate for Black workers fell to 4.7 percent in April, the lowest on record since the Labor Department began collecting Black unemployment data in 1972. This is a significant achievement for the Black community, which has historically faced much higher levels of unemployment relative to other ethnic groups.
The unemployment data creates challenges for the Federal Reserve, complicating monetary policy and the potential pause in interest rate increases. The strong labor market could lead to an increase in wages and inflation, making it more difficult to reach current monetary policy goals.
Another challenge is the increasing concentration of market share among the largest banks resulting from the closure and sale of several sizeable institutions. This has adverse effects on society by reducing competition, stifling innovation, and potentially leading to redlining, higher fees, and less favorable lending terms. Additionally, a highly concentrated banking system hinders the effective transmission of monetary policy and slows down the implementation of changes to interest rates, another impediment to the Fed’s efforts to control inflation.
Despite these challenges, the latest employment data is a positive sign for the U.S. economy. The strong labor market and historic low unemployment rates for Black and Hispanic workers are a testament to the resilience of the American workforce. As the economy continues to improve, policymakers will need to find ways to balance the growth with inflation control and maintain a healthy and competitive banking system.
The impact of regional bank troubles on Black people will likely be multifaceted, since this is a group with a higher proportion of underbanked and unbanked individuals. Some potential consequences include:
Reduced access to banking services: If regional banks close or consolidate, it may lead to a reduction in the number of bank branches in communities with a high proportion of Black residents. This could make it more difficult for people in these communities to access banking services, leading to a higher reliance on alternative financial services, such as check-cashing outlets and payday lenders, which often have higher fees.
Credit availability: As regional banks face financial troubles, they may become more risk-averse, tightening their lending standards. This could make it harder for Black individuals and businesses to obtain credit, potentially exacerbating the existing racial wealth gap.
Impact on local businesses: Many small and local businesses, including those owned by Black entrepreneurs, may rely on regional banks for financing and other services. The financial troubles faced by these banks could lead to a reduction in loans and financial support for these businesses, further impacting the local economy and employment opportunities.
Loss of jobs: Regional banks employ a significant number of people, and the financial troubles faced by these institutions may lead to job losses. This could disproportionately affect Black workers, who are already more likely to face higher unemployment rates.
Economic ripple effects: The banking sector is interconnected, and the troubles faced by regional banks may have broader economic implications, including reduced consumer confidence and spending, which can affect Black communities.
Impact on 401(k)s and investment portfolios: Many people, including Black individuals, have retirement savings and investment portfolios that are exposed to the stock market, including stocks of regional banks. Shares of PacWest Bancorp (PACW.O) declined Thursday. Zion Bancorp (ZION.O) fell by 12% and Comerica (CMA.N) was down 11%. KeyCorp (KEY.N) and Valley National Bancorp (VLY.O) fell by 7% and 4%, respectively. The decline in stock prices of these banks can negatively affect the value of these investments, leading to potential losses or reduced returns. This could be particularly concerning for those nearing retirement or already retired, as they may have less time to recover from market downturns. Moreover, it can also hamper the ability of younger investors to build wealth over time. For Black people who may already be facing a racial wealth gap and lower retirement savings, the decline in stock prices of regional banks could exacerbate these disparities, making it even more challenging to achieve financial stability and security. Efforts to minimize the impact of such declines and promote greater financial education and access to affordable investment opportunities can help mitigate these potential negative effects on the financial well-being of Black individuals and communities.
It is crucial for policymakers and financial institutions to address the challenges faced by regional banks to minimize the potential negative consequences on Black individuals and communities.
In recent years, Creative Investment Research has delved into various initiatives and strategies aimed at tackling the wealth gap, economic disparities and financial inclusion. In 2022, CEO William Michael Cunningham released a book examining the unique challenges faced by minority-owned businesses in accessing financial resources and support (Thriving As a Minority-Owned Business in Corporate America: Building a Pathway to Success for Minority Entrepreneurs 1st ed. Edition). In an article, we explored the development of a maternal health financing facility for the United States, which aims to improve maternal health outcomes by channeling investments into this crucial sector. Continuing our examination of initiatives to address financial inequality, another article we published in the American Banker Newspaper suggested the creation of a liquidity pool by the Federal Reserve to support Black banks, which brings us to the establishment of the Bank of Jabez, Iowa’s first Black-owned bank.
Reshonda Young, a Waterloo, Iowa native and entrepreneur, is driven to bridge the racial wealth gap through the establishment of the bank. As a community development financial institution (CDFI), this Black-owned bank will strive to empower people by providing accessible education, homeownership, and financial literacy. Young’s motivation stems from Waterloo’s identification by 24/7 Wall St., an online publication, as the worst place for Black Americans in terms of economic stability. With significant disparities in income, unemployment, and homeownership rates between Black and White residents, Young believes that a Black-owned bank can play a pivotal role in addressing these issues by lending to Black communities at higher rates than White-owned financial institutions.
In addition to her work to establish the Bank of Jabez, Young runs the Cedar Valley Black Business & Entrepreneurship Accelerator. This initiative has trained over 50 entrepreneurs and has been recognized as a model community accelerator. While the role of Black-owned banks in reducing the racial wealth gap may be significant, Young also emphasizes the responsibility of White-owned banks in addressing these disparities. She urges them to ensure accessibility, diverse representation in their workforce, and investment in programs catered to Black communities. As our society continues to grapple with financial inequality, the development of institutions like the Bank of Jabez and the implementation of inclusive banking practices represent crucial steps towards achieving economic stability for all.
According to the Wall Street Journal, Nike founder Phil Knight “are set to announce they’re donating $400 million to rebuild Portland’s Albina area, a historically Black community whose residents have experienced decades of disruption and displacement.
Rebuild Albina will be a project of the newly established 1803 Fund, a nonprofit that aims to combine elements of private investing and philanthropy. The number references the year that explorers Lewis & Clark decided to bring York, a Black frontiersman and slave, with them across the country to the Pacific.”
According to The Afro, Iowa native and entrepreneur Reshonda Young is working to open the state’s first Black-owned bank: “The Bank of Jabez, which is set to open this year, will be a community development financial institution (CDFI) and will work to prepare and empower people to create generational wealth.” For more, see:
This recent growth may be the result of increased funding for Black banks following the $71 billion corporations pledged for Black Lives Matter following the George Floyd incident. Longer term, even if we confirm the African American ownership of Tioga-Franklin and of Grand Bank for Savings, there are still only 21 Black banks, representing 4 tenths of one percent of 4,706 total commercial banks and savings banks in the US as of 12/2022, according to the Federal Deposit Insurance Corporation (FDIC).
Despite these developments, as I noted in 2019, banking regulators have a history of neglecting the banking needs of the Black community, and by extension, the country. Even now, black banks remain too small and too weak to have a significant economic impact.
Given recent activity, I still think it viable for the Federal Open Market Committee (FOMC) of the Federal Reserve Board to purchase mortgage-backed securities (MBS) originated by black banks as part of open market operations. I first suggested this in 1994 at the Federal Reserve Bank of Kansas City. Since the 2006 financial crisis and 2020 pandemic, the Fed has purchased trillions in securities, helping white-owned banks, broker-dealers, insurance companies auto companies, and investment banks survive.
The solution to the Black banking impact crisis is to have the Fed, via the FOMC, create a Black bank liquidity pool totaling at least $50 billion. The pool’s focus should remain on purchasing Treasury, MBS securities and Small Business Administration (SBA) loan pools from Black ownership verified banks. To administer this new effort, I suggest having the Commerce Department’s Minority Business Development Agency help the Fed make loans to Black banks instead of simply making short and intermediate term loans to large non-minority banks, as is currently the practice of the FOMC. This would provide an estimated $450 to $500 billion dollar boost, positively impacting both the Black community and the US economy.
According to the Consumer Financial Protection Bureau (CFPB), Wells Fargo Bank (WFB) “incorrectly applied loan payments, erroneously imposed certain fees and charges, incorrectly repossessed customers’ vehicles, and failed to refund certain unearned fees on debt cancellation products; (ii) with respect to home mortgage servicing, incorrectly denied mortgage loan modifications to certain qualified borrowers; and (iii) with respect to consumer deposit accounts, improperly froze or closed customer accounts, improperly charged certain overdraft fees, and did not always waive monthly account service fees consistent with its disclosures.”
Number of Accounts and Fines Assessed according to the Wells Fargo Consent Decree.
While CFPB claims to have fined WFB $3.7 billion, a review of the consent order released by the Agency reveals several discrepancies. The average penalty per account totaled $252.35 excluding penalties for mortgage servicing errors. These mortgage errors, while substantially higher, applied to fewer than 3.500 accounts.
According to the CFPB, 11 million auto loan accounts generated an average of $118 in penalties per loan account. CFPB indicated they have fined WFB a total of $3.7 billion. This is an average penalty of $336 per account.
