“This investment is an important step toward achieving our goal of economic equality,” Shaunise Washington, chief executive of the foundation, said Tuesday at a news conference. “Minority banks are an important source of accessible financial services and are key to reaching financially under-served communities.”
The foundation selected five black-owned, fiscally sound banks scattered across the country: Industrial Bank in the District, Liberty Bank & Trust Co. in New Orleans, Mechanics & Farmers Bank in Durham, N.C., Seaway Bank & Trust Co. in Chicago and City National Bank of New Jersey in Newark.
Each institution will receive $1 million through certificates of deposits guaranteed by the Federal Deposit Insurance Corp. The foundation plans to track the progress of the investment during the year, said Rep. Chaka Fattah (D-Pa.), chairman of the foundation board.
“The pillars of power have to be both political and economical,” Fattah said. “We are leaning forward to say we are going to make an investment and expect others to follow.”
Industrial Bank President B. Doyle Mitchell Jr. said the bank will use the investment primarily to fund small-business loans and some affordable-housing development. He said loan demand has been particularly strong among government contractors.
In the past two decades, the number of black-owned banks has dwindled by 50 percent, according to the foundation. Russell Kashian, a professor in the Department of Economics at the University of Wisconsin, said the trend was especially distressing because it gave rise to payday lenders, check cashers and other alternative financial providers known for charging high rates. Kashian recently conducted a study on minority-owned banks.
“These institutions attract monies into the community through reasonably aggressive rates on CDs,” he said. “They are a source for valuable jobs in the neighborhoods they serve.”
With the advent of the financial crisis, a number of black-owned banks struggled under the weight of heavy concentrations in commercial real estate, much like other community banks.
Members of the Congressional Black Caucus petitioned the government to aid minority banks during the financial crisis. Fourteen black-owned banks received funding from the Troubled Asset Relief Program, said Michael Grant, president of the National Bankers Association, a trade group for minority banks.
“This investment is a continuation of their efforts,” Grant said.