Black-owned local bank promises to serve the ‘unbanked’

The new First Independent Bank (FIB) opened for business at the former Wells Fargo bank branch located at 3430 University Avenue S.E.

Days ago, the Detroit-based First Independent Bank (FIB) opened for business (by appointment only) at the former Wells Fargo bank branch located at 3430 University Avenue S.E.

The bank’s chairman and CEO, Kenneth Kelly, noted in a press release that the University Avenue branch is “located in the community where it is visible and accessible to all in the Twin Cities… We look at the fact that it is close to the Metro Green Line and bus routes so that under-resourced and unbanked members of the community can easily reach us and use our services to improve their financial outlook.” 

FIB, one of the 17 Black-owned full-service banks in the country, has received approval from the Federal Deposit Insurance Corporation (FDIC) to set up shop in the Twin Cities. The current expansion into the Minnesota market is the result of collaborative action on capital enhancement, marketing, and research with Bank of America, Bremer Bank, Huntington Bank, U.S. Bank, and Wells Fargo.

Chairman Kelly explained that the “approval from the FDIC confirms [what] our supporting financial institutions have demonstrated that they recognize—[that] our bank is welcome in the Twin Cities market because it is important to have a variety of options available to all customers… It’s especially important for the unbanked members of the community.”

Kenneth Kelly

Black-owned banks

Nationally, FDIC data shows Black-owned banks hold some $5.2 billion in assets as compared to $17.7 trillion in non-minority institutions held in community and non-community banks. 

In other words, Black-owned banks only have a 0.03 percentage slice of the asset pie. The minority financial institutions, in general, hold a total of $234 billion, but by comparison, the number-one bank JP Morgan Chase, as ranked by the Federal Reserve, holds $3.29 trillion in assets.

The FDIC analysis tells an uncomfortable truth of a grave social problem hiding in plain sight. The Brookings Institute, a think tank in Washington, D.C., says the wealth gap between Black and White Americans is an accumulation of historic and persistent underinvestment in Black people, even in times when the economy is booming.

Kriston McIntosh of the Brookings Institute traces a thread of the problem to the 1874 collapse of the Freedman’s Savings Bank (FSB) attributed to Congressional mismanagement, which resulted in 61,144 depositors with losses of nearly $3 million. But before the FSB debacle, McIntosh said the problem started with “246 years of chattel slavery.”

The Brookings Institute is now saying, in the aftermath of the COVID-19 pandemic, another error is being made by Congress.

Building local capacity

The $10 million allocated by Congress to the Minority Business Development Agency under the coronavirus relief bill is best handled, says Brookings, by hyperlocal Black- and Latino/Hispanic-led banks. “The local banks know Black communities better than their larger counterparts but are built to have a low number of clients. 

“There needs to be a hybrid solution in which big banks and financial tech firms—in exchange for receiving federal funds—help build capacity and meet the needs of Black business owners,” the Brookings review notes. “We must use this short-term [health crisis] to build long-term infrastructure.” 

The collaboration among First Independent Bank and the other five larger banks may, therefore, be a lesson learned from the Brookings Institute playbook.

FIB did not promise to scale back the racial income gap, as by some estimates it will take 30 years before every dollar of revenue earned by every Black business placed in a Black bank becomes equal to JP Morgan Chase’s wealth-in-hand today. 

However, low-income residents of color in the Twin Cities who are denied traditional banking services may no longer be left to the wolves in the costly check-cashing outfits and other predatory businesses.

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