The Congressional Black Caucus Foundation, Inc. (CBCF) made a $5 million investment in African American-owned banking institutions as part of a broader effort to increase the availability of loans for businesses and individuals in African-American communities. CBCF selected banks in four regions of the country-the North, South, East and Midwest-in an effort to achieve geographic balance in an initiative that could prove crucial in lifting the economic fortunes of black communities. In all, five banks received $1 million each: the Industrial Bank in Washington, DC; Liberty Bank & Trust Company in New Orleans, Louisiana; Mechanics & Farmers Bank in Durham, North Carolina; Seaway Bank & Trust Company in Chicago, IL; and, City National Bank of New Jersey in Newark, New Jersey.
CBCF made the investments by purchasing certificates of deposits through the Certificate of Deposit Account Registry (CDARS) program and then depositing the certificates with the five selected banks. The certificates are FDIC insured.
“Historically, and still today, minority and women-owned banks remain an important source of credit and accessible financial services, filling a necessary gap in communities that might not otherwise have them,” said Rep. Chaka Fattah, chair of CBCF’s board. “CBCF has invested in this partnership because we want-and need-these institutions to grow and thrive, so that their success in supporting the broader economic health of communities across the country can continue.”
“Minority banks play an important role in the economic empowerment of minority communities,” said A. Shuanise Washington, president and chief executive officer of CBCF. “We hope that this investment will spur much-needed economic development, provide critical support to small businesses and inspire others to invest in minority banks-a critical lifeline for comprehensive economic recovery in black communities.
The move by CBCF comes a time when African American-owned banks face pressures that are threatening their ability to stay in business.
“As usual, the Congressional Black Caucus Foundation is filling an important leadership vacuum,” said Michael Grant, president of the National Bankers Association, which has represented the nation’s minority and women-owned banks on legislative and regulatory matters for the past 86 years. “The greatest challenge facing African-American leaders today is increasing the collective wealth of African-Americans. The $5 million deposit in these banks will stimulate more lending to small businesses that can, in turn, create more jobs.”
African-American banks have served African-American communities for the past 125 years. Traditionally, black banks served as a secure vehicle for African-American families to build their savings, as well as a much-needed source of loans for small businesses, residents and churches. But in recent years, the number of black banks has dwindled dramatically, a result of a number of factors, including an economic recession that has taken a particularly tough toll on black families, competition from larger banks and burdensome regulatory requirements that are especially hard on small financial institutions.
“Minority-owned banks, specifically Black-owned banks, are a foundational business in America’s urban area,” said Russell Kashian, Ph.D, a professor in the Department of Economics at the University of Wisconsin Whitewater. “They also serve several key roles, providing banking services to areas that are often barren of any other mainstream banking services and attracting monies into the community through reasonably aggressive interest rates on CDs. They are also a source of valuable jobs that have upward mobility options, like tellers, loan officers, and mortgage originators.”
“As Chairman of the 86-year-old National Bankers Association and CEO of the 79-year-old Industrial Bank, I applaud the actions of the Congressional Black Caucus Foundation to place $5 million in deposits in African-American banks,” said B. Doyle Mitchell, Jr. “These deposits provide the liquidity for Industrial Bank and others to make loans in the hardest-hit communities across the nation, continuing our legacy today of doing well by doing good.”
“It is critical that we, as a collective, remain ardent in our support of black enterprises,” said Ronald Busby, the CEO of the U.S. Black Chambers. “Our investments ensure that our businesses will prosper, as well as create new employment opportunities for African-Americans within our neighborhoods-a true win-win for the community.”
The banks participating in the CBCF effort are also significant players in the community development banking sector. The mission of these financial institutions goes beyond mere profits. These institutions are committed to the goal of making communities stronger through greater access to capital.
The crucial role these banks play in the economy is evident in a number of ways. For example, community development banks have 67 percent of all their branches in economically disadvantaged communities, compared to 17 percent for the overall banking sector. More than that, nearly $46 of every $100 that community development banks lend goes to borrowers in economically distressed communities, compared to about 16 percent for the overall banking industry, according to information collected under the federal Home Mortgage Disclosure Act.
“Community development banks have helped countless individuals and organizations to achieve their goals and dreams,” concluded A. Shuanise Washington. “We want to support these financial institutions, so that they can continue to support our communities.”
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