US bank branch closures widen social inequality | FT Film

foreign no other place like home it's a small town we just want to be able to take care of our own Banks come and they go why this one is leaving is not being explained [Music] people were wondering what are we gonna do that's just one more negative against us that we didn't have anything to do with that we can't help [Music] you have to go back to how Banks started right and who they were created to serve redlining basically isolated African-American people for you know almost 100 years when you have unequal access to the banking system you end up with unequal outcomes in Mississippi there are actually more payday lenders per capita than Starbucks there's cash on top no credit checks instant approval those those are some of the terms that they use my banking is important my dollars matter the social contract with banks has been broken [Music] is a great place to live we have school systems or Courthouse drug stores we have other businesses that uh keeping us alive and well they just need more people involved with the growth process the beautification process we got to notice early part of the year so we have 90 days we're closing we're moving out there was a notify all people that had accounts there it was very shocking in a sense elderly was really crime because it's commute the business were complaining it's just difficult to handle business here when we don't have banking so where are we going now this is the deal it's most what like the most recent restaurant that opened here we were voted in the top five best beef burgers in Mississippi last year it's a very much a community place I like living in Coffeeville a lot more than I would probably like to admit as far as the town you can't find better people that work together and mostly get along it's just hard when you're losing everything and you have to go somewhere else for everything before the Bank closed they were literally two blocks from us so I could send somebody walking to go get change if we needed it and now I have to drive 20 25 minutes one way it doesn't seem like it would be that big a deal but you can't even just go to the other businesses and swap change because they have to keep what they've got and then you have to be a female driving all that way with that whole week's deposit by yourself you get a little nervous people pay attention they know when you're coming and going they know where you're going so it's definitely been a hardship how does that make you feel hearing that your community is a big investment I am heartbroken for Coffeeville because that's such a negative thing to have attached to our name when we really are good people hello Mr Taylor it's got some visitors here my name is Jermaine Taylor I am a screen printer I make both t-shirts everything is in book I've been doing it self-employed eight years here in Coffeeville it's located it's just actually footsteps away from the bank I didn't have to worry about spending money in gas or anything like that I don't make deposits every day or twice a day anymore sometimes it's once a week sometimes it's the next week later and that becomes a security issue there's plenty of money in this town and it's definitely not a desert town my wife and I own the local newspaper here in Coffeyville it's called the Coffeyville Courier my business is a little different from everybody else's the hamburger place sells hamburgers I sell advertising well that depends on this town to advertise for different things promote their business to help promote our school well if businesses are closing or businesses won't come here because of the banking issues the net hurts it hurts everybody and you take away the business side of it and just look at the community itself but made it hard on the citizens young and older life people were wondering what are we going to do what happens to our money that's in this bank we need a bank if I wanted to buy a house I need a bank to be able to go in and sit down and speak with a loan officer the federal government has designated Coffeeville as a banking desert how does that make you feel unimportant neglected in some way like a second-class citizen and I'm not I am important my banking is important my dollars matter bacon is pretty well the lifeline of this community right now everybody's wanting a bank they want businesses they want housing but they're crying about the bank [Music] there are less branches in Black communities less branches in low-income communities and so when a branch closes it has a disproportionate impact we've seen about 7 000 branches close since 2017 about 4 000 since the start of the pandemic in March of 2020 so the pace of Branch closures has really accelerated which is partially driven by the fact that people are doing more Banking online but it's also driven by you know by profitability a lot of communities especially in the southwest of the U.S Southeast uh you know certain areas in the midwest that have generally been in Decline have lost their bank so as Banks merge they close up their inefficient branches that's part of the the model for banking banking deserts exist across the country but they're more concentrated in places like the Deep South in communities of color in inner city Urban neighborhoods [Music] having a relationship a good relationship with a financial institution is really what paves the way and helps people build assets so that they can also build generational wealth the primary driver of wealth the primary asset on most Americans balance sheet is a home most of the ways in which Americans build wealth involves borrowing money so when you have unequal access to the banking system you end up with unequal outcomes the inequality comes not from your great great grandfather it comes from who got to own a home in 1950. who was being helped by the federal government who add access to that Capital it's historical we have to get a good understanding of why people act the way they act I like to tell the story of the Freedmen's Bank when we look at inequality in America we see pretty deep divides on the basis of race a lot of that comes from access to banking services both historical and in present day African Americans have had a long history in this country of being denied opportunity to financial structures and institutions so you can go to slavery you could go to the post-slavery period called reconstruction in America where there was the creation of the freedmen bank and the creation of some institutions to help African Americans the result of the Civil War was the collapse of the Southern banking system the United States Army still occupied the South and so they had all of these soldiers many of them who were African-American and they had to figure out how do they pay them so one of the things was to create a bank the Freedmen's Bureau bank which allowed the government to pay these soldiers but also to set up a means for the newly freed to save their money it was a big name institution based right here in Washington DC right next to the White House millions of dollars were saved by these newly free people a lot of the people in the community at the time were under the impression that their savings and their wages would be federally insured what happened was with the Freedmen's Bank it took a series of really risky bets on railroads on other Investments it went bankrupt and lost everybody all their money so there's you know really good reasons why people uh distrust the banking system why is there a gap between communities of color and banks in this country and I think what you find is that oftentimes there is a lack of trust I was born in 1940. people in my community they didn't trust the banks because the banks collapse the Urban Development though is crucial to understand another dimension that Banks played this is where the wealth of the 21st Century is being created opportunity to access to land and capital in urban areas and the jobs that go with them part of that is to create these dividing lines that the banks underwrote in creating these segregated housing patterns how do we do that well we build massive subdivisions which end up replicating the patterns that have been put in place at the beginning of the 20th century and these maps that are drawn by the federal agencies charged with this have rare behinds to indicate these aren't good neighborhoods redlining refers to practice the banks the federal government used to have a really drawing red lines on a map around certain neighborhoods and Grading every neighborhood from more desirable to less desirable nine times out of ten the places that were redlined that were deemed to be less desirable were minority neighborhoods immigrant neighborhoods and so banks in redlined communities would not make loans we're not going to underwrite mortgages for this community we're not going to insure houses in this community and we're not going to give business loans in this community racial segregation and discrimination was very much baked into the credit model the banking model the racial wealth Gap first of all right that wealth was very much about you know housing it's the entire Midwest you know Southwest Southeast and in inner cities that were redlined the flow of capital repeated into white only neighborhoods continued to cut off black neighborhoods you would have Banks saying well this is a risk decision this is not a race decision every single subsidy that built the middle class whether it's the homestead loans the farm loans the New Deal mortgage student loans all of those not accidentally but explicitly Exempted certain races black predominantly also you know Mexican Japanese because 96 to 99 of all mortgages from 1934 until around 1970 were funded by the FHA that those neighborhoods never got mortgages what they got instead were things like contract loans installment loans they were paying twice or three times as much in rent your school taxes were linked to your mortgage the roads the parks all of the goodies of the sort of make America great was provided through those subsidized mortgages and that is sort of the the American dream and it was very much financed by the federal government and if you were not a white male Breadwinner you did not get that loan our Studies have shown that 70 percent of communities that were redlined in the 1930s are still low income today land ownership sits at the basis of all capital and so that history of not being treated equally or fairly in our system is what caused the racial wealth Gap [Music] those relationships with financial institutions at the very Foundation the relationships themselves have not been created or nurtured and so you find that in many communities of color they rely on other alternative lenders in the absence of a of a bank or credit union the payday lender is the check cashers the financial Predators come in and fill the Gap I said that there were two banking systems right one that is incredibly federally subsidized that plugs in directly to the fed and that system largely serves those who have wealth or have enough money to put in a bank account and then there's this whole other wild west system [Music] [Music] we look right across the street there's one here right on the corner it says cash on the top no credit checks instant approval those those are some of the terms that they use I really believe that with the payday lending places the advantage that they have is this instant and they can just go in and get a loan and come right back out with it but not thinking long term how it really affects them and how it really puts them back in the hole in Mississippi there are actually more payday lenders per capita than Starbucks payday lenders they are creative they will pop up in the smallest of places it is simply put a way for people to have access to small dollar amounts they're Limited at 500 here in the state on a short-term basis typically 30 days or less with incredibly High interest rates in Mississippi that's 521 APR that oftentimes the principles never be paid and people just end up in a spiral spiraling trap of debt that can take years or decades to break out of foreign [Music] on these kind of piecemeal Solutions instead of kind of a One-Stop Financial servicer I.E a bank means that you do end up spending a lot more money for basic Services what is it about the Delta region that draws these predatory lenders here I don't think it's a secret when we look at Mississippi and how it's ranked amongst everything Health Care education pretty much ranked the last on a lot of things so it's not surprising to me that large employees or corporations would take advantage of a population that they think is not educated enough to understand what they're getting themselves into we're here to talk about financial planning how to create wealth how to keep your money and the do's and don'ts of your money it's very important especially coming from a small town because we don't have a whole lot here and we're actually trying to build the community up for the younger generation that's coming along and if they don't know ways to actually make money and be able to create generational wealth then the towns the small town and the town surrounding will continue to go down from my experience I don't think most banks here in Mississippi are fair to a lot of loners I just think that if there's a system for loners it should be a system for everybody and not for one group of people we use a lot of little Community Banks around here others prefer not to use Banks why do you think people go to the payday lenders instead of a bank because it's easier to get money from them than it is from the bank because if your credit is not a certain thing sometimes the banks won't let you get the money I've tried to you know buy a house and it was just one thing after another we need your bank statement we need your your bills what did you do in 20 2015 what happened why you weren't working I've been trying to get a house in 2015. I tried to get a house in 2021. why

can't we talk about what I'm doing now an areas that are kind of run down or have a lot of poor you know not really middle-class people they feel like they can feed off of that because they know that they don't have the money especially if you live in paycheck to paycheck I don't know it's just hard it's hard and it hurts because you know you want to do so much for your family and you know your kids see you hurting and they see you want to do better and they see you you know struggling and they you know Mom what's wrong what's going on foreign all of our products and services are regulated at both the state level and the federal level what we offer is basic financial services that are transparent that are convenient that are cost effective and that provide a bridge for our customers odd of informality they all kind of have different signs and it looks to be embedded in the community they will have two payday lenders owned by the same company on the same block with different signs pretending like they're different companies right so that's a model that that is that is used many of our customers are either subprime customers or have thin or no credit files so that they are somewhat of a um a greater risk here's what payday lenders do that Banks don't right so payday lenders and check cashers have their fees listed usually and each week you may pay fifty dollars to renew that loan now that is an absurd interest rate to keep rolling over that loan but it's predictable with banks there are you know pages and pages of legalese and jargon that is like purposefully meant to vary that APR rate or that they may change the fees uh one month to the next our customers are intelligent they on understand their financial lives to assume that our customers get trapped is a criticism of our customers an annual percentage rate contemplates that alone will be outstanding for a year our products are often paid off in a much shorter period of time that annual percentage rate will distort the actual cost of the credit [Music] also here with us today is the great Bill Vina the CEO of Hope Credit Union [Music] and Mr Bynum as you know has helped connect so many people in Mississippi and across the South with the opportunity and yes with hope we were very excited to be able to host vice president Harris earlier this year invited her to come to the Delta to see firsthand the opportunities that exist and how the administration could leverage its efforts alongside Community Development Finance institutions like hope in many of the towns that hope is located many neighborhoods we're located we are the only financial institution 80 of our branches are in community of color 30 are in rural areas credit unions and Banks differ in some fundamental ways but mostly is who owns the institution all credit unions are owned by their members whether you have a million dollars or ten dollars in deposits you have one vote for the board and for key policy decisions I think in many cases financial institutions often don't know their neighborhoods or communities well enough particularly communities of color and so they actually need cdfis as partners to help them not only identify the need but to come up with Solutions on providing affordable access and credit to underserved communities I described a Delta Region as an amazing part of this country It produced some of the most Innovative people not just BB King or the writers and the musicians and artists but just imagine people who do so much who survive with less so there's systemic disparities in the banking system black entrepreneurs are three times more likely to report that they did not apply for credit for fear of being turned away by a bank black and Latino homeowners are rejected at a higher rate when applying for home loans from traditional financial institutions even when they have credit profiles similar to other applicants we've been fortunate to be able to go into communities in many cases where banks have closed and convert those Banks into a Credit Union branch one great example is Morehead Mississippi [Music] hello tail hi thanks for having us yeah well it's good it's good to have you guys here uh in our small community my name is George Holland again and I'm the mayor here in the town of Moorhead I've been married for 14 years I was born here my family was sharecroppers it was 13 of us in a small house two and a half miles east of Morehead Morehead is known for where the Southern Cross the yellow dog those two railroads across here in Moorhead and that was at back in the early 1900s late 1800s everything moved by rail so Moorhead started out to be the largest community the largest city in in the Delta when I was a kid this town was hustling bustling it was a real uh productive town Friday evening and Saturday evening if you couldn't hardly walk down these streets for for the traffic for people but now it's just dead when I went to Moorhead to talk to Mayor Holland and tell him that the bank branch was closed he invited me to get in his truck and drove me around the town he showed me the community he showed me a neighborhood called eastmoor where homes had been built in the 70s to bring the workers the black former Plantation workers closer in town so that it would be more accessible to the businesses that relied on them but it was built outside the city limits interestingly largely because they wanted to limit the impact of those residents on on local elections and the houses were built it will build terrible quality and didn't take long before you saw running sewage in the streets there were electrical fires some people died in some of those fires we were able to work with the mayor work with some of our partners and bring Capital into those Community into that community and we ultimately have renovated every home in that neighborhood that's what a bank does that's what a bank should do it is the primary economic engine for many communities particularly in small towns and I believe it was like 2015. it's hope field avoid that really really changed things here in this community we're in a bank lease we'll try to negotiate a contribution both of the facility and of financial resources to help us to invest in getting that grants to a level where it can perform as a community development Finance institution and in some cases we've been able to work with institutions that have been open to that in other cases we've had to go to the Senate and to house and ask policy makers to hold them accountable because there are laws that require that Banks reinvest in communities where they extract the profit thank you I think banking is a utility just like water you know nobody would think about cutting out a water that goes to everybody's house if you don't have access to credit you really can't fully participate not only in the financial system but in the Democracy the social contract with banks has been broken we give you the Federal Reserve liquidity and in return you serve the communities if we're going to support the system let it serve everybody I don't think this is a problem that the market uh should fix it was a problem created by policy Banks run on policy we manage Banks through a variety of different regulations and laws we should make sure that those laws are serving the communities that are most vulnerable there's something called the community investment outstanding obligation on banks to serve low and moderate income communities it ensures that they both provide basic banking services there are other tests that go along with lending and investment that actually is undergoing a big review right now in the United States and so it's really going to be modernized to take into account the very different way that banking services are both delivered and consumed It Was Written in 1977 and it was to reverse redlining we hardly had the globalized digitized system that we have today so it certainly needs an update it's easier to tweak something that exists that it is to create something new we need to really just take a look at what's tried and true what's in place we are encouraged by the trend which shows a steady decline in the total share of unbanked households banks around the country through American Bankers Association is really determined to make progress in bringing not just the total number down but making sure that communities of color all across the nation have a lower percentage of being unbanked it is still the case that the average American lives within um proximity of 25 Bank branches that is not to say that that is everybody and we are working hard and acknowledge the problem it is also true that the digitization of banking services means that there is less demand in some cases for customers to go into Bank branches the pandemic forced a change in consumer Behavior things have been talking about digitization for years and years and years they want more people to use their aperture cheaper for them the goal is to get everyone on digital the problem is that those very same communities in our banking deserts don't have Broadband we're talking about elderly populations we're talking about tribes we're talking about places where there aren't the same kind of systems I think banks will benefit by really expanding how they look not only at that population but those populations that have been traditionally unbanked or underbanked but also the opportunities that are available if they bring them into that system and help grow the customers themselves everybody who's outside of the banking system is a potential customer and Banks want customers one of the most important Solutions we see that's really bearing fruit is encouraging our banks to offer what are called Bank on certified accounts a basic bank account that is fully functional but it also has a special set of guard rails so that people who are not experienced with having a bank account can be completely confident this really starts with the inability to access capital and credit you know there need to be a number of solutions saying financial literacy is something needed is not to say that you illiterate is just to say that you can't be no more than what your experiences allow you to be by the time they get out of high school they should know how to do a checking account and a savings account and Etc because this is core to how you build wealth in America more financial education and addressing some of that distrust would go a long way towards creating a smaller unbanked and underbanked population the max ought to take a hard look at whether or not they can create mechanisms within themselves to deal with helping to repair things that are awry in our system more than anything else ownership closes the financial wealth Gap can we create an instrument here that says we can put people in housing but no down payment as we become a nation that's more Diversified in terms of our demographics you can't make it if you have 50 homeownership among black and Latino families if African Americans are are excluded from that Financial mainstream more than likely they don't have a savings plan to provide even greater benefits for their children that becomes then a community problem the belief of this country is that if people worked hard and do the right thing we all should succeed and we should all be able to have economic Mobility but that contract isn't true for everyone because when people don't feel like they can be part of the society the social contract is broken for them then they operate outside of that Society if the market isn't benefiting a majority of people then we need to rethink what kind of Market we have [Music] [Applause] [Music] [Applause] thank you [Music]

2022-12-16 01:37

Other news