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Many are concerned about the future of banking for African Americans and where they keep their money considering the impending debt limit crisis that threatens America’s fiscal status globally and the failure of Silicon Valley Bank (SVB), Signature, and First Republic banks.
In March, SVB was the first to fail as rising interest rates lowered the value of the bank’s holdings.
After a tumultuous weekend after SVB’s demise, Signature Bank ultimately shut down due to an overwhelming demand for withdrawals.
With their demise, America avoided the largest bank failure since 2008, when Lehman Brothers’ collapse triggered the Great Recession.
After this month’s seizure of First Republic by the Federal Deposit Insurance Corporation (FDIC), financial experts have officially declared a banking crisis.
And following the adage, “When America catches a cold, Black people get pneumonia,” Black-owned banks could be unintentional victims of the United States’ current banking crisis.
Dominic Mjarten, CEO of Optus Bank, a Black-owned bank formed by Black leaders in 1921, expressed great worry to Yahoo News about the impact on the community bank system.
While it might not necessarily be a crisis for Wall Street, it’s a major problem for Main Street, he said.
The FDIC reported that, of the more than 5,000 U.S. banks, just 25 are Black owned.
Based on experience, Mjarten explains, “When we have any hiccups, or any challenges in our financial system, underserved communities feel the impact first and recover last.”
Mjarten said Optus Bank is feeling the pressure since consumers are nervous about their money and are switching banks.
In effect, the funds have already left the areas Optus supports.
“It’s migrating over to larger institutions that are not as equipped to serve some of the smaller, underserved parts of our economy that we are,” Mjarten said.
Forbes adds that the failure of banks, especially Silicon Valley Bank, which dealt with roughly half of all U.S. technology firms funded by venture capitalists, will have immediate and long-term effects on the Black entrepreneurial environment.
“Even though Black entrepreneurs receive less than 0.5% of all venture dollars invested in the U.S., the fallout from SVB could have greater consequences for them,” Forbes wrote.
Experts agree that in order for Black business owners to be competitive in a wide range of industries, they need access to capital.
But, Teri Williams, president of the Black-owned OneUnited Bank, told the Washington Informer that African Americans shouldn’t lose any sleep.
“If you go to our website at OneUnited.com/FDIC, you’ll see a great article on this point,” Williams said.
“If you have $250,000 or less in the bank, you can sleep well because your money is safe,” Williams exclaimed. “If you have a joint account, it’s insured up to $500,000.”
She noted that the FDIC insures all deposits up to $250,000 for individuals and $500,000 for joint accounts. Further, “if you have more than one bank account, you can look for ways to increase FDIC coverage,” she stated.
“In the case of the banks that failed, they are very different institutions,” Williams explained.
“The average deposit at Silicon Valley Bank was $4 million. They had deposits of up to $500 million. There really was a lack of appreciation for the need to have multiple bank accounts or talking to your banker about whether you have FDIC insurance,” Williams said. “If you like your bank, there are ways to get additional coverage. The FDIC insurance protects 90% of our community, so we don’t have to worry about failures. You are protected.”
This week, President Joe Biden proclaimed that the nation’s banks are safe.
“Americans can have confidence that the banking system is safe. Your deposits are safe. The taxpayer will bear no losses,” the president declared. “Managers of these banks will be fired. Investors in these banks will not be protected.”
Williams offered further distinction from the 2008 collapse to the latest failures.
She said Black-owned banks wouldn’t be allowed to manage the way others have. “We are regulated, some would say over-regulated, so this is not our problem,” Williams posited.
“This also isn’t 2008, when we had a mortgage crisis. There isn’t a mortgage crisis today. If you own your home today, it’s probably worth more than when you bought it,” Williams added.
“In 2008, people paid more than their homes were worth, banks have tremendous capital today, and we are better regulated and managed than anything you saw in 2008.”