Transcript CFPB FinEx Webinar: Black Banking: Past, Present, and Future February 23, 2023 Presenters: Dr. Charles Nier, Senior Counsel, Office of Enforcement, CFPB; Betty Rudolph, Federal Deposit Insurance Corporation (FDIC); John Stanley, Office of Comptroller of the Currency (OCC); and Rohit Chopra, Director, CFPB Facilitator: Heather Brown, Ed.D., CFPB Office of Consumer Education, FinEx Program Lead >>Ms. Robin Dixon-Jefferson: [In progress]—go through some quick logistics for this event. This event is being recorded, just as a disclaimer to you all. The presenters for this event would like you to put all of your questions and/or comments into the chat box. They will be answering questions for this event on the back end of it. All questions may not be answered during the event, but they will get back with you with answers that you require. Heather, with that, I'm going to turn it over to you. >>Dr. Heather Brown: Thank you very much, Robin, and thank you, Tracey, also for all your help preparing and getting things ready to get started today. Thank you to all of our participants who have joined us, and welcome to CFPB's Financial Education Exchange webinar commemorating Black History Month on "Black Banking: Past, Present, and Future." I'm Heather Brown. I'm the Program Lead for the CFPB FinEx, and I'll be your facilitator for today's webinar. I will be providing everyone a copy of the slide deck after the presentation, so you don't have to take too many notes, and if time allows at the end, we'll have a Q&A. So feel free to put your questions in the chat, and should we not get to some questions, we'll try to answer them in writing and also send those out to you for everyone that's registered. I'd like to introduce our distinguished presenters for today and then provide a brief introduction to the CFPB Fin-Ex program for those that aren't familiar, and then we will get started. First, I'd like to introduce Johnny Stanley. He is Deputy Comptroller for the East and Northwest Region in the Office of the Comptroller of the Currency. In this role, Mr. Stanley oversees more than 200 community banks, federal savings associations. He manages a staff of more than 350 bank examiners and other professional and support personnel located in the offices throughout the United States. We also are going to have Ms. Betty Rudolph. She serves as the Director of the Federal Deposit Insurance Corporation's Office of Minority and Community Development Banking. In this role, she leads the FDIC's efforts to preserve and promote the FDIC-insured minority depository institutions and community development financial institutions and facilitate partnerships to help them build size, scale, and capacity to amplify financial services, the financial services they provide in serving minority, low-income, and rural communities. I'd also like to introduce to you our keynote speaker for today, Dr. Charles Nier. Many of you that have come to previous Black History Month presentations on the Black Wealth Gap will remember him. He's Senior Counsel with the Office of Enforcement. He also has done his own research and has a Ph.D. in history, and he is presenting the research that he's done today on Black banks and the Black banking experience. I am going to introduce our Director, Rohit Chopra, as we get closer to the final presentation, which he will provide closing remarks. So I'm going to hold off on that introduction and just get started so that I can introduce him when he begins to speak, and we're excited that he's able to join us today. I have to go through a quick disclaimer that this presentation is being made by a CFPB representative, myself and Dr. Nier. We also have guests, and for all of our guests, what we are discussing does not constitute legal interpretation, guidance, or advice of the Consumer Financial Protection Bureau, the FDIC, or the OCC. Any opinions or views stated by the presenters are the presenter's own and may not represent the CFPB's or the FDIC's or ICC's views. And also, any third-party references in our slides does not represent an endorsement, and we cannot guarantee the accuracy of what's on those third-party websites. It's provided simply for your information, and there may be other entities that meet your needs. And if you hand off your slides to others, just let them know that this document supports a live discussion, and so it may not express everything in its entirety. The CFPB is a 21st century agency that implements and enforces federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. That's our mission and what guides the work that we do. And the CFPB FinEx program is a place where financial educators, practitioners, counselors, researchers, and any others that teach financial literacy to adults can learn from one another, advance their work, and see what CFPB is doing to help you do the work you do to support the financial well-being of United States citizens and those that are living in the states—and internationally, for that matter. I'm just reminding people that we do still have our Coronavirus Pandemic page up, and we still update it with things, particularly when dates change relating to things like student loan changes or other forbearance issues. So feel free to check that. This is our Online Resources for Practitioner page. The link at the bottom, you can get there, and you can sign up to receive emails directly on our program if you're interested in getting advanced notice of webinars and other events. Please feel free to just put your email in the email address box there, and you will start receiving notifications. If for some reason you've stopped receiving notifications and you still want them, you may have fallen off our list, so please feel free to go back and reenter yourself. We do have a webinar archive. We are transitioning it to the YouTube channel, but if you do a search on a YouTube channel or hit one of the links here, you are able to go through our webpage and get to our webinar archives. With that, I'm going to hand off to Dr. Nier to make his presentation for this afternoon, and he is Senior Counsel at the Office of Enforcement. Thank you. >>Dr. Charles Nier: Thank you, Heather, and thank you to everybody for joining today's webinar. So today I'll be speaking about the history of Black banking, and I'll be focusing on a case study of Black-owned financial institutions, Civil rights activism, and economic self-determination in Philadelphia from 1910 to 1930. Next slide, please. So before I begin with the case study, I want to make sure we frame up that conversation with a historical methodology for analyzing African American urban history, and when we think about African American urban history, it's important to understand that from the historical intersection of several different significant factors. The first group of factors are really external factors. These are factors that impact the Black community, and we think about things like discrimination or segregation. The next set of factors are structural in nature, and these are more broad-based factors, usually federal or state or local government action, and we think about zoning laws and practices or housing policy and practices. And finally, internal factors, these are factors within the African American community, and we think about Civil rights activism and economic development. But it's important as we discuss today's case study to see the interaction between these factors and how external and structural factors have a huge influence and impact on the internal factors and internal developments within the Black community. Next slide please. So let's begin the story here with the Great Migration. Intent on escaping the violence and discrimination that was rampant in the South beginning in really 1910 and continuing to 1930, thousands, tens of thousands of African Americans left the South seeking economic and educational opportunities in the North. World War I had presented opportunities in the North that had not previously existed due to labor shortages, and many African Americans moved North to try to take advantage of those job opportunities. And in fact, 1.6 million migrants arrived primarily in the cities of the Northeast, and you can see in the numbers in Philadelphia, the population just exploded in 30 years, from 63,000 to almost 220,000, a tremendous population growth in the city of Philadelphia. And this was consistent across many cities in the North: New York, Baltimore, Boston. Throughout the North, they saw these huge expansions in population. And at least in Philadelphia, most of the migrants arrived from four Southern states: Virginia, South Carolina, Georgia, and Maryland. And it represented the largest internal movement of any group in American history. Next slide. Upon arriving in the urban areas in the North, African Americans often encountered racism and discriminatory conditions, in other words, external factors, and some of the factors would be de facto segregation. We like to think that segregation was confined to the South, but in fact, that's not accurate. Segregation was also rampant in the North. And Philadelphia, particularly, was notoriously segregated. African Americans were excluded from hotels, concert halls, public transportation, schools, churches, and all sorts of public accommodations. In addition, African Americans encountered inadequate and segregated housing, poor schools, limited employment opportunities, lack of services from white businesses, including banks, and also violence, which ranged from daily insults and harassment to assault and murder and mob violence. And in fact, in Philadelphia in 1918, there was a race riot that was triggered when a white mob descended upon an African American family who had recently moved into a largely white neighborhood. It triggered a four-day riot in which in which white mobs injured many people in Black neighborhoods in South Philadelphia. Next slide. And certainly, the exclusion of services was applicable in the credit and mortgage phase. So African Americans encounter numerous barriers to access credit and achieve home ownership. Banks often simply refused to accept the deposit business of African Americans, refused to lend to African Americans or for properties located in African American neighborhoods, and even if a bank did make a mortgage, the terms and conditions were often onerous and oppressive compared to whites. Typically, African-American borrowers were charged at least double the interest rate and double the fees in comparison to whites. And I have a quote here from Raymond Pace Alexander, who was a very prominent African American lawyer in Philadelphia, who described the situation: "[I]f a colored man owns City Hall, he would be unable to get a first mortgage on it at this bank. They absolutely refused to lend money in any manner to Negroes." Next slide. So in response to these external and structural factors, what we see here is a growing concentration of an African American consumer market with disposable income. Often migrants brought with them money, and Philadelphia was also known to provide relatively high wages to African American migrants, which contributed to the development of a solid working class in Philadelphia. And in many ways, these external factors lead to the creation of a separate racialized economy. So market conditions in Philadelphia become conducive to the rapid growth of African American-owned business districts, which were in turn supported by the emerging working class in Philadelphia. And in Philadelphia, the Black-owned business district was usually affiliated with South Philadelphia, and at the pinnacle of this economic period of this racialized economy were race banks. Next slide. Next slide please. So in talking about race banks, what I mean are banks that are owned and operated by African Americans, and I used the term "race banks" because that's how they were frequently referred to in African American newspapers at the time. And from 1900 to 1934, there were 130 Black-owned banks that were established throughout the United States. Many cities had large race banks—Chicago, New York—but Philadelphia had the largest number of total Black-owned financial institutions, including multiple banks and numerous building and loan associations. And in the 1920s, three African American-owned banks opened and operated in quick succession in Philadelphia" the Brown and Stevens Bank, the Keystone Cooperative Bank, and the Citizen and Southern Bank. So I'm going to turn and walk through some of the historical facts about each of these institutions. Next slide. So the Brown and Stevens Bank, that was established in 1916 by Andrew Stevens and Edwin Brown. Edwin Brown was a Philadelphian. He also worked at an African American newspaper, also worked for Dun and Company, which was one of the first commercial reporting agencies, and had established a couple banks in Virginia before he returned to Philadelphia. Andrew Stevens was the son of a relatively wealthy caterer. He was a graduate of Lincoln University as well as the University of Penn. And together they got together and established the Brown and Stevens Bank, and it was an immediate success in Philadelphia. And at its peak, it had combined assets of over $1.5 million with 11,000 depositors, and it provided all sorts of financial support to the Black community. It employed African Americans. It allowed for wealth accumulation through interest on deposits. It provided access to credit to borrowers to finance a home or a small business, and it also invested in the Black community through salaries, dividends, interest in investments. And you see a picture of the Brown and Stevens Banks, which was at 427 South Broad, which is South Philadelphia. Next slide, please. The bank was so successful, it was able to open two additional offices, and Brown and Stevens established a second bank , the Cosmopolitan State Bank, in 1924. And they were able to grow their customer base through aggressive marketing to the Black community with advertisements in newspapers and magazines. And on the right, you see an advertisement that was run in The Messenger, which was a publication published by A. Philip Randolph, and it talks about the importance of access to credit to the Black community, talking about men grow rich not by labor but by credit and capital, so in many ways, the advertisements making a pitch to the African American consumers to take advantage of credit as a way to build wealth. And Brown and Stevens expanded beyond just finance. They were involved in the instruction of five major theaters and purchased large apartment buildings in Harlem, New York, and the bank was widely followed in the African American press at the time. It was held as a monument to racial enterprise that inspired the confidence of the whole race. Unfortunately, the bank's spectacular rise was equaled with a very dramatic fall, triggered by a run on the bank. This was obviously before the time we had federal insurance on deposits. The bank collapsed following that run due to the fact that it had a number of speculative investment, and essentially, it lacked liquidity to meet that run when it came, ultimately resulting in the bank's closure in 1926. Next slide. So now let's turn to the Keystone Cooperative Bank Association. John Asbury, inspired by Brown and Stevens, established the Keystone Cooperative Banking Association in 1921. Asbury was a graduate of Howard University Law School. He served as a DA in Norfolk County, Virginia, and after he returned to Philadelphia, he served as an Assistant City Solicitor for the city. And he established this institution as an affiliate of the Keystone Aid Society, which was at the time the largest Black-owned insurance company in Philadelphia. His bank grew steadily for a number of years, growing to 2,000 customers with $100,000 mostly in small accounts. But after the collapse of Brown and Stevens, Asbury realized his own bank could potentially face liquidity problems, and to avoid a potential collapse, he reached out to another owner of a Black bank in Philadelphia, Richard Wright. In January 1927, Asbury announced that Keystone and Citizens had merged into a single institution, and this was the first time that two race banks had successfully consolidated their resources, emerged, and it was hailed as evidence of a desire to cooperate for the future prosperity of the race. Next slide, please. But Stevens and Asbury weren't limited just to sort of economic endeavors. Rather, they also struggled for Civil rights in Philadelphia and in Pennsylvania, and they used their race banks as a platform to engage in traditional Civil rights efforts through the political process as members of the Pennsylvania House of Representatives. Following a brutal lynching outside Philadelphia in Coatesville, Zacharia Walker was burned alive by a mob of 2,000 whites, and in response to that, Stevens fought successfully for the passage of an anti-lynching law in Pennsylvania. Likewise, Asbury, after he was forced to sit in the balcony of a theater for which he had a ticket in one of the front rows, introduced a bill in the PA House of Representatives known as the "Asbury Equal Rights Bill." And it was designed to guarantee equal Civil rights for all citizens of Pennsylvania, regardless of race, in places of public accommodations. It did successfully pass the House, but it died in the Senate, and both Asbury and Stevens were removed from the Republican ticket due to their Civil rights advocacy. Ultimately, there was a law passed in 1935 which outlawed discrimination in public accommodations a number of years later. Next slide. And finally, I want to talk a little bit about Major Richard Wright and his Citizens Bank, truly a remarkable figure. He was born as an enslaved person in Georgia in 1855, graduated from Atlanta University, eventually was appointed principal of the E.A. Ware High School, which was the only public-funded high school for African Americans in Georgia, goes on to lead Savannah State University. His educational philosophy was considered radical at the time, radical in the sense that it just provided a traditional education that whites were also receiving as opposed to just an industrial education. And on one occasion, he actually escaped a mob that had gathered to lynch him. He was, in fact, a major. He was appointed by President William McKinley as a major in paymaster in the U.S. Army. He was the highest-ranking African-American officer in the Spanish-American War. Next slide. But one day, Wright's daughter was insulted at a local bank while attempting to make a deposit. She was called the N word. Physical altercation ensued, and Wright demanded an apology from the bank president, a bank that he had patronized for many years. The bank president refused apology, and Wright vowed to start his own bank. So at the age of 66, after a career as one of the foremost educators in the South, Wright leaves the South and moves North and opens the Citizens and Southern Bank in Philadelphia in 1920. He really had two goals. He wanted to promote savings in order to achieve homeownership, while at the same time providing services to protect African Americans from real estate sharks, and the bank provided very traditional banking services, commercial services, savings accounts, title and trust insurance, mortgage loans, small business loans. And that's a picture or an image of the board of directors of the bank. Next slide. And Wright's bank was tremendously successful. It implemented a multifaceted marketing campaign, much like the Brown and Stevens Bank had done, to reach all parts of the African American community, and you see a full-page advertisement on your right that was running the Philadelphia Tribune where it refers to the finest bank building of the race in the North and then talks about all the various services that the bank provides. That's Wright in the center, and below him is an actual picture of the bank building. And Wright expanded his bank to include a trust company to counter discrimination and fraud in the mortgage market. So he was able to provide a full range of financial services to African American home buyers, reviewing mortgage documents, examining closing costs, representing borrowers at closing, to avoid financial exploitation in the Black community. By 1930, Citizens has $161,000 in capital, 6,000 deposit accounts, and 1,300 checking accounts, and had provided over a thousand loans. And in addition, Wright also established and was the first president of the National Negro Bankers Association, really a remarkable career. Next slide. So what do we learn from this examination of these race banks? So the founders of race banks viewed such institutions as essential internal factors for economic development and wealth creation in the Black community. In particular, they provided capital for business development and mortgages for homeownership as well as a host of other financial services, but they were not limited to just economic advancement. They weren't just simple businesses. They were rather essential elements of Civil rights advocacy that allowed the leaders to protest racial discrimination, fight for the passage of Civil rights legislation, and implement in practice economic self-determination. Next slide. But the movement was not limited just to banks. It also included building and loans. Now, building and loans, or thrifts, were essentially cooperative organizations that often provided persons with low to moderate income an alternative financing option to achieve homeownership. And basically, the way they worked was a member of the thrift subscribed to a certain number of shares, and they could essentially borrow money against those shares. And they typically offered reasonable loan terms and conditions, low interest rates and fees, and were also fully amortized so the loan was paid off in full at the conclusion of its term. They also had the benefit of being relatively easy to set up. They essentially required a charter and bylaws. There was limited to no capital requirements, and they often were able to operate relatively informally with limited operating costs, particularly in comparison to banks. And by 1930, they're quite widespread in the United States, originating more than 22 percent of mortgages in the United States. Next slide. And by 1930, there are 73 Black-owned building and loan associations in operation in the United States with assets of about $6.5 million. Nearly half of these associations were in Philadelphia, which was the epicenter of the Building and Loan Association movement. In fact, it earned the nickname the "City of Homes" because they were so prevalent, and these were tremendously successful in generating mortgage loans for African Americans. From 1910 to 1929, building and loans originated at least 1,216 mortgage loans to African Americans based on a review of the mortgage records in the City of Philadelphia Archives. And remarkably, this entire movement was really led by a handful of people, including several prominent African American lawyers who worked in conjunction with some of the institutional pillars of the Black community, and that would be the African American church community. Next slide. And the one gentleman who really led this movement was George Mitchell, another graduate of Howard University Law School. He focused his career on developing and establishing Black-owned building and loan associations in Philadelphia from 1905 until his death in 1931. He not only was instrumental in establishing the organizations. He also continued his involvement by serving as the solicitor and director for at least 20 associations and attended nearly every monthly meeting of every organization for decades. And he also served as editor of a magazine for the associations, The Monthly Home Visitor, and that's a picture of Mr. Mitchell there. Next slide. And I just wanted to give you a little taste of what some of these building and loans look like that Mitchell helped to establish, and I think one of the most interesting one is the Women's Building and Loan Association, which was founded in 1920. Not only was it an African American building and loan association, but it was also the only all-women association in Pennsylvania and quite likely in the United States. Mitchell was the only male associated with the association, and it was led by Viola Lee Hill, who her accountant described the institution as "in the best financial shape in comparison with many other larger associations of all races." And by 1932, the association had financed the purchase of over 100 home loans in Philadelphia. Next slide. But again, Mitchell also engaged in Civil rights advocacy. He was a leader in the Niagara movement and was appointed its secretary for Pennsylvania. The Niagara movement fought for civil and political rights for African Americans. It combated racial discrimination and segregation that was led by W. E. B. Du Bois and was the forerunner of the NAACP, which Mitchell was the founding member of the Philadelphia Chapter in 1911. He also fought against efforts to create separate schools for Black children, was a founding member of the American Negro Historical Society. We see a quote here from I. Maximillian Martin, "[Mitchell's' sane, conservative advice on management and his knowledge of real estate value are in no small measure responsible for the present satisfactory condition of many of the Black-owned associations." Next slide. While Mitchell spearheaded the legal work to set up these building and loan movements, the institutional pillars were the Black churches in Philadelphia, and there were at least eight Black churches that operated building and loan associations. And there's a picture of the Cherry Memorial Baptist Church in Philadelphia. Next slide. The leaders of Black churches viewed building and loan associations as key components of their broad racial uplift programs for their congregations, believing they encourage the principle of thrift, boosted civic participation, created social space free from discrimination and racism, advanced homeownership, and achieved economic stability for their congregations. Next slide. And perhaps the most famous of them was the Berean Building and Loan Association, which was founded by Matthew Anderson in 1888, and he selected William Still as its first president. William Still, of course, is a legendary African American leader. He's considered the Father of the Underground Railroad. He was helping as many as 60 enslaved persons a month escape to the freedom, including his own brother who he was separated from at a young age when his brother was sold and moved to Alabama prior to escaping North. Still also led a campaign to desegregate streetcar lines in Philadelphia, and by 1928, Berean was the largest Black-owned building and loan in the United States, with 3,000 members, nearly a million dollars in assets, and generating over 2,000 mortgage loans. Next slide. So overall, what was the impact of race banks in these building and loan associations? Now, some scholars have argued that Black financial institutions, they were too small or too poorly equipped to meet the demand for home loans in Black neighborhoods, and there's some truth to that. However, I think it underestimates the role that these institutions had on the Black community, and you can really see that in Philadelphia, which had such a large network of Black-owned financial institutions. It was generating a tremendous amount of loans, and you can see that in the overall homeownership statistics in Philadelphia, which over a 30-year period, they essentially tripled from 5 percent up to 12 percent and then over 15 percent by 1930. In contrast, New York and Chicago had much smaller increases in Black homeownership rates and also had much, many fewer Black-owned financial institutions. And by 1930, Philadelphia had the highest number of African-American homeowners of any major urban city in the United States, and essentially, I argue that one of the reasons for this success was the impact of Black-owned banks and building and loans. Next slide. So, in conclusion, African American communities established race banks and building and loans to provide capital for business development and mortgages for homeownership. They provided credit on reasonable and fair terms, and just as importantly, these were more than just business endeavors, but rather cornerstones for civil rights advocacy in Philadelphia, And we see that in the fighting of racial discrimination with civil rights legislation and economic empowerment. Next slide. And here are a list of references and sources. I will note this presentation is largely based on an article that will be coming out in the Journal for of African American History. It should be out any day now. And with that, I will turn it over to my colleagues. Thank you. >>Dr. Brown: Thank you so much, Dr. Nier, for that really great presentation. I always learn every time you present, and I'll look forward to reading that article when it comes out, and hopefully, you can share it with us. I also wanted to just mention our employee group, RISE, had posted something on Maggie, Lena Walker, the first Black woman to found a bank, and I had not heard of her either. So for those that are with the Bureau, you can check our Wiki to learn more about that as well. And thank you to RISE for keeping that information out and also initially conceiving the Black Wealth Gap webinars that we've had in the last two years. Okay. At this point, we're going to have Betty Rudolph join us from the FDIC. >>Ms. Betty Rudolph: Thank you, Heather. Can you hear me? >>Dr. Nier: Yes, we can hear you. >>Ms. Dixon-Jefferson: Yes, we can hear you. >>Ms. Rudolph: Okay. Thank you. Well, thank you very much. I really appreciated that historical perspective as well, and now we're going to move into sort of the present portion of our past, present, and future recap of Black banks. And I'm going to talk very briefly— Next slide, please. —on what are MDIs. Why do they matter? What is the FDIC's role? Talk a little bit about the African American MDIs and then talk about access to the banking system. Next slide, please. So what are minority depository institutions? From our perspective, there are 145 FDIC-insured MDIs. We have a map of them on our website, and they have $329 billion in total assets located across the country in 29 states and some territories. And these are FDIC insured. So they don't include minority depository institution, credit unions. Next slide, please. So we define an MDI in two ways. The first one is whether or not 51 percent or more of the voting stock of an institutions owned by minority individuals. That's how most MDIs qualify, but we also have a second definition, which is if a majority of the board of directors of the institution is minority and the community is predominantly minority, they also can qualify. So on the right-hand side of this slide, it shows the breakdown of the 145 total as of September 30th: 20 African American, 30 Hispanic, 73 Asian and Pacific Islander, 20 Native American, and two multiracial. And I should mention that just last night, I received the updated numbers for December 31st, and we've added one new African American MDI to the list as of the end of last year and one new multiracial institution for a total of 147. And I should also mention that the newest Black MDI, Adelphi Bank, opened in Columbus, Ohio, earlier this month. And so when we report our numbers for African American banks at the end of March, it will be 22. Next slide, please. So why do they matter? The FDIC published a very comprehensive study in 2019 talking about the financial impact and the social impact of MDIs, and this slide is kind of small to read, but what it shows is on the left-hand column there are the African American MDIs for two years, 2011 and 2016. And the share of the population they serve, that's in a lower/moderate income community. The second bar graph there shows for Hispanic banks, and the third one shows for Asian banks. The fourth set of bars there is for non-MDI community banks, and the last one is for large banks. So you can see that MDIs largely serve LMI communities at much higher rates than mainstream institutions. Next slide, please. So this slide is showing a very similar pattern, and this is just an example for the African American MDIs from our study. This is showing the percentage of the population that these institutions serve. So the first group of bar graphs there in 2011, the median African American MDI served 72 percent of their customers were African American compared to a non-MDI community bank down there at—I think that's 4 percent and 5 percent for large banks, and the same pattern holds for 2016. As Dr. Nier mentioned, many were organized by minorities to create pathways to economic development in segregated communities, and MDIs often provide banking services to those who might not otherwise have access to a bank account. And so our study showed sort of the important role that they play. Next slide, please. So what is our role? We do as an insurance agency. We insure the deposits in all 145 of these MDIs. We supervise about two-thirds of them, and the other supervisors are the Office of the Comptroller of the Currency—you'll hear from my colleague about that today—and the Federal Reserve as well supervises some MDIs. And all three of our agencies work to fulfill five statutory goals that we have to preserve and promote MDIs. The next slide, please. So our five statutory goals are to preserve the number of minority depository institutions; to preserve the minority character when there's a merger or acquisition of an MDI, particularly when they fail—and the FDIC plays a role in the receivership process there—third, to provide technical assistance to help prevent insolvency of MDIs; fourth, to promote, encourage creation of new MDIs. And finally, the fifth goal is to provide training, technical assistance, and educational programs for MDIs. So in addition to wearing our supervisory hat for these institutions, we also serve in a—preserve and promote and do everything we can to support these institutions. Next slide, please. I think there might be a slide just before this one. Yeah. So, traditionally, our efforts here since 1989 and before have focused on outreach with MDIs on education and training and technical assistance. We have a fairly robust technical assistance program where an MDI can request technical assistance at any time, and we provide what some of the bankers have termed as "free consulting" to them on our regulations and our supervisory strategies. But more recently, I would say within the past two to three years— Next slide, please. —we've been really trying to think out of the box in ways to support MDIs more broadly, and so in 2019, we hosted what our former chairman termed "speed dating sessions" where we invited the CEOs of large banks or large regional banks to meet with the CEOs of MDIs to explore opportunities for partnership, whether it would be investment in the MDI or putting deposits in the MDI, providing technical assistance. And larger institutions gained a lot of benefits from partnering with MDIs as well in terms of understanding how to better serve underserved communities, and so those were really great. Then the pandemic hit, and we put a pause on those. But we're going to be resuming them later this year on an interagency basis with our colleagues at the OCC and the Fed. We established an MDI subcommittee, which is a subcommittee of our Advisory Committee on Community Banking, and it's a board-level committee where our board meets with a subset of nine MDI CEOs a few times a year and provides a platform to share best practices, to bring forward challenges and to talk about opportunities. And that's been a really good thing to have, the voices of MDIs at the table, when we're considering policy. We do host interagency conferences. I mentioned our research. We have a board-level statement of policy about the importance of these institutions, and it lays out our program to preserve and promote them. More recently, we've engaged in some opportunities to train our examiners in the unique business models of MDIs. MDIs often serve communities where, in some instances, for example, it might be more challenging on the earning side. But these are mission-driven institutions that are all about serving their communities, so helping understand examiners how to apply the examination standards to the unique business models of MDIs. And we've also provided some tools to them to really understand the communities that these institutions are serving. We put in place some new policies for failing banks to provide a unique window of two weeks for failing banks to look at a failing bank's books and records, to understand the transaction, to get technical assistance, and we've been working on some cultural change, sharing positive stories of the impact of MDIs in their communities. On the right-hand side there, the Community Reinvestment Act is an important tool to incentivize larger institutions to partner with MDIs. We helped to champion the establishment of a Mission-Driven Bank Fund, which has $120 million in commitments to date that we'll be investing in and funding MDIs this year, and the federal government really stepped forward during the COVID pandemic, $12 billion in federal assistance. So the ECIP there is the Emergency Capital Investment Program. The Treasury Department invested. They've invested to date 8.3- of the $9 billion in purchasing stock in the institutions, and then the Community Development Financial Institutions Fund has grant money as well, and many, many CDFIs are also MDIs. And that $3 billion has also been a game changer. And then with all this new capital coming into the industry, we put together a capital estimator and a guide for these institutions. We published some designation procedures, which is how we designate an MDI based on the definitions I shared earlier. And then we've shared on our website, origin story videos about these institutions, and we have a Banking on Inclusion podcast where we share about MDIs as well. Next slide, please. In terms of African American MDIs, I mentioned the March 31st list will show 21. It will actually be 22 now. We've had actually three new Black banks in the past several months. As I said, I got our updated December numbers last night, and I wanted to talk briefly about recent injections of capital, particularly in the Black banks. Over the past 11 quarters, the capital has gone up by $377 million, or 84 percent increase, for the 19 Black banks that existed 11 quarters ago. And the total assets went up by $2.7 billion, or 56 percent, so tremendous growth in both the size of these institutions and their capital. Much of it came from the large banks, Citi, Bank of America, JPMorgan Chase, Wells Fargo, and others. But in addition of that ECIP money I talked about, I think around 760- or -70 million dollars was invested in those—in some of those nine 19 Black banks, so tremendous inflow of capital into these institutions that will enable them to lend sort of at a 10-time ratio in their communities with this new capital. Next slide, please. I wanted to end my presentation today just talking a little bit about access to the banking system from some of the other work that the FDIC does. So every two years, we publish a study on unbanked and underbanked households in the United States, and we just published this a couple of months ago. And you can see there an increase of 1.2 million banked households between 2019 and 2021, and a lot of that's attributable to what we call "bankable moments." So COVID payments coming from the government, if you had a bank account, that could go direct deposit into your bank account, and so we saw a number of people open up bank accounts. We worked with the IRS also to increase the opening of bank accounts for payments from the IRS and other federal payments. Next slide, please. But I did want to mention that the study showed that there continues to be a sizable racial and ethnic gap among the nations on bank households, and so you can see there that the rate is 2.1 percent for white households, 11 percent for Black—that's down from prior years but extraordinarily high—and 9.3 percent for Hispanic households. So there's still more work to be done. We find that MDIs tend to be very active in this space. Next slide, please. A couple more things I wanted to mention, FDIC initiatives to help encourage access to the banking system, we have our #GetBanked campaign, and that's featured pretty prominently on the FDIC's website. And the goal here is encouraging people to open bank accounts, and we ran a major media campaign in a lot of large cities and a big social media campaign. Some of our MDIs promoted this as well. Our website includes more information there about the top 10 reasons to get banked and how to find a financial institution and really what the benefits there are of having a bank account. Next slide please. And then finally, another initiative that FDIC has partnered with others on in terms of access to the banking system is the Bank On movement, and I think the FDIC started this a number of years ago by developing sort of some standards for what might be a safe, affordable bank account. And that work has been taken over by the Cities for Financial Empowerment, or CFE, and they published the standards on their website. And you can see some of the clips there from their website. And the Federal Reserve Bank of St. Louis recently did some analysis about the number of new Bank On accounts that had been opened. So these are no-overdraft, no-surprise-fee, your-money-is-secure bank accounts, and they're a good way for somebody who hasn't participated in the banking system to join the banking system economically and in a safe and trustworthy manner. And the study that the Fed produced noted that 14 million accounts had been opened to date, and those numbers are growing very rapidly. A number of our MDIs have Bank On accounts as well. So I thought that might be of interest to some of our audience today. And then my last two slides are just a number of resources about the things that I've talked today. Next slide, please. So this is our MDI program webpage, our Statement of Policy. That map I showed you, you can actually get an MDI list and an interactive map of MDI and CDFI headquarters and branch locations—it's a very useful tool to find an MDI or CDFI mission-driven bank near you—and our research study. And then the next slide is the additional resources on access to the banking system, so our unbanked survey, the GetBanked campaign, Bank On accounts, as well as our award-winning FDIC Money Smart financial education program. So with that, I will turn it back over to Heather. Thank you so much for the opportunity to present today. >>Dr. Brown: Thank you so much. That was such great information and so interesting. You timed it beautifully also. I think we have about three minutes before the Director joins, and you had generated quite a few questions, starting at 2:53 in the chat. So you might want to review those so that when we get to the end, you'll be ready, but maybe you can answer one now since we have just a couple minutes before the Director comes. And then after the Director speaks, we're going to move on to John Stanley, John Stanley's presentation from the OCC, and you won't want to miss that either, so stay tuned. But the question that's in here is, what is the biggest challenge MDIs face currently? Do you find that they tend to fail more than non in the MDIs? >>Ms. Rudolph: That's a great question. I think that it's really challenging to come up with the biggest challenge for MDIs as a group. They're very unique institutions, and when we were developing the requirements for the Mission-Driven Bank Fund, we heard from the CEOs of about 70 MDIs and CDFIs that if you've met one MDI, you've met one MDI. And they have different business models, different customer bases. They serve different histories. I think overall a general challenge has been access to the capital markets. I mentioned a lot of the new resources, both private and federal, that have been coming into the industry. I think that that has made a big difference. If you talk to some MDIs, though, they'll tell you that's just a small down payment on 400 years of racial wealth gaps, and so that's not as front and center. I think right now it's really deploying that capital and building the strategic capability, and the capacity of the institution to really grow that that new capital has been a game changer. And so it's providing all kinds of opportunities for hiring new talent, reaching new markets, which is really exciting and might be a little bit scary as well for some, but it's a really fantastic opportunity. Regarding failure rates, we haven't had any MDIs fail since 2019. One bank failed, which is when we used our new procedures. A Black bank in Newark, New Jersey, failed, and another Black MDI was the winning bidder. And they did credit our change in policy for being helpful to them. I think during the crisis, some MDIs did fail at a greater rate. Many of them were much smaller institutions. That's one of the challenges that MDIs face. There are MDIs that are $65 billion, but many of them are small, and so getting that capital and growing so they can spread their costs across a broader revenue base is something that they are aiming to do now. >>Dr. Brown: Excellent. Thank you so much for answering those two questions so thoroughly and efficiently . Well, please stay with us because it looks like you have questions from people that would like to hear, I'm sure. We'll hopefully have some time at the end for those that can hang on. >>Ms. Rudolph: Thank you, Heather. >>Dr. Brown: My pleasure. Thank you. I'm going to go ahead and introduce the Director. Do we know if he's online yet? >>Mr. Rohit Chopra: Oh, I've been here, Heather. >>Dr. Brown: Okay, wonderful. We're so glad to have you, Director Chopra. >>Mr. Chopra: I thank you. Oh, go ahead. Sorry to interrupt. I just wanted to thank you, Heather, for planning this and putting it together for this audience of people. We really care about practitioners in the are, and I also want to thank Charles and our Enforcement Team for sharing his research. I want to thank Betty from the FDIC and John from the OCC on all the work they're doing to help our MDIs to really be able to compete, gain, share, and really, frankly, build momentum on the work that's been done. I want to make sure everyone is thinking hard about what is it that we're trying to do at the CFPB to really help people think differently and not feel ashamed about their financial situation. We're working hard to help people spot pitfalls, assert their rights, seek help, and not just really blame themselves. So I think all of us are trying to think about ways we can include more people while also understanding the historical exclusion that so many people in our country have faced, and I want to read you into a couple of things that are going on. So you heard a bit about the history of some of these financial institutions. I think I also want to read you into things we're worried about in terms of the future. So redlining used to be a major vector of discrimination. There were literally lines drawn around certain neighborhoods where they could not access mortgages and loans. But we're really thinking hard at the CFPB about digital redlining and algorithmic discrimination. Many of the people you serve and work with may be completely unaware when they are a victim of some of these types of nefarious, abusive data. We've seen in so many sectors in health care how Black patients have been treated differently in the maternity setting, how on job websites, based on your own search history or your identity, you're being shown different job listings, often ones that are for qualifications that are less than yours. Every single sector digital discrimination is real, and we are really thinking hard about what do we do at the CFPB to combat it, but also how can we help all of you and the people you work with spot it, report it, and fight it. I also want to share with you something that the agencies are working together on: the OCC, the Fed, the FDIC. It's a major, major rulemaking about Community Reinvestment Act. Some of you may be familiar with the obligations that banks have in fairly serving their communities. Sometimes it takes the form of financial education programs, which I think many of us know may not always be totally unbiased. We have to make sure that the CRA gives real obligations to financial institutions, that they are fairly serving and that a modernization of those rules is coming. I really hope as that process moves forward, the entire financial education practitioner world can be thinking about how they plug into it. So there's so much going on I could talk about from mortgages to credit cards and more, but I'm just really glad that we're thinking through some of these historical issues about how each of us in different communities have accessed the financial system and the lessons from the financial crisis where greed and abuse combined with a cavalier attitude by the regulators led to the destruction of billions of dollars of wealth and magnified the racial wealth gap in such horrific and dramatic ways that it's taking so much time to rebound from. So I hope all of this discussion and learning today really helps us connect the dots on what we collectively have to achieve. So, Heather, thank you again for just letting me say a few words, and thanks again for all the work to put this together. >>Dr. Brown: Thank you for coming, and I appreciate you taking the time to provide that interesting summary and also for your commitment to ensuring that we continue to work toward racial equality and personal finance. Okay. And now we're going to move to our final—but last does not mean least—presenter, Mr. John Stanley, and he is with the OCC, and he's going to talk about the programs they have for minority institutions. So we just have to get back to his slide. There we go. Perfect. Thank you so much, Robin and Tracey. John, are you all set? >>Mr. John Stanley: I'm all set, Heather. Thank you. So I appreciate the opportunity to speak today on behalf of the O CC and just talk a little bit about the history of Black financial institutions in America. Some of the information will touch on some of the things that my colleague, Betty, from the FDIC spoke to and just the OCC's role in some of those projects and a few others. Next slide please. Starting out with Freedman's Savings and Trust, better known as Freedman's Savings Bank, was established in 1865 through an Act of Congress by John Alvord, a minister and abolitionist. John met with community leaders to establish a bank for African American soldiers that provided a secure place to save their money and encouraged thrift and industry in the African American community. The primary objective was just a simple savings institution for former slaves and their descendants. The original charter was to invest solely in stocks, bonds, and T notes with no lending activity. At its peak, the institution had 37 branches spanning 17 states with up to $57 million in deposits. This institution functioned smoothly for the first five years, but Congress amended the charter in 1870, giving it the authority to invest half of its deposits in riskier assets and opening a door to fraud, speculation, and mismanagement. Eight years after it was founded, Congress gave the OCC authority to examine the bank. After the second OCC examination in February of 1874, the bank was insolvent. And despite Frederick Douglass's selection or election as president, it was basically hopeless. According to an article written by OCC economist Abby Gilbert that was published in 1972, the OCC not only discovered the institution's insolvency but a succession of comptrollers spent over 40 years pleading unsuccessfully with Congress to compensate the Freedman who had lost their savings in the collapse. Next slide, please. And you heard Director Chopra talk a little bit about the Community Reinvestment Act, or CRA. From an interagency perspective, we continue to seek ways to improve consumer access to financial services, especially for people of color. Before the enactment of the CRA in 1977, discriminatory lending and disinvestment practices left urban, often minority communities without fair access to credit and financial services. The term "redlining" was used for maps, redline marked neighborhoods, typically those homes to Black, Hispanic, and other minority or poorer households deemed by federal agencies as high-credit risk. The passage of the CRA in 1977 was meant to help address these injustices by encouraging banks and thrift to serve entire communities and markets they were chartered to do business in, in a safe and sound manner. Such services included both lending and deposit taking, because at the time, banks would take deposits but would fail to lend on those deposits in the communities they served. The OCC remains committed to ensuring the CRA continues to modernize, to address continued inequities in low- to moderate-income areas and families. And you may have heard just from a public standpoint lots of chatter and activity around CRA on an interagency basis as well. With input from all stakeholders, we can strengthen and modernize the CRA regulations in a manner that can meet the challenge of today and tomorrow. Next slide, please. So the OCC has several activities that we're involved in that highlight these areas. We continue to take action to ensure consumer rights are protected while identifying ways to hear the voices, stories of those impacted. 2023 through 2027 Strategic Plan details initiative our Acting Comptroller Michael Hsu has laid out for our agency to seek a diverse workforce as well as elevate fairness within the banking industry. For example, Project REACh, which stands for Roundtable for Economic Access and Change. In July 2020, OCC launched Project REACh amid widespread civil protests to promote greater access to capital and credit for minority and underserved populations, and you may remember after the murder of George Floyd, some of these were highlighted in the media, on TV. So it was at a point of inflection that Project REACh originated out. Project REACh's work is divided into four workstreams: affordable homeownership, inclusion for credit invisibles, revitalization of minority deposit institutions, and access to capital for small and minority-owned businesses. While these workstreams are focused on solving not national problems, the OCC also has launched local-focused initiatives in Los Angeles; Detroit; Dallas; Washington, D.C.; and Milwaukee. With these initiatives, the OCC gives local leaders a forum in solving community problems, some of which may be shared in other communities. So OCC really does not act as really the person or the entity in Project REACh that moves everything along but acts more as a convener, bringing together separate industries and individuals that can have an impact in these areas. In addition, the MDIAC, or the Minority Depository Institution Advisory Committee, provides an invaluable perspective on the business environment affecting minority depository institutions, their customers, and the communities they serve. The committee also provides advice and insight regarding the condition of MDIs, potential regulatory changes or steps that may promote the health and viability of MDIs and other issues affecting institutions. The committee includes officers and directors of MDIs and other depository institutions committed to supporting minority depository institutions of all types, sizes, operating strategies, and geographic areas. The committee meets two times per year with public access. Next slide, please. So the Project REACh MDI revitalization workstream aims to expand its work by encouraging the creation of de novo MDIs through information and webinars for interested parties, offering MDI executives access to a REACh stakeholders board-effectiveness training program, creating a shared talent platform to help MDIs close existing talent gaps, connecting MDIs with core service providers to explore ways providers can help support MDIs in their critical mission, and developing resources and technical assistance supporting MDI strategic planning and capital deployment strategies. Next slide, please. The OCC uses its convening authority to bring together those with the ability to help reduce inherent and structural obstacles to underserved populations that have the same opportunities as others to succeed and benefit from the nation's financial system. OCC launched Project REACh in July 2020 to promote financial inclusion through greater access to credit and capital. REACh brings together leaders from the banking industry, national civil rights organization, business and technology to identify and reduce barriers that prevent full, equal. and fair participation in the nation's economy. Next slide, please. And I think I may be one slide off. If you could advance one more slide. Okay. And just some of the key performance indicators of Project REACh, the MDI revitalization workstream developed a pledge for larger banks committed to the preservation and promotion of MDIs. The Project REACh MDI workstream has been a catalyst for initiating more than $500 million in equity investments made into MDIs by larger banks, offering subject-matter expertise to a dozen executive secondments on complex financial products and services, and developing an internal assessment for MDIs to consider the technological needs of their institutions and how to integrate them with legacy systems. There's also an online technical assistance portal for MDIs to access specialized training. And then on a slide in front of you, this is just an example of the FDIC MDI list that I believe Betty Rudolph touched on a little bit. And then next slide. These are the OCC-supervised MDIs that we supervise across the United States, and again, these institutions play a vital role. It will be critical as we look to the future and the nexus with financial technology firms as they advance and how these institutions are able to integrate into that system moving forward. At this point, I will turn it back over to my colleague, Heather Brown. Thank you, Heather. >>Dr. Brown: Thank you, John. That was very interesting, and it's neat to look at this list that you have here as well. I think the first bank there was a movie made about them, something like "Too Small to Fail" or something, maybe "Too Small to Save." I can't remember. But it was really good. Okay. Well, thank you all for coming today. I wanted to take some time to answer a few of the questions for those that can stick around to listen to them, but I also want to thank all of our presenters. It was really, really great information, and it all melded together quite well. So thank you for all the time you put in preparing and coming and sharing that. And I'd also like to thank the Events team again and thank my supervisor, Dubis Correal, for supporting this as well as my team that helped and other people throughout the agency to get everything cleared and ready to go. So I think we can go to the next question. There was a question on reverse mortgages, and I actually answered that one in writing in the chat. So after that, there's a question from Katie asking about what research has been done to know why these minorities are unbanked and what are institutions doing with that information. I think that was in reference to the information that was given on the unbanked. Yeah, I think that one is for you, Betty. >>Ms. Rudolph: Yeah. I think that there's like hard data, Black and white data, in our survey, our household survey. I do know that the team, the research team, has done some focus groups, which is not hard data, right? It's more anecdotal. But I think that a number of reasons that have been given are a lack of trust in financial institutions. I think that is a continuing barrier to folks that have not opened a bank account. And even some, anecdotally, MDIs I've spoken to have mentioned that as well. A lot of MDIs have financial education programs, and also more and more, they're building in sort of financial education principles into the products and services that they have for their customers. And so I think there are a number of efforts, and the Bank On accounts is, in particular, an account that's designed to really reach somebody who, you know, doesn't have trust, thinks the bank account—that thinks the bank is going to just ding them with fees and that is just not a very reliable, trustworthy system. So I think that financial institutions are really making—coming up with creative ways to bring additional people into the banking system. >>Dr. Brown: Thank you. The next question, I don't know if you had a chance to review it, but it was asking about the studies related to access, how someone can access studies on the role of bank deregulation and subsequent mergers on larger banks and how that's impacted smaller African American banks. >>Ms. Rudolph: Yeah, I saw that question. I'm not aware of any studies that have looked at the effect of mergers of larger institutions on smaller African American banks. So I'm not aware of any research. >>Dr. Brown: Okay. >>Ms. Rudolph: I think we'll just leave it at that. >>Dr. Brown: Sure, sure. And any of our other presenters can also weigh in if they have information when we're throwing these questions out. Feel free to do. Let's see. Let's move on to Adrian's question. She said in the unbanked slide, does the difference between Latinos and whites take into account the legal status of Latinos, i.e., a significant share of Latinos may not be banked because they don't have papers? >>Ms. Rudolph: That's a great question. I'm sorry. I don't know the answer to that. I believe it's probably answered in our website where we have a very comprehensive website about that study and sort of all the statistical analysis that goes into that, and I would imagine it's addressed there. If not, they have a mailbox there where you could ask that question, and they monitor it very regularly, and I think you could get an answer to that question. So you could go to www.FDIC.gov, and I think it's backslash "household survey." But you could just do a quick Google search as well. And I have the link. Actually, I forgot I put the link on my slide. >>Dr. Brown: Okay, great. Wonderful. The slides will be sent out so you'll have the link when you get a copy of the slides. Okay. I also just wanted to mention that Director Chopra added some information about algorithms bias, discrimination in facial recognition. So you might want to copy that link by just clicking on it, right-clicking on it and copying it or clicking and dragging it. Okay. And that is going to conclude our webinar for today. We thank you all for showing up. We thank our speakers, and we hope everyone has a good day. We'll give you back a few minutes on your Thursday afternoon. Take care, everybody.