Black financial leaders offer new strategies to help narrow the racial wealth gap

An average black American is expected to make up to $ 1 million less than a white American during their lifetime. But that narrative can change if we help black people by narrowing the wealth gap. 

About 65% of black US citizens live in 16 states that perform below the national average for social, economic, and public health.

And high-income black families aren't even exempt from this: the average black family with a family income of $ 100,000 lives in a neighborhood where the average income is $ 54,000.
These are just some of the amazing statistics from the recent McKinsey & Co. Wealth report.

Thus, I will say: welcome to the financial situation of African Americans in this country. This lingering effect of the racial wealth gap is not just having a negative impact on black Americans, but also on the United States as a whole in terms of economic growth.

The urgency to help create wealth for all Americans - mostly blacks - was discussed this month at the Freedman's Bank Forum hosted by the Treasury Department. The forum commemorated the 155th anniversary of the founding of the Freedman's Savings and Trust Company.

The institution often referred to as Freedman's Bank was founded in 1865 to provide newly emancipated Americans with economic opportunities, help them become more financially stable, and improve their access to capital.

 At its peak, the bank reportedly had $57 million in deposits (adjusted for inflation) and some 70,000 depositors before it closed in 1874.

The forum, which was attended by around 200 people, enabled public, private, and nonprofit leaders to discuss ways to improve the economic vitality of communities on various fronts, including job creation and wealth creation. The importance of financial inclusion and economic integration for African Americans was now a key issue.

"The history of Freedman's Bank shows the importance of financial opportunity for all Americans," said Treasury Secretary Steven Mnuchin.

Panelists recognized not only the legacy of Freedman's Bank but also the role minority depositaries play in broad-based economic growth. Public and private strategies to combat financial health, community, and economic development were also discussed. Mnuchin and Robert L. Johnson, founders and chairmen of RLJ Companies, participated in a fireside chat.

John Hope Bryant, Founder, Chairman, and CEO of Operation HOPE, attended a panel discussion on “The Legacy of Freedman’s Bank in the Pursuit of Building Wealth.”  He was joined by Thasunda Brown Duckett, CEO of JPMorgan Chase Consumer Banking, and Kenneth Kelly, President, and CEO of First Independence Bank in Detroit and Chairman of the National Bankers Association.

Hope has repeatedly said that African Americans should never give up and continue to seek wealth. He mentioned some programs that could financially empower African Americans. These included modernizing the Community Reinvestment Act, Opportunity Zones and the EITC, the Earned Income Tax Credit, a federal program to promote work and reduce poverty by increasing wages for low-income workers.

"You could argue that today is the best we've ever had in a modern Marshall plan to revitalize a people," said Bryant. "But we have to be strategic and never give up."

For her part, Duckett spoke of structure and systems. She said if you think of the daring not to involve African Americans and a bank that African Americans trust. "We always live with this effect when it comes to being wiped out." She said the effect still lingers when it comes to confidence in the financial system. She said that black Americans have $1.2 trillion in buying power but could have zero net worth in 2053.

“This is a state of emergency that I think we all have to connect into and leverage all of our ecosystems, from government, CDFIs, credit unions big banks, and non-profits,” Duckett added.” This issue is structural and about getting proximate to the African American community.”

Banker Kenneth Kelly reported stats that when you look at African Americans for their financial impact in America, there are weaknesses in all aspects. He noted housing is the lowest since it been measured since 1968. Income divide by 10 times the wealth of white Americans. “Those are issues we need to address,” he said.

"You almost have to close your eyes and imagine what you were thinking in 1865 to take such a bold move," said Kelly. He spoke about the current state of black-owned banks in America, many of which are in crisis and need great support to stay open.

In commemoration of the 115th anniversary of Freedman's Bank, Kelly asked, why can’t there be an effort to (invest) $155 billion into minority depository institutions. Kelly said that can be done. “And when we do that, we may not see the fruit of that labor. But I will tell you it would have to have a positive trend on all of these issues we talked about including education, housing, and net worth.”

Kelly says there is legislation on the Hill dealing with minority depository institutions and the unbanked and underbanked. He noted one in five (black) people in Detroit don’t have a bank account, which he calls unconscionable. “Between industry, the legislative branch, and the executive branch, when we put our mind to it, America has always demonstrated it knows how to fix and adjust weaknesses.”

Another participant in the forum, Shelley Stewart III, attended the round table titled “Financial Literacy and Wealth Accumulation”. As a partner at McKinsey & Company, Stewart is co-director of research for the consulting firm on the creation of black wealth in the United States. He has published articles and speaks on the subject.

What do black Americans need to do in order to build wealth and increase financial literacy?

It helps first to recognize the economic and social barriers that prevent black Americans from creating wealth. These barriers include educational differences, geographic influence, and lack of family wealth, declining income, and historical financial exclusion.

While there are no simple solutions to deep-seated problems like the racial gap, the public, private and social sectors can take institutional steps to address these differences, such as the increase in diversity in the financial services industry, research into innovative and inclusive credit decisions, Eliminate discriminatory lending practices and implement employee benefits and support services to help Black Americans make smarter financial decisions.

Collectively, Black Americans will have less trouble pursuing entrepreneurship, banking, homeownership, and opportunities to improve financial literacy - key steps in wealth creation.

Why is it important now for black Americans to take steps to build wealth?

Understanding the scope of a problem is critical to solving the problem. The financial prosperity gap means that many black families are at a significant economic disadvantage, have less financial security, and are less able to participate fully in the economy.

Less wealth also means that black Americans are underrepresented in the market for financial products and services. Uncontrolled, black Americans remain disadvantaged for generations, costing the US economy between $ 1 trillion and $ 1.5 trillion between 2019 and 2028/14 at 6% of projected GDP in 2028.

Involving black Americans more in the financial system would benefit the economy as a whole: Black families would have greater opportunities to reinvest and grow their wealth and then support increased economic activity.