Our latest Public Newsroom shows how our banking decisions can transform our communities for the better
By Ellie Mejía
Last week, our Public Newsroom centered on a core question: How do we make informed decisions about banking that reflect our values and advance racial equity? The question was inspired by a WBEZ/City Bureau piece published in June that revealed the vast disparity in dollars lent to white, Black and Latinx neighborhoods in Chicago.
To help us answer this complex question, we were joined by Ron Milsap, VP of Mission Banking and Community Reinvestment Act Officer at Providence Bank and Trust and Megan Hryndza, co-founder and CEO of the bank comparison site Mighty. Our moderator was Andrew Fan, who co-wrote the original story as a City Bureau fellow and is now the chief operating officer and data reporter at the Invisible Institute.
Here’s what we learned:
Deposits are the raw materials of a bank
A bank can’t make loans without deposits. When you make a deposit with a bank they take those dollars and leverage them into lending activities. If a bank is focused more on consumer lending, for instance, your deposits would flow into those areas of investment. “When you put your deposit in a bank, you’re essentially given an opportunity to create a loan,” says Hyrndza. Think about the trajectory of your deposit, she says. If you get to make one loan, in one neighborhood, where would you like to create that loan? It’s one way your banking decisions can help decide where loans are and are not made.
Follow the money
There’s no one magic metric that’s going to tell you whether a bank is great or not. But following where, how and what banks invest their money on are good initial indicators. Look at where the bank’s money is based, suggests Hryndza. “Banks base money in their branches,” she says. “Some banks collect money hyperlocally, some banks collect money all across the country, so when you put your money in a bank—whether you do it through your phone, through an ATM, through a bank branch—it might stay in your local community or it might leave and it might never come back.” Also, compare banks by the types of projects they’re lending. Look at which banks lend more to large businesses and construction versus housing and small businesses, for example.
Federal designations can help you find a bank more aligned with your values
A bank designated as a Community Development Financial Institution (CDFI) has a mandate that 60 percent of all of their activities must be generated to support low- and moderate-income communities. “The very nature of their lending, the very nature of the customers that they serve, are all centered around this policy mandate,” says Milsap. The designation ensures their mission year in, year out, continues to support the kind of work that helps that community, particularly Black and brown communities across the country.
Milsap adds that there are a number of community banks that may not be certified as CDFIs but very much operate within the same vein. Looking at loan-to-deposit ratios and at the bank’s CRA report, which gives you information on how much a bank lends and who they’re lending to in their assessment area, are good data points to evaluate a bank’s activity.
CDFIs are great for communities, but they lack support
CDFIs and community banks are often seen as a last resort. Some folks might not see them as real, viable banks or as safe as larger national institutions—even though their deposits are all insured by the FDIC, Hryndza notes. This perception can affect the lifetime of a bank, and inevitably lead to its closing. “For community banks, for minority banks, for CDFI banks to really effectively compete against national and regional banks there needs to be greater awareness that those banks exist,” says Milsap. “We need to take real, direct action as consumers to value what they exist for and actually invest in them.” Investing even 10 percent of your money in a community bank, Milsap says, can give it the capital to grow and improve its service to that community and beyond.
It’s the right moment
“Talking about the significance of Black banks a couple of months ago, is different than talking about the significance of Black banks now,” says Hyrndza. She notes the current top search at Mighty is ‘What banks are supporting Black communities?’ Milsap adds that the moment we’re in highlights banks that are truly about the mission to do good in the community and raises the profile of how people view those banks. “Those banks will continue to struggle if we value convenience over the true mission of what that bank is doing in the community,” he says.
If you’re interested in making better informed decisions about banking here’s a few places to start:
Learn more about Mighty:
Where does your bank invest the money you give it? Now you can find out
Special page for event participants: https://mightydeposits.com/wbez
Stay in touch with our guests:
Mighty - hello@mightydeposits.com
Ron Milsap - rmilsap@providencebank.com
Andrew Fan - andrew@invisibleinstitute.com
More coverage on the issue:
You can also view the entire conversation below:
This event was part of City Bureau's Public Newsroom programming, a series of free workshops that highlight efforts to provide mutual aid, meet information needs and hold space for joy during the COVID-19 pandemic.
To get monthly emails about our organizational culture and lessons learned from our programs, sign up for City Bureau’s Notebook newsletter.