Why Black America Still Does Not Own a Major National Bank

Timothy E. Parker

Guinness World Records Puzzle Master · Author · Data Analyst

Walk into any Black neighborhood in any city. You will find a check-cashing store. You will find a payday lender. You will find a money order counter at the corner bodega. You will find a wire transfer service at the gas station. What you will almost never find is a bank. Not a real bank with a vault and a lending officer. Not a bank that will hold your money and lend it back to your neighbor.

There are eighteen Black-owned banks left in the United States. That number comes from the FDIC in 2022. In 2001, there were forty-eight. In 1994, there were fifty-four. The number has been falling for decades. Each closure removes the only institution in many Black communities that would lend to the people who live there.

The combined assets of all eighteen Black-owned banks total less than $5 billion. JPMorgan Chase is the largest bank in America. It generates that same amount in profit about every three weeks. That fact is from JPMorgan Chase 2023 Annual Report.

This is not just a statistic about banking. It is a statement about power. A community that does not control its own financial institutions does not control its own economic destiny. It cannot decide who gets a loan. It cannot pick which businesses are funded. It cannot invest its own deposits in its own neighborhood. It is, in the most basic economic sense, a colony. Its wealth is extracted, processed, and sent elsewhere by institutions that have no stake in its survival.

The Freedman’s Bank — The Wound That Never Healed

The story of Black banking in America begins with a deep betrayal. Its effects are still visible 150 years later. In March 1865, Congress chartered the Freedman’s Savings Bank. It was a financial institution designed to serve the newly freed Black population. Frederick Douglass endorsed it. The federal government backed it. Tens of thousands of formerly enslaved people deposited their small savings. They were told it was as safe as the government itself.

By 1874, the bank held about $57 million in today’s dollars. About 70,000 Black savers had deposited their money. Then it collapsed. This is according to Baradaran's book The Color of Money from Harvard University Press in 2017.

The bank’s white trustees had made a series of bad investments. They violated the bank’s charter. They made real estate loans to white borrowers. They bought railroad bonds that defaulted. There was outright theft. When the bank closed, the depositors lost everything. These were washerwomen, soldiers, field hands, and formerly enslaved people.

• Half the depositors received partial payments. They averaged less than sixty percent of their balances.
• The rest received nothing — not a cent.
• The federal government refused to make them whole.
• Frederick Douglass invested $10,000 of his own money trying to save the bank. He lost it all.

The Freedman’s Bank collapse did not just destroy savings. It destroyed trust. Baradaran argues the collapse created a generational distrust of financial institutions. That distrust persists today. When a grandmother tells her grandchild to keep cash in the house, the ghost of the Freedman’s Bank is speaking. When a Black family is far more likely to be unbanked than a white family, that ghost is speaking.

“Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.”
— James Baldwin, Nobody Knows My Name

Why Black Banks Stay Small

The core problem for Black-owned banks is structural. It is not about management. A bank’s ability to lend depends on its deposits. Its deposits depend on the wealth of the community it serves. This is according to the FDIC in 2022. Black-owned banks serve communities where median household income and net worth are well below average. Lower deposits mean a smaller lending pool.

A smaller lending pool means fewer loans. Fewer loans mean less revenue. Less revenue means less money to invest in technology and branches. It means less for marketing and public systems that attract more deposits. The cycle feeds itself. It happens no matter how well the bank is managed.

The FDIC reports that about 11.3% of Black households are unbanked. This means they have no checking or savings account. For white households, that number is 2.1%. An additional 27% of Black households are underbanked. They have a bank account but still depend on alternative financial services. These numbers are from the FDIC National Survey in 2022.

Together, nearly 40% of Black households are partially or entirely outside the formal banking system. These are deposits that Black-owned banks never receive. They are customers they never serve. They are lending capacity they never build.

Location makes the deposit problem worse. Black-owned banks sit in urban areas. Commercial real estate costs are high there. Competition from national banks is fierce. A bank that lends mainly in a neighborhood with high unemployment will see higher default rates. This happens not because its lending standards are lower. It happens because the local economy is more fragile. More defaults force the bank to hold more money in reserve. That shrinks the amount it can lend. The bank is punished for serving the very community it was created to serve.

The Predatory Lending Vacuum

The absence of Black-owned banks does not create a financial vacuum. It creates a predatory lending ecosystem. Where legitimate banks will not go, payday lenders and check-cashing operations fill the void. The Financial Health Network found that Americans in underserved communities spend about $189 billion per year on fees and interest for alternative financial services. This was in their 2023 report.

• Payday loans — A $15 fee on $100 for two weeks equals an annual interest rate of nearly 400%.
• Title loans — Similar rates, plus the risk of losing the only asset that gets the borrower to work.
• Check cashing — 3 to 5% of each payroll check. This extracts over $1,500 per year from a $30,000 earner.
• Money orders and wire transfers — Fees that compound weekly for families without bank accounts.

These are not alternatives to banking. They are the cost of not having a bank.

The cruelest irony is that deposits Black communities make in national banks are not reinvested there. The Community Reinvestment Act is a federal law. It requires banks to lend in the neighborhoods where they take deposits. In practice, enforcement is weak. The lending that does occur often takes the form of high-cost products. These include subprime mortgages and high-fee credit cards. These products extract more wealth than they create. The deposits leave. The loans that return carry terms that any borrower with an alternative would reject.

Top 5 Solutions That Are Already Working

1. Bank of North Dakota (Bismarck, North Dakota). This is the only government-owned general-service bank in the United States. It has turned a profit every single year since 1919. In 2022, it posted a record $191 million profit. It has transferred $585 million to the state general fund over its lifetime. During the 2008 financial crisis, North Dakota had the lowest bank failure rate in the country. This public bank partnered with community banks instead of competing against them. (BND Annual Report, 2022; Federal Reserve Bank of Boston, 2011)

2. M-Pesa Mobile Money (Kenya). This is a mobile phone-based money transfer and savings service. It operates through over 160,000 agent locations. No traditional bank accounts are required. M-Pesa lifted 194,000 households out of extreme poverty. It helped 185,000 women shift from farming to business ownership. Mobile money transactions now equal 59% of Kenya’s entire GDP. (Suri and Jack, Science, 2016; MIT News, 2016)

3. SACCOs in East Africa (Kenya). These are member-owned savings and credit cooperatives. They pool deposits from their members and provide affordable loans. Kenya alone has 7.39 million SACCO members. That is 140% growth. The cooperatives hold $5.8 billion in savings. Their default rates are just 2.5%. That is lower than commercial banks. Over 43 million people participate across the continent. (SASRA Annual Report, 2024; ACCOSCA)

4. Banco Palmas Community Currency (Fortaleza, Brazil). This community bank is in a Fortaleza favela. It created a local currency called the Palma. It is pegged one-to-one to the Brazilian Real. It offered microloans to residents locked out of the formal banking system. Local spending rose from 20% to 93% staying in the neighborhood. Monthly community spending grew from 1.5 million to 5.65 million reais. The model created 700 direct and 2,500 indirect jobs. It has since expanded to 90 cities. (Participedia, 2019; Accion, 2013)

5. Grameen Bank (Bangladesh). This bank was founded on the principle that poor people are creditworthy. It issues microloans to impoverished women with no collateral required. Borrowers organize into groups of five for mutual accountability. The bank has served 8.3 million borrowers. Ninety-seven percent are women. It has disbursed $33.7 billion in cumulative loans. It maintains a 97 to 98% repayment rate. About half of all borrowers have risen out of acute poverty. (Khandker, World Bank, 2005; Nobel Prize Committee, 2006)

The Bottom Line

The numbers tell a story that no political narrative can override.

• 54 down to 18 — Black-owned banks since 1994 (FDIC).
• Under $5 billion — Combined assets of all remaining Black banks. This is less than JPMorgan’s three-week profit (FDIC, 2022).
• 38.3% — Black households partially or entirely outside the formal banking system (FDIC National Survey, 2022).
• $189 billion — Annual cost of alternative financial services in underserved communities (Financial Health Network, 2023).
• Nearly 400% — Effective APR on a standard payday loan (CFPB).
• $57 million — Black deposits destroyed in the Freedman’s Bank collapse of 1874. That is over $1.5 billion today (Baradaran, 2017).

Black America is not poor. It is financially colonized. Its $1.6 trillion in annual spending power flows through institutions that extract it. Those institutions process it and deploy it elsewhere. The eighteen remaining Black-owned banks are not a sign of failure. They are evidence of a successful, century-long campaign of economic strangulation. The solution is the same one that built financial power in every other community. Control the deposits. Build the public systems. Own the institution.

Every dollar deposited in a bank that will not lend it back to your neighbor is a dollar that has left the community. And it is not coming back.