A Little More about My Job
(exploring how mission-driven banks have outsized impact in vulnerable communities)
In today’s newsletter, I wanted to share more about my role as Research and Impact Director for the National Bankers Association, an organization that advocates for the nation’s 145 minority depository institutions as well as the broader universe of mission-driven banks including community development financial institutions. But first, a few items to note:
1): In a sign that divine favor is still with us, Ethan Hawke is directing a new movie starring his daughter Maya as the Southern Gothic novelist Flannery O’Connor: “Maya has been working hard for years to put this project together, and we’re grateful for the opportunity to introduce a new generation of filmgoers to the genius of Flannery O’Connor,” Ethan said, while also sharing a first look at the production on Instagram. “Her work explores themes important to all artists — the intersection of creativity and faith, the blurred relationship between imagination and reality.” (source)
2): Buzzfeed announced it is going to use the AI bot ChatGPT for content creation, and now its stock is up 200%. Let me know ahead of time next time, I’m begging you (don’t do this, it’s illegal), I could have been so rich (this is a joke, insider trading is a serious crime).
3): Last night, I watched about 2/3s of the new Elvis movie which is nominated for Best Picture. Can someone please tell me what the heck kind of accent Tom Hanks was attempting, and also why? Hanks is a great actor but he straight up ruined the movie for me.
MDIs and Me
I recently had the opportunity to present about the important role of MDIs in addressing the racial wealth gap for a roundtable event with a variety of stakeholder organizations including VISA, JP Morgan, Kellog Foundation. Preparing for the event gave me ample opportunity to step back from the day to day of my job, to think about the broader mission that animates my work.
The National Bankers Assocation was founded in 1927, during the Jim Crow era, as the Negro Bankers Assocation, an organization focused on supporting Black Banks. But the NBA expanded its orbit in 1948 to be an advocate for all Minority Depository Institutions (banks) and the communities they serve. Today, MDIs are Asian, Black, Hispanic, Native, and Multi-racial-owned banks that serve geographies with large minority populations, and whose banking services reach underserved communities that are often low-to-moderate income.
There are currently 145 MDIs, which represents 3% of the total number of FDIC-insured banks in the United States. Collectively, MDIs hold $330billion in assets, representing 1.4% of the $23trillion dollars in the overall banking sector. These MDIs are joined by the 1300+ CDFIs (community development financial institutions) that also serve low-and-moderate income communities. (Many MDIs are also certified CDFIs and vice versa.)
During the Roundtable, I talked about how impact is commonly discussed when it comes to mission-driven banks including stories about homebuyers who are the first in their family to own a home, or small business loans that allowed a minority entrepreneur to increase scale and hire more employees. But I began this conversation by showing this picture (below) from a 2018 article about Industrial Bank, a Black bank in DC.
When I think about the legacies of systemic racism, mass incarceration and the overrepresentation of minorities in prison is one of the more glaring examples. But what does it mean for financial institutions to be countervailing forces, using their social and financial capital to invest in civil society building rather than the carceral system? And what does it mean to have an expansive and inclusive definition of the “community” to ensure that groups often kept invisible are brought to the center?
In the example highlighted in this image, the young men who participated in Industrial’s financial wellness certificate program were given the opportunity to build skills that can aid them as returning citizens, even as their participation was tied to reductions in sentences. This is an area close to my heart for some personal reasons I won’t go into, and it also connects back to work I did with Dr. Anthony Bradley for his book on civil society solutions to mass incarceration while I was an undergraduate.
Stepping back for a moment though, one of the major themes of my research at Brookings was on how place-based disinvestment is a core driven of gun violence, even as place-based investment into the social, physical, and economic fabric of a locality is empirically shown to reduce gun violence and crime. (You can read more about my work here and here.) In this area, too, the work of Industrial and other mission-driven banks is vital as a catalyst for the kinds of place-based development that can structure opportunity and encourage flourishing. Seen in this way, the argument is that MDIs have a crucial role to play in disrupting the cycles of harm and violence by providing pathways for social and economic mobility.
The qualitative narrative matters tremendously, but when you’re sitting in a room filled with researchers, investors, and other numbers-oriented people, it’s important to attend to the quantitative dimensions as well. But here too, I think the framing matters a lot. MDIs are profitable: any bank that isn’t profitable will eventually either be acquired through merger or will fail. But like community banks (your typical hometown bank with less than $10billion in assets), the shareholders for MDIs and CDFIs can’t expect to see the kinds of returns that you would find at one of the major banks or in other sectors like venture capital. It’s a completely different business model, and crucially, a very different sense of mission. Thus, a big part of my role is making the case that the main dimension for measuring impact is mission-aligned outcomes: are these institutions able to meaningfully reach underserved populations and geographies?
As just one example of quantifying this dimension of impact, I shared this graph from a 2022 Federal Reserve Bank of Dallas study that uses the CDC Social Vulnerability Index. The Index captures several different indicators such as economic vulnerabilities and also vulnerabilities to climate and natural disaster. And the Dallas Fed finds that 45% of all MDI branches and branch deposits are in Socially Vulnerable counties. And over 20% of mortgage originations occur in vulnerable counties, which is a much higher share than mortgage originations from community banks, which again are typically around the same asset size as MDIs.
This Dallas study joins several others in the literature including a great 2019 study from the FDIC that shows MDIs do a greater share of lending - across all major categories including small business lending - in low/moderate income communities relative to other banks. And a Minneapolis Fed study that finds Native CDFIs are vital in helping improve Native American credit scores. Over the course of the year, I will be helping to add to this literature, while also producing research on topics like digitalization in an era of fintech competition, climate finance and the opportunity for MDIs to leverage federal infrastructure and IRA funding, and what the explosion in entrepreneurship amidst the pandemic can mean for communities of color.
Currently, I am working with a cohort of MDIs who are piloting our new impact assessment tool which will allow us to help capture social impact across a number of domains and using a variety of indicators. I’ll be helping produce a public report in partnership with some other researchers and will of course share stats and graphs from that report once it is publicly released.
We are at a crucial inflection point as a nation, after the outpouring of support for MDIs, HBCUs and tribal colleges, and other anchor institutions in the 2020 “racial awakening era.” But there’s a real possibility that this 2020 moment will lose its energy, and attention in corporate philanthropy or other sectors will return to a pre-2020 status quo. In this context, I see my mission as keeping the importance of MDIs and other anchor institutions front and center, while inviting a wide array of stakeholders to support the vital work through partnerships, grantmaking, knowledge-sharing, capacity-building, etc.. Ultimately, we want to close the racial wealth by raising the economic floor, and we know that MDIs, CDFIs, and other mission-driven institutions are crucial to this effort of facilitating upward mobility for individuals and broad, long-lasting economic development for communities.
What I am Reading Elsewhere:
In Slate, The Banshees of Inisherin and the put-on Irishness of Martin McDonagh: “…it isn’t always clear whether McDonagh is subverting ancient clichés about Ireland and the Irish—misty poeticism, rural backwardness, prodigious boozing, etc.—or merely employing them in his own distinct way.”
In The Baltimore Banner, What caused a 33% drop in gun violence in West Baltimore last year? We analyzed it
In the Wall Street Journal, China’s Global Mega-Projects Are Falling Apart: “During the past decade, China handed out a trillion dollars in international loans as part of Beijing’s Belt and Road initiative, intended to develop economic trade and expand China’s influence across Asia, Africa and Latin America. Those loans made Beijing the largest government lender to the developing world by far…Now, low-quality construction on some of the projects risks crippling key infrastructure and saddling nations with even more costs for years to come as they try to remedy problems.”
A new Brookings Institution report makes the argument for Why state and local relationships matter to national prosperity: “The breakdown between Jackson and the state of Mississippi reveals a broader trend: a coarsening of state and local relationships that could threaten the transformative use of billions in federal infrastructure funds and other investments flowing to states and local communities.”
In National Catholic Register, Putting the ‘Catholic’ in Catholic Worker - “A new generation of communities are integrating hospitality and solidarity with the poor through prayer and Church fidelity, consistent with the vision of the movement’s founders.”