The Rise and Fall of Black Wall Street

Richmond was once the epicenter of black finance. What happened there explains the decline of black-owned banks across the country.

The St. Luke Penny Savings Bank in Richmond was one of the first black-owned banks in the United States. (Courtesy of National Park Service, Maggie L. Walker National Historic Site)

On April, 3rd, 1968, Martin Luther King Jr. gave his famous “I’ve Been to the Mountaintop” speech in Memphis. In it, he urged African Americans to put their money in black-owned banks. It wasn’t his most famous line, but the message was clear: “We’ve got to strengthen black institutions. I call upon you to take your money out of the banks downtown and deposit your money in the Tri-State Bank. We want a ‘bank-in’ movement in Memphis … We begin the process of building a greater economic base.”

The next day, King was assassinated, and his hope of harnessing black wealth remains unfulfilled. Before integration, African Americans in cities like Richmond, Chicago, and Atlanta relied on black community banks, which were largely responsible for providing loans and boosting black businesses, churches, and neighborhoods. After desegregation, black wealth started to hemorrhage from these communities: White-owned banks were forced to open their doors to African Americans and the money that once flowed into black banks and back out to black communities ended up on Wall Street and other banks farther away.

“We started to lose a lot of our businesses and support for our businesses,” says Michael Grant, president of the National Bankers Association, a trade group representing nearly 200 minority and women-owned banks across the United States. “That was the toxic side of integration.” The financial meltdown of 2007 wiped out 40 percent of African American wealth in the United States, killing off many of these already-struggling community banks (they were not part of the big Wall Street bailout). Tri-State Bank in Memphis still exists, but it’s among the few that survived. Only 25 black-owned banks remain in the United States, according to the latest data from the FDIC, compared to 45 a decade ago. At their height, there were more than 100, says Grant.

The decline raises the question of whether these niche banks still have a place in modern America. I visited the Jackson Ward neighborhood of Richmond, Virginia, once dubbed America’s “Black Wall Street” and “the birthplace of black capitalism.” At the turn of the 20th century, it was one of the most prosperous black communities in the United States, with thriving theaters, stores, and medical practices. Richmond is where the first black banks opened, including one chartered to a former schoolteacher named Maggie Walker—the daughter of a freed slave. The St. Luke Penny Savings Bank, which Walker opened in 1903, made loans to qualified borrowers who were shunned by traditional banks, such as black doctors, lawyers, and entrepreneurs. St. Luke’s would eventually merge with other black banks and become Consolidated Bank and Trust. By the end of the 20th century, the bank was the last black-owned bank in Richmond and was struggling to compete with much bigger banks downtown. It had several troubled loans on its books and couldn’t raise enough capital to stay afloat. In 2005, a Washington, D.C.-based bank bought it, then a West Virginia-based bank took over in 2011 and renamed it Premier Bank. The last bank of “Black Wall Street” was gone.

Premier’s president, Darryl “Rick” Winston, says he too wonders what role black banks will play in the future. He once reviewed loans at Premier Bank when it was still the black-owned Consolidated Bank and Trust. At one point, he says, the bank had $111 million in assets and seven branches. Winston, who is African American, left for a consulting job in 2000, and returned last year to take over as regional president after the buyout. Winston drove me around Jackson Ward, pointing out the shuttered businesses that once made Richmond a bastion of black wealth and culture. “Duke Ellington and Louis Armstrong stayed there,” he said, pointing to the former site of the Eggleston Hotel, one of the few upscale lodgings for blacks in the Jim Crow south. As we drove by, a construction crew was busy building a mixed-used complex that will house 31 apartments, 10 townhomes, several stores, and restaurants.

Two blocks away, Premier Bank remains in the same brick building as its predecessor. Much of the bank’s staff is the same. Winston says it’s important to make sure his employees reflect the community they serve, even if it's no longer a black-owned institution. That’s in part because African American borrowers still face immense bias in the banking and lending industry, he says. “It’s more subtle. A black person goes into a mainstream bank and the loan officer might think of rejecting their application before it’s even complete,” he says.

Racial bias in the lending industry remains all too common, despite legislation aimed at preventing it. In 1992, a landmark study from the Federal Reserve Bank of Boston examined 4,500 mortgage-loan applications and discovered that black borrowers were twice as likely to get rejected for loans than white borrowers with similar credit histories. More recently, an economics professor at the University of Massachusetts found that banks in Boston and across the state of Massachusetts continue to reject black and Latino borrowers for home mortgages at a much higher rate than whites.

To determine just how pervasive the problem is, the Consumer Financial Protection Bureau has started sending undercover employees posing as potential homebuyers to banks across the country. In June, the federal watchdog agency sued BancorpSouth Bank in Mississippi for allegedly discriminating against black homebuyers. In one scenario, it sent black and white employees to the bank to apply for a home loan. The black person, who had better credit, was allegedly steered toward a smaller loan with a higher interest rate. BancorpSouth settled the lawsuit for $10.6 million.

In Richmond, Thomas Davis, who owns T.K. Davis Construction, told me that he closed his accounts at SunTrust earlier this year and now works solely with Premier Bank. He felt that the large corporate firm wasn’t treating him like a priority, despite his successful business. He recently took out a loan from Premier to renovate a historic church for one of his clients. It’s a shame the bank is no longer owned by an African American, he says, but it matters to him that most employees are black. “It’s important that they can look you in the eye and understand the challenges you face as a diverse business,” he told me. “Large banks aren’t looking to make loans to us unless they are trying to meet a quota.”

Another Premier client, Adam Harrell, credits the bank with giving him loans to open his law firm, Harrell & Chambliss, in downtown Richmond. He’s been banking there for 34 years and was one of the attorneys that represented Consolidated Bank and Trust during the transition. “It saddened me that we couldn’t get a coalition of minority investors to take over the bank.” Unfortunately, younger generations don’t see the value in supporting black banks, probably because corporate banks have the latest technology and offer a wider range of services, he says.

But even so, some black-owned banks have started seeing a surge in new accounts. Last month, in the wake of the police shootings of black men in Dallas and Louisiana, rapper Killer Mike urged African Americans on MTV and BET to put some of their money in black-owned banks. This spawned the Twitter hashtag #bankblackbanksmallbanklocal. The call to action reportedly boosted the client base of Citizens Trust Bank, the only black-owned bank left in Atlanta, which received 8,000 applications for new bank accounts in the days following the campaign.

In theory, there should be no need for black-owned banks in post-segregation America, since banks should treat all customers fairly. But the surge in demand for these services show just how far the country is from that theory.