Photo: Keith Brofsky, Getty Images
The US Treasury Department uses big banks to process a variety of financial transactions. The big banks, or “financial agent banks,” earn fees to process tax returns and passport applications, collect debts and disburse benefit payments. The Treasury expects to pay the big banks about $850 million in fiscal 2020 but that money is simply out of reach for Black owned banks. A Treasury Department program is helping to spread the wealth by pairing smaller, minority deposit institutions with some of those big banks.
By taking on some of the workload, the minority banks earn fee income and for Unity National Bank, Houston’s only Black owned bank, the program has become a major lifeline. Unity is one of just seven minority owned or operated banks that are participating in the Treasury Department’s Financial Agent Mentor-Protégé program. The program launched in the late 1990s but Treasury Secretary Steven Mnuchin has made its expansion a priority, according to American Banker. Unity, like most of the other banks in the cohort, are struggling to make a profit. Unity boasts $106 million in assets. By comparison, Wells Fargo’s assets hover around $2 billion. Unity has lost close to $3 million in the past three years and hasn’t reported a profit since 2016.
Of Unity’s $82 million loan portfolio, commercial Commercial real estate made up about two-thirds, entering January. Unity has only $16 million in residential mortgages on its books and no outstanding credit card or automobile balances. The void in lending services leaves the door wide open for payday lenders. The lack of mortgage lending, especially in a city where Black neighborhoods are quickly gentrifying, is a critical concern. All of this, of course, goes back to a lack of capital. Further, not having access to the same government revenue streams that the larger banks do, is a severe handicap. The fee income Unity will earn from its partnership with the larger bank is needed, if the bank is to expand its services and offerings; fee income made up less than a fifth of the bank’s revenue, last year.
In time, if the revenue is consistent, Unity should not only be on more solid footing but also, able to provide capital for Black homebuyers and entrepreneurs. The lack of equal access is a severe hindrance to Black owned banks and it must be addressed. Other larger banks, regardless of what they would have us to believe, very much benefit from grand “welfare” programs that Black banks have historically been locked out of. While these inequities must be corrected, Black people must also do their part to support Black financial institutions, no matter what the government does or doesn’t do.
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