On March 13, President Biden addressed the collapse of Silicon Valley Bank in an attempt to reassure panicked Americans that the U.S. banking industry was safe, quipping that customers’ deposits will “be there when you need them.”
That same day, the Federal Reserve and the Federal Deposit Insurance Corporation issued a joint statement claiming they would take steps to “fully protec[t] all depositors and depositors would have access to all of their money immediately.
Seke Ballard found this to be really interesting.
“If Silicon Valley Bank was Black-owned, that sort of protection would have never happened like that.” Ballard is the founder of BetaBank, a small business-focused digital-banking venture he launched in 2021 after noticing minority entrepreneurs struggle to find capital in notoriously prejudiced financial systems.
It all started with his father, who owned a successful logging company but couldn’t secure a bank loan to carry out his dream of expanding his business. He was turned down 13 times.
“It wasn’t about the figures on paper—the loan officers wanted to know if he was trustworthy, just by looking at his. They applied subjective character tests and often their subconscious biases against him would win out.”
This isn’t a singular issue.
According to 2020 data from the US Federal Reserve, more than half of companies that have Black owners were turned down for loans that year, a rate twice as high as white business owners.
“According to the Federal Reserve, if I go into a bank and a white guy goes into a bank, we have the exact same identical financial profile, and we are applying for a small business loan, I’m 2.7 times more likely to be denied,” Ballard explained. “I’m going to pay 1.8% more on average in interest. This is true across all forms of debt, all forms, whether it’s a small business loan, a mortgage, a personal loan, a car loan.”
Ballard points out that cultural biases and socioeconomic disparities put Black-owned banks on the back burner and wouldn’t have received the same savior treatment Silicon Valley Bank did last month.
“The fact that the FDIC came in and said they’d cover all of their deposits showed the clear difference in the way minority and non-minority businesses are treated,” Ballard said. “Now if that were a Black-owned bank, not only would it have been allowed to fail, but the deposits over $250,000 would have been lost. The FDIC would’ve said ‘sorry, not our problem. 250,000 is the legal limit. Now go deal with it.’ That’s how the FDIC has treated bank failures in the past and I think that’s how they would have treated a bank failure if it were a Black depository institution or if it were a bank that did not have the type of clientele that Silicon Valley Bank had.”
That clientele Ballard is speaking of consists of social media-savvy business owners with deep connections across both political aisles. “They were able to get things done based on their societal standing and it’s really unfair.”
One solution is further investment in banking with Black-owned banks.
“If you think about the role that banks play in wealth creation and economic development, it’s absolutely central,” Ballard told ESSENCE. “It’s almost like the heart. The heart is how blood is distributed throughout our body. If blood doesn’t reach a limb or a finger, then it’s going to atrophy. It’ll die. And I think the same exact thing is true of banks IN communities. If banks aren’t distributing capital to aspiring homeowners, business owners and even bank owners then those communities are going to atrophy economically. Something needs to change immediately.”