This is a Bloomberg Radio special, Black America Confronts a Credit crunch Shanali bask Though many Black Americans have been celebrating Juneteenth for years, it's only been two since the US finally declared it a federal holiday. While President Abraham Lincoln's Emancipation Proclamation officially freed slaves in eighteen sixty three, many areas in the South didn't follow through for some time.
It was on June teenth, June nineteenth, eighteen sixty five that Galveston, Texas released the very last enslaved people in the country. But the day comes with the stark recognition, as far as we've come since slavery, we still have a ways to go for racial equity in the country for Black Americans, particularly when it comes to wealth. A Brookings Institute report shows that in twenty nineteen, the median net worth of a typical white household was nearly eight
times higher than that of a typical black household. One key factor drive the disparity is access to credit. Everything from business loans to securing a mortgage remains a challenge for many black families. A Saint Louis FED report from that same year found that Black businesses were denied loans at much higher rates than their white counterparts, and today's economic landscape is no friendlier to Black Americans as recession
fears and recent banking turmoil loom large. Over the next hour, we'll take a closer look at the challenges black communities are facing as we see a broader pullback and lending. We're joined now by Cynthia Day, She's the president and CEO of Citizens Trust Bank, one of the very limited number of black owned banks in the country, and Harold Butler, who leads the Diverse Financial Institutions Group at Wall Street Giant City Group. Cynthia, let's start with you, what does Juneteenth mean to you?
I first have to acknowledge the fact that we're talking about Juneteenth, when a couple of years ago there were millions of people in our country that didn't even know June tenth existed. So today it's becoming the national conversation and the recognition of the significance of Juneteenth, I think,
in itself is progress for me personally. When I think of Juneteenth, I think of a time to reflect and celebrate the American African American spirit, its resilient and the unsung contributions that have been made to the American society.
It's also a time to look forward and recognize the deep impact and the cost of this, you know, his these historical events to the Black community and it She continuously reminded us to continue to press forward and to press for economic parity and financial well being in an African American community.
As we set up the conversation about parity here, maybe Cynthia, you can kind of describe the role of black owned banks and black communities.
Our bank has been around for, you know, over one hundred years. Our founding mission was to create parity. And the fact that our institutions are here, I think we've we've seen this tom and tom during the Great Recession and the pandemic, where we get into credit constrained areas and there's no access or people that understand the plight of these communities and what are as willing to extend credit for good reasons.
In economic downcycles.
But it takes a bank or an African American business that are that are in and of those communities. We saw this during the during the Great Recession, we saw it during the pandemic, whether it was through PPP or traditional credit.
We were there.
We saved businesses, we saved jobs, we saved home we save families, We saved communities.
Now, Harold over at City Group, you're really spearheaded the program to work with minority depositary institutions. And that signals to me that you saw early on the ripple effects from big bank to medium sized bank to smaller bank across communities on the flow of capital. You know, why did you start this program? And you know where does the stand today? And what concerns do you have given that there are concerns about a credit crunch.
You know, we began this journey, you know, much before you know the world had its crises or took part and witness the murder of George Floyd. And you know, for us as a firm post that, it was really about determining what could we do to help make things better?
Right?
What role could city play at helping to achieve parody as we just talked about reducing the racial wealth gap, things of that nature. When you look at communities that are underinvested and underrepresented, they all have a common theme and that common theme is the lack of banking infrastructure.
And they what about this moment in time. What does it feel like to run a bank today?
Like many economic cycles that we've gone through, it just requires a lot of resilience. It could be very difficult. We have to make sure that we are strong and well managed and well focused and well capitalized so we can help our customers. They needed us, They needed us during PPP, they needed us during the Great Recession.
They need us.
I think partnerships with people like City and other corporations. I think that united in collaborative front can help us create greater impact. It can help us close these wealth gaps. It can help us increase home ownership. It could help us create healthy ecosystem within the communities that we serve. And I think it will be beneficial to our country because I think if we take this fourteen percent of this population, it can increase GDP. So I think this
is not just a minority bank. It's not an underrepresented or under invested community. This is a national issue.
Speaking of challenges, I think one major concern is a recession and what a recession would mean, what doesn't mean for all small business owners, let alone black small business owners, let alone black female small business owners. Another question that is Embedded in that too, is this decade's long disparity, this widening gap between the wealth of Black Americans and white Americans that has just expanded over time, and what a recession would mean for that. Does it create setbacks?
What do you tell business owners communities that might be worried that some of the progress might be challenged in the next year or so.
You know, we just keep the conversation open with our customers. We are consistently talking to them. We had to talk to them during this recent bank failures. We have to keep reassuring them that you know, we're here, We're with them, we are feeling some of the same impact and effects.
We've been doing this for one hundred years.
I keep repeating that we understand these different cycles that we go through. It does continue to take that conversation making sure we're there during those recessionary times.
And I know that all of us.
Are aware of that that during recessions, historically, African American communities have a deeper and more severe impact with higher business closures, higher job loss, hire unemployment, steep losses and home values and more importantly, you.
Know the lag in the recovery.
We saw the same issues and trends during the pandemic with you know, people of color seeing disproportionately higher job and wage loss. So it's hard to provide that comfort. But what we can say is, you know we were here with you during these times.
We don't have a crystal ball.
We don't know where all this is going, but we do know one thing. We're still committed. We were here to help with those providing access to capital for businesses during those times. But we do know we've been through this before. We're resilient, Our customers are resilient, and we're going to be there to help them through this time.
Harold the question for you, and i'd like Cynthia away on on this too. I know over at to the group, we've done a lot of work with the US government, and if you think about the role the government plays both in supporting large banks, let alone black owned banks, medium and small size banks, if you think about kind of the work they've done to kind of foster the growth of minority depository institutions, where we know that the number has shrink over a wide number of years. What
can they and should be they do? What can they and should they be doing?
You know, I think it's important for our government to continue to focus as they are right on creating programs, doing things that can uplift and support the need to change the narrative broadly. They're not easy, and I don't think anybody is under a delusion that it would be easy. These are tough things to sometimes, you know, have conversations about.
But the important thing is that the government continues to do what it does and to lead these conversations to be a part of solutioning things that make sense for the space, because then I think we get to a better place.
I agree with what Harold has laid out there, and I will say during the pandemic and during the bake failures, I think that the swiftness with which the government moved and some of the programs they put in place was very helpful and it really stopped us short of a catastrophic events more catastrophic than what we had during the pandemic.
One of the number one things on my.
List that I think would be helpful is to let like things and like businesses participate in a meaningful and meaningful.
Way as vendor suppliers.
There are trillions of dollars that flow within the governmental enterprises, and I think the supplier should reflect the diverse tapestry of the people they serve.
And there are effective ways in which to accomplish this.
I mean, we can encourage partnerships between minority suppliers, banks and other corporations like City.
This can be effective, it can be efficient.
Yet it provides for opportunities to grow minority businesses, to create jobs. It will increase home ownership, you can build generational wealth. It's something that we should be doing and something I think that we should be committed to make it happen.
Special thanks to Cynthia Day, president and CEO of Citizens Treuss Bank, and Harold Butler, the head of the Diverse Financial Institutions Group at Citygroup, for joining us. Ryan Williams founded Cadre in twenty fourteen as a way for more investors to get access to commercial real estate markets. He grew up in Baton Rouge, Louisiana, and started investing in real estate while he went to college at Harvard University.
When he was in his twenties, he went to almost a dozen banks for loans for investing in that real estate and was turned away by many. The bank willing to give him a loan Citizens Trust Bank that was a firm run by our last guest, Cynthia Day. For Ryan Williams, his relationship with citizens Trust Banks set him on a path to eventually starting Cadre. Ryan, talk to us about how you're thinking about this June teenth June team.
To me, it's really a symbol freedom. You know, it's the commemoration of the end of slavery in the US. It's deeply personal to me because I have family members who were enslaved in Texas, and it's a reminder of the fact that there's still far too many Americans, especially Black Americans, that are fighting for economic freedom and opportunity
and social freedom and opportunity. For me, it's really about how can I use my platform, my network to create greater financial opportunity, whether that's democratizing access to alternatives like we're doing at Cadre, or whether it's helping advocate for both private and public action to close the racial wealth gap.
When you think about kind of getting through this credit crunch and the fact that people are worried about small banks in general, but the black owned banks in America have been under pressure for decades. How do black owned banks and black communities that rely on black owned banks really see through this credit crunch.
Yes, I mean, I believe it's a combination of public and private partnership.
You know.
I believe that there needs to be proactive action taken by the government, whether that's helping incentivize private investment into many of the banks to help further capitalize these banks to ensure that they can continue to lend to their communities, or whether that's entrepreneurs and companies taking action to intentionally funnel capital to many of these banks that have been
the bedrock for their community. It's ultimately about the flow of capital, and it's ultimately about incentivizing those in the private sector and those in the public sector to do more to accelerate that flow of capital into these banks and communities.
Maybe talk a little bit about what those solutions could look like, because you're one of the people that has worked with other entrepreneurs and that has worked with large financial institutions to get the ball rolling.
One of the most encouraging solutions that I've seen was the way JP Morgan stepped up to help infuse capital and to challenge banks over the past really three to four months and created effectively a syndicate. Now, it didn't ultimately have the result of stabilizing First Republic in this case, but it did show that this collective action when banks come together or financial institutions come together to invest and those that are struggling, can ultimately lead to a result in more opportunity.
I'm glad you mentioned the biggest banks here too. I'm glad you mentioned JP Moore again. We're also talking to Goldman and City Group and different banks who are looking to work to finance black entrepreneurs. Talk a little bit more about the role of the financial system, especially because in this year we're watching the biggest banks get bigger, which means the eyes are really on them to make change.
It's right, Yeah, I mean, I think the divide and delta between the haves and have nots is increasing faster than it has in recent memory. One of the best approaches here is the largest banks thinking about ways to create syndicates, partnerships and investments that elevate banks that maybe aren't directly competitive with them, but have specialized focused on communities that they're not reaching or can't reach, or that offers certain you know, loans to certain types of companies
rather that otherwise would not be capitalized. And so I really think that American ingenuity. You know, some of the unique elements of each region of our country are financed by many of these regional community ranged banks, and without government or larger bank action, I think you're bound to see many ultimately fail or lose market position.
When you think about the involvement of larger banks into the minority depositary institutions, black owned banks and black owned businesses for that matter. With all the commitments that have been made over the last couple of years, how do you feel about the pace of progress?
Now, Yeah, it was it was incredibly encouraging to see, you know, so many institutions and corporations discuss, you know, how important they felt it was to ensure there's greater economic justice and opportunity, you know, commit to various organizations that are focused on creating more economic opportunity and access by and larger I think it's been pretty discouraging and disappointing that a lot of those commitments and a lot of those statements have not been met with any kind
of accountability. There's been no progress report of note that I see that analyze whether these commitments are being met, and so I think this Juneteenth is actually an incredible opportunity for many of these corporations to look inwards, to hold themselves accountable for the commitments that they made in the immediate aftermath of June teenth, and you know, to also ensure that at a time when you know, things like diversity or inclusion on a lot of different dimensions
can be overlooked for you know, solving the most pressing business issues, that those commitments, you know, don't get completely washed out.
Let's also talk about the fact that you're an entrepreneur. You're an entrepreneur who look to black owned banks to help get financing as you really got off the ground. We've talked about this a couple of times before. Tell us a little bit about the role they played and why they were so important relative to the big banks.
Absolutely.
I mean it goes back to pattern matching and pattern recognition number one, and then being nimble. I think those are two unique attributes to community oriented banks and and MDIs as well. They're more agile, they're able to move faster, and then you know, they have a different quote unquote risk box than many of the larger banks. They're able to really understand the nuances behind why certain local businesses may succeed in certain areas and why they may not.
And as a result, they're able to help propel and prop up many local businesses that would not get the time of day from larger banks. And so, you know, for me personally, I was turned down by more than ten banks, you know, to finance the acquisition of an apartment complex in the Atlanta metro area. I had incredible credit behind me. I had multiple ultra high net worth
investors were willing to behind the guarantee. But when I spoke to some of the larger banks and they saw that I was, you know, relatively young African American and you know, relatively new in my career, I was shut down for even had a chance to start to get along. No One Bank, Citizens Trust Bank, who we actually work with now today. Black Owned Bank started in the nineteen twenties that focuses and serves Atlanta and other markets in
the Southeast. You know, they saw something different. They knew you know, the region, the area that I was investing in. They knew that there weren't a lot of people who looked like me, who were buying apartment buildings in that area, and they understood my business plan and that you know what, We're going to give this young man the benefit of the doubt. We're going to lend to him, We're going to think about building a long term relationship with him.
We think that the way that he's investing in the community will actually not just elevate his investors, but actually the community itself.
And you know, we're going to.
Look at the opportunities versus the risks and lint as a result. And if it weren't for that bank, I probably would not be where I am today, you know, the founder and CEO of Cadre, because that acquisition ultimately ended up in generating significant returns for my investors, and that put me on the path to saying, Okay, how can I democratize access to this kind of institutional real estate today because it created a track record for me.
Our thanks to Ryan Williams, founder and CEO of Cadre, for joining us on today's program. You're listening to a Bloomberg Radio special, Black America Confronts a Credit Crunch. I'm Shanali Basik. Today we're looking at how black communities are faring as economic uncertainty is leading banks to pull back on lending. It's a situation that often has an outsized impact on Black Americans. Asahi POMPEII is one of the
most senior black women on Wall Street. She's on the management committee at Goldman Sachs and as head of Corporate Engagement. She's also president of the Goldman Sachs Foundation. She leads initiatives like ten Thousand Small Businesses, which supports smaller business
owners through education, finding fresh capital, and more. She also helped Goldman launch one Million Black Women in twenty twenty one, an initiative that pledges ten billion dollars in investments and one hundred million dollars in philanthropic funds to address racial and gender bias across businesses. Black executives from across the country, including Walgrand CEO, Rosalind Brewer, and political powerhouses Valerie Jarrett
and Counduiz of Rice, are among the program's advisors. I was wondering if you could start just kind of big picture when you think about June teenth, you know, how do you think about it from your stands at Goldman Sachs and how do you talk to your colleagues about it.
You know, if we think about June Team, we really, you know, think about how Black Americans are faring in this country overall, from an economic perspective, what's happening on the social front, and in particular, because we're an investment bank for us, the focus is really on black small businesses and how they're faring. I would describe this June teint as a really jittery June teint for black small
businesses and small businesses of color. And that's as a result of a number of factors that I am happy to go into.
Yeah, let's get into that a little more deeply here. Obviously, there are worries about a recession, but there's also worries about what a credit crunch might be given so many smaller banks have started to face so many troubles. What are the biggest concerns you're seeing?
You know, we're seeing a number of sinctionally. You know, on a good day, it's challenging for black businesses to get funding, and this year that gets amplified, and so they are really worried about the credit crunch. It's frustrating their ability to be able to access access capital and it's a very uncertain time for small business of color, and in particular black small businesses since the done of
the pandemic. The last three years, Golden Taxes conducted over seventeen surveys of small businesses to really keep a pulse on what's happening. And here's what we're seeing. Dial back a year ago, when we surveyed small businesses and said, how do you feel about the economy more generally and in particular your ability to access capital, We found that seventy seven percent of them were confident in their ability to access capital. Today, seventy seven percent of those businesses
are now concerned about their ability to access capital. So they went from confident twelve months ago to concern right now. And that's really manifested in terms of what they're experiencing. They're experiencing a higher loan rejection, They're being asked for more data than they were ever asked for before, more
scrutiny on their projection. Things are taking longer prolonged barring approvals for their borrowing things that would take three months now taking upwards of seven months to get approved.
So how much of this is because of the strains that small banks are feeling in the United States, and that extension to black owned banks, which are smaller than America's top five for example, you.
Really put your finger on it. Small businesses rely on small banks, and we know that. You know, they received almost seventy percent of their commercial loans from banks with less than two hundred and fifty billion in assets and thirty percent from banks with less than ten billion in assets. So when small banks have small have problems, small businesses
have problems as well. In particular, you know things like you know your do you have a pre existing relationship with the bank, what's your geographic proximity to the bank. All of those are important factors as it relates to a small business's ability to be able to access capital, and all of that gets exacerbated when you think about it for black small businesses.
And I want to be clear about this too, because when we saw the bank failures in the United States, it's not the black owned banks that necessarily faced the same troubles. But with that said, you do have the sense that financial conditions are tightening and credit is contracting. What does that mean for black owned businesses in particular
black owned banks in this kind of a cycle. I think there's a worry here that some of the disparities that we have seen into the run up into the runop into COVID, for example, might be exacerbated if we were to face a recession ahead.
I would definitely agree with that. Look. I would say, the same condition that can cause a small business to shiver will cause a black small business to freeze because they don't have the same safety net and frankly, the same capital. And I'm talking about the social capital that we know is a part of being able to access
actual capital for their business. We know that black small businesses tend to are more likely to be denied for a loan, they tend to get less favorable loan terms even when controlling for credit worthiness, they tend to get higher interest rates and stricter requirements. And so all of those issues are creating significant concerns for what I'm calling a jittery June teen for black small businesses.
But there's a reason also that you're leading this ten thousand small businesses program as well as one million black women. Where is the overlap.
As we think about closing the racial wealth gap. We published a report called Black Women on Its and we found a number of things. In particular, it talks about the multiple things that are at issue when you think about black people's ability to create into generational whether it's education, whether it's access to capital, whether it's healthcare, whether it's
jobs and workforce. And as Golden Facts thought about where can we step in and really change the tie, and in particular, entrepreneurship and our focus on entrepreneurship has been that area. I'll share with you a couple of facts. Over ninety seven percent of black small businesses are solopreneurs, and that means it's a single person or maybe a part time person working in that business. Now, black people, black women in particular are starting small businesses faster than
any other demographic in this country. However, after three years, what we're finding is that the majority of those businesses have failed, and in particular, these women who started off with such enthusiasm and such commitment are actually in a worse position than if they hadn't started the business to begin with. Now, a lot of PEOPLETIONALLI would see this
as a problem. Golden Facts saw this as an opportunity, and two years ago we launched one million Black Women Black in Business with the specific goal of working with black women solopreneurs to do a number of things to grow their revenue, to move them beyond being solopreneurs, to employing individuals in their community, because we know black small businesses employ black people in their community, and to really
be able to start to create intergenerational wealth. And so we just had about three hundred of them here at Goldmen Sacks headquarters a couple of weeks ago, and that's a part of our business that we've been doubling down on now.
I want to go back to a term you've used a couple of times, jitterary June teenth. You know, that's a really tough reality when you're thinking about all of the challenges that people are facing in the economy right now.
What do the next six to twelve months look like, given some of the big problems that we're seeing in the economy, And is there a risk that some of the strides that corporations that the economy has made with trying to close the racial wealth gap, is there a risk that some of that is unwound.
Look, I think there's definitely a risk. I would love to paint a rosy picture for the next six to twelve months in the US economy. But there are a number of headwinds. One, we've got high interest rates. We've seen the FED hike interest rates ten times since March of last year. Secondly, we inflation persists, it's stubborn and it's continuing to be high. We see seventy one percent of our small business owners saying that inflationary pressures have
increased in the last three months. The third thing we're seeing is workforce challenges. Seventy eight percent of small businesses say they're having trouble finding qualified applicants for their open position. And fourthly, we've still got supply chain issues that are problematic. Now, is there some relief around the debt ceiling. Absolutely, we're
seeing that in our small business community. But when you've got high interest rates, high inflation, workforce shortages, supply chain issues, a credit crunch, it's hard to be optimistic in that environment. Except I would say this, I would bet any day on the resilience and the tenacity of our small business community and our black small businesses. I would bet on them any day.
That's a Sahi Pompei, global head of corporate Engagement at Golden Sacks and President of the Goldman Sachs Foundation. This is a Bloomberg Radio special, Black America Confronts a credit crunch. I'm Shinali Basek. June teens marks an important day for Black Americans, but it's also a reminder that there's still
a long road ahead to achieving parody. And as shown by our conversations across the financial industry, economic parity in particular can't be achieved without doubling down on efforts, some of which have only emerged in the last couple of years. So how can the country keep pushing forward? Let's get closing thoughts from each of our guests, Asai Pompey at Goldman Sachs, Ryan Williams at Cadre, Cynthia Day at Citizens Trust, and Harold Butler at City Group.
You know, I think it's about recommitting every day because systemic issues needs sustained focus, and I think the critique has been, you know, people being episodic or headline chasing. And I think what's particularly important is that commitment on a daily basis to who are you hiring, who are
you extending credit to? And so we see that the impact of slavery and discrimination persists in this country, and I think June tem while it's an important day to recognize that and to talk about it, it's about the daily commitments about all the days that are not June teemed, and what are we all doing then to hold ourselves accountable to really making advances.
I have these definitely one way to think about this period of recollection in June teenth. You know, the word that I associate sort of with this current context and environment is opportunity. And I think of opportunity from the perspective of there's a lot of stress, there's a lot
of challenges. There's so many open questions about, you know, where the economy is going, about where certain businesses are going, and there needs to be a lot more answers, and with those answers, you know there will be opportunity to build and during businesses.
There will be.
Opportunity to reimagine how we actually finance and capitalize businesses that are backed by diverse entrepreneurs. There's going to be an opportunity, and there is opportunity to reimagine how we support banks that are going to be disproportionately overlooked as we work through this period of turbulence in our market.
I think we have to be intentional.
I think we have to be committed, and I don't think this is segmented into just minority underrepresented communities.
I think this is.
A collaborative effort for our whole country. That we need to continue to focus on access to capital that creates jobs. We need to ensure that our leadership and our management inside of our board of directors, in our companies and in our government are reflective of diversity and thought and ethnicity of our customers.
It's very important that we not make this a moment in time right. Much of what and how we've been focused here at the Bank and doing the things that we're doing, the commitment of the Diverse Financial Institutions Group by you know, Jane Fraser and Mark Mason was a game changer for us in many ways. And we've learned that it not only matters to the space right to our industry peers, to the banks like Cynthia's firm, but
to our employees themselves. And so you know, it goes along way to helping us to indeed change the narrative and through very deliberate and purposeful focus. And the last part of that, and I say this all the time. We need to keep telling the story right, asking the questions. If questions are asked and it makes people uncomfortable, it's probably the right question.
We want to continue this conversation of how these recessions are impacting these communities. You don't have to go look at a study. You can come talk to me and I can tell you what I've seen firsthand, but also can tell you the successes that come out because we keep doing what we do.
Some closing thoughts to remember on this Juneteenth holiday. Our thanks to Asahi POMPEII, Ryan Williams, Cynthia Day, and Harold Butler for joining us on today's program. You've been listening to a Bloomberg Radio special, Black America Confronts a Credit Crunch. If you missed any part of our program, you can listen back to the podcast anytime it's available on Today's Bloomberg Business Week, Bloomberg Surveillance Feeds. Subscribe any time on Apple, Spotify,
or anywhere else you get your podcasts. I'm Shanalie Bassek, and this is Bloomberg