Photo caption: CHICAGO, once known as the Black Business Mecca, is struggling to stabilize many of its once vibrant Black communities by creating businesses, encouraging homeownership and establishing independent financial centers like credit unions. (Illustration by Crusader)
Sixty years after Rev. Martin Luther King, Jr., stood on the steps of the Lincoln Memorial to deliver a poetic challenge to America, a group of Black pastors broke ground in the Austin neighborhood for a new credit union they believe will slow the growing poverty-industrial complex.
Under the banner of “Fulfilling the Dream,” the Leaders Network hosted a groundbreaking ceremony on August 28th, the anniversary of King’s “I Have A Dream” speech. Prior to the event organizers said the faith leaders intend to “make a deposit of $250,000 to open the account” in commemoration of “the day in the tradition of Dr. King – by marching for racial, social, and economic justice” the group said.
The Leaders Network Credit Union is described as a financial services organization that aims to break the cycle of poverty and advance economic power. “Dr. King spent the last months of his life fighting for economic justice for Blacks, poor whites, Latinos, and indigenous people!” stated Rev. Ira Acree of Greater St. John Bible Church and co-chair of the organization. “This credit union initiative, if duplicated in other urban markets, could ultimately change the landscape in America, because Black families and Black businesses will be able to get loans in their own community without being redlined or getting outright denied.”
Though the credit union is slated to open in February of 2024 at 5600 W. Madison in the Central/Madison Plaza in a new build-out, members can access its services at: https://bit.ly/3L2IqsJ.
The poverty rate in Austin is 21.1 percent, which is more than 1.5 times the rate in Illinois and the working-class neighborhood has a 44 percent child poverty, compared to 31 percent for Chicago overall. The neighborhood is 99 percent Black. By comparison, the poverty rate in predominantly Black communities on the South Side is equally alarming.
In Woodlawn, the poverty rate exceeds 40 percent, and in the neighboring lakefront community of South Shore poverty rate hovers around 30 percent. Chatham, once the beacon of Black middle-class achievement, its largest Black-owned bank (Independence) has been replaced across the street with the largest welfare office at the corner of 80th and Cottage Grove on the South Side.
According to the Federal Deposit Insurance Corporation (FDIC), 4.5 percent of U.S. households, or approximately 5.9 million households, are unbanked. This means that no one in the household has a checking or savings account at a bank or credit union. Those individuals rely on “fringe banks” such as currency exchanges and pawnshops where people have paid over 200 percent interest for small loans.
“In 2005 several faith communities organized and modeled our social justice work after Dr. King’s SCLC to advocate for the marginalized on Chicago’s Westside and beyond,” said Rev. Marshall Hatch senior pastor of New Mount Pilgrim Church, who is also a co-chairman of the group. “This giant step toward financial empowerment of families is launched today in honor of Dr. King who himself resided on the Westside in 1966. In 2023, the dream still lives.”
Meanwhile, the nightmare of poverty and economic erosion continues to haunt Black people like a bad dream. Despite the city once being labeled as the “Black Business Mecca” Chicago now has only one Black-owned bank in a city of nearly 800,000 African Americans. Now named GN Bank of Chicago, the institution was originally established in 1934 as Illinois Service Federal. Though the median income of the Bronzeville neighborhood, where it is located sits at $62,829, the bank is currently struggling to keep its doors open.
In 2017, Seaway National Bank and Trust, once considered the largest Black-owned bank in the nation, was shuttered by financial regulators surprising thousands of customers in the process. The pride of the South Side, the bank was turned over to a Texas financial group and renamed.
Ironically, it should be noted that in 1865, a bank was established to serve Black Americans – known as Freedman’s Savings Bank. It opened 37 branches in over 17 states and had 67,000 depositors. It came under the control of white financiers, who used the bank’s resources to fund speculative investments, losing the life savings of thousands of Black depositors.
The U.S. “poverty-industrial complex” consists of a host of businesses and services targeted at the poor, uneducated, or marginalized citizens. It includes used car dealerships, check-cashing outlets, pawnshops, payday loan businesses, collection agencies, rent-to-own programs, high-interest credit cards or mortgages, finance companies and trade schools marketed specifically to low-income people. On the backside, the industry is supported by the nearly $3 trillion in social safety net spending by the federal government, doled out monthly by struggling families hoping to make ends meet.
Fair lending laws, such as the 1977 Community Reinvestment Act (CRA), have been slow to eradicate blight caused by economic disinvestment, racism, redlining, and systemic poverty in Black communities on the South and West sides of Chicago.
The CRA allows citizens to file federal complaints against banks’ lending records and requires financial institutions to make deliberate attempts to provide credit and loans to Blacks, and people living in underserved, economically distressed communities. However, the law won’t work if there aren’t any banks available.
There are nearly 1,200 bank branches in Chicago. Statistics suggest BMO Bank has surpassed Northern Trust on this year’s list of Chicago’s Largest Banks, taking the No. 1 spot with $177 billion in assets, a 6 percent increase from 2021 to 2022.
While banks and credit unions provide the same services, there are differences in how they are governed and who benefits. In June 2020, WBEZ found that “The city’s biggest banks are lending eight times more money in white neighborhoods than they are in Black or Latino neighborhoods” which are hyper-segregated and therefore easy to identify.
Another study showed that poor and “minority homeowners in the U.S. who cannot obtain full-coverage” property insurance is nearly 50 percent greater than that for residents of mostly white, middle-class areas.
“The Leaders Network Financial Credit Union will enable residents of the Greater West Side to access the financial tools we need to pursue our dreams and simply fulfill our day-to-day needs,” said Rabbi Max Weiss, in the group’s press release. “Every community should have access to full banking services. Our partnership with Great Lakes Credit Union will allow us that access.”
“As member-owned not-for-profit institutions, credit unions give back the income they generate to their members and communities,” Steve Bugg, president & CEO of Great Lakes Credit Union told the Crusader. “This not-for-profit model allows credit unions like Great Lakes and others to invest in partnerships – like our partnership with the Leaders Network – that support historically divested communities. This also allows us to focus on creating and offering products and services to these communities with a focus on what’s best for the consumer, not what’s best for our profits.”
The West Side of Chicago has historically been an underserved area when it comes to banking and financial services. According to a 2019 study by the FDIC, 17 percent of Black households in the United States are unbanked compared to just 3 percent of White households. Specifically, in Chicago, one in five Black households lacks access to mainstream banking services.
Credit unions were touted and strengthened by President Lyndon B. Johnson in his push to create a social safety net in the wake of new freedoms secured by King and thousands of other Black protestors, like the late Rev. Charles Koen, of Cairo, IL.
The first U.S. credit union, St. Mary’s Cooperative Credit Association, was established on April 6, 1909, in Manchester, New Hampshire. The first credit unions for Black Americans were established in the 1920s and provided lending opportunities to farmers, entrepreneurs, and people trying to establish credit and keep the hounds of poverty at bay.
In 2003, the South Side Community Federal Union opened its doors in the Washington Park, neighborhood. It drew statewide attention when GOP candidate for Illinois governor, Bruce Rauner, promised to deposit a million dollars in its coffers which stands at about $7.5 million. The nation’s largest credit union is Navy Federal with an estimated $166 billion in assets.
The Leaders Network says both outreach and collaboration will address trust issues that have developed due to how banks have historically been viewed with skepticism in economically depressed neighborhoods. “We intend to do that by first establishing a Brick and mortar branch in a community that is familiar to the members,” the group said in a statement. “And through hiring staff familiar with the community and by connecting with local churches, schools, and community leaders, which will provide confidence that we are a trusted source for the good of the community.
The credit union will also launch robust consumer education and financial literacy workshops.
And to what extent do community-based credit unions contribute to local economic development? Bugg said, “At the end of the day, more money kept in consumers’ pockets means more money to circulate in the economy. By keeping this money in members’ pockets and helping it to grow; allowing members to borrow at competitive rates; and supporting local businesses through access to capital and banking services, credit unions support the entire economic ecosystem within underserved areas.”
AS ONE OF Chicago’s Black newspapers with a citywide distribution, our mission is to provide readers with factual news and in-depth coverage of its impact in the Black community. This examination is funded in part by a grant from the Inland Foundation and the Chicago Crusader Newspaper.
