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The 2-cent solution to close the racial wealth gap: A call for U.S. companies to invest in Black communities

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If just 2 cents of every dollar earned by U.S. corporations was reinvested in Black communities, the racial wealth gap would close at a pace and scale never before seen in this country.

Referred to as “The 2% Solution,” this premise, championed by Vista Equity Partners founder Robert Smith is bold, yet simple. He proposes that corporations, which reap the benefits of America’s prosperity, take the lead in reversing centuries of structural economic racism by investing 2% of their net income over the next 10 years in Black businesses and financial institutions.

This proposal is good not just for direct beneficiaries of the investment, it is good for corporations and the entire nation. Analysis by McKinsey and Company found that closing the racial wealth gap would add between $1 to $1.5 trillion in economic activity over the next 10 years through job creation and income gains.

So how would this plan close the racial wealth gap? By investing in Black businesses and Black-owned financial institutions, which directly translates to jobs and economic growth in Black communities.

The evidence is clear. In a study of Minority Depository Institutions (MDIs), the FDIC found that Black-owned banks locate and lend in Black communities at significantly higher rates than white-led financial institutions. Likewise, research by the Association for Enterprise Opportunity showed that while the Black/white wealth gap is 13:1; the wealth disparity shrinks to 3:1 when comparing white and Black business owners.


U.S. banks notoriously underinvest in Black people and communities.

Unfortunately, the resources available to close these gaps are far too scarce. U.S. banks notoriously underinvest in Black people and communities: While 77% of white households are “fully banked,” less than half of Black households can claim the same status. Not surprisingly, the denial rate for mortgage loans for Black households is nearly twice the rate of whites. Even among Community Development Financial Institutions (CDFIs) — mission based lenders created to serve low-income communities — capital levels for white led CDFIs are, on average, twice the size of CDFIs led by people of color, a function of capital investment.

Even philanthropic support for these communities is woefully inadequate. The National Committee for Responsive Philanthropy reports that per-capita grant making in the Mississippi Delta / Alabama “Black Belt” — home to the nation’s most concentrated rural population of Black residents — is a woeful $41 per person, compared to San Francisco, where philanthropic investment is $4,096 per person.

Read: To build racial and wealth equality in post-pandemic America, invest in a Cultural New Deal

Also read: It’s time for wealthy donors to embrace reparations, not more charity

Our experience at HOPE, a Black-owned credit union and CDFI serving the Deep South, has shown repeatedly that aligning resources with need enables people to climb the economic ladder. Nowhere was this more evident than in our work to help Black businesses access the Small Business Administration Paycheck Protection Program (PPP).

In a typical year, we make 40-to-50 business loans. However, the onset of the pandemic, the shutdown of the economy and disproportionate impact on Black communities mandated an extraordinary response. Anchored by substantial support from Goldman Sachs, HOPE redirected nearly half of its workforce to originate PPP loans. By the time the program concluded, HOPE had processed close to 7,400 PPP applications and approved 2,900 loans for $85 million. The majority of these loans were to mostly Black communities, with an average loan size of less than $30,000 — more than $70,000 lower than the average for the overall program.

Many of HOPE’s PPP borrowers were small businesses and nonprofit organizations run by Black leaders who could not even get a return phone call from traditional lenders. One of those organizations included a small nonprofit serving youth in the Arkansas juvenile justice system. After reaching out to its bank, the nonprofit learned the financial institution would no longer accept PPP applications.

The news was particularly devastating because, short on funds, the organization was experiencing an influx of teens in need of case management services. Youth formerly in the system were reaching out following their early release, a precautionary measure to prevent an outbreak of COVID-19. Before the organization had a chance to find another lender, the program’s first phase had ended. When the program restarted, HOPE made the loan. While maddening, the outcome was not surprising. What would one expect when a study commissioned by the Winthrop Rockefeller Foundation found that in Arkansas, where 15% of the population is Black, just 1.2% of SBA loans go to Black businesses?

Corporations and their shareholders have long benefitted from systems, policies and practices, all promulgated by law, that have facilitated and perpetuated the racial wealth gap. However, as HOPE’s PPP experience demonstrates, there is a better way. The health, economic and racial crisis facing America has crystalized the importance of transcendent action at this critical moment in history. Smith’s 2% Solution offers a guide for moving forward: Make substantial, sustained and targeted investments that equip Black communities to thrive. All it takes is 2 cents.

Bill Bynum is CEO of HOPE (Hope Enterprise Corporation, Hope Credit Union and Hope Policy Institute), a family of organizations that advances economic opportunity for disenfranchised populations in Alabama, Arkansas, Louisiana, Mississippi and Tennessee. Bynum serves on the boards of the Aspen Institute and NAACP Legal Defense Fund, and previously chaired the Consumer Financial Protection Bureau Consumer Advisory Board, and the Treasury Department’s Community Development Advisory Board.

More:‘Every recession, there’s a massive bailout given to corporations and CEOs’: Stockton mayor Michael Tubbs says basic income payments can help bail out Americans

Plus: Helping companies that ‘keep the country going’: Small businesses can narrow racial wealth gaps and save the U.S. economy, says microlender’s CEO



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I lost my job at 55 and started my own successful business. I now constantly get texts from friends and former coworkers asking how I did it. What do I do?

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I read your column regularly. I never thought that I would reach out to you with my own issues. But I was wrong. I’m hoping you can help on how best to handle this situation.

In 2016, I lost my long-term job. The company simply went through serious changes, and my position was no longer needed. They were great to me when I worked there, and they gave me a small severance package. I was 55 at the time. I was more than a bit anxiety ridden as I wasn’t in a position to retire, and I was concerned about the prospects of being rehired at this age. The good news is that I was a saver, had no debt and always lived frugally. My husband’s job carried the benefits.


‘I woke up every morning at 4 a.m. to research, research, research how best to use my resources and ended up starting a small business.’

I woke up every morning at 4 a.m. to research, research, research how best to use my resources and ended up starting a small business. Once I started, I made mistakes, messed things up but I kept educating myself more and more. There were tough times that were not easy to get through, but I was determined, and kept going.

After about 18 months, it was working! Everything fell into place, and the train finally started going down the track! Now, I wake up each day and think, ‘I own a small business!’ My hubby even took early retirement to partner with me. While we are not making $1 million, we crossed over into six digits over the past few years.

We run our business out of a home office. I offer a service based on my knowledge from my prior job that I lost. So what is the problem? Several times a month, friends and prior co-workers reach out to us to ask how they too can get started in what we do.

This is just one example of the text I woke up to this morning:

“We are thinking about starting our own business as a husband and wife team like you. We want to discuss this with you, and learn from your experiences. What day and time would be good for you? Early morning or late afternoon? Can you come to our house?”

These requests send me to the moon and back, and I’m not totally sure why. I’m struggling with being a good human being and helping them vs. asking myself why would I want to train my competition to take business away from ourselves?

I liken these friends and former colleagues to the kids at school who march right to the head of the lunch line to get their food, without waiting in line like the rest of us.

My husband and I built relationships across the country and locally, but we do not live in a town where there is enough business for all of us.

Quentin, I hope you can help me sort through how best to decline these requests or tell me if I am wrong? We will retire in 6 years, and we hope to sell the business at that time.

Enjoying My Second Act (& Want It To Last)

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com

Dear Second Act,

Your life and business is not a blueprint for anyone. Your path is your own. Your timing was right for you. You did your boots-on-the-ground research, and it’s paying dividends. And you’re correct: Never underestimate your own ability to build relationships. Not everybody has that skill.

That text sounds like an aggressive sales pitch: a strong-armed approach with a smile. No. 1: If they are asking you to do them a favor, regardless of what that favor is, suggesting you do it on their terms is a no-no. If these friends are not willing or able to get off their sofa and come around to your home or meet you close to your house or business, how do they expect to start their own business from scratch, and go above and beyond to build both a reputation and a business?


‘Pushy people tend to know they’re being pushy. They just don’t care.’

No. 2: Pushy people tend to know they’re being pushy. They just don’t care. They may need you to acquiesce to their requests for the reassurance that others can and will bend to their will OR perhaps they simply have their eye on their goal and everyone else are minions (with a lower case “m”). You don’t need to worry about their psychology, of course, but you do need to be just as tough and push back. If people ask me what to do with their money, I say: “I don’t even recommend Broadway plays.”

And that lunar feeling you have when you get those texts? It’s your boundaries bending and creaking. It’s the Old You and the New You doing battle: guilt and people pleasing vs. self-protection and no-can-do. Remember, saying “no” does not make you a bad person. You could pick a book and say, “I read this. The rest was luck and timing. Good luck!” But my guess is someone who thinks that you hold the key to their success will not be so easily put off.


‘You learned a valuable lesson not to discuss your affairs with other people.’

That brings me to No. 3: The clearest, fiercest response is often times no response. Find that muscle. It’s one you can exercise over and over again. As a friend once told me when I had to make a big financial decision: “Take the emotion and personalities out of it. It’s just business.” This is your business. You have nurtured it and you have worked hard at it. Trust your instinct. Protect it. You don’t have to do anything you don’t want to do. Is your gut saying no? Then don’t go.

You have learned a valuable lesson not to discuss your affairs with other people. Make it known that you do not like to talk about business when you’re off the clock. Try a new approach to conversations at dinner parties or chats over the garden fence with friends or neighbors. If they ask you about your business and how it’s going, tell them: “Good, thanks.” If they persist, say: “My first and last rule of business is I never discuss business with friends, and I never mix business with friendship.”

Delete that text without replying. Do the same for other texts. Flex that “no reply” muscle and keep flexing it. It gets easier. Don’t be held hostage to the “reply” button on your phone, and do get acquainted with the ability to say “no.” After a while, you will likely come to enjoy it.

The Moneyist:‘Warren Buffett and Harry Potter couldn’t get those two retired early’: Our spendthrift neighbors said our adviser was ‘lousy.’ So how come WE retired early?

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My husband and his brother inherited a property. Our son moved in. We paid $60K in taxes and repairs. Do we split it 50/50?

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My husband and his brother inherited their family home. When they were able to take possession, our son and his family needed a place to live. His brother was quite willing to let them move in and, in lieu of paying him rent for his 50%, my husband and I would be responsible for all upkeep, repairs, taxes, etc.

The house is probably 90 years old, and needed quite a lot of work before they could move in. We spent approximately $20,000 to make it livable. After four years the house caught fire and, with the help of a crooked contractor, it took another $30,000 of our money to repair all the damage.

Now comes my concern: If my husband and his brother had sold the house when they first inherited it, they would have split proceeds 50/50. It would definitely have been sold, because we didn’t want to be landlords to anyone other than our son. But now six years later, we have paid well over $60,000 in repairs and taxes. This amount is well over what we had planned on, but it was a chance we took.

According to old tax records, the house was probably worth $45,000, and now is worth over $100,000, and growing. The future sale and split of the house proceeds was never discussed. My husband is all for splitting it evenly. I’m the one with the issue because of all the money we spent in improvements.

I understand his brother took nothing at beginning, and I’m all for his getting 50% of the original value plus some extra, but I just don’t feel like he should get half of the current value. The house would certainly never be worth what it’s worth now if we hadn’t done all the work on it. Unless the house continues to increase in value, we will never recoup our investment.

May I have your opinion on this problem? On paper, this makes me look petty but my mind is unsettled over this.

Upset Wife

Dear Upset,

Sometimes, the clue is in the question: “In lieu of paying him rent for his 50%, my husband and I would be responsible for all upkeep, repairs, taxes, etc.”

You are aggrieved that you walked into this money pit with both eyes wide open in order for your son to save money in the short term. It seemed like an attractive prospect at the time, and I can see why: Your brother-in-law is easygoing, so why don’t your son and his family live in the house for a while and give it a new lick of paint when needed, a scrub-scrub here and a scrub-scrub there, and make sure it’s ticking over while they live there rent-free? Everyone wins, right? Well, not quite.

You, your husband and your son and his family win. Your brother-in-law, alas, did not get much out of that deal. But being Mr. Nice Guy, he said, “Be my guest.” Literally. Why would he want to charge his nephew rent? He decided to forgo the money to be made from a potential rental property or quick cash for the sake of family. What’s the point in having a house if you can’t help other people out? Plus, it would be looked after. And it was. But then there was a fire.


‘Your brother-in-law decided to forgo the money to be made from a potential rental property for the sake of family.’


— The Moneyist

You don’t say how the fire started. Was the stove left on? Did faulty wiring cause it? Or did a power line fall on the house in a storm? If it was your responsibility to take care of the property while your son and his family lived there, you are accountable for those first two scenarios. Even if it was an act of nature, you are responsible for ensuring that the home is insured. Of course, the main thing is no one was hurt. Still, as you say, upkeep (and that includes insurance) is your department.

You don’t fare well in the renovation vs. free rent argument, but you also raise a hypothetical argument to support your case: You should receive more than 50% of the proceeds from the sale of the house because your brother-in-law and husband would have sold the house (maybe; we’ll never know for sure) had your son not moved in. It was worth $45,000 then, and it’s valued at $100,000 now, so given your $60,000 in repairs and taxes, he should be happy with $22,500.

OK, I’ll play that game. Let’s peel back another layer of wallpaper and say, “If their parents passed away when they were much younger, they would have sold the house at an even lower price.” Or, “If their parents lived to be 99 1/2, they could be living in the house in 2021, and maybe you would make out like bandits because you would never have paid money to Uncle Sam and Sam the Contractor.” Let’s peel away even more layers: “If no one had been born, we wouldn’t have this problem!”

If you have to bend the laws of space and time to justify your proposal, splitting the proceeds 50/50 doesn’t sound like such a bad idea, after all.

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com

The Moneyist: I married ‘the life of the party,’ but he’s different at home. He takes his money woes out on me — and calls me a ‘gold digger’

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As the market nosedived last year, my older brother advised me to sell. I lost $80,000. How can I ever forgive him?

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Dear Quentin,

This time last year, when the market was nosediving, my older brother advised me to get out of the market, and go to cash to conserve my assets. It was only going to get worse, he proclaimed, and he had 40 years’ experience in the market.

Granted, it was an ugly drop. Following his lead, I said hello to a $80,000 loss, while thinking I’d say goodbye to an even worse disaster. That same downturn soon ended, and the market recovered. It took me months to get back into the market.

If I’d ignored his advice and stayed the course, I’d be way ahead instead of way behind. To this day, I’m behind $55,000, so I’ve recovered some. I don’t feel good about being led down this path. Perhaps I have no one to blame for listening but myself.

Any thoughts on this matter would be greatly appreciated.

The Brother

Dear Brother,

Accountability is everything. You can start forgiving your brother by forgiving yourself. But in order to do that, you must repeat after me: “I, and I alone, was responsible for buying these stocks while the going was good, and I, and I alone, am responsible for selling them.”

Intent also matters. Your brother, whether he has four years or 40 years of experience, did not mean you harm. He may have been feeling concerned himself, and projected that worry onto you. You didn’t say whether he sold stocks too. Regardless, rinse and repeat the above quote.


‘It was a hard lesson. But the fun part is figuring out what it is you have learned.’


— The Moneyist

You are responsible for making money, you are responsible for saving money, and you are responsible for investing money. When you ask for advice and give 100% of your decision-making over to that person, you are making a choice. You are also handing over your power.

It was a hard lesson. But the fun part is figuring out what it is you have learned. 1. Don’t sell your stock during tumultuous times based on fear. 2. Don’t give up your own agency. 3. Don’t torture yourself by counting every rise and fall. That is what got you into this situation in the first place.

The situation, by the way, is temporary — so you can now choose to suffer, or you can take an action and choose NOT to suffer. Close your laptop, call your brother and ask how he is doing, stick with it for the long haul this time, and take a walk and get in some steps.

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com

The Moneyist: ‘Warren Buffett and Harry Potter couldn’t get those two retired early’: Our spendthrift neighbors said our adviser was ‘lousy.’ So how come WE retired early?

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