In this community, one can grow numb to more disturbing reports of racial disparities, as African Americans in St. Louis fare worse than their mainstream counterparts by every major quality of life index, starting with money, safety and health. Even still, the National Survey on Unbanked and Underbanked Households released last week by the FDIC managed to sting – and should provoke a concerted response from community and civic leaders.
The FDIC examined the number of households in the U.S. that do not have checking or savings accounts (unbanked), as well as those that have a checking or savings account but use alternative financial services such as check-cashing services, payday loans and pawn shops (underbanked). The study found a high disparity between racial groups, with 21.7 percent of black households unbanked compared to 3.3 percent of white households. Regionally, the disparity is even worse. The percentage of St. Louis households that are unbanked is slightly lower than the national average (7.5 percent); however, the racial disparities are more significant than in any other metropolitan area, with 31 percent of black households in the St. Louis region being unbanked, compared to only 1.1 percent of white households. In fact, the percentage of African-American households that is unbanked in St. Louis is higher than for any other metropolitan region in the country.
“Many African-American neighborhoods are littered with alternative financial services such as payday lenders and auto title loan companies that charge excessive interest rates,” said Mira Tanna, assistant director of the Metropolitan St. Louis Equal Housing. “It is time for banks to offer equitable access to credit to African Americans in the St. Louis region.”
We wholeheartedly agree. Every week, this newspaper prints personal finance columns in our Business section. While this is not the sort of journalism that excites journalists or wins awards, we believe this basic information is essential and, as the FDIC report makes clear, direly needed in our community. However, clearly we are not doing enough – clearly, no one in St. Louis is doing enough. Tanna argues, “The report shows that banks in the St. Louis region have done a poor job reaching out to African Americans,” and this must be true. However, for the racial disparity to be this wide and appalling, the blame must be shared between banks, the community itself, those of us who advocate on behalf of the community and business leaders.
The business community in St. Louis has a stake in this situation that should spur them to action. An unbanked and underbanked black community is in a very poor position to improve its financial standing and contribute more to our local economy in taxes and spending. Access to credit and a routine relationship with a conventional banking institution is a foundation for all other aspects of financial literacy, which must be mastered gradually if this community is to improve its earning power, bolster its savings and help to improve a region that remains, at best, in the middle of the pack by most economic and quality of life indices.
We know that the Urban League of Metropolitan St. Louis and Better Family Life, Inc. – to name two local institutions – have shown leadership in teaching financial literacy. They must do more, and inspire other agencies to do more. The Equal Housing Opportunity Council recently helped found the St. Louis Equal Housing and Community Reinvestment Alliance to increase investment in minority and low-income communities by ensuring that banks are meeting their obligations under the Community Reinvestment Act (see www.slehcra.org). This important new alliance deserves our support – very much including the support of the wealthiest and most powerful individuals and institutions in the area. Yawning racial disparities of this sort must be overcome if St. Louis is to realize its potential as a region.