How to reduce the wealth gap between Black and white Americans

As last recorded
by the US Federal Government,

the median wealth for a white family
in the United States was 171,000 dollars

and the median wealth for a Black family
was just 17,000 dollars,

a 10x different over 150 years
after the end of slavery.

I think first we have to ask ourselves,
what is wealth really?

Well, wealth is all of your assets,
all of the things that you own,

minus all of your liabilities.

Assets are things like your car,
your house, your savings account,

your checking account, your investments,
if you own other properties,

your business.

Well, that gap, that 10x gap,

is partially because for many years,

decades in fact,

Black Americans
were left off of that ladder

and didn't really have access to it.

Well, why are we talking about this now?

Well, in 2020, in the midst of
a global pandemic and a looming recession,

inequities are really laid bare

across nearly every system
in the United States:

health care, education,
criminal justice and finance,

and people were moved
to take action online, in streets,

in meetings at work,
in corporate boardrooms.

And I, as a consultant, started
having conversations with clients

that I thought I would never have.

I guess the question
that I'd been asking myself is,

how do we make sure that in this moment,
this results in action and progress

that starts to close that wealth gap
for Black versus white Americans?

So who am I?

My name is Kedra Newsom Reeves.

I am a consultant
for banking institutions,

hedge funds, asset managers.

But before any of that,

I am a Black American
who is the descendant of slaves.

And when we talk about the wealth gap,

it's really important
to understand the history,

so I thought I'd tell a little story
about a family, my family,

and how policy intersects with wealth.

So we'll start with
my great-great-grandfather.

He was a man named Silas Newsom,

and Silas was born a slave
outside Nashville, Tennessee,

on Newsom Station,

where he and his family
worked on a quarry.

He didn't own anything.

He didn't own his home.
He didn't own property.

He didn't really even own his own body,

his own labor, his children.

Any of those things, all of those things,

were here to create wealth
for someone else.

So we believe that he was a servant

during the Civil War
for a Confederate general

who was actually fighting
to keep him enslaved,

so he really had no wealth,
he had no control over his life.

Well, at the end of slavery,
there was a policy opportunity.

There was a question:

what do we do for
the hundreds of years of slavery

now that we are ending slavery
and the country is coming together?

And there was a choice.

We could make a settlement
with the slaves,

or we could make a settlement
with the slave owners.

Well, the slaves had no power
to advocate for themselves in that moment,

and the country had to be united,

so the federal government decided
to give that settlement to slave owners,

essentially giving them money
for the property that they had lost

at the end of the war.

And not their physical property,
not their homes, but people,

the slaves that had provided
free labor for years and decades.

So Silas, at the end of the Civil War,

had no wealth.

He was free, but had no wealth.

He became a sharecropper.

My great-grandfather Silas was born

a number of years
after the end of slavery,

and he was drafted to serve in World War I

along with 350,000
other Black American soldiers

in segregated units.

He served in the war.

When he came back to the United States,

at the end of the war,
there was very anti-Black sentiment.

The economy was compressing,
there were a lot of stressors,

and Black people could not get land,
they could not get loans for homes,

they really could not acquire any credit
to build wealth over time,

so he also became a farmer.

And he had a son, also named Silas --

there are a lot of Silases in my family --

my grandfather.

My grandfather Silas was also a soldier
and fought in World War II.

After World War II,

the US Federal Government
passed the GI Bill,

which provided support for veterans.

And the bill provided
for building of hospitals,

student loans

and, most importantly for wealth-building,
low-interest home mortgages for veterans.

In the years following the war,

the GI Bill accounted for
four billion dollars of funding

to nine million veterans.

But Black veterans
largely did not benefit.

So Silas, my grandfather,
came back to Nashville, Tennessee,

and he married my grandmother,
whose name is Cinderella.

Yes, my grandmother's name was Cinderella.

And they had eight children.

But they never bought a home.

And the highlight of their housing journey

was moving into
a new public housing project

with their children

and paying rent for that housing project,

which in terms of the quality of housing
was fantastic for them and a step up,

but did not allow them to build wealth.

My father, another soldier,

a 20-year veteran
of the United States Marines,

bought his first home in his early 50s,

but it took four generations
for our family to move into homeownership

and begin to build ownership
and equity in a home.

That's one family's story,
and I skipped a lot of things

that happened between
the end of slavery and today:

redlining, housing discrimination
before the Fair Housing Act in the 1970s,

the really important role
that Black-owned banks played

in building Black communities,

the Savings and Loan Crisis of the 1980s,

which crushed a lot of Black banks,

and the subprime crisis in 2008,

which stripped a lot of Black
and brown homeowners of their homes.

There's a lot of history there,

but that story tells you a bit
about how we get to this 10x gap

where we are today.

Now, certainly, as we think
about the size of that gap,

it is critical for the Federal Government
to take a number of actions.

That said, financial institutions
play a really important role

in providing access to credit,
access to capital,

to build communities

and allow Black communities to thrive.

We have to be clear;

managing 17,000 dollars better
does not get us there.

Better education does not get us there.

Access to credit and capital are critical.

So I want to talk
about four solutions today

that financial institutions can contribute
to start to close the wealth gap.

Number one is getting
more people on the ladder,

getting more people banked.

We know today that
about half of Black Americans

are un- or underbanked.

Unbanked means that
you don't have a banking account.

Underbanked means
that you have a bank account

but you use alternative services
for check-cashing or payday lending

or paying bills.

And that's not just expensive
from a transaction perspective

in terms of the fees that you pay,

it's also expensive in terms of the time
that you commit to paying a bill.

Think about how you pay
your utility bill today.

It probably comes
out of your checking account.

You don't even think about it.

You set it up in advance,
and it's automatic.

Well, if you're unbanked,

you are probably going
to get a money order somewhere,

physically, a piece of paper.

You then travel to City Hall or your DMV

to pay that bill.

About 40 percent of people
who are unbanked

say they are unbanked because they think
they don't have the minimum amount

to really maintain a checking account.

Well, that's just not true.

In the last several years,

credit unions, community banks
and major banking institutions

have created low-cost, no-minimum
checking and savings account products

specifically made for this population.

So we have an issue with awareness.

Banks, community partners and others

have to work together to increase
the awareness of these products

in communities that need them,

so that we can start to reduce
the number of people

who are un- and underbanked

and get them on the ladder
that we talked about earlier.

The challenge is about 28 percent
of Black and Latinx families

are credit-invisible,

which means that you have
a thin credit file or no credit file.

And the way that credit works
and creditworthiness assessments work

is to say, if you can prove

that you have paid credit back
consistently previously,

then I can lend you more credit.

It's kind of a chicken
or an egg situation.

The interesting thing is that banks
and financial technology companies

have really innovated in recent years
to use alternative data --

cable bills,

utility bills,

rent payments, etc. --

to show that you're able
to consistently make payments.

The additional challenge on this one,
unlike the last one,

which was more about awareness,

is that you need to have
regulatory support to do these things.

You need to prove to regulators

that you are able
to fairly use alternative data

to lend credit to marginalized groups.

What we need to see is,
from the Federal Government

and the banking industry,

to come together
to create innovation sandboxes

to start to use alternative data
to expand to marginalized groups.

Well, what about communities?

Without community wealth,

individual wealth, in a way,
is on an island.

And if you go into most
major cities in the United States

to most communities of color,

what you'll find
is underinvested communities.

For every economic crisis,
these communities have suffered severely.

For every economic boom,
they have not benefited.

And so what we're seeing
in a number of cities across the country,

and I'll use Chicago as an example,

is the partnerships occurring

between banking institutions,

philanthropists,

the city and community leaders

to invest hundreds of millions of dollars

to build community resources

and communities that have
historically been disinvested.

Lastly, we've got to talk about business,

and not just small businesses.

Now, when you have individual stability
and a banking institution,

and you have access to credit,
and when you have community wealth,

those are all fantastic things,
but we need also job creation.

Take all of the new tech companies,

and I say "new" because now
they're not so new,

but take Facebook, Google, Amazon.

At some point, all of those companies
were sole proprietorships

with one employee

or a few employees

that were building a technology
that was not yet proven.

What those companies received early on

was venture capital money.

And when you look
at venture capital today,

only one percent of venture capital funds
go to Black founders.

So if Black entrepreneurs
are largely shut out of those networks

they're not able to grow,

and the only way for that to change

is from within the industry itself.

In this generation, we must not only
be talking about thriving businesses

in Black communities.

We must also be talking
about seeing more Black-owned

and founded businesses going public.

Those are just four solutions.

There's many other things
that can and should be done

to close the wealth gap.

This gap is not new.

It was born and perpetuated
by federal policy, social constructs

and business practice over time,

and all of those things need to change

to start to close the gap.

Financial institutions
play a really critical role

at the individual level,
at the community level

and at the business level.

It's important to our families,
it's important to our communities

and it's important to our economy.

Instead of talking about
how the gap continues to grow,

let's begin to close the gap now.

Thank you.