If you’ve ever been refused a bank loan because you lived in a neighborhood that the bank considers a “poor financial risk,” then you’ve been “redlined.”
Redlining is not only morally unfavorable, but it’s also downright illegal. And its impact on the financial mobility of individuals or a community can be devastating.
Yet this is exactly what JPMorgan, Wells Fargo, and Bank of America are indirectly doing, by closing down their branches in so-called “low income” neighborhoods.
Within every low-income area is a multitude of people with a vast and varying range of financial and economic potential.
As the saying goes, it’s not where you’ve been or where you are now, but where you’re going that matters the most.
While some economically-challenged Americans may remain in “poor” neighborhoods, others have the capacity to propel themselves outward, either moving beyond their neighborhoods or transforming their neighborhoods both socially and economically.
We don’t all live in the wealthiest of areas. Some of us might have hit hard times, personally or financially, forcing us to downscale.
Some of us are simply still on the rise, beset by meager means yet endowed with an abundance of ambition, a profusion of principle, a surplus of savvy, and a formidable glut of fierce grit.
If you’ve ever been in this situation, you know well that what matters is not your empty pockets, but your vision and drive. And if you’re entrepreneurial, then a bank loan can make the biggest difference between current reality and your reachable aspiration.
But the big banks--JPMorgan, Wells Fargo, and Bank of America--would rather not help people embarking on this self-defining and community-forging journey.
It’s cheaper to provide ATMs than branches.
And what’s costing them chump change may cost future entrepreneurs and plain citizens the opportunity for financial mobility.
According to S&P Global Data via Bloomberg, banks have shut down 1,915 more branches than they opened between 2014 - 2018 with JPMorgan, Wells Fargo, and Bank of America at the head of the closure trend.
The banks’ responses:
- “About one-third of our financial center network is in [low- and moderate-income] neighborhoods and that has been consistent over a number of years,” Bank of America’s spokesperson Betty Riess said to Fortune magazine.
Note that this response doesn’t address the branch closures.
- JPMorgan also mentioned that Bloomberg’s view of the data assumes that “family income in all communities is the same” and that JPM is looking to see to it that 30% of its branches will be in low-to-moderate income areas.
This comment also doesn’t address the branch closures.
- And finally, Wells Fargo sent a statement claiming that it provides services to “significantly more markets than any other national bank peers, including in underserved communities where our branch closures have been notably lower.”
The fact remains that Wells Fargo still holds among the largest closures, confusing their own statistical data with the impact that it may have on the areas having to deal with the trend.
So, how much might all of this matter?
According to UC Berkeley professor and economist, Hoai-Luu Q. Nguyen, a study in 2014--when massive closures were just beginning--small business loans dropped by 13% for several years and none of it was offset by other banks entering to serve these communities.
For well-meaning Americans living in these neighborhoods--citizens who are striving to economically compete in and therefore improve the capitalist market system-- these closures constitute a harsh blow.
Whether you believe in free markets or just hold a libertarian view toward economic morality, you know that as competitors engage in the economic arena, equality will shift. Sometimes you may find yourself on the winning side, sometimes on the losing side. That’s what free-market capitalism is all about.
But you have to get there in the first place in order to compete. And to deny anyone the right to compete, simply because they’ve been deemed “low-potential” based on where they live, well, that’s a real tragedy.
That’s redlining. And that’s what banks are now doing, no matter how indirect the approach: redlining is redlining, is redlining.