Queens might get the money, but finding a local bank remains a challenge for the borough’s predominantly Black ZIP codes, and red tape derails an otherwise promising opportunity for minority-owned banks to open and operate branches through state subsidies in these underserved areas, as well as those across New York. State lawmakers representing southeast Queens districts hope their legislation will be the change they want to see.
State Sen. James Sanders Jr. and Assemblymember Khaleel Anderson joined NYS Comptroller Thomas DiNapoli earlier this month to champion a pair of bills reforming how New York encourages operating physical banking sites in underserved communities, particularly through minority-owned institutions. The legislation specifically tackles the Banking Development District (BDD) program and Community Bank Deposit Program (CBDP), which place public funds in local banks and credit unions to foster economic development.
“Supporting community and minority-owned banks and credit unions puts state funds to work in neighborhoods that have historically been overlooked,” said DiNapoli in a statement. “These funds will help expand financial services; increase access to capital; and build wealth through homeownership, entrepreneurship, and job growth. It is a win-win for the state and our local communities.”
Just two minority-banks currently participate in the BDD program and none are enrolled in the CBDP. Meanwhile, “banking deserts” are frequently found in Black and Brown communities like in southeast Queens, where a lack of physical branches mean less access to credible financial services and increased vulnerability to predatory lending. This gap affects everything from cashing a check and opening an account to applying for a home loan for communities long affected by historical discriminatory practices like redlining.
“A Black-owned bank is more likely to get a Black person a loan than any other bank,” said Sanders. “You’re increasing your chances of borrowing money and to build your house and business, buy a car, finance education, [and] pay major bills.”
In 2020, Rep. Gregory Meeks’s office found that predominantly white Queens ZIP codes boasted one physical banking location for every 3,159 residents, while those with majority Black and Brown populations shared one local branch per 22,936 residents. The numbers stemmed from isolating the most recent census data. Poverty fails to explain these disparities, which persist even in the borough’s high-earning Black and Brown neighborhoods.
“There are folks [who] have access to capital and resources that should be investing in our institutions,” said Anderson during the press conference. “The reality is folks are faced with the need to access capital, whether it’s to start a business or to purchase their first home or to invest in the community they grew up in. Now we have a program that helps to do this … the Banking Development District program. It helps bring [financial] entities and organizations to underbanked communities across our state …”
The BDD program specifically encourages opening and operating physical banking locations in underserved communities identified by the Department of Financial Services through subsidized state funds — but it requires participants to tie up collateral in U.S. Treasury Securities such as government bonds for assurance, freezing crucial money for smaller banks to otherwise use towards providing loans. Sanders and Anderson’s bill, S.8357/A.9574, allows them to, instead, provide collateral through reciprocal deposits, which pools FDIC-insured money in a network through a credible institution and keeps the money available for lending.
Carlos Naudon, president and CEO of Ponce Bank, heads one of two minority-owned banks (federally known as Minority Depository Institutions) enrolled in the BDD program. Puerto Rican community activists in the Bronx started the organization, which ultimately grew into a sizable, publicly traded financial institution. Even a decade ago, though, participating in BDD would be tough for Ponce, said Naudon. He believes the legislation will allow other minority banks to grow at a faster pace while serving banking deserts.
“We have to make the state feel secure by collateralizing the deposit with acceptable collateral, which means essentially treasury bills,” said Naudon. “The easiest way to explain it is, they give me $50 million [then] I have to go and buy $50 million worth of treasury securities so I can collateralize it … it might help you in terms of improving the profitability of the branch slightly, but it doesn’t leave you any money to make loans with.”
The other bill, S.8406/A.9573, is also sponsored by Sanders, with Assemblymember Clyde Vanel, to bolster the CBDP. The program allows the state comptroller to deposit funds in local banks with a track record of supporting small businesses, community development, and home mortgage lending. Through the bill, the state can place $10 million more by raising the CBDP cap from $20 million to $30 million.
“This program is a little different [from] the Banking Development District program, but in theory, the idea is similar in that we want folks to participate in it because it helps for economic development,” said NYS Comptroller spokesperson Mary Mueller. “If you expand the cap on what banks can qualify to receive, that means banks may receive more money … that also means with more money comes the ability to support more mortgages, more small businesses, more farms, and then, in turn, more economic development.”
Four banks are currently enrolled in the CBDP. None are in New York City and the NYS Comptroller’s Office would like to see minority-owned banks participate in the program.
For Sanders, looking into banks is just the start for ensuring racial equity among financial institutions that receive taxpayer money.
“We’re just getting warmed up,” said Sanders. “We will look at the hedge funds, we will look at the venture funds. We will look at every place that the state and the city are using the people’s money, and we will ensure that we’re going to use these monies properly. We will turn over every rock, we’re peeking into all of the books. Our job is to ensure that New York is [a] New York for everyone.”