The good news is Carver’s doors will stay open, the bad news is that control of the bank has shifted from the community to corporate America. This is a prime example of why the black businesses need more support from the community. Instead of banking with Bank of America and Citibank, should black people have put their money (and faith) in Carver instead?
Carver Bancorp’s shareholders confronted a painful choice on Tuesday. They could vote to cede control of the Harlem-based institution to a consortium of Wall Street firms and the U.S. government in return for $55 million of cash to rescue their ailing bank. Turning the money down would likely have doomed Carver Federal Savings, the nation’s largest bank founded and run by African-Americans.
In the end, the shareholders voted to approve the rescue package—but not without first voicing considerable anguish over the options they faced. “This represents a significant shift from community ownership to corporate,” said an investor who identified herself as Wimberly Edwards. “What’s our future with all the outsiders whose interests may be different from ours?”
Carver Bancorp CEO Deborah Wright tried to assure the audience at Harlem’s Studio Museum that Goldman Sachs Group Inc., Morgan Stanley, Citigroup and the other new owners are “keenly attuned to our mission” and “wouldn’t have stepped up” if they didn’t think Carver was worth preserving.
“I understand the optics,” Ms. Wright said in an interview after the shareholder meeting. “But there was no alternative. The amount of capital we needed wasn’t available locally.”
Carver’s clients, who generally live and work in the city’s poorer precincts, have been hit especially hard by the recession. The bank posted a $40 million loss last year, more than wiping out the prior decade’s worth of profits, as seriously delinquent real-estate related loans soared to more than $120 million—well in excess of Carver’s $24 million set aside in reserves.
In February, federal regulators ordered the bank to raise additional capital. Ms. Wright, a former Giuliani administration housing official who sits on such powerful boards as the Partnership for New York City and Time Warner, began searching far and wide for money.
In June, she announced she’d been able to raise $55 million, mainly from the city’s biggest banks, while the U.S. government agreed to convert into common stock a preferred stake it got upon bailing out Carver two years ago during the financial crisis.
But tempering that good news was the fact that the price of salvation was terribly steep for Carver’s stockholders, many of whom are long-time customers of the bank. Under the terms approved at Tuesday’s meeting, the Wall Street banks will hold 73% of Carver’s shares, the U.S. government 25%, with the rest going to Carver’s existing stockholders. The new owners didn’t demand any changes to Carver’s board and allowed Ms. Wright to remain in the CEO post she has held since 1999.
Wow. Just wow. So this means Carver is no longer the largest black-owned bank anymore right? Cuz that’s what it sounds like to us.
The sad part is that this may have been preventable. In an op-ed piece on TheGrio Karen Hunter argues for blacks to support local and community banks:
As I watch Occupy (fill in the blank) movement spread across the country and the world, there has been an outcry for an agenda. A real agenda. Well, here’s one for them: Urge people to support local and community banks. Put the pressure of the conglomerates (the Bank of Americas, the Wells Fargos and the Citibanks, etc.), to really service the community that bailed them out.
This is a can-do action that can get real results. This is the kind of thing that will put the power back in the hands of the people.
While blame can definitely be laid at the feet of government (namely the Dodd-Frank financial reform bill) for the banks lack of accountability, nothing is stopping the banks themselves from doing the right thing.
They certainly can’t cry broke.
Bank of America earned $6.2 billion in profits last quarter. Wells Fargo announced a record third-quarter profit of $4.06 billion. And Citibank’s earnings rose 74 percent to $3.8 billion in the third quarter — the seventh straight quarter of income growth for the bank.
While we, the people, are experiencing one of the worst financial crisis in our generation, the banks are experiencing record profits. And have the audacity to raise fees?
This is one case where you can be mad as hell and actually do something about it…
Yes. And the demise of the black banks can be directly tied to the high unemployment and record poverty in the black community. According to theGrio, between 1888 and 1934, there were more than 130 U.S. banks owned by African-Americans, which is believed to have been the force behind the explosion of African-American businesses, which grew from 4,000 in 1867 to approximately 50,000 by 1917.
Today, according to a March 2010 Federal Reserve Board report, only 30 U.S. banks are black-owned.
By putting our money behind Carver and community banks like it, we are securing our own futures and jobs and economic survival.
Under Wright, while the bank has struggled, it has even during its struggles served the community — providing loans for small businesses and launching a check-cashing program, “Carver Community Cash,” to counter the often-predatory check cashing spots in our neighborhoods. Giving people who have to use check cashing places as an option, dignity without the exorbitant fees.
The question is, how many people are willing to give up the convenience of banking big for the sake of keeping their monies “in the hood”??? The fee hikes at Wells Fargo and Bank of America have been CRAZY, so this may be a realistic solution for some.
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