On this last day of Black History Month, we would like to take a break from the news and tell you the story of Jesse Binga, a banking titan in the early 20th century. Binga State Bank, which he founded in 1908 in Chicago, was one of two major black-owned financial institutions in the United States until its collapse during the Great Depression..
Why is this important: Binga’s rise and fall – he died virtually penniless – shows how overt racism affects market values and businesses.
- It’s also an example of how more subtle types of discrimination, still in play today, hold back black entrepreneurs, said Mehrsa Baradaran, who writes about Binga in her 2017 book The Color of Business. ‘Money: Black Banks and the Racial Wealth Gap’. (Read Axios’ Kia Kokalitcheva for more on black entrepreneurs.)
- At its peak, “[Binga] was a hero of entrepreneurs and an icon of success and hope,” says Don Hayner, author of “Binga: The Rise and Fall of Chicago’s First Black Banker.”
Details: Born in Detroit in 1865, Binga first settled in Chicago as a real estate broker during the Great Migration. Binga was able to buy cheap houses from white residents fleeing their neighborhoods following the arrival of black Americans from the South. He repaired the houses himself and sold them to black families, Baradaran explains.
- His black customers couldn’t get loans from white banks, so Binga set up a bank himself.
- “Just as white discrimination and flight led to his real estate success, he turned white banks’ refusal to lend to his real estate customers into another source of profit,” Baradaran writes.
- At the height of its success, Binga’s bank was “consistently more capitalized” than its white counterparts and considered “a model strong bank,” she writes.
- Success didn’t come easy. Binga’s house, in a white neighborhood, was bombed seven times. Each bomber left a note telling them to move. “I will not race. The race is at stake and not myself,” he said at the time.
What happened: Back then, before the Federal Reserve or the FDIC, Binga and other Chicago bankers paid for their memberships in the Chicago Clearinghouse, a bankers’ cooperative that provided funds to ensure members had access to liquidity in times of crisis.
- This was Binga’s downfall. When the Depression hit, he turned to the Clearinghouse – where he had contributed for more than a decade. They didn’t even acknowledge he was a member, Hayner said.
- “Binga was not the kind of man they wanted to be successful,” WEB Du Bois said at the time.
- The bank closed in 1930, and Binga’s customers, including many prominent Chicago blacks, lost most of their money. All other members of the Clearinghouse survived the Depression, Baradaran notes.
- Binga would later be sent to prison on bogus embezzlement charges that a white bank owner would never have faced. He was eventually pardoned and died in 1950.
The bottom line: The black bank has been seen as both a shield and a sword throughout American history, Baradaran told Axios.
- A shield to give black Americans access to capital when they were completely excluded from the white financial industry.
- And a sword – promoted by the likes of Martin Luther King jr. — to allow black people to create their own alternative to white-dominated institutions.
- Today, there are only about 20 black-owned banks left in the United States, and they are struggling to stay open, as ProPublica reporters point out in a room from last year about GN Bank, the last black-owned bank in Chicago.