It seemed like a big number.
Two years ago, after a summer of widespread protests over police brutality and racial inequality, JPMorgan Chase made a sweeping vow. In an Oct. 8 announcement that was sent to reporters and linked to a sleek new web page, the bank pledged to put $30 billion toward closing the racial wealth gap.
Many of its peers were making similar pledges. In late September, Citigroup had proffered a plan worth $1 billion. Bank of America’s pledge, also $1 billion, dropped first, on June 2, the week after George Floyd’s murder. But JPMorgan’s pledge was the biggest.
“The existing racial wealth gap puts a strain on families’ economic mobility and restricts the U.S. economy,” the bank’s announcement said. “Building on the firm’s existing investments, this new commitment will drive an inclusive economic recovery, support employees and break down barriers of systemic racism.”
Broadly, the bank was referring to the fact that Black Americans’ household wealth had held below 15 percent of white Americans’ for 60 years.
Closing the wealth gap is, of course, a job too big for any one company, even with a $3 trillion balance sheet like JPMorgan’s. In my book “The White Wall: How Big Finance Bankrupts Black America,” from which this article is adapted, I detail some of the systemic and individual discrimination that Black Americans face even now when trying to work at or do business with large banks.
I wondered what might change with this $30 billion pledge.
The website for the pledge outlined its components without going into much detail. At first glance, it was hard to tell what was charity and what was part of the bank’s regular business.
The pledge would obviously provide good P.R. in an area — racial equity — where JPMorgan did not often get it. But as representatives from the bank walked me through specifically what was in it, I came to understand that these big commitments all raised the same question: What does it mean for a private-sector company, with responsibilities to its shareholders to earn money, to try to fix society?
In JPMorgan’s words, the bank would do things like “promote and expand affordable housing and homeownership for underserved communities” and “improve financial health and access to banking in Black and Latinx communities.”
But to expert observers, that seemed complex — and worth seeking specifics to understand what was a significant change in business and what was simply rhetoric, perhaps helpful in the height of 2020 protests but lacking lasting financial impact.
“They’re willing and happy to do anything that goes into their regular business without sacrificing anything,” said Mehrsa Baradaran, a law professor at the University of California, Irvine, who studies racism and inequality in the financial system. “There’s a long legacy of companies doing this stuff, announcing things that make sense for the bottom line.”
I asked Jesse Van Tol for help. He is a pragmatist about what large financial institutions can do, believing both that there’s room for improvement in the industry’s behavior and that it’s worth continuing to push for change.
Mr. Van Tol is president of the National Community Reinvestment Coalition, a nonprofit that helps banks fulfill their requirements under the Community Reinvestment Act, which was enacted in 1977 as a way to make up for decades of practices that specifically cut off Black Americans from housing and credit opportunities. He works with lenders of all sizes to develop pledges like JPMorgan’s.
His advice was simple: Look for as many specifics as possible, including time frames for increasing activity, benchmarks against which increases can be measured, and clear differentiations between charity and business.
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
How does Mr. Van Tol judge the strength and value of these pledges?
“I look at: Is it one big number without a breakdown of what it’s really for?” he said. “Can you measure the dollars or units? Do you know what time period it’s for? When the time period is done, can you go back and verify whether what was being committed to is done? Is it an increase? Is it new money?”
Mr. Van Tol did not help design JPMorgan’s pledge, so he felt free to help me analyze it. Given that JPMorgan had indeed provided details for how pledge activity would be carried out and a timeline to measure its progress, Mr. Van Tol judged it to be one of the industry’s best.
JPMorgan’s package included mortgages, small-business loans and loans to big developers vowing to create affordable housing.
At the top of its list, according to the web page announcing the pledge, was a vow to underwrite 40,000 mortgages for Black and Latinx borrowers over five years. The bank’s estimate for how much money it would lend out was $8 billion. Another $4 billion in mortgage refinancings would help lower interest rates for 20,000 Black and Latinx borrowers.
There was no information about JPMorgan’s previous lending to the groups specified in its pledge, to show what kind of an increase the 40,000 loans over five years would be.
“It is all incremental — dollars and units,” a JPMorgan spokeswoman, Patricia Wexler, said in a conversation in the spring of 2021, when she went over the pledge with me in detail for the book. She said the bank would compare its pledge activity with the volume and dollar amount of mortgages it had made in 2019, when interest rates were low and its home lending was “among our highest volumes.”
Another huge chunk of JPMorgan’s pledge came from its plans to make loans to real estate developers. It would do $14 billion in loans and other capital infusions for projects that included affordable housing units, mostly apartment buildings, with the goal of financing — an activity that can include rehabbing older units — 100,000 rentals.
Loans to developers are quite lucrative for banks on their own, not just because they can be made at higher rates and traded, but also because some projects come with a special tax credit. There is still an overwhelming shortage of affordable housing in major American cities even as developers and banks continue to benefit from this extra incentive.
“Win-win,” Ms. Wexler said. “It’s good for affordable housing and the families that can benefit from it and good for the banks that finance the developers.”
Another $2 billion in the bank’s activity was also for profit: small-business loans to borrowers with businesses in neighborhoods where the majority of the population is nonwhite.
The design of this component seemed to show that JPMorgan officials didn’t want to pour money indiscriminately into a neighborhood. The money was targeted not toward wealthy outsiders planning to buy up real estate, increase rents and open expensive stores and restaurants that priced locals out of the picture — in other words, to gentrify the area — but toward residents who had been unable to get financing for their small businesses.
Ms. Wexler explained that JPMorgan would create a program that paired “technical assistance” with loans to borrowers without the credit history to qualify for a more conventional arrangement. The program would be available only in certain cities at first; then it would be expanded. The bank provided a list of the cities — Chicago, Los Angeles, Detroit and Atlanta — where it would begin in 2020 and 2021 and added that the education program would start first and that the lending would come afterward.
Another $750 million was straightforward business expenses. The bank said it would spend that much hiring minority-owned vendors to do things it could not do in-house.
A further $50 million would be invested in minority-owned banks and community development financial institutions, those frequently nonprofit organizations that make loans and grants to people who cannot get normal ones from a for-profit bank.
C.D.F.I.s need outside capital because although they function like banks in some respects, they don’t have a wide base of deposits to draw on. But banks like JPMorgan don’t provide those capital infusions for free. While some of the money that goes to C.D.F.I.s comes in as philanthropic gifts, other infusions have strings attached.
Banks collect dividends from the minority-focused institutions in which they invest, at varying rates. JPMorgan hasn’t disclosed the terms of its investments in minority-owned banks and C.D.F.I.s as part of its pledge, but since announcing its initial $50 million allocation, it has increased the commitment in its racial equity pledge to $75 million, then to $100 million.
The bank also announced that it was extending its philanthropic program, which originally pledged $1.75 billion over five years beginning in 2018 to “drive an inclusive economic recovery and support Black, Latinx and other underserved communities” and would now be worth $2 billion over five years starting in 2021, a $250 million increase in the total pledge.
So charity, it turned out, was a small piece of the puzzle.
“When the public sees a big number, they may think that that is philanthropic money,” Mr. Van Tol said. “But a major breakdown in a lot of these communities is what is debt and what is philanthropy or equity?”
Loading poor communities up with debt from new loans can be risky, he explained. “I’m a big believer in homeownership and homeownership’s role in building wealth, but debt is not automatically good,” he said, adding: “That’s very different from the bank giving away $50 million or $100 million.”
The last countable components that Ms. Wexler walked me through did not quite add up to $30 billion.
“There are other incremental investments and expenses that get us to, or beyond, the $30 billion commitment,” Ms. Wexler said. She did not specify what they were.
The bank’s summary of its pledge mentioned other spending in general terms, including a new effort to market its services to nonwhite people.
“We are building trust and awareness because in some of the communities where there is a large minority presence and where we’re trying to grow our customer base, we don’t have enough local employees on the ground to establish those important relationships with nonprofits and other community partners,” Ms. Wexler said.
“As such, we’ve hired hundreds of local community relationship advisers and community home lending advisers, many of whom are Spanish speaking in communities where that is the preferred language. Also, we’ve significantly increased our marketing spend in order to reach more customers in minority tracts across the country.”
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More activity that fell into the “win-win” category: It counted as the bank’s effort to bring about racial equity while it also happened to be good business.
Some components of the pledge were presented entirely without numbers, time frames or any specifics, such as JPMorgan’s vow to “amplify education and counseling programs to prepare more Black and Latinx communities for sustainable homeownership.”
“We do not require people to go through education programs to qualify for a mortgage with us,” Ms. Wexler said. “However, there may be additional financial incentives if they do.”
Customers getting a $5,000 down payment assistance grant could get an additional $500 if they took a “first-time home buyer course.”
“It feels funny when they respond by saying, ‘These people need more information’ or ‘We’re going to help them with technical assistance,’ despite the fact that their tentacles are part of this whole economy, they are so implicated in these problems,” Ms. Baradaran said.
In general, though, Ms. Baradaran and others agree that business — not charity — is exactly what large corporations should be doing in their efforts to address inequality. After all, the racial wealth gap was created with willing participation by the private sector, from the period of slavery all the way to Jim Crow, when banks and housing developers carried out city officials’ restrictions on doing business with Black residents.
“The problem with charity is it doesn’t build people’s own resilience,” said Eugene A. Ludwig, who served as comptroller of the currency from 1993 to 1998, during the Clinton administration, where he was a steward of the Community Reinvestment Act and brought more race-discrimination cases against banks than any of his predecessors.
“Doing good business has a double-whammy benefit,” Mr. Ludwig said. “It brings people into the real economy of the country.”
Another beneficiary of the pledge is JPMorgan itself.
“It shields them from any kind of criticism that rightfully should be directed to them,” Ms. Baradaran said.
A year after announcing the effort, in October 2021, JPMorgan declared that it had completed $13 billion of the $30 billion, including the pledged $4 billion in mortgage refinancings, as well as an expansion of its home buyer grant program. By the end of 2021, the completed portion had risen to $18 billion, according to the bank.
In an email on Wednesday, Ms. Wexler said: “We have committed to making sustainable, long-term systemic change to help close the racial wealth gap and fight racial inequality. We are tracking investments and initiatives to ensure they are making a significant impact.” She later added that the bank intended for the work to go well beyond its initial five-year commitment.
But JPMorgan didn’t seem to have publicized a legitimate bragging right: The proportion of its mortgage customers who were Black rose from 4 percent in 2019 to 5 percent at the end of 2021, according to an analysis of government data by a fair-lending information service, LendingPatterns. That was still below the 6 percent proportion among all banks, according to the analysis, but a 25 percent increase from the earlier period.
There are other mortgage lenders that do more, like New American Funding, a non-bank lender where Black borrowers account for nearly 8 percent of all its loans.
The company achieved that rate through a concerted effort to lend to more Black customers beginning in 2016, said Rick Arvielo, its chief executive. The loans cost New American Funding more to make and to service, because Black borrowers so often have lower credit scores as a result of the decades of subpar terms and services offered to them by financial institutions.
The loans are less profitable and more time-consuming, Mr. Arvielo said, but, in his view, the effort is worthwhile.
“We’re mission-driven,” he said. “This is our goal.”
JPMorgan’s mission is still, of course, to be a bank.
To some observers, when a bank pledges $30 billion toward closing the racial wealth gap, the best way forward is for it to act like a bank and track and report key performance indicators.
Ms. Baradaran, the scholar of racism in finance, wanted more precise measurements of success, such as: “This many people who wouldn’t have owned houses own houses now,” she said. “We increased wealth by this much.”
Marc Morial, the president and chief executive of the National Urban League, said he had spent several hours on the phone with JPMorgan officials in 2020 designing the pledge “to suggest the kinds of things as a bank they should do.”
Two years later, Mr. Morial said he thought it was too early to tell how effective JPMorgan’s pledge really would be. He noted that the bank had agreed to allow a third party to audit the package, a step in the right direction for transparency.
“A $30 billion commitment, to me, is a down payment,” he said.