The focus of the effort is housing, where the bank says it will lend an additional $14 billion dollars, finance the construction of 100,000 affordable rental units and issue $12 billion in mortgages. These efforts are meant to be supplemental, that is, the bank says these are loans and investments it would not otherwise make.
Of course, problems with racial inequality in the U.S. have been magnified after the May 25 death of George Floyd, instigated by former members of the Minneapolis, MN police department. The incident sparked weeks of protests across the globe. In addition, the COVID pandemic exposed gaps in health care access. The Black community has experienced far higher Covid-19 mortality than in the overall population.
Banks, which have contributed to income and wealth inequality through unfair, uneconomic and discriminatory practices, are now vying to address society’s racial problem. We note that both Bank of America and Citigroup have each made $1 billion Black Lives Matter (BLM) "pledges." These commitments are designed to lower US income and wealth inequality.
Federal Reserve Bank of Atlanta President Raphael Bostic recently stated that “U.S. banks need to improve financial services to Black Americans, many of whom have avoided financial institutions because of a history of racism.” The statement came less than a week after the CEO of a banking institution the Fed is responsible for regulating, Wells Fargo, blamed the trouble it is having in reaching its diversity goals on the “limited pool of qualified Black talent.”
Our data shows that total corporate BLM pledges now stand at $40 billion. In analysing these pledges, we use three guiding principles: our IMM framework: Innovation, Money, Momentum. The JP Morgan Chase pledge meets one (and a half) of these criteria: it appears to be a sizable dollar amount. It gets half a Money point because banks have made these types of pledges before, and they have failed to help move the needle in terms of Black economic empowerment. It definitely helps continue the BLM Corporate momentum. The pledge fails our first principle, however. It is neither innovative nor impactful.
While we are pleased to see the continuing attention placed on issues of racial discrimination and the resulting income inequality, innovation, in our framework, is a key measure of potential long-term effectiveness.
Only time will tell how truly impactful this new "commitment" will be.