Fighting the wealth vortex

WATERLOO, IOWA

ReShonda Young strode into a church too big for its congregation, in a still-segregated city where economic barriers often strangle Black ambition, on a mission to tackle a tenacious consequence of American discrimination.

If she could buy this sprawling property, she would be one step closer to opening the only Black-owned bank in Iowa — potentially the first in more than 20 years to launch anywhere in the country. If she could open the bank, she hoped it would provide more tools to shrink the yawning gap between the wealth held in the U.S. by typical white families and most everyone else, Black families especially.

Trying to narrow a wealth gap that’s taken a personal toll is as difficult as it sounds, particularly when the strategy is founding a bank. That requires convincing investors to hand over a lot of money. Young’s target: about $10 million.

On the September day she stepped into the brown-brick Ambassadors for Christ Church, eight months after her first conversation with federal regulators and 17 months after starting down this road, she had commitments for about 5% of the money she needed. 

The wealth gap she’s been contending with her whole life did not occur by accident. That white families have eight times the median net worth of Black families, at last count by the Federal Reserve, is hundreds of years of American history contained in a single statistic. It is slavery and Jim Crow and modern-day discrimination. It’s how all of that translates into the unequal way wealth passes from one generation to the next, with whites nearly three times more likely than Blacks to receive an inheritance.

Young’s grandparents sharecropped in Mississippi under a system designed to keep poor farmers poor — especially Black farmers — and enrich large landowners. As children, her parents worked long hours in the fields, picking cotton, sometimes missing school to do it.

Her parents and grandparents bucked stiff odds to become homeowners. Even so, there was no money left for funeral costs when her mother’s mother died, and relatives had to chip in. Young contributed the housing portion of her college scholarships and moved back home for the last semester of her senior year.

Two decades later while working at a local investment firm, she learned just how much some of her white peers’ grandparents were able to leave their own children.

“My classmates will inherit that, and I think it’s awesome,” said Young, 46. “Unfortunately, that’s not the story for myself and many others.”

The gap, trillions of dollars wide, is so massive that academics who study it say it can’t be closed with anything but a major government intervention. 

Federal actions to narrow it are scattered and collectively small. The grim truth: The wealth gap between Black and white families today is no better than it was in the early 1960s. 

In fact, it’s larger.

What do you do in the face of that?

Young’s own answer came bit by bit as she bought homes to rent out, started a business she franchised, survived financial turmoil and helped other entrepreneurs in Waterloo. Over and over, she saw lending decisions that looked discriminatory or unreasonable and placed roadblocks to building Black wealth. A devout Christian, she felt a persistent sense that God was telling her to act.

Her first move was to sue the federal government with three other plaintiffs in 2019, demanding it make financial institutions disclose race and other demographics in their small business loan decisions as a 2010 law required — information critical to finding and stopping discrimination. 

She won. Public release of the data is still likely at least several years away, but the Consumer Financial Protection Bureau is working on enacting that long-delayed rule.

And still, she felt God prodding her. Open a bank.

It would be the most difficult business launch she’d ever attempted. Even if she jumped all the hurdles, her bank couldn’t by itself defeat the wealth gap in Waterloo, let alone the nation. 

And the gap fights back. Among roughly 5,000 banks in the U.S., the number the federal government says are Black-owned or -led dropped to 19 from 49 in the past two decades because they’ve been starved of capital like the communities they serve, making blows like the Great Recession more lethal. The survivors collectively increased their cash and other assets just over 30%, accounting for inflation, from 2001 through 2020. Meanwhile, the country’s 10 biggest banks — beneficiaries of white wealth — saw assets more than triple.

Despite the daunting prospects, Young, a planner and quiet risk-taker, still felt the prodding: Open a bank. She began drawing up a to-do list.

‘Keep me from harm’

The book of “miscellaneous” records was a deep red. Inside, white type on black paper detailed in dry language the restrictions the homeowners of Waterloo’s well-to-do Highland neighborhood banded together to place on their properties in 1945. No low-cost homes, no small lots, no businesses — and no owners or tenants “of any race other than the Caucasian race.”

Young leaned over the book in the county recorder’s office, looking at the 18 pages of signatures of people who once lived in what is now her neighborhood, each of them intent on keeping it all white.

The restrictive covenants that spread in Waterloo and across the country were just one skirmish in a long campaign by the government, banks, real estate agents and myriad other combatants to keep America separate and unequal. For decades, Black residents in Waterloo could live only in a small part of the city hemmed in by railroad tracks and factories. 

By the 1930s, federal employees were making maps of U.S. cities that deemed certain areas “hazardous” for investment, a practice that came to be known as redlining. They offered just one reason they shaded that part of Waterloo red: “This is the colored section.”

As a child, Young would walk through the Highland neighborhood, passing by the pocket park, the mature trees, the inviting early 20th-century homes in contrasting styles, and dream of living there. And when she grew up, she made it happen, finding a deal on a cozy blue house. 

In a sense, her moving there meant the white-collar white supremacists who erected those earlier barriers had lost. 

But in another sense, they had already won. 

Congress passed anti-discrimination laws in the 1960s and ‘70s to try to stop racially biased decisions in hiring, real estate and lending. But the country never fixed the wealth gap that generations of that discrimination created, locking those disparities into place. Half a century later, Black households headed by a college graduate have a lower median net worth than white households headed by a high school dropout, according to research by Duke University’s William Darity Jr. and other scholars. 

Less family wealth means more student-loan debt. More trouble when emergencies hit. More difficulties buying homes or starting businesses. Running hard might do nothing more than keep you from falling further behind, even if no further discrimination piles on.

Young, who wrote an opinion piece for the Des Moines Register in 2020 calling the situation “an impossible race,” looked at the once-legal document under her fingertips and thought of the insidious equivalents today. Lower property appraisals, real estate steering, biased loan denials. It all feels harder to fight because none of it comes with a blunt written statement like the one staring back at her.

“This is in-your-face,” she murmured. “You know where you stand.”

Young grew up a few blocks south of the redlined community that was once the only place Black residents could live in Waterloo. And she was born just two years after the local school system approved a desegregation plan over strenuous objections from a well-organized group of largely white parents who said they objected to mandatory busing. Up until that point, the U.S. Commission on Civil Rights noted, many of the district’s white teachers “had never met a black person.”

For years, Young said, she was passed over for gifted and talented classes in school despite having excellent grades. It made her more determined. She graduated in the top five of her high school class and won scholarships for college, part of the first generation in her family to go. 

That same determination runs through her working life, starting with her first summer job. Young said that after she put in a day of exhausting fieldwork at age 14, struggling to quickly remove the pollen-producing tassels from corn, a supervisor told her not to bother coming back. She was certain she could do much better her second day — and just as sure that no one would notice if she returned. Young said she was right on both counts: She quickly worked her way onto the fastest crew.  

She’s tapped that resolve many times since. She bought rental property at 25 while repairing her credit after her identity was stolen. She repaired her credit again after her first business partnership went sour and she filed for bankruptcy protection. She started a gourmet popcorn business with a loan smaller than she’d needed, franchised it and sold it. She sued the federal government and won. And she negotiated a settlement from a bank whose error she says triggered a domino effect leading to her second bankruptcy.

Young has also worked for investment and financial services companies — unusual in the Waterloo region, where whites are employed in finance jobs at three times the rate of Black residents, U.S. Equal Employment Opportunity Commission records show. But she’s never worked at a bank.

Still not entirely sure she should try to open one, she texted a cousin with two decades of banking experience and expected to hear it was too big an idea to take on. 

Instead, her cousin wanted in.

It was April 2020, a month after health officials declared the coronavirus a pandemic and a month before George Floyd’s murder. “OK,” she thought in a silent prayer, “if this is really something I’m supposed to do, I need You to give it a name.”

Soon after, in the middle of doing laundry, she had the strong sense that she needed to read the verses of 1 Chronicles about Jabez, who was “more honorable than his brothers.” 

“Jabez cried out to the God of Israel, ‘Oh, that you would bless me and enlarge my territory! Let your hand be with me, and keep me from harm so that I will be free from pain.’ And God granted his request.”

She stopped thinking about the bank as something she might do. It would be the Bank of Jabez. And she was going to open it.

The wrong sort of No. 1

The words were blunt: “No U.S. metro area has larger social and economic disparities along racial lines.” That was how the financial news site 24/7 Wall St. described the Waterloo region in a 2018 article ranking it the worst place in the country for Black Americans. 

It hit like a thunderclap in the Black community. Residents already knew there were problems — a report the year before called the region “still severely segregated,” and there were huge gaps in income and homeownership between whites and Blacks. But now they had a ranking that showed Waterloo’s troubles didn’t merely mirror the country’s.

Joy Briscoe, talent acquisition specialist for the Waterloo school system and a leader in the Black community, thought back to her 1980s childhood in town and couldn’t say that things had improved.

One key economic measure, in fact, was getting worse. In 1950, despite the barriers erected by powerful people, the city’s Black homeownership rate was an impressive 68%, double the national figure for Black Americans and about the same as for white Waterloo residents. Good industrial jobs and union leaders committed to racial equality made a difference, said Colin Gordon, a University of Iowa history professor whose students tracked the restrictive covenants in Waterloo.

Then many of those jobs disappeared. And the Black community, with less intergenerational wealth to draw on, with homes devalued by redlining and other discriminatory practices, was hardest hit.

The Black homeownership numbers tell the story: 46% in 1990, 40% in 2010 and, by the end of the last decade, 32% — the reverse of the economic situation at the start of the civil rights era.

“For working class African-Americans in the urban north, economic losses (falling wages, unemployment, deindustrialization) overshadow most of the legal gains of the civil rights movement,” Gordon wrote in an email.

That experience was threaded through Briscoe’s own family history. And now, the same month Young was contemplating a bank, Briscoe and other local leaders fired up about the 24/7 ranking met to discuss another way to fight the wealth gap: starting a business accelerator that would support Black entrepreneurs with mentorship, training and other aid. They needed someone to run it, someone with an entrepreneurial record, a habit of helping other business owners and the ability to build something new at high speed.

The answer seemed obvious to them. But would Young say yes?

She already had plenty on her plate. But the mission fit well with hers. She agreed.

“I was so happy,” said Briscoe, executive director and co-founder of the group, the 24/7 Black Leadership Advancement Consortium. “It was really fate: The planets aligned, God was smiling on us. … We couldn’t have found a better person.”

By September 2020, the accelerator was running with a dozen business owners. Other cities in Iowa soon came calling, hoping to replicate it. 24/7 BLAC raised hundreds of thousands of dollars in grant funding to keep the accelerator and other efforts going as Young helped recruit more participants, led discussions and worked with the entrepreneurs on their challenges. 

Frequently, their biggest challenge was getting a loan.

Accelerator participant Rosie Daniel, owner of LuLit's Hair Essence, needed to replace the failing car she relied on to make deliveries of her hair restoration products. She went to a local credit union where she banks to apply for a business auto loan in 2020. She said the lender, after assuring her he would verify her credit score without a “hard inquiry” that would ding it, told her it wasn’t high enough. Then, in the parking lot afterward, she saw an alert on her phone that made her even more upset: It had been a hard inquiry. The credit score she’d been working to improve would go down for nothing.

Daniel, who can’t wait to move her accounts to the Bank of Jabez, dialed Young on the spot. “Guess what just happened to me,” she said.

Young listened, feeling more certain with every story like this that banking had to change. Too often a credit score simply reflects the wealth gap — and helps maintain it. After delving into accelerator participants’ financials and understanding their risks and opportunities in a way no single number could convey, Young thought local banks could widen their lens for customers, “looking at them and their business holistically.”

She and other 24/7 BLAC representatives suggested this type of broader thinking — which some financial institutions already employ — in conversations with local bank CEOs, all white. Some agreed it was a good idea. Others weren’t receptive, Young said — their loan-approval process worked for them, and they didn’t seem interested in changing.

But she could see that Stacey Bentley, president and CEO of Community Bank & Trust, took the request to heart. The two women knew each other from serving on local boards together, and Young tucked a thought away: Perhaps Bentley, who helped open Community in 1997, would be willing to offer advice to the Bank of Jabez.

Climbing the mountain

A new bank is not a typical startup. The Federal Deposit Insurance Corp. and another banking agency, federal or state, must both sign off. After the Great Recession hit — contributing to more than 500 bank failures — regulators demanded more capital and more evidence of community need. And investors weren’t so eager to jump on board.

“It’s a very different world today than it was then,” said Nathan Stovall, lead banking analyst for S&P Global Market Intelligence. “There just were too many banks.”

Organizers started more than 100 on average nationwide each year from 1990 to 2008, according to the Federal Reserve Board. From 2009 through 2020, that annual number sank to six. 

Waterloo has a lot of banks already. But Young was confident about the case for community need. Raising money, she thought, would be the far harder task: $10 million minimum, and more if possible. She thought regulators would OK a smaller amount, $3 million, but she feared that would be too little for the bank to succeed.

And beyond the money, she had a lot of regulatory boxes to check.

When she hired banking consultants in the middle of 2020, they handed her a list of every major step she’d have to complete — 74 in total. Recruiting a board of directors, undergoing background checks, lining up three different kinds of insurance, writing policies and charters and plans.

“It is a process that generally takes a good year and a half,” she said in December 2020, trying to balance optimism and realism as the mountain loomed before her. “So we’re hoping to be open by the end of 2021.”

As 2021 unspooled, she tried different methods of fundraising. Asking the community. Reaching out to large banks where she had some connection, hoping to tap into the new appetite for racial equity work before it might fade. Attempting to launch a partnership with nonprofits to seek grant money.

Organizing Zoom meetings and working late into the night, she tried not to think about how far off the top of the mountain remained. 

By summer, it felt to her like one or even two steps back followed every step forward. There would be no grand opening for the Bank of Jabez that year.

Ken LaRoe has launched three new banks, all in Florida, and said the fundraising was never easy. But LaRoe, CEO and chairman at Climate First Bank, whose board members include the CEO of a Black-owned bank, thought Young’s task would be particularly difficult. It’s “the wealth disparity,” said LaRoe, who is not involved in Young’s effort. “It’s a smaller community to try to raise capital out of than a bunch of old white guys.” 

LaRoe, himself white, couldn’t think of a single founding shareholder across the three banks he started who was Black. He said it wasn’t for lack of trying. “Yeah,” he said, contemplating that stark fact, “that’s pretty stunning, isn’t it?” He thought about the implications and added: “really, pretty scary.”

Then there’s the way regulators, anxious to ensure banks won’t fail, judge the fitness of prospective executives and directors. 

First off, they want people with high-level banking experience — roles that EEOC records suggest Black workers have been systemically locked out of. Nationwide, Black and white workers hold jobs in finance, which includes banking, at rates roughly the same as their share of the population. But white employees become senior managers at seven times the rate of Black employees.

Secondly: If anyone on a prospective management team has “a history of bankruptcy filings,” the FDIC says in its guide for startups, approval could be “problematic.”

Young came across that warning in late July. She’d figured her financial past might be one of the hurdles in the bank’s future. It was a development that could fill a less-determined person with anxiety, but Young reacted with characteristic calmness, saying she trusted that God had not put her on a path with a dead end.

“It’ll be something to work through as we move forward,” she decided. Either it would be OK, or she would get the bank as close to the finish line as she could and others would cross without her.

Around that time, she said, her credit union told her she couldn’t open an account for the Bank of Jabez because it would be “too risky.” Thinking of Stacey Bentley, Young then turned to Community Bank & Trust.

The bank said yes. Bentley, who’d seen the 24/7 Wall St. ranking and knew her institution was not reaching all of the community, invited Young to tell her more. At the end of a meeting full of ideas and positivity, Bentley said, “There’s a lot of people who will really want to see this succeed. So if you want me to introduce you to some people I think would be great investors, let me know.”

Soon afterward, Bentley emailed her parent company in Illinois. She thought QCR Holdings could be one of those investors.

What would fix the wealth gap?

Duke University’s Darity sums up the wealth gap with one big number: $840,000. That’s how much less net worth the average Black family had in 2019 compared with the average white family.

The average is skewed upward by massive wealth at the very top, part of a larger story of American inequality that cuts across race. But the very top is overwhelmingly white, which comes right back to Darity’s point.

Darity has spent decades studying the gap, seeing it however the numbers are sliced. Marriage doesn’t solve it, advanced degrees don’t close it, homeownership isn’t a magic bullet, his and others’ research shows.

And Black banks, he said, as helpful as they can be to the communities they serve, aren’t the solution.

Their assets combined were just shy of $5.6 billion at the end of 2020. 

At that point the nation’s largest bank, JPMorgan Chase, was 541 times that size.

And even those assets fall far short of the extent of the gap.

“If we were to identify the amount of resources that it would take to bring the Black share of wealth into consistency with Black America's share of the nation's population, it would require approximately a minimum of $11 trillion,” Darity said. “It's clearly not something that can be done by the existing apparatus of Black banks, nor can it be something that would be accomplished by incremental increases in the number or scale of Black-owned banks.”

His answer to the problem? Reparations. The federal government set this injustice in motion, he said. It fed the gap by giving land to white Americans after the Civil War, largely through the Homestead Act, but to only a handful of the formerly enslaved people whose stolen labor made others wealthy. And President Andrew Johnson quickly snatched back land that had been provided to freed slaves on the orders of Maj. Gen. William T. Sherman. 

After it abandoned Reconstruction, the government stood by for decades amid lynchings and mob violence and voter suppression, starved Black communities of credit and extended government benefits unequally. And it never made up for the damage.

Session after session since 1989, a bill to study reparations has been introduced in the U.S. House of Representatives. In April 2021, H.R. 40 made it out of committee for the first time but went no further. In the closely divided Senate, Minority Leader Mitch McConnell — whose ancestors owned enslaved people, NBC News found — said he dislikes the idea of reparations “for something that happened 150 years ago, when none of us currently living are responsible.”

And therein lies the tension for Young and everyone else trying to make their community a more equal place: Do you throw your energies into pushing for federal action that may never come? Do you work locally and hope that will be enough? Do you attempt to achieve both somehow?

As a teenager, Young helped register people to vote. Later, she would testify before Congress in support of equal pay and be named a 2015 White House “champion of change” for economic equality efforts. She understands the power of policy. She’s also familiar with the long pushback to reparations. A bank can accomplish only so much, but she believes it can make a difference in Waterloo. And maybe, she hopes, beyond the city.

Her work taps into a rich history: Black Americans have always pushed back against the wealth gap. Mutual-aid societies. Business cooperatives. Tireless entrepreneurs like Maggie Lena Walker of Virginia, who launched a newspaper, a department store and, in 1903, a bank. 

All around Young today are community leaders, many Black, some white, working on their own answers to the wealth gap. What the country needs, she said, is more people doing the same. And fewer standing in the way.

“It's really all of our responsibility,” she said. “It's just, what role are we going to play?”

Past, present, future

When Matthew Gilbert heard about the Bank of Jabez, it pinged an old memory: his great-aunt telling him that his great-grandfather had started a bank.

Gilbert, an attorney who works on economic inclusion and talks regularly with Young about how to move the needle in Waterloo, started digging. 

He found that his ancestor, Dr. Lee Furgerson, joined forces in 1947 with other Black community leaders to launch the Black Hawk Savings & Loan Association, named after their county. It opened in the building where Furgerson practiced.

Perhaps this institution helps explain Waterloo’s huge jump in Black homeownership between 1940 and 1950. It’s hard to know because so few records are left.

Furgerson, the first Black physician in the city, died the year after the savings and loan’s founding, the victim of an intestinal obstruction. He was just 49. Another of the four founding officers died two years after that. 

Gilbert, thinking of the health toll of discrimination and the wealth toll of lost working years, looked for more details about the financial institution’s existence and couldn’t find anything beyond the late 1950s. 

Young’s efforts looked to him like a new chance. “Here in Waterloo, it could be a really powerful example,” said Gilbert, tapped to be on the Bank of Jabez’s board.

As summer turned to fall, Young continued talking with Bentley, the Community Bank executive. She also pitched to individuals with money to invest, some from out of state. She and her family went door-to-door in Waterloo neighborhoods, some comfortably well-off, some not, asking people to commit to opening accounts at a future Bank of Jabez.

In October came a turning point — for another prospective Black bank. Organizers in Columbus, Ohio, filed an application with the FDIC seeking approval to open. They’re hoping to begin operating in the fall of 2022.

Their Adelphi Bank might be the one to break the 22-year drought in Black bank startups.

But not, most likely, as a Black-owned bank. Instead, it would be a Black-led one.

Organizers are aiming to meet an alternative federal definition of a minority bank that’s based on board composition and communities served, said Kevin L. Boyce, an Adelphi co-founder. Even in Columbus, 13 times the size of Waterloo and home to nearly a quarter-million more Black residents, the money test looked formidable.

“That’s part of the challenge with wealth distribution in America,” said Boyce, a former Ohio state treasurer. “We’ve been fortunate to have other partners with us, both institutional and individuals that are not minority, that have joined in our efforts.”

Though Waterloo has Iowa’s highest share of Black residents, it’s modest enough — 18% — that a new bank would need to serve a broader demographic. Young was pretty sure the harder road was her only alternative: Just over half the money would have to come from Black individuals.

Thinking about the momentum she’d have if she could get the other 49% covered, she drafted a pitch to give to Community’s parent company. In between meetings with Bentley to prepare, she’s worked to recruit board members and executives. 

For now, the bank's future remains a question mark. Will the money come? Can she launch it?

Young said she's determined to get there. To see it open someday.

Which is why she's already made an offer on a property for it. 

In the summer of 2021, Young visited a church property for sale in an east-side neighborhood of small homes, some in disrepair, to see if its kitchen could work for home-cooking entrepreneurs needing commercial-grade resources. The 97-year-old brown brick building and an addition that once housed a parish school stretched nearly the length of a block, with a parking lot and empty land on the other side of the street. 

There was room not just for the home cooks, but also for small businesses ready to rent their first space. She could imagine the Bank of Jabez across the street — 13 blocks from the former site of the Black Hawk Savings & Loan.

What she didn’t yet know: Fifteen years before she’d texted her cousin about a bank she felt God calling her to open, the pastor of this church sat up in bed in the middle of the night with a vision from God to incubate five businesses on the property.

Pastor Faye Scott said she tried to make it happen, but it never came to pass. Eventually her Ambassadors for Christ Church needed to sell this too-big home. An offer fell through. An auction drew no one. The boiler broke, the pipes burst.

And now here was Young, explaining about the bank and the small businesses. Five of them already were interested. For Scott, it was like a promise from God that the first vision was no mistake.

“I couldn’t help but get on board,” Scott said.

She offered the entire property to Young for $22,500.

Young, amazed, started digging into the old building’s challenges. She talked to her cousin and lawyer. On a warm September afternoon, she returned in a Bank of Jabez T-shirt — “Experience Excellence,” it said — to meet with Scott. In the sanctuary, light filtering in through the stained-glass windows, she handed the pastor a purchase agreement.

“Knowing that it’s yours,” Scott asked, “how do you feel?”

“I’m still very carefully suppressing emotions,” Young admitted.

There were so many steps left that she needed to stay focused on, not all of which the original list of 74 included. The real estate deal wasn’t official yet and a legal battle over a mechanic’s lien on the property could upend things. Contractors weren’t getting back to her. The building needed a new heating system ASAP. Small businesses couldn’t move in until rooms were readied for them.

She didn’t want to tear her gaze from the path ahead by looking back at how far she’d come.

“It’s a time to rejoice,” Scott insisted. With a mischievous smile, she added, “Just take a couple of minutes. Go ahead, girl.”

Young didn’t have a couple of minutes. But for one unguarded second, she let out a joyful laugh.

You can hear a podcast about Young’s quest in the newest season of The Heist.