TheLoop21.com

By: Devona Walker (Add to your loop)
Wed, 10/08/2008 - 00:00

Minority banks are seeing benefits from the economic turmoil.

Minority-owned banks in many cases are faring much better than the big, mainstream banks during the the nation's financial crisis. They have avoided the major pitfall that has plagued Wall Street — primarily subprime mortgage loans— and are actually benefiting from the economic turmoil, at least for now.

"We're getting a flood of money market business right now because of what's happening in the mainstream market," said Dan Fischer, president and CEO of Urban Trust Bank, which is controlled by BET founder Robert Johnson. "People are looking for a safe place for their money."

Urban Trust Bank has increased its deposits by $10 million per month, a growth rate of about 10 percent, for the last six months. It has a number of real estate loans on the books, but it never got into the sub prime lending market.

The same is true for Metro United Bank, an Asian-controlled bank operating in Texas and California. "We're in much better shape than the mainstream banks," spokesman Amy Yuen said of the Texas-headquartered bank with about $433 million in assets. "We don't do mortgage loans. We don't do subprime, and we are not involved in the financial markets."

There are 119 minority-owned banks listed with the Federal Reserve. About 39 are African-American owned or controlled, while 17 are controlled by Latinos. Forty-one are owned or controlled by Asians. Together, these banks make up a roughly $160 billion industry.

The reason they didn't get into the business of offering subprime loans is simple. "Many of these banks didn't have the resources for it," said Stacey Gordon, a spokeswoman for the Urban Financial Services Coalition.

A cloudy financial future

Today, Fischer, with Urban Trust Bank, said his company is looking to expand. "We are hoping as some of those other banks start having problems, we can step in and take over," he said.

But the trouble on Wall Street is already percolating in the broader economy. (Read more about that here.) And as the country's financial crisis deepens, financial analysts predict all banking institutions, minority-controlled or not, are likely to see ramifications.

One small-business owner who Gordon spoke with recently had a home equity line of credit withdrawn because of the internal stress at Washington Mutual, which was taken over by JPMorgan Chase in September. Another small-business owner, she said, was unable to secure a loan, despite a solid credit record and 20 percent down, and had to let go of workers.

"People who had nothing to do with the credit crisis and the housing industry are being affected by it,"Gordon said. "Now they are not able meet payroll. Now they are having to lay people off."

Check out some other stories on the credit crisis:

Black communities hit hard by the financial crisis

Business stories feel the economic pain

Opinion: Blaming minorities for the credit crisis

A bailout for (black) homeowners

Opinion: A bailout just for Wall Street