The Color of Money: Racism in Finance, presented on Sept. 17, was the fourth installment in the Critical Conversations series sponsored by the office of University of Missouri-Kansas City Chancellor Mauli Agrawal and the UMKC Division of Diversity and Inclusion.

Participating panelists included:

• Gary O’Bannon (co-moderator), executive-in-residence, Henry W. Bloch School of Management and former director of human resources, City of Kansas City, Missouri
• Lisa Uhrmacher (co-moderator), UMKC Bloch student, IoT and analytics practice lead, Atos
• Ruben Alonso, president, AltCap
• Victor Hammonds, director of small business banking, First National Bank of Omaha
• Nathan Mauck, associate professor of finance, Henry W. Bloch School of Management
• Nick Richmond, president and CEO, Kansas City Credit Unions

Critical Conversations is part of the Roos Advocate for Community Change, UMKC leading thoughtful action on campus and in our community to ensure lasting and comprehensive change.

The United States continues to struggle with its history of systemic racism, and that struggle is expressing itself in nearly all areas that make America what it is—the political system, corporate America, entertainment, athletics, social media and the police and criminal justice systems.

“The financial services industry has a responsibility in considering their role in this movement both in how we got there and how to work to achieve an equitable and inclusive financial system,” O’Bannon said. Of the systems that contribute to disparities in wealth, he started with employment.

“It is impossible to build wealth without steady and rewarding jobs,” O’Bannon said. “But minority unemployment is consistently twice that of whites no matter what the economy.”

Education is another system impacted. O’Bannon said Black and Hispanic children’s opportunities and choices are more limited than any other group.

Regarding the health care system, O’Bannon said repeated studies have found doctors and medical facilities have unconscious racial biases when it comes to minority patients.

The fourth system discussed was housing and redlining, barring Black and brown people from living in certain areas.

“It is still present today,” O’Bannon said of redlining. “These systems remain broken and won’t be corrected soon. So perhaps the question today is whether financial services companies and its professionals that run them, will be a part of the solution.”

Before the group delved into the role financial institutions have in being part of the solution, Uhrmacher led a discussion on Kansas City’s own history.

“We know that wealth is something that’s handed down from generation to generation primarily through home ownership,” Uhrmacher said. “And if you think about it, it’s the way that much of our wealth is transmitted from one generation to the next. For every one dollar that is passed along generationally in a Black family, 10 dollars are passed along in a white family.”

In many instances, according to Uhrmacher, the crux of the issue in terms of finance, comes down to home ownership. In her research of Kansas City housing, she found the city wasn’t always segregated. J.C. Nichols was a proponent of the covenant neighborhood concept in Kansas City, a concept that spread nationally. Redlining, which began in the 1920s, was the drawing of red lines on maps indicating where financial institutions would not provide home loans. The practice of redlining effectively segregated Black and white neighborhoods.

Mauck presented national trends on all of the systems and discussed wealth inequality from an educator and researcher’s perspective. According to the Institute for Policy Studies, Mauck said the gap in wealth grew between 1983 to 2016, with many drivers of wealth inequality going back to housing.

“This gap has been very persistent over time,” Mauck said. Levels of education is also something Mauck has examined. He cited a St. Louis Federal Reserve wealth report regarding college education and the wealth gap as he discussed the disparity in net worth and holding of assets among minorities. He said the gap in financial literacy levels impacts lending and who receives it.

Alonso also addressed racist constructs that prevent people of color from accumulating assets. He said lending is based on qualifying borrowers through their personal credit and assets. If the most common form of collateral for lending is real estate, and if there is a subset of the population that can’t get housing because of other discriminatory practices, Alonso said accessing capital is limited.

“That is a continual challenge for entrepreneurs of color,” Alonso said, which negatively impacts the number of minority-owned businesses. Compared to white families, he said all other races have lower levels of income and net worth and are less likely to hold assets of any type. In fact, Alonso said 19% of Black families have zero or negative net worth, while only 9% of white households have no wealth.

Richmond, as president and CEO of a credit union, said they try to help their customers and will often discuss financial literacy issues. For example, Richmond said there have been generations of Blacks watching their parents and grandparents get money orders to pay their bills. Richmond said he advises customers that it’s better to save the money order fee and get checks.

“However, it’s hard to break generations of habits with money,” Richmond said. He would like to see banks partner with schools, school districts and universities in educating community members on financial literacy so they can break the cycle of making bad financial decisions.

Hammonds said as a banker he also sees people who can’t get value out of their homes and builders who can’t build houses at a valuable price point in underserved areas. He said gentrification of neighborhoods also makes homes too expensive.

“When you’re in an underserved community…you can’t get value out of your home,” Hammonds said.

So, what is the financial industry doing to make progress to include communities of color? The panelists agreed that the desire to help and find ways to best serve the people in their communities is how they can make progress.

Alonso said Community Development Financial Institutions (CDFIs) are great partners because they don’t have the limitations/regulations on lending rates and terms. These organizations may be good options for minorities.

Representation matters. Like most systems that provide the opportunity to build wealth in this country, the underlying cause for a lack of substantive progress may be that leaders and industry decision-makers don’t see the barriers to entry, because they haven’t experienced them. And, unfortunately, the people negatively impacted aren’t represented. While every company in the S&P 500 Index now has a woman on the board, Uhrmacher said the same is not true in terms of racial diversity. An example is that only about 10% of the Russell 3000 Index has ethnically diverse board members.

When asked what the industry can do so their boards and leadership teams represent the communities they serve, Hammonds said it is something every company must be intentional about. The key is to start.

One of the last topics discussed was the responsibility that should be placed on educational institutions to push the narrative of financial literacy, address income inequality and the racial wealth gap.

“Education is a good place to help bring attention to this,” Mauck said. Education can be delivered in a number of different ways including K-12 education, college, community workshops, bank and financial institution education sessions and mentorship.

Uhrmacher said investments with traditional institutions and investment managers that promote Environmental, Social, Governance (ESG) and socially responsible investing has recently become popular. And while there’s good intentions, she said some say they may actually be inadvertently causing social, economic and environmental harm. She suggested a better option may be to offer both restorative and regenerative investment solutions.

“As an organization you have to listen to the voice of your customer,” Hammonds said. “Be sensitive. Cross all of the areas of ESG. Be aware of the social impact your organization can have.”

A third session on the future of policing is scheduled for Oct. 5, The Future of Policing in Kansas City: A Conversation with Mayor Quinton Lucas.

Watch the discussion in its entirety below and check-in on the original story for the next sessions, which includes A Dialogue Among Women of Color and White Women in Higher Education on Oct. 7.