You see that video Trevor Noah just put out about police, the system and the good apples? The system isn’t broken. It’s working exactly how it’s intended to work. “The system is more powerful than any individual. The system in policing is doing exactly what it’s meant to do in America. And that is to keep poor people in their place,” he said.
And then monetize them. Banking is no different. There are a few good apples.
JP Morgan Chase and Citi came out with pledges last year, vowing to commit $30 billion and $2.5 billion, respectively, to help reduce the racial wealth gap. That all sounds good. And I like to think they’re the good apples. But even if they are, the banking system, the tree as a whole, is rotten to its fucking core. “Who happens to be the most poor in America? Black people,” Noah also stated in his vid. “You monetize them, you imprison them, which monetizes them again. It’s a system. It’s not broken. It’s working the way it’s designed to work.”
Bank of America’s FUCKERY
In Q4 of last year — between October and December of 2020 — Bank of America made around $5 billion from their stock trading department and their investment banking divisions combined, per the Wall Street Journal and their investor relations documents.
Meanwhile, that same Bank of America made $9.85 billion in “non-interest income,” nearly double that of their well-off customers. What do you think non-interest income means? Fees. Overdraft fees.
(Yes, I know private clients are charged fees too. But part of private client fees are reimbursed and the larger point still stands.)
And that doesn’t even include the borderline-illegal interest rates on credit cards. Despite what they say, there’s no incentive for the banks to change their business model. In fact, Bank of America and the other banks cried when they might’ve lost this revenue stream.
Median Black wealth will drop to $0 by 2053
Some quick stats: Black wealth is projected to drop to $0 by 2053, a trend mainly due to a dramatic macro disparity in home ownership between BIPOC families and white families. Black families, on average, have $23 of every $100 by white families. Important statistic: Ninety percent of millionaires are made from owning property.
Yet, the Wall Street business model is predicated on predatory lending practices, saddling — effectively imprisoning — non-savvy bankers with credit card debt they know they can’t pay off. Because of these tactics, minorities largely avoid getting credit in the first place. Meanwhile, 94 percent of white families have access to banking, per the FDIC. Black and Hispanic families? Forty percent.
And guess what? No credit, no ownership. Again, absence of ownership is the single-largest driver behind the racial wealth gap. Oh, and by the way, banks gave out $4 trillion in mortgages last year. I mean, this is not rocket science. The system is working how it’s designed to.
So, what’s the solution?
I’m not one to whine and complain, highlighting the issues that exist systemically. It’s there, it is what it is. I’m a solution-oriented motherfucker.
And the truth about systems is simple: They don’t really change, no matter how much we protest. They simply evolve or die a thousand deaths of disruption, replaced by new ones that render them moot. Think of horse carriages being replaced by automobiles. You can still ride one in Central Park, I suppose, but no one is taking a horse crosstown.
Like I like to say, “No one is coming to save you.” I think people are realizing that and taking matters into their own hands…
I’ll get to a practical solution in a bit. Stay with me…
Psychographic emergence: The money-conscious BIPOC millennial (and Gen Zer)
Here’s the reality: Black people spend $1.4 trillion a year…yet own no assets? The underlying issue here is the culture of consumption. That’s some shit we gotta fix internally.
But, these banks know what the fuck they’re doing. “Keep poor people in check. And then monetize them. Who happens to be poor in America? Black people.”
Since the pandemic hit, there’s been a shift in the BIPOC psychographic profile. Exactly 12 months ago, quarantine fresh, I decided to put out videos about financial literacy.
Quick backstory on me: I came to New York in 2014, undocumented, with $79. Long story short, I did my first real estate deal in 2016, putting down 3.5 percent to buy a three-family property.
That eventually led to more properties. Fast forward five years, we’ve built a real estate portfolio of $500 million+ across 1500 actively cash-flowing apartments plus another 500+ under construction.
To this day, I still don’t know what a square foot is. Real estate, truly, is the millionaire’s roadmap to millions. That is the truth. Mixed with some S&P 500 index funds, becoming a millionaire literally goes from a probability to an inevitability.
What can be done on our end…(and the banks’)
In April of last year, I decided to open up access to our portfolio in the middle of a pandemic, anchored around a mission to create 100,000 millionaires of color by 2030.
Because of various residual components rooted in slavery, sharecropping, redlining etc., there are residual systemic byproducts that exist today, ultimately manifesting in the wealth gaps we see. I’m super proud to say that our tiny little contribution helped create over 2000+ new first-time real estate owners and thousands more who began investing the stock market.
All self-funded, no venture capital. But, we’re just a bootstrapped startup. Where are the banks that profit off these systemic byproducts?
Instead of taking advantage of these generational deficits, why not help this very willing, but underbanked segment get access to investments? Why not get them on a path to good credit? Set them up with automatic dollar-cost averaging in S&P 500 index funds? The technology is there. If you can snatch automatic fees, why not do an opt-in for spare-change investing? Alerts when spending is crazy?
You know as well as I do that monthly deposits in an index fund is all it takes to get to $1 million liquid by the time someone is 30. People are fucking ready. Let’s create some more millionaires.
The rich getting richer…
Less than 10 years ago, in order to invest in sexy projects like New York City high rises or tech startups like Facebook and Google, you had to be a so-called “accredited investor.”
An accredited investor is someone who either makes $200,000 a year or is worth $1 million — NOT INCLUDING their primary residence. Guess what Bank of America revenue stream they fall under? Ever heard the expression the “rich getting richer”? Exactly.
“Keep the poor people in check. And then monetize them.”
On April 5, 2012; Former President Obama signed the JOBS Act, allowing so-called “non-accredited investors” to invest in private projects like high rises, tech startups like Uber, Facebook — all the good shit.
Through this regulation, we offered access to our real estate holdings, which helped create 2000+ first-time BIPOC real estate owners. We offered $360,000 at a $1M valuation in this development (by design); four months later, it appraised at $2 million, doubling the valuation of the building. That’s good and all, but that’s just 1300 people. And what the fuck is $360,000 gonna do on a macro level?!
Here’s what the banks need to do…
I don’t pretend to have the answers. I don’t even know that much. But, I do know numbers. I know business. And I have common sense. And I know that I can match wits with ANY of you motherfuckers and you can’t fool me with your predatory shenanigans. Try me.
Again, I do believe JP Morgan Chase and Citi are sincere. The former literally helped me when no one else would. I’d love to see them do it for more people. Right now you’re reinforcing an exploitative business model, predicated on macro-based ignorance — almost like an automated debt-prison with no escape.
If you really, truly are about reducing the wealth gaps, and not just healthy PR that’ll give you woke brownie points, I’ll offer you — Citi, JPMC, Wells Fargo, whoever — a deal. I’m not asking for a trillion like you gave everyone else. Just give me $2.5 billion —0.0625 percent of the $4 trillion issued in 2020. I — in return — will deliver you 10,000 FHA-qualified BIPOC first-time home owners.
Just 10,000. Let’s start there. If we take the average house price — it fluctuates, so let’s assume $250,000 — that’s $2.5 billion. This doesn’t even have to cannibalize your greedy business. All you gotta do is move this segment of customers up the chain, bring them into a department, and charge interest vs. overdraft fees.
Assuming 4 percent interest with fees, you’ll make an easy $100 million back a year just from this group. In fact, I’ll sweeten the deal. I already built an app that allows BIPOC investors access. I’ll gladly build the technology to hedge against defaults.
Keep the fees, the interest income, whatever. I’m not gonna take a single cent. Grease whatever back-end wheels you need to — I don’t care. Just give people a fucking chance. You’re writing off credit debt anyway, right?
People are ready. Just go look at the thousands of comments on various Instagram pages, on Twitter. I’m probably being naive and idealistic. But, I truly believe if more people are less hungry, we’ll see a sharp reduction in crime, drugs and all the byproducts that come with poverty.
You won’t lose money. You’ll even make more money. And you’ll do right by society. Just stop fucking preying on people. And step up and do the right thing.
Post-scriptum: A 2019 investigation by the National Fair Housing Alliance, a Washington D.C.-based nonprofit, found that 60% of the time, applicants who were people of color — and way more financially qualified than their white counterparts —nevertheless were offered higher-priced car loans, costing them an extra $2,662 each over the course of the loan.
BIO: Philip Michael is an investor, entrepreneur and bestselling author. Founder of fintech NYCE (the “Robinhood of real estate”), his goal is to help create 100,000 millionaires of color by 2030.