2. Financial literacy is not the problem
How does JPMorgan view extending credit to black entrepreneurs? Here's how a glowing recent "60 Minutes" segment began:
Jamie Dimon, the CEO of JPMorgan Chase, is testing out a new kind of business investment in the city of Detroit. The idea grew out of Dimon's interest in changing the way the bank was engaging in philanthropy. — Leslie Stahl, opening her "60 Minutes" segment
Apparently, the first thing that springs to mind when Dimon wants to lend money to black people in Detroit is "philanthropy." To that end, JPMorgan extended not only credit but also educational and informational resources for budding entrepreneurs.
- A more germane concern for Dimon should be that if his bank wasn't lending to black Detroiters already, that might be a sign of biased assumptions embedded in JPMorgan's underwriting processes. After all, Dimon himself says racist assumptions still exist.
- Stahl asked whether Dimon had observed "a racial bias" when it came to extending loans to African Americans, and Dimon responded yes, he had.
The big picture: There is a long history of racism in U.S. financial services, and that bias manifests itself in many ways, not least the notorious racial wealth gap.
Driving the news: The TIAA Institute quizzed African Americans on financial questions. The National Urban League's Cy Richardson, introducing the report while extolling his own financial literacy programs, told Axios that “financial illiteracy is particularly acute in communities of color," that it is "a dangerous epidemic," and that it is best addressed through what TIAA's report describes as "increasing efforts to promote financial education in school and the workplace."
- Reality check: There's no evidence that financial education works and quite a lot of evidence that it doesn't.
My thought bubble: Insofar as financial illiteracy is real, it's a symptom of poverty much more than a cause of it. Besides, the questions in the TIAA survey do a dreadful job of measuring individuals' real-world ability to navigate a system that is stacked against them.
The bottom line: TIAA, JPMorgan and other giant financial institutions will happily commit high-profile philanthropic dollars on the premise that the poor stay poor because they don't have enough financial information or education. But as long as communities of color remain cut off from access to non-philanthropic capital, nothing will really change.