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Which uninsured bank depositors get saved by the federal government?

By Masao Suzuki

San José, CA – After the collapse of Silicon Valley Bank, headquartered in the city of Santa Clara, just north of San José, the local news was full of interviews with technology entrepreneurs talking about the “importance to the community” to have all of the uninsured depositors get their money back. With the closing of Signature Bank in New York, which had large numbers of crypto-investment related depositors, over the weekend, federal regulators tried and failed to find buyers for the two banks. This made these two banks the biggest ever – with about $200 and $100 billion in deposits, respectively – to have to shut down.

On Monday morning, March 13, President Biden announced that all the depositors will get their money, including uninsured depositors with more than $250,000 in the bank. Most of these are Silicon Valley technology start-ups and include a few larger businesses such as the streaming technology company Roku.

This stands in contrast to the mainly African American depositors at Freedom National Bank, which failed in 1990. Under pressure from the public, the federal government paid uninsured depositors, many of which were large non-profits serving the Black community, but only 50 cents on the dollar.

At the founding of the United States, African American slaves were counted as three-fifths of a person. Since then, the systematic national oppression of African Americans, that is, the unequal treatment on the basis of nationality, has maintained a gigantic wealth gap between white Americans and African Americans.

African Americans have lower income, higher unemployment, and lower rates of home ownership. In the words of Reverend Martin Luther King, Jr, “Of the good things in life he has approximately one-half those of whites; of the bad he has twice those of whites.” (Where Do We Go From Here, Chaos or Community, 1967). But the wealth gap is a chasm, with white American households having a median wealth of $187,300 in 2019, while African American households owning only $14,100. Thus on average, white American households have more than 13 times the wealth of Black Americans.

While the average African American household has only 7.5% of the wealth of white American households, the number of Black-owned banks is even smaller. There are only about 26 of these banks, plus another 19 Black-controlled credit unions in the entire United States. This means only about one-half of one percent of all banks are owned by Black Americans, along with a slightly smaller percentage (0.4%) of credit unions.

Black-owned banks are not only restricted by national oppression and the huge wealth gap, but also by monopoly capitalism where huge banks buy, take over, or feast on the failures of smaller banks. Many of the former depositors at Silicon Valley Banks, as well as depositors of other smaller banks, are heading towards the big four monopolistic banks that have more than half the deposits in the country. These big banks – Bank of America, J.P. Morgan Chase, Citigroup and Wells Fargo – are widely known as “too big to fail.”

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