FINANCE

Not All Bank Failures Are Created Equal

Remembering the bank founded by Jackie Robinson and how regulators dealt with its demise

Freedom National Bank, founded by baseball legend Jackie Robinson, was once one of the largest Black-owned and operated banks in the U.S. Photo Credit: Rachel Robinson, credit: Bruce Williams

This month, the Federal Deposit Insurance Corporation announced its seizure of New York’s First Republic Bank. The bank’s failure was second only to that of Washington Mutual’s collapse amid the 2008 financial crisis. As was the case with Washington Mutual in 2008, JPMorgan Chase stepped in to purchase First Republic.

The bank’s failure was the latest in a flurry of spectacular bank collapses. In April, three high-profile banks failed over just five days. Regulators seized Silvergate Bank and Signature Bank, both with significant exposure to the cryptocurrency market. In what some have described as the first high-tech bank run, Silicon Valley Bank lost $40 billion in deposits over a few hours.

With each of the banks in question, the government made depositors whole, even accounts with balances above the FDIC’s $250,000 insurance limit. As a result, tech companies with enormous bank deposits, such as Roku, which had $487 million, 26% of its $1.9 billion in cash held at the bank, never lost a penny.

Whether the FDIC’s approach to the recent bank failures constitutes a bailout or the most prudent approach to staunching a potential financial crisis is an item of fair debate. That said, the regulator’s current stance on bank failures bears little resemblance to how it handled the demise of a legendary Black-owned financial institution — a bank that happened to be one of my clients.

‘Our Bank’ in Harlem

After he retired from the Brooklyn Dodgers in 1957, Jackie Robinson, major league baseball’s first African American player, made a name for himself in the business world.

After his retirement, Robinson joined Chock Full o’Nuts, becoming the first Black vice president of a major American corporation. He launched several businesses, including a construction company and a clothing store. Then Robinson set his sights on another goal: bringing a Black-owned and controlled bank to Harlem.