What does JPMorgan Chase’s $30 billion commitment to tackle the racial wealth gap really mean?

We took a look at JPMorgan Chase’s new announcement to give a balanced breakdown of what it means.

JP Morgan Chase, which holds $2.82 trillion in U.S. assets, announced a pledge of $30 billion on October 8, 2020 in order to achieve greater racial equity over the course of 5 years. Their efforts consist of five pillars:

Promote Affordable Housing and Homeownership for Underserved Communities

What they’re doing: in anticipation of 40,000 home purchase loans for Black and Latinx households, Chase is allocating $8 billion in mortgages and $4 billion to refinancing loans over the next five years. In addition to policy advocacy and increasing funding availability, they will also offer fiscal support to efforts that expand affordable housing.

These actions could increase homeownership, increase economic growth by up to 0.2% per year, reduce mortgage cost by 20–30bp, and add $500B of additional mortgages to the market.

Why it matters: Home ownership is a huge obstacle for Black and Latinx communities due to legislative barriers and their lasting impact on the ability to build generational wealth through property ownership. By making a purposeful effort to help the communities secure housing at fair prices, Black and Latinx families will be able to strengthen their financial security.

Grow Black and Latinx-owned Businesses

What they’re doing: Chase is allocating $2 billion to business loans for Black and Latinx entrepreneurs. They will also address the biggest pain points for the communities, such as long wait times, challenges with the application process, and SBA support. Lastly, Chase will set aside $750 million to spend specifically with Black and Latinx suppliers.

According to the Federal Reserve, minority small business owners cite long wait times for funding as their most common pain point with large bank lending.

Why it matters: Black and Latinx populations make up a significant percentage of entrepreneurs, but do not have an influential market share. And during COVID-19, less Black and Latinx-owned businesses received stimulus funding, which will inhibit their chances for recovery. This additional support will help businesses recover and thrive in the long term.

Improve Financial Health and Access to Banking in Black and Latinx Communities

What they’re doing: Chase will increase their presence in minority communities in order to improve access to financial services. They will also prioritize local hires and community-centered programming to build trust, meet the needs specific to the residents, and create free educational training. Additionally, they will invest up to $50 million with banks and financial institutions that have Black and Latinx owners.

According to the JPMorgan Chase Institute, Black and Latinx families have 32 and 47 cents in liquid assets for every $1 held by White families.

Why it matters: There is a lack of physical bank branches in predominantly minority neighborhoods, and while many younger retail bankers may prefer digital banking, branches still play a vital role in building wealth for small businesses and households. These efforts can lead to an increase in fiscal education and access to more investment opportunities.

Accelerate Investment in Our Employees and Build a More Diverse and Inclusive Workspace

What they’re doing: In addition to building an inclusive, diverse workforce internally, Chase will offer greater support to its employees in regards to personal financial coaching and professional education. They will also invest in future talent by partnering with HBCUs and early-stage companies in underserved communities.

Businesses with diverse leadership generate 19% more revenue than non-diverse companies. Diverse and inclusive workspaces can also reduce turnover.

Why it matters: It is widely known and accepted that businesses with a diverse workforce have a better chance to achieve growth. By implementing stronger efforts to elevate Black and Latinx employees, Chase increases its likelihood at being a long-term success.

Philanthropy

What they’re doing: Chase will give $2 billion over the next 5 years to philanthropies focused on building an inclusive economy. In addition to supporting the four previously mentioned pillars, the philanthropic capital will also go towards research initiatives to glean more data and insights on inequalities throughout the economy and society.

Through partnerships with Massachusetts Institute of Technology, as well as PolicyLink, the National Fund, and Burning Glass, the firm will examine the future of work and inequalities in the labor market.

Why it matters: Not all change can come from for-profit institutions. In the uphill struggle against racial inequity, research and data will be necessary for creating a sustainable impact. Furthermore, non-profit and philanthropic organizations may already have strong ties to the communities that Chase wants to help, and can potentially support future efforts.

Our take:

Time will tell how effective and impactful this all is, and we’re generally impressed and optimistic about the size and scope of the new initiative. As with most things, we’ll take it with a grain of salt until we see how the rollout looks, and start hearing from people it is positively affecting. We hope more institutions follow suit, and look forward to the day when such a mandate is no longer necessary.

• Arlan Hamilton, Christie Pitts, Brittany Davis, & Chacho Valadez, with research and analysis by Sterling Schuyler.

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