Swept up in civic unrest, banks confront deep societal issues
After a weekend of protests that turned to violence and looting, bankers in cities across the U.S. faced a three-part agenda of ascending difficulty: secure their own employees and property, help many small-business clients recover from their second major economic blow this year and figure out how banks can promote long-term socioeconomic change.
Jeanne Crain, CEO of Bremer Financial in St. Paul, Minn., was wrestling with them all on Monday. Bremer has closed branches near areas where protests were held in nearby Minneapolis, the epicenter of national anger over the death there of George Floyd at the hands of police last week.
The $13 billion-asset Bremer has begun working to support organizations in rebuilding the corridors of local businesses that were destroyed "in the havoc and grief of the last several days," Crain said in an emailed statement.
The banking industry has a responsibility to help rebuild, she emphasized.
“Racism is endemic in America’s history and our culture," Crain said. "The uncomfortable truth is that for centuries, banks have been a part of furthering these racist structures, and that means that we have a crucial responsibility, perhaps more than most organizations, to engage in long-term work to ensure that the systems that once held so many people down instead provide everyone the same opportunity to be lifted up."
Crain pledged to work with nonprofits, social service agencies and other businesses "with a goal to make real impact in this area."
Citizens Financial Group in Providence, R.I., was tackling similar problems, but on a much larger scale.
On Monday it temporarily closed 67 of its 1,000 branches in New York, Pennsylvania, Delaware, Ohio and Michigan. A spokesman for the $176.7 billion-asset company said the branches were either damaged during riots or in neighborhoods that were in affected areas.
Jerry Sargent, Citizens’ head of corporate banking for the Northeast region, said bankers also spent much of the day talking to small-business owners who are now dealing with not only the devastating economic impacts of the coronavirus pandemic, but property damage, too. He said many business owners who have reopened or are on the brink of doing so — and whose buildings were damaged — are hurting.
“The very organizations whose revenue evaporated [in March] are the most susceptible to the rioting and violence we’ve seen in the last few days,” Sargent said. “This now complicates reopening for them because not only do they need a little bit of working capital to get restarted … now they’ve got collateral damage to properties and somebody has to pay for capital expenditures on top of this to get these businesses restarted.”
Sargent wonders if some small-business clients will ultimately decide that enough is enough.
“I worry that some people might say, ‘Why should I invest more money into this business at this point?’” he said. “So I think it’s creating a fair amount of trepidation in the business community, especially for those operating consumer-facing businesses in urban settings.”
Some bankers are already beginning to speculate whether a whole new round of emergency aid will be necessary.
Kevin Cummings, chairman and CEO of the $26.7 billion-asset Investors Bancorp in Short Hills, N.J. — whose branches in metropolitan New York and in cities in New Jersey had eluded destruction as of midday Monday — described the video of a white Minneapolis police officer kneeling on Floyd’s neck as colleagues looked on as “terrible and tragic” and said “people are rightfully upset and protesting.”
However, the burning of buildings and looting of retailers is appalling, he said. “There are many small businesses suffering as it is because of the pandemic,” Cummings said. “This comes just as they are trying to make their way back.”
The added devastation on businesses may require additional federal government loans and grants — something akin to the Paycheck Protection Program, he said. Recently the U.S. House passed a new $3 trillion coronavirus relief bill with provisions addressing the economic fallout of the pandemic. As negotiations with the Senate unfold, new forms of emergency aid could get addressed in light of the rioting of the past several days, Cummings said.
Chris Nichols, chief strategy officer at the $18.6 billion-asset CenterState Bank in Winter Haven, Fla., agreed. “There is a big need coming,” he said in an interview. “We might need something that could span a year or more — to get these businesses to 2022 at this point.”
He envisions a modified version of the Small Business Administration’s standard 7(a) loans — originated by banks but largely guaranteed by the government — perhaps extended to more types of businesses and with the potential of at least partial forgiveness like was done in the PPP.
“As if these small businesses didn’t have it hard enough already, now they have their buildings damaged or destroyed,” Nichols said.
Nichols, who also serves in the National Guard in his home state of California, spent the weekend in Oakland helping to police both demonstrations and riots there. He witnessed a mix of legitimate, peaceful demonstrations and what he called inexplicable lawlessness and vandalism that resulted in substantial property destruction and numerous injuries.
“There was a lot of mayhem,” he said. “That was really tough to see because you had these anarchists and looters taking it all out on these small businesses, in many cases, that demonstrators were trying to support.”
Banks spent much of Monday trying to dig out from retail-level damage and decide how best to conduct business in the near term.
In La Mesa, Calif., near San Diego, a Union Bank branch was burned to the ground over the weekend.
A spokeswoman said the bank did not appear to be targeted, as other banks and businesses in the area were also destroyed. The San Francisco-based banking subsidiary of Mitsubishi UFJ Financial Group in Tokyo has not yet closed any of its other 340 branches, but it is following individual mandated curfews — including those in effect today in San Francisco, Santa Monica and Beverly Hills — and will close in the event that the situations are deemed unsafe.
A new branch that was opened in the Deep Ellum neighborhood near downtown Dallas by the $228 million-asset Texas Brand Bank was boarded up Monday as windows were shattered. A bank spokesperson did not respond to a request for comment.
Citigroup branches in downtown San Diego and New York City reportedly endured riot damage.
Wells Fargo branches were reportedly set ablaze in Minneapolis, Portland, Ore., and Philadelphia, while additional locations in California and Georgia also sustained damage. All Wells Fargo branches in the city of Philadelphia were closed on Monday, some because of damage sustained and others due to safety concerns.
Fires were reported at JPMorgan Chase branches in Portland, suburban San Diego and Oakland. A bank spokesman said that the company is monitoring its branches and nearby conditions and adjusting its hours as appropriate.
U.S. Bancorp in Minneapolis did not immediately respond to an interview request Monday.
Elsewhere, Capital One's new “cafes” in Portland and Philadelphia had some damage from the protests, a spokesperson for the $397 billion-asset company in McLean, Va. said in an email. The spokesperson said the bank was ready to help small businesses that were also in need of repair.
Dallas-based Comerica closed 25 locations on Monday "out of an abundance of caution and added additional security," a spokesperson said in an email. The $76.3 billion-asset company's headquarters in downtown Dallas was surrounded by boarded up shops and restaurants that were damaged during the protests. So far, the bank has not been contacted by any customers whose properties were targeted by looters, the spokesperson said.
"Over the past several days, we have experienced damage, such as broken windows and graffiti, to eight of our facilities and banking centers throughout our footprint," the spokesperson said. "At this time, all of our colleagues remain safe."
Laurie Stewart, president and CEO of the $738 million-asset Sound Financial Bancorp in Seattle, said the company’s branches and offices in Seattle were spared damage but that she had a host of near- and longer-term concerns.
Worries are mounting in Seattle, among the cities hardest hit by the coronavirus pandemic, that people gathering by the thousands could result in a new wave of coronavirus cases in the coming weeks, Stewart said.
“It seems obvious we will have a spike, and it will be very hard to track because these are very large crowds that disperse to all over at the end of the night,” Stewart said. “I worry that the work we’ve done” to slow spread of the virus “will be undone and we’ll be back at ground zero — or worse than ground zero if you are a business whose property or facility is destroyed.”
Even after the physical damage and other immediate consequences are dealt with, daunting challenges to fix societal and economic inequities remain.
Initially peaceful protests late last week “give hope” that Americans want to come together “because clearly we have an amazing amount of work yet to do on equality and racism,” Stewart said.
Citigroup Chief Financial Officer Mark Mason, one of the most prominent African American executives in the banking industry, said anger spilled out onto America’s streets with “devastating consequences,” sparked by the terror of the Floyd killing.
“I have watched that video of his death with a combination of horror, disgust and anger,” Mason wrote in a Citi blog post over the weekend.
“Racism continues to be at the root of so much pain and ugliness in our society – from the streets of Minneapolis to the disparities inflicted by COVID-19,” Mason said. “As long as that's true, America's twin ideals of freedom and equality will remain out of reach. These systemic problems will not go away until we confront them head on.”