Paycheck Protection Program Lending in Baltimore City

MCRC’s latest report examines how Baltimore City’s top ten lenders served the community through the distribution of the federal Paycheck Protection Program SBA backed loans.

Explore the map above to see which businesses in Baltimore City received loans.

“Baltimore needs financial institutions that meet our
communities needs and new solutions such as public banking must be seriously considered.”
— Delegate Stephanie M. Smith, District 45

Report Summary

The COVID-19 public health crisis has devastated both the economic and physical health of Americans and Baltimore is no exception. The new report issued by the nonprofit Maryland Consumer Rights Coalition, based on data from the National Community Reinvestment Coalition (NCRC), analyzes where the top 10 Baltimore City banks distributed Paycheck Protection Program (PPP) loans, looking at zip codes and business-type, as well as the amount of dollars allocated. While communities across the nation have experienced the burdens of this crisis, the impacts have especially devastated low-income communities of color that have experienced disinvestment for decades.

The COVID-19 impact on Baltimore City’s economy was catastrophic but its harm was not felt equally across industries or races. While most of the banks’ PPP lending favored majority Black zip codes, lending patterns were still concentrated in the “White L”, particularly around the Inner Harbor, with more dispersed lending across the “Black Butterfly”. Lending patterns still do not reflect the racial demographics of Baltimore City - if they did, one would expect to see lending of over 60% in majority Black zip codes and less in majority white neighborhoods.

Key Findings

PPP Loans by Top 10 Banks Ranked by Deposit:

  • Baltimore City’s Top 10 banks by deposits (in order: Bank of America, M&T, Wells Fargo, PNC, Truist, Howard, Harbor, Fulton, TD, and Capital One) distributed almost 4000 PPP loans of which 54.8% went to majority Black zip codes – But Baltimore’s population is 62.35% Black

  • Bank of America ranks #1 in deposits but its PPP lending was significantly lower at $76,783,118.91 than #2 ranked M&T

  • #2 ranked M&T lent 42% of the total PPP funds in the City – By far the largest amount at $256,631,457

  • Wells Fargo is ranked #3 by deposits but severely under-lent compared to its competitors at $20,534,366

  • African American-owned Harbor Bank distributed PPP loans at a higher average to majority Black zip codes

There were higher amounts of lending in zip codes 21202, 21230, 21226 which largely comprise the bottom of the “White L.” These zip codes contain the Inner Harbor, Federal Hill, Fells Point, and Canton - neighborhoods that are highly developed and deeply white (more than 70% white).

 
 

Policy & Research Recommendations to Equalize Investment in Majority Black Zip Codes:

Policy

  • Create a public banking option at the state or city level with an assessment component to analyze the impact public banking has on lending patterns. A public banking option would ensure that lending was conducted in the public interest and commensurate with the needs of the community

  • Establish a state level Community Reinvestment Act (CRA) that extends CRA requirements to a more diverse set of financial institutions including credit unions, fintech, and other non-bank lenders

  • Tie city bank deposit decisions to equity considerations. Using the assessment from the report outlined below, the city would be obligated to move city money to a bank that best represents equitable lending

Research

  • Research bank lending and branching in a biannual report. Reporting on bank mortgage, small business lending, and branching by census tract will indicate banks’ equity considerations and inform the city’s banking decisions

Conclusion

The Federal Paycheck Protection Program was established by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act to help businesses keep their workforce employed during the COVID-19 crisis. While the program was administered through the Small Business Administration and the Treasury Department who issued guidance to lenders to ensure that the program prioritized underserved markets, analysis found widespread racial disparities in how those loans were distributed. The Federal Housing Administration’s practice of redlining has had a devastating impact on Baltimore City’s physical and financial landscape. Baltimore’s PPP distribution leaves room for concern because it still reflects racial disparities in bank lending.

Under the Community Reinvestment Act, Baltimore’s top ten financial institutions have a continuing, affirmative obligation to meet the needs of the communities from which they take deposits - especially in low and moderate-income neighborhoods like many in Baltimore City. The top ten banks in Baltimore hold over 98% of the deposits in the city and must be held responsible to the communities from which their capital flows.