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Johnson Buys Bank to Build Black-Focused Financial Firm

By Terence O'Hara
Washington Post Staff Writer
Wednesday, March 15, 2006; A01

Robert L. Johnson, the founder and former chief executive of Black Entertainment Television, said yesterday that he acquired a tiny Florida savings and loan and plans to move it to Washington to use as the springboard for a large consumer financial services company aimed at black customers.

The bank, to be renamed Urban Trust, is part of an effort by Johnson to build what he hopes will be the country's largest minority-owned financial services company, one positioned to attract major Wall Street investors as it seeks to foster and profit from rising black wealth. The company is meant to compete with the nation's most elite financial firms, but, its new chief executive said, it will also spend "a lot of afternoons in churches" advocating homeownership.

"Urban Trust will . . . bring more access to capital to individuals and families who need it, especially those that need help managing their assets and their wealth in a better way," Johnson said. "There's no doubt in my mind that a well-capitalized, well-managed black-owned financial institution will be welcomed."

While average household net worth of blacks is far lower than the national average -- $15,500 vs. $71,700 in 1998, according to the latest figures compiled by the Federal Reserve -- it is growing far more rapidly than the national average.

In establishing Urban Trust, Johnson wants to reverse a decade-long slide in the number and performance of small, undercapitalized black-owned banks across the country whose traditional markets have been invaded by mainstream financial institutions.

"I've observed what's been happening with some minority banks out there," Johnson said. "The other big banks have gotten very aggressive at going after their customers. What we're saying is that we can bring the focus and the capital to compete with those big banks on the same terms."

Johnson, since resigning as chairman of BET in December -- he sold the privately owned cable broadcaster to Viacom Inc. in 2000 for $3 billion -- has been assembling what he calls his "second act": a large asset management and financial services firm from the Bethesda headquarters of his RLJ Cos. He has teamed with Deutsche Bank AG to form a hedge-fund investment business for wealthy individuals and institutions. And Washington's Carlyle Group, the biggest U.S. private equity firm, is helping him form a leveraged-buyout fund. Three years ago, Johnson began investing in hotels, and he now has a $3 billion portfolio of properties around the country.

The slide Johnson noted in historically black banks has been evident in Washington. Independence Federal Savings Bank in the District and Industrial Bank NA in Oxon Hill, were largely passed by while the deposit base in the Washington area doubled over the past five years. Independence's deposits actually shrank during that period, while Industrial's grew only 3 percent.

Johnson began speaking publicly of his desire to own a financial institution three years ago, when he tried to purchase Independence. That effort failed, but it laid the groundwork for his purchase of the Florida thrift.

Metro Bank FSB was founded in 1963, and for almost all its life it was a black-owned financial institution in a poor, black section of Orlando. It has just one office and less than $10 million in deposits, and it hasn't made money in years.

After running into financial and ownership troubles in 2003, Metro was purchased by Frank J. Hanna Jr., an Atlanta entrepreneur who made millions of dollars in the debt collection business and is a prominent financial contributor to conservative causes and Republican congressional candidates.

According to Johnson, Hanna, who could not be reached for comment, had hoped to return Metro to minority ownership at some point. Through a mutual friend, the two were introduced after Johnson's bid to buy Independence faltered. Johnson bought most of Metro's stock from Hanna, who will retain a small interest in the new company.

Johnson would not disclose the purchase terms, but described them as "nominal." He also would not disclose how much of his own money he plans to invest in the new business.

Urban Trust will be headquartered in Bethesda and plans to open its first branch this summer at 1350 I St. NW, on downtown's Franklin Square.

Dwight L. Bush, a former Sallie Mae and Chase Manhattan Bank executive, will be Urban Trust's chief executive. He said yesterday that the bank will focus at first on offering basic deposit and lending services in the Washington market, and that it plans to open several branches in the next two years.

However, Bush said, the company plans to immediately begin marketing college loans nationally, through university financial-aid departments.

"Most important for us at the start is to validate the investment premise in Washington," Bush said. "But the student loan business will be a nationwide business."

Bush said a key part of Urban Trust's business plan is to provide financial education to the black community "to help them gain and hold onto the wealth they're creating. You'll see us spend a lot of afternoons in churches giving seminars on getting a home mortgage."

Dozens of black-owned banks were formed in the 1970s and reached their financial peak in the mid-1980s, according to William Michael Cunningham, head of Creative Investment Research Inc. of Minneapolis and a longtime expert in minority financial institutions.

In the 1990s, tougher federal community reinvestment laws forced major banks to better serve urban black neighborhoods, prompting a new wave of competition for black-owned banks.

"The age of socially responsible community investment really began with black banks," Cunningham said. "But they're not the only game in town anymore. What happened is that minority banks didn't innovate. They thought they could hold on to their little niche. But the demand changed as their neighborhoods gentrified, and the supply changed as bigger banks moved in."

Cunningham thinks that Johnson's efforts could bear fruit, particularly if he focuses on black communities on the East Coast, where Cunningham said black wealth is growing most rapidly.

"The Washington area is about as good a banking market as you can find," Cunningham said.

© 2006 The Washington Post Company

© MBM

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He is Black in skin color only...---AudioGuy

Is that not the goal?

Numerous posts here talk aggressively about optimizing the economic; the social; the political.

Even I am of the position the 'black' is only what we are rather who we are.

'black' in skin only sounds like a 'good thing'.

Right??

If Johnson's venture benefits African America while he is making money, what can be wrong with that?

That is far more than others have done WHILE MAKING MONEY, and not being 'black' in any manner.


PEACE

Jim Chester
No, I don't think so, JWC.

If, as you say, Black is what we are and not who we are, then being Black in skin color only doesn't make him "one of us." Affirmative Action is a program that gives "benefits" to at least some African Americans ... that was not initiated to benefit us by someone who was neither "Black" on the inside nor the outside! Eek

Being Black in skin color only means you can get some pats on the back for what you do that others would not be so privvy to. The Black Republican comes to mind. And usually what they do is not "a good thing."
quote:
Originally posted by EbonyRose:
No, I don't think so, JWC.

If, as you say, Black is what we are and not who we are, then being Black in skin color only doesn't make him "one of us." Affirmative Action is a program that gives "benefits" to at least some African Americans ... that was not initiated to benefit us by someone who was neither "Black" on the inside nor the outside! Eek

Being Black in skin color only means you can get some pats on the back for what you do that others would not be so privvy to. The Black Republican comes to mind. And usually what they do is not "a good thing."


I'm 'missing you' here. I know you disagree, but I am not getting the relationship of 'being 'black' to your point.

Can you say it for me another way?


PEACE

Jim Chester
I'll give it a shot, Mr. Chester Smile

And actually, as I think about it I do see your point. Smile

But, those that are 'black in skin color only' are really no beter than those feed off of us in the same manner as those who don't look like us do. They provide benefit for personal gain, not in order to contribute to the community "goal" of upliftment, as it were.

They go around taking accolades as "The first Black this ... and the first African American that ..." But they are much more green than they are Black. When we want to be proud of one of "our own" it's hard to do when you look up and see a green man and the country is patting a Black man on the back.

So, I don't have a problem with any benefit to black folks that comes from Mr. Johnson buying this bank ... and I really do believe that he will use it directed at opportunities for some of us that need it. He is actually one of the better ones that manages to surprise me with his generosity to African American-oriented causes from time to time. sck

But, I'd be more inclined to think that his motivation was more to the tune of his noting (as do on this board) the amount of money that flows through the Black economy every year and came up with a way to get a piece of it using that "black skin" of his (and us) to do it.
But, I'd be more inclined to think that his motivation was more to the tune of his noting (as do on this board) the amount of money that flows through the Black economy every year and came up with a way to get a piece of it using that "black skin" of his (and us) to do it.---EbonyRose

Thanks for the extra effort for me.

As people grow within themselves, they spend less and less time 'beginning their day' with the color of their skin.

When I begin my day, I don't look in the mirror and see 'black' me. I simply see me.

Living in this society, you can never forget you are (societally) 'black'.

You do learn to not focus on it.

The greater the demand on you to perform, the less you are able to consider your color.

And then...there are times it hits you in the face when performance is critical.

Robert Johnson functions as a 'black' man in American society. He knows that every day of his life.

I think the issue that arises in the general community is does he give testimony to that blackness, and how, and when.

We want the authority to approve his behavior.

We can't have it.

We didn't earn it.


I agree with you that Robert Johnson sees the mony flow in African America ain't looks a way 'to get his'.

That's good.

As long as he doesn't diminish African America while doing it.

Making money is the name of he game.

He seems to be doing things the have the potential to lift us.

Sometimes in a way we like.

Sometimes not.

PEACE

Jim Chester
quote:
Originally posted by James Wesley Chester:
He seems to be doing things the have the potential to lift us.

Sometimes in a way we like.

Sometimes not.

PEACE

Jim Chester


True, Mr. Chester. And he also "seems" to do things that have the potential to set us back. Selling the only black-owned television/cable station in the United States to a white-owned conglomerate is not very helpful. Roll Eyes

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