Seaway Bank & Trust in Chicago, Illinois used to be one of the biggest black-owned FDIC financial institutions in the country.
However, approximately a week before Black History Month in 2017, this historic symbol of African-American banking power was officially sold to a Texas-based bank, which is owned by shareholders from India. This major blow to the black American business world went down without receiving any real national media attention.
According to ChicagoBusiness.com, a news website owned by Crain’s Chicago Business, Seaway Bank & Trust was officially shut down by state bank regulators prior to the FDIC announcing that the institution’s control would transferred to State Bank of Texas, which is located in the city of Dallas.
At one point in recent history, Chicago had four black-owned banks within the city limits. Today, just one black-owned bank still remains. Steve Daniels, a reporter for ChicagoBusiness.com wrote the following about the foundation of one of the former biggest black-owned banks in America:
“Seaway was founded 52 years ago to combat red-lining in African-American neighborhoods in Chicago. For decades, it was owned by Jacoby Dickens, a politically connected businessman who was an adviser to Chicago’s first black mayor, Harold Washington, in the 1980s. Seaway is probably most noticeable to Chicagoans as the lone operator of foreign exchange operations in both of Chicago’s airports.” (ChicagoBusiness.com)
Losses from bad loans were the primary cause for Seaway’s collapse. Efforts were made to keep the bank in black hands in the last days of its existence. However, no African-American investors would contribute due to the risk of taking over such a financially volatile banking institution.
Fractional reserve lending is a legal financial practice, which banks can use to issue personal and business loans. However, small community banks can get into trouble when they try to take advantage of the opportunities that big banks do. When a bank loans out 10 times more than what it has in its holdings, trouble can often mount.