How "Black Wall Street" Inspired a Family Banking System
BY THE LEGACY PROJECT TEAM
In the early 1900s “Black Wall Street” was a symbol of economic hope and success for the African American community in the United States. Black Wall Street founder O.W. Gurley took advantage of Oklahoma’s rapid economic growth during the oil boom, purchasing 40 acres of land north of Tulsa in 1906, an area later deemed the Greenwood District. Gurley’s intent was to establish a community, led- and-run by entrepreneurial African Americans, and so he began parceling land to other enterprising Black businesses and developers. Between 1910 and 1920 Greenwood’s population grew exponentially from 10,000 citizens to over 100,000, and by 1921 Greenwood comprised of 191 Black owned businesses.[1]
The astonishing economic growth was largely attributed to the community-centered vision of mutual support. The emphasis on “buy local” added to the overall economy because of the higher circulation of dollars within their community. As the money cycled through their community, businesses thrived and hired more residents and employment and growth continued to soar. In keeping with this vision, Gurley and other business owners lent money to other African American entrepreneurs and economic growth continued to expand throughout Greenwood. According to the Federal Reserve Bank of Kansas City’s forthcoming book "A Great Moral and Social Force: A History of Black Banks," this community held:
"...an especially strong (belief) in the idea of using a community’s pooled resources as the fuel to drive its growth. (They) followed this ideal in business practices, operating under what is essentially a textbook definition of a community bank, albeit one with a single depositor whose resources were used to the benefit of many borrowers."[2]
So what does all of this mean? What lessons can we learn from Black Wall Street? Well, for starters, we can learn that the flow of money is a good thing! The movement of money from one place to another is the basis for economic success in any environment at any scale. Like pond water, a vehicle, or your body, as soon as you stop moving and circulating the major components, it will rot, break down, and not perform optimally. The circulation of dollars inside Greenwood attributed to its macro success over time. Like in Monopoly, or even Settlers of Catan, as soon as the transfer of money or resources stops, the game becomes boring and breaks down. The winner is almost always the one who always has his or her money on the move! Many people park their money inside a qualified account (e.g. 401K, 529 plan, Roth IRA, self-directed IRA, etc.) where it sits static until they retire. Their hopes are that it will help pay for their retirement, supplemented by Social Security which may or may not even still be in existence. Money in these accounts are static. They’re trapped! Access to that money isn’t available (without fees) until you’re fifty-nine and a half. The rich do better than this and we too can do better too.
Another thing we can learn is that keeping your money inside a closed system allows that money be cycled, where it continues to provide value to the same subset. Simply put, keep your money in your community, or better yet, your own family. On pages 71 and 72 of Nelson Nash’s book "Becoming Your Own Banker", Nash outlines a simple plan to establish generational wealth by creating a Family Bank. Take for example the process of buying a car. When you buy the car, the money you exchange for it is gone from your family forever. Or even worse, you decided to finance the vehicle so not only is the money gone that you used to pay for the car, so too is the interest money you had to pay the bank back with too. What if there was a way to not only get ALL the money back from buying that car, but also the interest too? Rather than allowing your dollars to outflow to credit card companies, banks, student loans, etc., keep your money within your family and continue to recycle it again and again.
How would this look you ask? By establishing a generational ladder of Infinite Banking Concept (IBC) policies. Policy loans are taken to finance the things we want in life, TAX FREE, and the balance is paid back with interest as to sustain future generations. It’s exactly what banks do. Banks lend money, then get that money back with interest. We are doing the same thing. With laddering this concept within a family structure, the older generation would use their capital to pay off the younger generation’s debt. That younger generation would then make payments back to the Family Bank rather than third party institutions, thus recycling the dollars inside the family and recapturing the interest that would otherwise be paid to others. Furthermore, because this is a Family Bank, the loan terms are established in a manner that all involved parties benefit! As debts are cleared, the older generations can loan money for family members to start their own businesses and establish their own Family Banks. The older generation essentially becomes “bankers” for the family, and everyone thrives. What is even more incredible is the tax-free windfall of money paid back to the family when the death benefit is realized.
Permanent life insurance is one of the most common forms of wealth preservation. You need to understand that you should be using life insurance while you are alive, where you can lend to yourself, borrow, earn a guaranteed return and leave a Legacy. Wealthy families like the Rothschilds, Rockefellers, Morgans, the Barclays etc. have used these policies to not just preserve their family’s wealth, but continue to grow it! Nash outlines the following as significant advantages to this plan:
Passive income is assured
Estate planning becomes greatly simplified
It promotes long range planning and covers multiple generations
Mitigate underwriting issues i.e. no financial institution telling you no
The initial investment is miniscule compared to the ultimate yield
When the death benefit is realized, the system becomes self-sustaining
Transference of a wealth mentality to succeeding generations
Promotes an understanding of stewardship
The build-up of cash value is tax free
If you want to do what the wealthy do and establish your own Family Bank, please reach out to us at The Legacy Project. We sincerely believe in this process and we want to see you and your family thrive and establish a Legacy of your own.
Work Cited:
[1] MESSER, C.M., SHRIVER, T.E., AND ADAMS, A.E. (2018). “THE DESTRUCTION OF BLACK WALL STREET: TULSA’S 1921 RIOT AND THE ERADICATION OF ACCUMULATED WEALTH. AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY, 77(3-4), 789-8, PG. 792. [2] TODD, T. (FORTHCOMING). A GREAT MORAL AND SOCIAL FORCE: A HISTORY OF BLACK BANKS. THE PUBLIC AFFAIRS DEPARTMENT OF THE FEDERAL RESERVE BANK OF KANSAS CITY.
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