In the ephemeral nine years of it’s existence, the Freedman’s Savings and Trust Company instituted to bolster the financial ability of newly freed black slaves was scarcely able to live up to it’s objective to support the monetary development of the recently emancipated African-Americans.
The bank’s services ranged from a modest cum personal savings account which helped it’s holders grow their funds, to a scheme that favored organizations aiding them in expanding their fiscal reach. Initially headquartered in New York, then Washington DC and with an extensive spread of 19 branches across 12 states, the company housed up to $57 million and at the time possessed a clear cut goal; to encourage full participation in the American society of former slaves.
Linked to the Freedman’s Bureau Act which was established by the Congress to ease the unfortunate economic conditions of the liberated slaves, the bank was formally launched by clergyman John Alvord on March 3, 1865 to a welcoming public who tired of the previous inconsistencies and mismanagement of black funds in smaller institutions in little time took advantage of it’s services, an action that would culminate in it’s becoming the prominent financial institution for freedmen.
For the slaves it was a statement, a flag of liberty, visible proof that they too had economic capabilities, that they were capable of hard-work, thriftiness and overall great financial decisions.
So when John Alvord, a former minister journeyed to the South to conscript them, bearing ratification’s from General OO Howard (the commissioner of the Freedmen’s Bureau): “as an order from Howard … Negro soldiers should deposit their bounty money with him,” and a handwritten note that read; I consider the [Freedman’s Bank] to be greatly needed by the colored people, and have welcomed it as an auxiliary to the Freedmen’s Bureau, they embraced him.
It had at the time seemed an imperative and forward thinking movement especially because aside its obvious objectives, it also created jobs for freedmen, fitted them with teachings in banking and inculcated them step by step into the swift industry. The office was depicted by a reporter in 1870 to be full of Negroes depositing little sums of money, drawing little sums, or remitting to a distant part of the country where they had relatives to support or debts to discharge.
African-American social reformer, Frederick Douglass described the purpose of the institution as instilling into the minds of the former slaves lessons of sobriety, wisdom, and economy, and showing them how to rise in the world.
This sense of inclusion was however threatened when the first wave of woes hit the institution in 1871 after Congress endorsed the provision of mortgages and business loans by financial institutions. The all-white board of the bank blinded by racial prejudices did not envisage giving such loans to freed slaves and this caused an uproar by the masses who believed the board was corrupt and that they sponsored the economic activities of the whites from the funds of the black depositors.
There were cases of fraud and siphoning, men like Henry Cooke, who served on the Bank’s board used the company’s resources to finance his family banking business, negligence, inexperience and a total apathy for the affairs of freed slaves led to an institution that was almost in ruins by the Panic of 1873.
Moved by the rumors of corruption, fraud, mismanagement of their funds from the slaves and a general need to protect business interest, a more inclusive board was created to lead the bank and was chaired by Fredrick Douglas who invested about $10,000 of his personal savings to rescue the fading organization. This sacrifice fueled perhaps on one hand by good intention, and on the other by a connection to the masses than the previous administration did little to help the situation and on June 29 1874, the Bank’s trustees voted to shut down.
The institution collapsed with $2,993,790.68 due to 61,144 depositors and although a program was established to refund the slaves of about 62% of their savings, by 1900, only a small percentage of them ever received the reimbursement, the majority losing all.
This is believed to have fostered a cycle of distrust for the banking industry in subsequent years. American sociologist, historian and co-founder of the NAACP W.E.B Du Bois wrote about the incident; Then in one sad day came the crash —- all the hard-earned dollars of the freedmen disappeared; but that was the least of the loss —- all the faith in saving went too, and much of the faith in men; and that was a loss that a Nation which to-day sneers at Negro shiftlessness has never yet made good.
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