How Banks Backed By The U.S. Government Swindled Ex-Slaves Out Of $66 Million

The American Dream is anchored on the strong conviction that thrifting and saving are necessary for financial success. Like Booker T. Washington, Founder of the Tuskegee Institute and former advisor to presidents, said, “By habits of thrift and economy… we are coming up.”

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When it comes to saving, banks play a key role. This was a challenge for ex-slaves who wanted to save their money since banks were a reserve of the whites. To address the issue, Freedmen’s Savings and Trust Company was established in 1865. As he was signing the Freedman’s Bank Act on March 1865, President Abraham Lincoln said, “This bank is just what the freedmen need.”

After its foundation, the bank rolled out an aggressive recruitment drive that saw the number of depositors skyrocket between 1865 and 1870. As many as 34 branches sprung up in different cities across the nation, including Washington D.C., Atlanta, Philadelphia and Charleston. “Go in any forenoon, and the office is found full of Negroes depositing little sums of money, drawing little sums, or remitting to a distant part of the country where they have relatives to support or debts to discharge,” a Charleston journalist reported in 1867.

Unfortunately, the hope of prosperity and abundance wasn’t realized. The institution was marred with serious cases of fraud, discriminatory lending, and mismanagement.

Unfortunately, the hope of prosperity and abundance wasn’t realized. The institution was marred with serious cases of fraud, discriminatory lending, and mismanagement.

In 1871, Congress gave a nod to banks to provide loans and mortgages. Paradoxically, it was whites who benefited and not the African Americans whose money was the lifeline of the bank. Poor lending patterns, risky investments, cronyism, and corruption slowly destabilized the bank.

“By 1874, massive fraud among upper management and among the board of director had taken its toll on the bank. Moreover, economic instability brought upon by the Panic of 1873, coupled with the bank’s rapid expansion, proved disastrous,” wrote the Black Post.

The bank couldn’t continue in business and it was closed down on June 29, 1874. At the time, a total of 61,144 Black people still had stakes in the bank equivalent to modern day $66 million. It all went down the drain. This development made members of the Black community to distrust white banking systems since Freedmen’s Savings and Trust Company was established and managed by white people.

Although Blacks and whites bank with the same institutions today, Blacks are still discriminated against. In some cases, they’re still forced to pay higher rates or denied small business loans or mortgages altogether. Research reveals that Blacks are treated far worse than their white counterparts when seeking loans even where all variables are the same.

Aware of such disheartening discrepancies, many Black leaders are urging African Americans to bank Black.

So, as you think of banking today, ensure you put your money in a Black-owned bank. By so doing, you’ll be helping the Black community in general.

Your Black World

Tiffany Cratic

Tiffany Cratic

Southern raised. "All In" for the pursuit of justice for all.

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