Booker T. Washington, the Founder of the Tuskegee Institute and the son of slaves, once wrote, “By habits of thrift and economy… we are coming. The belief that thrifting and saving are the necessary means to an end that is comprised of prosperity and abundance is what the American dream is firmly rooted in.

Bank Incorporation and Early Success

The incorporation of the Freedmen’s Savings and Trust Company in 1865 was spurred by this belief in the American dream coupled with the banking needs of formerly enslaved black soldiers.

Abraham Lincoln proclaimed, “This bank is just what the freedmen need” on March 3, 1865, as he signed the Freedman’s Bank Act and authorized the organization of a national bank for ex-slaves.

The number of ex-slave depositors grew rapidly from 1865-1870 partly due to aggressive recruiting tactics.  Thirty-four branches were established in cities across the nation, including Atlanta, Charleston, Philadelphia, and Washington D.C. A Charleston journalist in 1867 reported, “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.

Fraud and Failure

Unfortunately, the thrifting and saving did not yield desired results. The lofty dream of prosperity and abundance slowly spiraled into a nightmare of fraud, mismanagement, and discriminatory lending.

Congress in 1871 authorized banks to provide business loans and mortgages for blacks but ironically, such mortgages and loans were usually administered to whites at the expense of black depositors. A combination of risky investments and lending patterns in conjunction with cronyism and corruption at the level of upper management, slowly undermined the stability of the bank. According to a Black Past report, “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.”

On June 29, 1874 the Freedmen’s Bank was officially closed. At the point of closing, 61,144 black depositors were robbed of the modern equivalent of $66 million. As a result of the failure of the bank many black depositors and borrowers became distrustful of the white banking community especially since the Freedmen’s Bank was established and managed by white men.

Present Day Challenges

It has been proven that the white banking community has imposed higher interest rates on black borrowers or simply rejected their applications for mortgages and small business loans in subsequent years. Although black depositors should be far less concerned about being overtly robbed of their money today, research indicates that blacks continue to be treated far worse than whites when seeking loans or mortgages, even when all other variables, such as credit history or academic and professional credentials, are the same.

Glenn Christensen, Professor of Marketing at Brigham Young University has this to say, “If you are white and set out to get financing for an entrepreneurial venture, it might be a tough journey but generally speaking, you would experience fewer obstacles and find more help along the way than if you came from an African American or Hispanic background.”

Why You Should Bank Black

Lately, a growing number of community leaders are supporting black-owned banking institutions in recognition of these age-old disparities in access. Usher, a popular singer/songwriter during a Black History Month appearance at the black-owned Citizens Trust Bank in Atlanta said that empowerment starts with ownership. He explained. “We’re here supporting Citizens Trust Bank as a black bank, but it also stands for the support of all the black businesses that they support. It’s all about supporting our own.”


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