Freedman's Savings Bank
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The Freedman's Saving and Trust Company, popularly known as the Freedman's Savings Bank, was a financial organization created by the U.S. government to encourage and guide the economic development of the newly-emancipated African-American communities in the post-Civil War period. Although functioning only between 1865 and 1874, the company achieved notable successes as a leading financial institution of African-Americans. Its archives are valued as an exhaustive collection of information regarding the African American community and its socio-economic life in the immediate aftermath of emancipation.
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[edit] Establishment
Following the end of the American Civil War, the poor economic condition of the newly-emancipated African-Americans (often called Freedmen at the time) was aggravated by the economic devastation of the Southern states. The emancipated peoples had few economic resources or capital and little experience or exposure to private enterprise. Many soon fell into sharecropping and forced labor in the South. To help alleviate the socio-economic condition of the community, the Republican-controlled U. S. Congress established the Freedman's Bureau and passed an act of incorporation and a charter for the Freedman's Saving and Trust Company, which was signed into law by President Abraham Lincoln on March 3, 1865.[1] Originally headquartered in New York City, the first branch of the company opened in Baltimore, Maryland. By 1866, the bank had established 19 branches in 12 states, mainly in the South. The national headquarters was shifted to Washington, D.C. in 1867.[1]
[edit] Function
The company was created specifically as a repository for African-American veterans, ex-slaves and their families to build their savings, but it also enabled numerous community organizations increase their financial strength and thus, expand their activities. The company attracted a large number of societies, churches, charities and other private organizations that opened accounts and established trusts with the company.[2] With the assistance of the company, numerous hospitals, schools and institutions such as the St. Elizabeth Home for Colored Children and the St. Francis Xavier Church's Orphan Aid Society were established. Noted community leaders and civil rights activists formed the management of several trusts and held other important positions in the bank. A large number of African American soldiers and veterans of the Civil War held savings accounts in the banks; the management of their funds was organized through an allotment system supervised by the officers of the respective army regiments. The surviving documentation and papers of the bank archives illuminate the names, whereabouts and other relevant information about the veterans of the 7th Regiment United States Colored Troops and their transactions with the bank; the data is considered historically important in the study of African-American history.[2] The bank's records of 480,000 names, estimated to be the largest single repository of lineage-linked African-American records, has been indexed by the Church of Jesus Christ of Latter-day Saints. The searchable database is available to amateur as well as professional genealogists. [3] At the height of its success, the Freedman's Savings Bank held assets worth more than $3.7 million.[1]
[edit] Failure
For several years, the company remained stable and operated well. But in 1870, the company's new management encouraged the U.S. Congress to change the policy requiring that all deposits be invested only in government securities. As a result, the bank management began to make more speculative and riskier investments in the stock market and real estate.[1] Poor management, speculation, dubious investments and corruption soon overwhelmed the bank, substantially increasing its debt burden while its assets shrank.[4] In midst of crisis, leading African-American politician Frederick Douglass joined the bank as its president in 1874 to boost the morale of the organization, the depositors and its clients.[1] However, a U.S. Treasury report found the bank heavily indebted when a severe national economic depression began in 1873. The bank could not call in its loans and account holders found it impossible to withdraw their money. The trustees faced not only a loss of credibility but also enormous debts. Realizing the full extent of the crisis, Douglass urged Congress to take steps to protect investors from further losses, and later recommended the dissolution of the bank itself. Subsequently, the U.S. Congress passed legislation authorizing the trustees to close the bank; the company was formally terminated on June 29, 1874.[1][4]
The failure of the bank amidst the economic crisis created widespread problems and discontent. Although the U.S. Congress approved a program making depositors eligible to recover as much as 62% of their account values, most did not receive any compensation.[1] The failure of efforts to petition the government to assume responsibility created deep dissatisfaction and resentment in the African-American community, hampering entrepreneurship and economic development while fostering its political isolation and disenfranchisement.
