Savings and Trust: The Rise and Betrayal of the Freedman's Bank

Savings and Trust: The Rise and Betrayal of the Freedman's Bank by Justene Hill Edwards

The Freedman's bank was formed at the end of the Civil War to give former slaves a place to save their money. It was initially charter to be a very safe savings bank in a single location. It would invest in government bond and pay a small amount of interest. It expanded to other locations. Many of the leaders were white men who desired to help the blacks. The bank later expanded to many other locations. Many of the clients were using it as a place to store money until they could buy land. Transactions tended to be small. The bank later ran into money issues. It had difficulty making the promised interest payments. It spent money on opulent buildings. The solution seemed to be to go into other money making ventures, such as making loans. It was restricted to making "safe" loans to those with significant land as collateral, and was forbidden from loaning to those controlling the bank. Alas, the first restriction ended up restricting loans to most of the black patrons and the second restriction was flouted. After a banking panic hit, the bank hit huge issues. Advance notice was required for withdrawals. (Though certain mostly white business customers could get money out easily.) The bank eventually failed. Even in failure, there were some last minute loans to friends. Almost none of the outstanding loans were paid back. The clients only received a few cents on the dollar and now were resistant to dealing with banks. It is a typically case of bank failure caused by greed, tho. This probably set back the financial condition of the freed slaves, though was only a small part of the many negative policies during reconstruction.