On this dayJun 28, 1874
Freedmen’s Bank Fails, Devastating Black Community
The Freedmen’s Savings and Trust Company, more commonly referred to as The Freedmen’s Bank, failed in June 1874, taking with it millions of dollars in black wealth. The bank was first incorporated on March 3, 1865, the same day the Freedmen’s Bureau was created, and formed to help previously enslaved people economically transition to freedom.
Before Emancipation, most black people in America were enslaved and had no means of accumulating, protecting, or passing down wealth from generation to generation. After slavery’s end, many black people had little foundation from which to develop economic independence and prosperity. The Freedmen’s Bank emerged as an institution seeking to help bridge this gap; as part of its mandate, the bank employed freedmen, providing jobs and training for those on its staff as well as banking services for those in the black community.
With the help of the Freedmen’s Bureau, the Freedmen’s Bank grew strong as tens of thousands of depositors trusted it with their assets. Individual accounts were typically small, ranging between five and fifty dollars, but collectively the bank grew to hold millions of dollars. At its high point, the bank had thirty-seven branches operating in seventeen states and Washington, D.C.
The headquarters, located in the nation’s capital, was an impressive sight on Lafayette Square, but cost more than $200,000 to build and decorate. In addition, the volatile post-war economy that eventually led to the Panic of 1873, took a toll on national economic stability. By 1874, fraud and mismanagement by senior leaders and the board of directors had weakened the bank significantly. For example, white businessman and politician Henry D. Cooke approved unsecured loans to his own quarry operation while sitting on the bank’s board; when his company could not repay the loans following a stock market crash in 1873, the quarry went bankrupt and the bank was devastated.
In an attempt to restore public trust in the institution, prominent black leader Frederick Douglass was brought on as the bank’s president in early 1874. Douglass believed in the importance of the bank's economic power, even putting thousands of dollars of his own money into the coffers to keep the bank afloat. Despite these efforts, the Freedmen's Bank closed its doors in late June 1874; many sources place the exact date of the official closing on June 28 or 29, and press began to report on the failure in early July.
The bank’s closure caused more than 60,000 black Americans and black organizations to lose $3 million in savings. Many victims waited for years for a mere fraction of their deposits to be returned. The failure of the Freedmen’s Bank financially devastated many who had entrusted it with their funds, and has been linked to a cultural legacy of distrust toward the banking system within the black community.