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Speaker 1: This Day in History Class is production of iHeartRadio. Hello

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Speaker 1: and welcome to This Day in History Class, a show

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Speaker 1: that tallies the gains and losses of everyday history. I'm

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Speaker 1: Gabe Lucier, and today we're talking about the broken promise

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Speaker 1: of the Freedman's Bank. It was founded to give newly

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Speaker 1: freed black Americans a fighting chants in the free labor

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Speaker 1: economy of the reconstruction era, but the bank's eventual and

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Speaker 1: avoidable collapse left black families less financially secure than ever.

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Speaker 1: The day was June twenty eighth, eighteen seventy four, all

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Speaker 1: branches of the Freedmen's Bank closed their doors for good.

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Speaker 1: The Freedmen's Savings and Trust Company, more commonly known as

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Speaker 1: the Freedmen's Bank, was established in eighteen sixty five, on

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Speaker 1: the same day the Freedmen's Bureau was created. During its

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Speaker 1: nine years in business, the bank provided financial services to

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Speaker 1: tens of thousands of formerly enslaved black Americans. At its peak,

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Speaker 1: the bank operated thirty seven branches in seventeen states, including

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Speaker 1: every former slave holding state, as well as in Washington,

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Speaker 1: d c. By its fifth year, nearly all of those

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Speaker 1: local branches were run entirely by African Americans. However, the

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Speaker 1: bank's upper management and board of trustees remained all white

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Speaker 1: and all male for most of the institution's brief existence.

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Speaker 1: With hardly any government oversight, the directors funneled their depositors

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Speaker 1: money into a series of increasingly bad investments and risky

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Speaker 1: speculative ventures. Seventy four, their gross mismanagement had taken its

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Speaker 1: toll on the bank, and a collapse seemed imminent. There

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Speaker 1: was a last ditch effort to save the bank by

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Speaker 1: installing Frederick Douglass as its new president, but the damage

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Speaker 1: was too far gone. Accounts differ on whether the official

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Speaker 1: closing was June twenty eighth or June twenty ninth, but

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Speaker 1: by early July one thing was clear for certain. The

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Speaker 1: Freedmen's Bank had failed. The need for a bank for

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Speaker 1: freed black people first became apparent during the American Civil War.

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Speaker 1: By eighteen sixty two, many black Americans had found employment

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Speaker 1: in union garrisons, and while they were paid for their work,

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Speaker 1: they were often denied access to conventional banks, making it

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Speaker 1: all but impossible to accumulate any real savings. As a result,

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Speaker 1: some black soldiers simply spent their pay as quickly as

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Speaker 1: they received it, while others lost their earnings to white

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Speaker 1: swindlers who promised to invest it on their behalf. As

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Speaker 1: the war went on, northern abolitionists and sympathetic army officers

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Speaker 1: began calling for the creation of a freedman's bank, a

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Speaker 1: place for black soldiers and freedom seekers to safely deposit

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Speaker 1: their money. Eventually, a few small banks were established for

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Speaker 1: that purpose across the South, but the services they offered

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Speaker 1: were nowhere near as robust or reliable as those found

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Speaker 1: at white banks. Deposit records, for example, were frequently misplaced,

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Speaker 1: making it difficult for customers to recover their funds. There

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Speaker 1: was also little to no communication between the banks, which

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Speaker 1: once again made it harder to access funds. In early

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Speaker 1: eighteen sixty five, as the war was drawing to a close,

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Speaker 1: two prominent white men began advocating for the creation of

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Speaker 1: a centralized black bank. They were John W. Alvert, a

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Speaker 1: congregational minister and abolitionist, and Anson M. Sperry, paymaster for

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Speaker 1: the US Army. Their calls to action, along with those

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Speaker 1: of Senator Charles Sumner, ultimately convinced Congress to create a

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Speaker 1: single institution under which all black deposits would be managed.

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Speaker 1: The legislation incorporating the Freedman's Bank was passed on March third,

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Speaker 1: eighteen sixty five, and signed into law by President Lincoln

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Speaker 1: shortly after. At first, the Freedman's Bank was just as

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Speaker 1: bare bones as its predecessors in terms of service. Customers

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Speaker 1: could make deposits, but that was about it. There were

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Speaker 1: no loans available, and depositors had no say in the

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Speaker 1: stocks or bonds in which their money would be invested.

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Speaker 1: The bank essentially functioned as a kind of co op,

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Speaker 1: with each depositor owning a share of the bank's assets

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Speaker 1: in proportion to the amount they deposited. Customers could open

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Speaker 1: an account with as little as one nickel, and would

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Speaker 1: then earn interest on deposits of one dollar or more.

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Speaker 1: Most individual accounts were small, ranging from five to fifty

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Speaker 1: dollars on average, but collectively the Freedmen's Bank grew to

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Speaker 1: hold millions of dollars, the combined wealth of upwards of

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Speaker 1: one hundred thousand customers. Many of them opened accounts with

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Speaker 1: the first paychecks they'd ever received in their lives. Free

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Speaker 1: from bondage, they now earned a living as farmers, cooks, nurses, barbers,

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Speaker 1: and carpenters, and with a bank to secure the fruits

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Speaker 1: of their labor, they were able to develop responsible financial habits,

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Speaker 1: save up for major purchases, and build a cushion to

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Speaker 1: protect against economic uncertainties. The Freedmen's Bank thrived during its

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Speaker 1: first few years and had a profoundly positive effect on

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Speaker 1: its customers. Recent studies have shown that the bank's account

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Speaker 1: holders were more likely to be literate, educated, and employed

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Speaker 1: than Black Americans of the era who did not bank

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Speaker 1: at Freedmen's. They also had higher incomes and owned more

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Speaker 1: real estate. As the year went by, Freedman's opened dozens

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Speaker 1: of branches in southern cities with large black populations, and

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Speaker 1: there's evidence that just living near a branch could have

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Speaker 1: an uplifting effect on a community. Sadly, despite that strong start,

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Speaker 1: the Freedman's Bank showed signs of trouble as early as

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Speaker 1: eighteen sixty seven. That's the year the bank's headquarters was

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Speaker 1: moved from New York City to Washington, d C. A

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Speaker 1: grand new building was built there at the southeast corner

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Speaker 1: of Lafayette Square, where the Treasury Annex stands today. The

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Speaker 1: Lavish bank headquarters cost more than two hundred thousand dollars

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Speaker 1: to construct and furnish, the equivalent of more than four

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Speaker 1: million dollars in today's money. It was a questionable expense

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Speaker 1: for an institution that was still finding its footing, but

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Speaker 1: the bank likely would have still survived if not for

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Speaker 1: the reckless actions of its government appointed trustees. Although it

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Speaker 1: had been founded as a savings bank first and foremost,

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Speaker 1: many of the bank's deposits were ultimately used for high

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Speaker 1: risk investments in railroad companies and real estate, most of

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Speaker 1: which didn't pay off. To make matters worse, the trustees

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Speaker 1: started allowing the first national bank to offload its liabilities

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Speaker 1: onto the Freedmen's bank books, essentially sticking black customers with

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Speaker 1: the debt of a white bank. Those decisions proved terrible

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Speaker 1: for the bottom line of both the bank and its customers,

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Speaker 1: but the largest damage was done in eighteen seventy. That's

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Speaker 1: when the board made an amendment to the Freedman's Charter,

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Speaker 1: changing its loan and investment policy so that it no

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Speaker 1: longer had to invest deposits only in government backed securities.

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Speaker 1: The revision allowed the board to take even greater risks

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Speaker 1: with depositors hard earned money, a fact which customers were

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Speaker 1: kept in the dark about, as they were never notified

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Speaker 1: that the charter had been changed. The Black writer and

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Speaker 1: abolitionist Frederick Douglass later commented on the bank's decline, lamenting

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Speaker 1: that it had become quote the black man's cow, but

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Speaker 1: the white man's milk. Many factors contributed to the bank's

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Speaker 1: eventual collapse, but one of the biggest was the lack

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Speaker 1: of government oversight. Government officials were supposed to keep an

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Speaker 1: eye on the Freedman's Bank, but they didn't, enabling the

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Speaker 1: trustees to run amok in their absence. In eighteen seventy three,

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Speaker 1: Congress responded to rumors of the bank's impending in solvency

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Speaker 1: by sending the Comptroller of Currency to review the bank's books,

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Speaker 1: but by then it was already too late. A financial

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Speaker 1: crisis known as the Panic of eighteen seventy three was

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Speaker 1: the final nail in the bank's coffin. Real estate prices plummeted,

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Speaker 1: borrowers defaulted on loans, and depositors demanded their money back.

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Speaker 1: By spring of eighteen seventy four, the Freedmen's Bank was

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Speaker 1: hanging by a thread. Its coffers were virtually empty, and

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Speaker 1: customer confidence was at an all time low. In March

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Speaker 1: of that year, the bank's white trustees resigned and its

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Speaker 1: longtime president, John Alverd stepped down. In an effort to

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Speaker 1: rebuild trust, the government convinced Frederick Douglas to take over

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Speaker 1: as the bank's president. He invested more than ten thousand

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Speaker 1: dollars of his own money in the bank, but most

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Speaker 1: account holders remained distrustful of the tarnished institution. Before taking

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Speaker 1: the job, Douglas hadn't known just how bad the bank's

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Speaker 1: situation was, but once he found out, he compared his

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Speaker 1: new position to being quote married to a corpse. Things

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Speaker 1: were so dire that only six weeks after taking the job,

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Speaker 1: Douglas recommended that Congress shut down the bank. Ultimately, the

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Speaker 1: Freedman's Bank collapsed on its own, with many depositors losing

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Speaker 1: their life savings in the process. The bank's assets were

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Speaker 1: not backed by the federal government, and Congress initially refused

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Speaker 1: to reimburse account holders. In the blink of an eye,

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Speaker 1: more than sixty thousand depositors lost a combined total of

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Speaker 1: over three million dollars, the equivalent in purchasing power to

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Speaker 1: about eighty million dollars today, Many of those impacted by

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Speaker 1: the bank's closing continued to petition Congress for compensation. The

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Speaker 1: process dragged on for years, and in the end, most

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Speaker 1: depositors recouped only a fraction of what they had lost,

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Speaker 1: while some received nothing at all. The Freedmen's Bank had

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Speaker 1: started as a venture with great promise and admirable intent,

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Speaker 1: but due to gross mismanagement and outright fraud, it became

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Speaker 1: yet another harm inflicted on the Black community. The bank's

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Speaker 1: closing shattered a generation's hopes for economic advancement and has

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Speaker 1: since been linked to a legacy of distrust toward the

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Speaker 1: banking system among Black Americans. The painful effects of the

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Speaker 1: bank's closing are still with us today, but so too

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Speaker 1: is the hope it represented at its founding, the belief

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Speaker 1: that ever every American needs and deserves financial security, regardless

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Speaker 1: of their background, because, as former President Obama once said,

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Speaker 1: a country cannot succeed when a shrinking few do well

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Speaker 1: and a growing many barely make it. I'm Gabe, Lucia,

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Speaker 1: and hopefully you now know a little more about history

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Speaker 1: today than you did yesterday. You can learn even more

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Speaker 1: about history by following us on Twitter, Facebook, and Instagram

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Speaker 1: at TDI HC Show, and if you have any feedback

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Speaker 1: you'd like to share, feel free to send it my

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Speaker 1: way by writing to This Day at iHeartMedia dot com.

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Speaker 1: Thanks to Chandler Mays and Ben Hackett for producing the show,

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Speaker 1: and thanks to you for listening. I'll see you back

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Speaker 1: here again tomorrow for another day in History class