Over 150 years ago, a massive bank robbery took place.  The targeted bank had been set up by the government to serve the financial needs of formerly enslaved people.  The government knew who the thieves were and allowed them to get away with it.  This is the story of the robbery of Freedman’s Bank, how that broken promise stole generations of wealth from Black Americans, and how it’s consequences are still existing in today’s society.

At the end of the Civil War, the United States Congress and President Lincoln recognized the need to aid newly freed Black men and women in their transition to freedom.  A Freedman’s Bank was established on 03 March 1865, in Virginia, to help newly freed slaves navigate their lives financially and to support land grants and other elements for the Freedom Bureau Act — hence the name FREEDMAN.  Activities included establishing hospitals and schools, providing rations, supervising the creation of labor contracts between freedmen and planters, and ensuring justice.

The act had a clear objective and purpose: a simple savings institution created primarily for former slaves and their descendants.  The deposits received by the bank, with the exception of a fund set aside for operating costs and other emergencies, were to be invested in stocks, bonds, Treasury notes, or other securities of the United States.  The charter suggested that “no loans would be made” and that “all assets of the Bank were owned by the depositors in proportion to the deposits of each.”  By January of 1866, with its headquarters in New York and the assets of the 2 military banks at Norfolk and Beaufort transferred to the company, Alvord and other bank officers moved to open branches in other cities.

In less than a decade, an estimated seventy thousand depositors had opened and closed accounts, with bank deposits totaling more than 57 million dollars over 37 branches in 17 states!

In an effort to protect the interests of depositors and their heirs in the event of a depositor’s death, the branches collected a substantial amount of detailed information about each depositor and his or her family.  John W. Alvord, a congressional minister and abolitionist, met with more than 20 philanthropists and leading members of the business community to explore the idea of establishing a savings bank for the benefit of Black soldiers.  Alvord, who had worked with these soldiers in a variety of humanitarian ventures, informed the group that many Black soldiers who were receiving back pay and bounty payments for enlisting in the service had no safe place to deposit their money.  

The Panic of 1873, which was a financial crisis that began in Europe and metastasized to the United States, caused most of the bank’s investments to lose value or become worthless.  The Panic was caused by a stock market crash, the collapse of a major bank, and the failure of many railroads.  By March 1874, the Freedman’s Savings Bank was in financial crisis.  

With the intention to reassure Black American depositors, officials elected Frederick Douglass as bank president.  Douglass had been a prominent supporter of the bank, serving as a trustee and also holding a personal account.  Not including other contributors, he loaned $10,000 of his own money to the institution to help with a bail-out.  Just six weeks after taking the position, he realized that the bank was insolvent and beyond saving so he asked Congress to shut it down to prevent further losses and later regretting his association with the Freedman’s Savings Bank.  The U.S. Congress was supposed to supervise the bank, but paid little attention, leading to its collapse.

On 29 June 1874, The Freedman’s Savings and Trust Company, also known as the Freedman’s Bank closed.  The bank’s failure was caused by a combination of corrupt officials, financial panic and distress, and gross-negligence by the United States Congress.  Many ramifications ensued as a result.

Psychological Impact: The bank’s failure left many Black Americans with feelings of betrayal, abandonment and distrust of the American banking system.  This disdain has been passed down amongst generations and still exists today.  At a time when people of all races, including Blacks, were saying that former slaves couldn’t make it on their own, the Freedman’s Bank was a piece of demonstrable proof that they could only for their hopes and dreams to be snatched away from them.

Economical Impact:  The collapse prevented Black American’s from building wealth, buying land and providing quality education to their children causing a perpetuated racial wealth gap.  Over 60,000 depositors lost nearly $3 million while many depositors lost their entire life savings.  This destroyed the hopes for Black economic prosperity.