Greenback America

The Freedman’s Savings Bank in the Age of Reconstruction

By Michael Caires
Greenback America Post-Doctoral Fellow

At The Atlantic, Alexia Fernandez Campbell’s “The Rise and Fall of Black Wall Street,” is a wonderful piece on black community banks in the Jim Crow Era and its legacies that reach into our present day. Of special note, was Maggie Walker’s St. Luke Penny Savings Bank. In the Age of Jim Crow, African Americans struggled to find access to credit. What few banks existed in the South after the Civil War were in the hands of white southerners who refused to extend loans to black farmers and entrepreneurs. Created in 1903, Walker envisioned the bank as a means to break this monopoly on credit by leveraging the community’s existing wealth and using it to grow a vibrant and prosperous black community through loans to black businesses. As she told the Order of St. Luke Convention in 1901, “Let us have a bank that will take the nickels and turn them into dollars.” Walker’s bank would endure into the 20th century were it would succumb to the financial pressures and competition of the mega-banks of the early 21st century.

The article serves as a reminder and jumping off point to explore the broader history of African Americans and American banking that extends back before 1900—in which banks and banking expanded slavery, empowered recently freed slaves and then impoverished them in the 1870s. Scholars such as Calvin Schermerhorn and Edward E. Baptist document the way that southern banks, in conjunction with larger European banks, used various financial instruments to pay for the expansion of slavery into the American West. Southern slave masters would also put up their slaves, and banks would accept, as collateral for loans from these banks—making the antebellum financial system another part of the many tools that whites used to extract wealth from the bodies of Africans American slaves under slavery.

With emancipation, the US government attempted to use banks as a way to reconstruct the South and in a didactic way—teach ex-slaves about the values of thrift and savings within the world of free labor capitalism they were creating across the former Confederacy. Congress passed, and President Abraham Lincoln signed, a law creating the Freedman’s Savings and Trust Company in March 1865. In the law, Congress stated that the banks purpose was to serve “persons heretofore held in slavery in the United States, or their descendants.” Moreover, the bank would not make risky loans to businesses, but would only invest its deposits in US bonds. There was more than a little confusion about where the bank might do business. The law established a bank in Washington, D.C.—but some Republicans hoped that this would serve as a national system to freed slaves across the country. Eventually the bank opened 37 branches across the South with the bank in DC as headquarters, including a branch in Richmond created less than a year after the passage of the law.


Freedman’s Savings Bank, Washington, D.C.

Former slaves, in turn, deposited millions of dollars into the Bank. In 1866, the Bank held just under two hundred thousand dollars in deposits. By 1874, the Bank held 3.6 million dollars representing the earnings of not just individual black families, but black churches and beneficial societies—all less than a decade since the Thirteenth Amendment. African American leaders served various leadership roles in the banks, and Frederick Douglass served as president for a short time. But, in 1874, Douglass was forced to apply to Congress to shut close the doors of the entire system of Freedmen’s Banks in 1874. The reasons were several—including mismanagement and embezzlement by white members of the bank’s board in addition to the financial pressures of the Panic of 1873 which would lead to long depression in the US and Europe that would last until 1879. While Congress determined that depositors should get some of their money back—many black depositors never received a dime of their original deposits. 

To the black community, the loss of these deposits deeply hurt both financially and emotionally. Because of its success in becoming the most important single bank of African Americans in Reconstruction—the Bank’s colossal failure wiped out thousands of deposits that represented untold stories of work, toil, and savings in the first years after slavery. Writing of the black community in 1890, John Mercer Langston said “the day is distant even now when they will lose entirely their sense of disappointment and their consciousness of loss in its failure.” W.E.B. Du Bois also wrote of the deep cultural effects of the Bank’s closing in his Black Reconstruction and The Souls of Black Folk. Thus Maggie Walker’s initiative in the 1900’s was both a moment to rebuild the system of black community banks for the twentieth century, but with critical differences that marked the experience of Reconstruction. Critically, it was a local bank. Walker and her allies applied for a charter from the Commonwealth of Virginia—not the Federal Government. Along with the failure to enforce civil rights legislation, stop the terror of lynching, or the economic disenfranchisement embodied in Jim Crow laws—the federal government in the progressive era seemed like it held little promise to help the black community. The African American banks of the progressive era, like the St. Luke Penny Savings Bank, would look to the local black community to provide the access to credit and protect the deposits of its members.


Certificate of Deposit, Martin Hilliard, July 29 1866; Courtesy of Freedmen & Southern Society Project–’s%20Bank%20deposit.html

Here on our Tumblr and in our exhibit—we will look to uncover more about the Freedmen’s Banks and their place in Reconstruction, and how they, like the other topics our exhibit, help to illuminate the history of how the federal government used its power over banks and money to transform the country—and its legacies for today.