After the Civil War, former slaves were encouraged to participate in a free-labor economy. But much of the South lay in ruins. It was difficult to find work, much less start enterprising careers.
The 1860s was a decade of economic adjustment. During the conflict, many African-American soldiers saved paychecks in newly established banks such as the Free Labor Bank in New Orleans.
Anticipating victory by the Union and the eventual freedom of all slaves, the Freedmen’s Savings and Trust Company, commonly known as the Freedmen’s Bank, was formed before the war’s end. A congressional act incorporating the institution was enacted on March 3, 1865.
In the beginning, the Freedmen’s Bank had a limited purpose. It was a place to deposit money to be invested in stocks, bonds, and other securities of the United States. Legislators initially ensured that deposits were not lost due to risky ventures.
Although never part of the Freedmen’s Bureau, which was created to help recently freed slaves live independently, the bank served a complementary mission. For that reason, many freedmen perceived the Freedmen’s Bank and the Freedmen’s Bureau to be one. It is not difficult to understand why. Bureau agents often encouraged freedmen to build capital and distributed bank literature while doing so.
Even the lifespan of the organizations were similar. Both were formed legally on the same date. Although the bank lasted a little longer than the bureau, both organizations’ effectiveness decreased considerably after 1870.
When the bank struggled financially, trustees elected abolitionist and former escaped slave Frederick Douglass as chief officer to restore the bank’s credibility and popularity among blacks. Once assuming the helm, Douglass figured out that the bank had been sinking slowly in a sea of debt, and he even used his own money to try to keep it afloat. But his efforts only polished the brass of a sinking financial ship.
Previous executive and trustee mismanagement, argues historian Walter Fleming, had doomed the “most promising plan to aid” the freedmen; after an 1870 charter amendment allowed the bank to lend money, top management issued a series of questionable loans. According to historians John Hope Franklin and Alfred Moss, “political influence” secured those loans while big financiers “unloaded bad loans” on the bank.
Public confidence in the bank had been waning, and after the economic depression of 1873, it was lost. On June 28, 1874, all branches closed.
Branches were in the 11 former states of the Confederacy and in former slaveholding West Virginia, Kentucky, Maryland, and Missouri. There were branches in Washington, D.C., New York City, and Philadelphia, too.
In North Carolina, Freedmen’s Bank branches were located in New Bern and Raleigh. Bank trustees established a New Bern branch, as many freedmen lived in the town’s vicinity.
After two years of lobbying, Assistant Commissioner of the North Carolina Freedmen’s Bureau Nelson Miles played an integral role in convincing national bank trustees to establish a Raleigh branch.
Some scholars, such as Carl Osthaus, argue the bank failed because the government forgot about the freedmen and made no great effort to relieve them. Other historians, including Fleming, contend that government officials and bankers colluded for individual profit.
By the late 1880s, African-Americans eventually established themselves in the banking industry — a difficult task with memories of the Freedmen’s Bank failure still fresh in many minds. In 1888, in Richmond, Va., W.W. Browne opened the first bank to be administered solely by blacks — Savings Bank of the Grand Fountain United Order of True Reformers. Two years later, similar banking ventures had opened their doors in Washington, D.C., and Chattanooga, Tenn.
Although the causes of the Freedmen’s Bank’s failure have been debated, one thing is certain: Recently emancipated slaves saved money with hope of participating in a free-labor economy.
Dr. Troy Kickler is director of the North Carolina History Project.