How White Greed Destroyed a Bank for the Newly Freed (review of 'Savings and Trust,' by Justene Hill Edwards

The New York Times Book Review (Oct. 19, 2024)

There are at least two problems with burying your money in the ground. First, someone might steal it. Second, you might forget where you dug the hole.

These were among the complaints raised by Black parishioners in a Richmond, Va., church in June 1865. The Civil War was over, slavery was on the way to being abolished and those newly emancipated from the terrors of bondage were trying to plan for the future.

But as the assembled Black congregants explained to a white visitor, they needed somewhere safe to store the money they could now freely earn and keep. They needed, as one report of the meeting put it, “a bank of their own.”

That was just what the visitor was trying to sell them on. He was vice president of the newly established Freedman’s Savings and Trust Company, created by Congress in the waning days of the Civil War to serve the financial interests of Black Americans struggling to find a secure economic footing after Emancipation. Long a footnote in the story of Reconstruction, the Freedman’s Bank is now the subject of “Savings and Trust,” a timely, well-crafted account by Justene Hill Edwards, a historian at the University of Virginia. It makes for a riveting and heartbreaking read.

The bank was originally the idea of a white Northern minister who noticed that many Black soldiers in the Union Army had no place to store the money they were making while enlisted. A savings bank would allow them to deposit funds, accrue interest and work toward the dream of purchasing land. Meanwhile, the bank would use a portion of its funds to buy government-issued stocks and bonds, which would help finance the effort to defeat the Confederacy, end slavery and rebuild the nation on a more just basis.

At first, the bank seemed a success. By 1874, deposits had soared to $57 million (more than $1.5 billion today) in 34 branches. The bank was a symbol of freed people’s determination to become full economic participants in American life. One Black abolitionist and businessman who took a job as cashier of the Philadelphia branch said he believed the bank represented “the proudest monument in the history of modern civilization.”

Unbeknown to its depositors and supporters, however, the bank had quickly veered off course. A pot of uninvested funds proved irresistible to the well-connected white businessmen on the bank’s board of trustees, who began chipping away at the risk-limiting provisions in the charter. While dishonestly implying to depositors that their savings were guaranteed by the federal government, the trustees made illegal loans to their Washington cronies and expanded the bank’s operations at an unsustainable pace. Only 8 percent of deposits came from white Americans, who nonetheless received some 80 percent of its loans.

Even the elevation of the celebrated Frederick Douglass to the bank’s presidency in early 1874 couldn’t save the institution. Edwards convincingly suggests that the most famous Black man in America was only brought on to take the blame when the bankruptcy the trustees knew couldn’t be avoided finally came. In his last autobiography, Douglass would recall with “a feeling of humiliation” his role in the Freedman’s Bank. When it went under, just a few months after he took the helm, Black depositors lost millions.

Edwards argues that the story of the Freedman’s Bank offers a new way to think about the origins of the racial wealth gap in America. Today, the median Black family in the United States possesses about 15 percent of the wealth owned by the median white family. W.E.B. Du Bois wrote that “not even 10 additional years of slavery” could have done as much to harm the economic prospects of Black Americans as the collapse of the Freedman’s Bank.

At the same time, Edwards seems less eager to consider what the story might say about how claims of philanthropy and justice can sometimes serve as cover for corruption, predation and opportunism. In another author’s hands, the “rise and betrayal” of the Freedman’s Bank might be told as a fable of corporate woke-ism run amok, a warning of what happens when supposed “friends” of historically oppressed groups make exaggerated promises on which they have only vague intentions of delivering, then are nowhere to be found when, owing to avarice or inattention or both, things don’t pan out. Edwards rightly dismisses as disingenuous white Southern critiques of the Freedman’s Bank’s mismanagement — these aimed to demolish a pillar of Reconstruction — but without addressing how such allegations of do-gooder malfeasance align with her own.

Near the end of the book, Edwards cites Sander L. Howell, a Black minister in Washington, who “believed in the bank’s righteous mission” and entrusted it with his life’s savings. “I lost all I had in the bank,” Howell lamented at a congressional hearing after the bank’s fall. He might as well have put his money in the ground.