Freedman`s savings bank #BadHistory
Wednesday 27th February 2019 | Saskia
As weird as it sounds, Lincoln decided after the end of slavery that a bank is necessary in order to help newly freed slaves with their transition to freedom. The line of thought was that a free person in contrast to a slave has the ability to have a bank account.
This makes a bank account for a newly freed person an important symbol standing for equal citizenship. Unfortunately, this symbol was a more than unlucky one for most of the so called Freedman`s savings bank`s customers.
Originally, the Freedman's Savings and Trust Company was a nonprofit organization which was created as a repository for African American veterans, ex-slaves and their families. The idea of founding a bank like this could have been a good one. However, its realisation was more than deceptive and misleading.
First of all, clients were told that the federal government had assumed responsibility for the bank`s financial solvency.
Secondly, few black people actually received loans, most invested what little savings had and little money was actually invested in the black community, since the requirements for black people were measurably higher than for white people.
Thirdly, Freedman`s savings bank invested heavily in real estate in Washington and made large unsecured disastrous loans which eventually led to its bankruptcy.
Being a bank with 37 offices in 17 states with over $ 57 million in deposits and 70000 depositors Freedman`s bank`s bankruptcy had severe consequences. Alone, in the District of Colombia over 3000 depositors lost their savings. Many client deposits were ever paid back. Freedman`s savings bank left 61,144 with losses of nearly $3 million.
The first attempt of freed slaves to grasp economic security and equal citizenship was crushed and left many African Americans with nothing than mistrust for the banking system. Even worse, many had to give up their hopes and dreams connected to the savings they had.
The only consolation this debacle has is that African Americans were inspired to create their own banks and became thereby more independent. Moreover, the records created by Freedman`s about its customers provide a worthwhile source for family research for the period following the American Civil War.