Bank President | Frederick Douglass
Don’t Trust Funds
I know what you’re thinking. And yes, Frederick Douglass was a president of a bank, a bank named after opportunities of high aspirations of being free only to be held captive in the burning flames of white supremacy.
On March 3, 1865, President Lincoln, with the approval of Congress, signed into law the Freedmen’s Savings and Trust Company (Freedmen’s Bureau was also created on this day), which became the only bank created by the federal government. Lincoln after the signing said, “This bank is just what the freedmen need.” We will see how that statement ages later in this article.
After the Civil War, newly “freed” Black people wanted land ownership to ensure their survival as a people. The idea of Black people having the power to influence the physical environment in subsistence farming was a nightmare for southern white farmers and the federal government.
“the negro [is] the proper, legitimate and divinely ordained laborer of the South…[who] has become wild in the exuberance of his freedom…and will be trained to work as a free man. He cannot be permitted to become what he is in St. Domingo [Haiti].” — South Carolina planter (Sven Beckert, Empire of Cotton, p. 228)
President Andrew Johnson, a white supremacist, assumed the presidency after Lincoln’s assassination and foreclosed on land redistribution promises in the Freedmen’s Bureau bill. Johnson proclaimed that America is a “white man’s government.”
The federal government gave Black people a savings bank instead of giving them saving land!
The purpose of the Freedmen’s Savings Bank was to serve as an educational institution for newly “freed” poor black people to learn money management skills while saving money to purchase land that was already owed to them.
“mission of the Freedmen’s Bank is to show our people the road to a share of the wealth and well-being of the world.” — Frederick Douglass
Prominent white men such as William A. Booth, Peter Cooper, John Murray Forbes, George Whipple, Thomas Webster, and John Jay led by the bank’s creator, John Alvord, were among fifty of the bank’s trustees. Many of these trustees provided their reputation to the bank but were not involved in the management of it. Since Congress was not a bank regulator at this time it left the bank open to exploitation.
“The general business and object of the corporation hereby created shall be to receive on deposit such sums of money as may from time to time be offered, therefore by or on behalf of persons heretofore held in slavery in the United States or their descendants and to invest the same stocks, bonds, treasury notes and other securities of the United States.” —Bank Charter of the Freedmen’s Savings Bank
The bank opened in 1865 and was headquartered in New York on Wall Street where they opened eleven branches in the South. In 1867, the trustees moved the headquarters to an opulent area in Washington D.C. where John Alvord appointed Henry Cooke as the finance chairman of the bank because of the success of his brother’s (Jay Cooke) investment bank, First National Bank.
Now, let's get into the theatrics of whiteness. Henry Cooke took full advantage of Section 6 of the bank’s charter that states a third of the deposits called, “available funds” could be invested anywhere. Cooke coordinated a covert mission turning the savings bank into an investment bank with the help of his brother, holding meetings in the First National Bank, and using the Freedmen’s Bank deposits to fund their speculations in the market.
Black funds were funding white speculation investments!
Meanwhile, the Freedmen’s Bureau was providing financial literacy classes on the consequences of investing their money in speculation markets. John Alvord and the trustees were unaware of Henry Cooke’s mismanagement of the Freedmen’s money.
After receiving success in the market, the money-hungry Cooke’s wanted more deposits to make more money. So in 1868, they created a monthly newspaper called, “National Savings Bank”, that targeted “freed” Blacks with advertisements of land ownership and promised the bank was free of speculation.
Can you name any media outlets today that are deceiving Black people for financial gain?
The deception of the Cooke’s worked and by 1871, the bank had over thirty branches in operation in the South. But the deception did not stop there; Henry Cooke used some of the reserves to purchase an expensive building that would give the illusion of the bank's stability ensuring Black depositors and bank trustees the prosperity of Black economic independence. According to the U.S. Congress report, the cost of the building was $260,000, about $4.5 million today.
On May 6, 1870, Henry Cooke managed to persuade John Alvord and the bank managers to ask Congress to deregulate the Freedmen’s Bank charter. Congress granted the amendment, officially turning the savings bank into an investment bank. This allowed Cooke and the bank managers to plunder the savings of “freed” Blacks into railroad bonds, real estate, personal loans, etc.
White bank managers who were trusted to protect the savings of “freed” Blacks, robbed the bank.
Following the Panic of 1873, Black depositors were taking their money out of the bank at a rapid rate and the Cooke’s lost $2 million in deposits in less than two years due to a losing speculation venture.
For their last magic trick, in efforts to save the bank, the trustees designated Frederick Douglass, who had no banking knowledge, as the president in March of 1874. In typical white fashion, they used a famous Black face to keep the support of Black people in order to fund their self-interests.
Can you name any white businesses today that utilize this century-old philosophy to deceive Black people for financial gain?
Luckily for Black people, Frederick Douglass was more than a famous face and quickly noticed the bank was failing after he lent the bank $10,000 of his own money to cover the bank’s illiquid assets.
“The bank was full of dead men’s bones, rottenness, and corruption.” — Frederick Douglass
Douglass rushed that information over to Congress stating he “could no longer ask [his] people to deposit their money in it.” After wrestling with the bank’s trustees, Congress agreed with Douglass ordering the trustees to end their operations on June 20, 1874.
On June 29, 1874, the Freedmen’s Savings Bank officially closed its doors, leaving over 60,000 depositors without access to almost $3 million. At the bank’s zenith, it handled more than $75 million of deposits made by more than 75,000 depositors — approximately $1.5 billion today.
“not even ten additional years of slavery could have done so much to throttle the thrift of the freedmen as the mismanagemnt and bankruptcy of the series of savings banks chartered by the Nation for their special aid.” — W.E.B. Du Bois
So, in the flames (minds) of white supremacy, Lincoln was right, the freedmen got just what they needed…nothing!
What can we learn from this piece of history? And how is it relevant to today?
We can learn not to trust and depend on the government for our survival and know that banks can legally use 90% of our deposits to lend to other depositors in the form of loans (mortgage, car, business, etc.) to create more money (collect interest) through a process called “fractional reverse lending”, the magic of banking. Therefore, it comes as no surprise when white-owned banks deny Black people credit and loans while they use their deposits to enrich themselves.
