After the Civil War, Northern missionaries and Freedmen’s Bureau agents encouraged emancipated slaves to participate in a free-labor economy and embody middle-class values. But the South lay in ruins. It was difficult for many whites to rebound financially and for former slaves to find work, much less start enterprising careers.
To encourage freedmen to save money, white Northerners, many from New York, formed the Freedmen’s Savings and Trust Company, commonly known as the Freedmen’s Bank. With the help of Senator Charles Sumner of Massachusetts, an act to incorporate the Freedmen’s Bank was enacted on March 3, 1865.
In the beginning, the Bank had a simple purpose. It served as a place to deposit money. The deposited money was to be invested in stocks, bonds, and other such securities of the United States. No provision provided for loan disbursements. Legislators initially made every attempt to ensure that deposits were not lost because of risky ventures.
Although never part of the Freedmen’s Bureau, the Bank served a complementary mission. For that reason, many freedmen perceived the Bank and the Bureau to be one and believed the government backed their deposits. It is not difficult to understand why. Agents from both institutions many times cooperated, and Bureau agents encouraged freedmen to build capital and distributed Bank literature; bank pamphlets often contained drawings of Abraham Lincoln, American flags, and bald eagles. Some top officials in the Bureau, such as John W. Alvord, national school superintendent, were also top officials in the Bank.
Even the lifespan of the organizations were similar. Both were formed legally on March 3, 1865. Although the Bank lasted a little longer than the Bureau, both organizations’ effectiveness decreased considerably after 1870.
In hopes of restoring the bank’s credibility and popularity among blacks, trustees elected former escaped slave and abolitionist Frederick Douglass as chief officer. Once assuming the helm, Douglass figured out that the Bank was sinking in a sea of debt. The mismanagement of former trustees and chief officers had doomed, in the words of historian Walter L. Fleming, the “most promising plan to aid” the freedmen. After an 1870 charter amendment allowed loans, top management had issued a series of questionable loans. The economic depression of 1873 further sealed the Bank’s fate. On June 28, 1874, all branches closed their doors.
Branches were in every former slaveholding state of the Confederacy, and in West Virginia, Maryland, Missouri, and West Virginia. In North Carolina, Freedmen Bank branches were located at New Bern and Raleigh. Bank trustees quickly agreed to establish a branch in New Bern, for many freedmen lived in the town’s vicinity. Advocates of a Raleigh branch lobbied unsuccessfully for two years. The persistence of Assistant Commissioner of the North Carolina Freedmen’s Bureau Nelson A. Miles, however, played an integral role in finally convincing national Bank trustees to establish a Raleigh branch. Miles also persuaded such Tar Heel notables as Governor W. W. Holden to serve as local trustees. A branch in Salisbury was only discussed.
Although reports listed the New Bern branch as unproductive, many North Carolina freedmen there deposited much money. If North Carolina freedmen’s statistics are similar to those across the South, the average freedmen deposited $50. When the banks closed, the deposits in New Bern totalled $40,621 and in Raleigh, $26,703. If regional statistics once again hold true for North Carolina, freedmen received approximately sixty-two-percent of their dividend payments (an average of $31 per depositor).
The reasons for the bank’s failure are debatable. Some scholars, such as Carl R. Osthaus, argue that the government forgot about the freedmen and made no great effort to relieve their economic plight. Other historians, including Walter L. Fleming, contend that government officials and bankers colluded for individual profit.
The legacy of the Bank has been debated, too. Some write that African Americans lost their faith in the American dream and middle-class values and abandoned frugality. Others cite the establishment of black-owned banks less than fifteen years after the collapse of the Freedmen’s Bank as evidence that many African Americans remained enterprising.
One thing is certain: freedmen adjusted quickly to the demands of a free-labor economy. In the words of Osthaus, they “made a massive investment of money.” Over the life of the Bank, approximately 70,000 depositors had moved a little over 57 million dollars to and from their accounts.
Walter L. Fleming, The Freedmen’s Savings Bank: A Chapter in the Economic History of the Negro Race (Chapel Hill, 1927) and Carl R. Osthaus, Freedmen, Philanthropy, and Fraud: A History of the Freedman’s Savings Bank (Chicago, 1976); Reginald Washington, “The Freedmen’s Savings and Trust Company and African American Geneological Research” Prologue (Summer 1997).