Justene Hill Edwards’ incisive Savings and Trust: The Rise and Betrayal of the Freedman’s Bank examines a noble idea destroyed by corruption. The idea emerged at the end of the Civil War when John Alvord, a Congregational minister and antislavery activist, realized that newly emancipated people would need a banking institution they could trust. Drawing on examples of military banks established for formerly enslaved Union soldiers, Alvord formed the Freedman’s Bank in March 1865. At its height, Edwards notes, “freed people had opened over one hundred thousand accounts and deposited over $75 million ($1.9 trillion today).” But within nine years, the bank failed.
Edwards, whose previous book, 2021’s Unfair Markets, examined the internal workings of enslaved people’s private economic activity, is a trustworthy guide through details concerning the early promise of the Freedman’s Bank, its improper transactions and the host of institutional and individual failings that led its collapse.
She lays primary (but not sole) blame at the feet of railroad executive Henry D. Cooke (brother of 19th-century finance titan Jay Cooke) who headed the bank’s finance committee. Cooke and his committee moved the bank’s headquarters from New York City to Washington, D.C., opening it to political influences; approved illegal loans; altered its charter; and loaned Black depositors’ money without due diligence, primarily to white bank trustees and other insiders, and only infrequently to Black depositors. As the bank failed, trustees fled responsibility and brought in the great Black activist Frederick Douglass, to his eternal regret, to do damage control.
Edwards also points out that Alvord and other well-meaning supporters were ill-equipped to oversee such an institution. More tellingly, Edwards questions the underlying assumptions of the bank. It promoted the virtue of saving to the newly freed population, but it included no Black founders, advisors or early trustees. The white bankers assumed the depositors would be wage earners; but most of the Black savers wanted to own and work their own land independently and thus needed a broader, more flexible array of financial services than the bank ever offered.
The collapse of Freedman’s Bank has reverberated throughout U.S. history: “Black people’s generational distrust of financial institutions can be traced to the founding, plunder, and failure of the Freedman’s Bank,” Edwards points out. And white Americans used the failure “to fuel stereotypes about Black people’s laziness and their lack of fitness for . . . political and economic inclusion.” Savings and Trust adds materially to our understanding of the racial wealth gap and our long legacy of social injustice.
