This week, on January 7, U.S. Treasury Secretary Jack Lew will rename the Treasury Annex Building as the “Freedman’s Bank Building,” in conjunction with the bank’s 150th anniversary. The building sits on the same place where the original Freedman’s Bank was located, on Pennsylvania Avenue, just across the street from the White House.
The mere existence of the Freedman’s Bank answers the age-old question of why generation after generation of African Americans do not trust government institutions.
In a 2014 survey of low income communities of color and their banking habits, it was discovered that over 50 percent of people of color learn lessons about finances, good or bad, from family. If your parents kept their money in their mattress or used money orders to pay all of their bills, then you are more likely to as well.
The history of the Freedman’s Bank gives African Americans an all-too-poignant lesson about trusting banks and the federal government.
After Emancipation, President Abraham Lincoln felt it was government’s “benevolent desire to aid in the financial inclusion of blacks.” Republicans were divided on how to achieve this. Radical Republicans promoted complete economic inclusion, while conservatives thought inclusion should be a gradual process. Whatever their differences, they agreed on one thing: In order to be politically and economically equal, blacks needed education and wealth.
On March 3, 1865, President Lincoln founded the Freedman’s Savings Bank. Its unique feature was that it was the only savings bank chartered by the federal government. Pamphlets promoted the bank as Lincoln’s “Gift to the Colored People” – first Emancipation and now a savings bank.
At the height of its success, the Freedman’s Bank handled more than $75 million in deposits, made by over 75,000 depositors, equal to approximately $1.5 billion today. However, Congressional deregulation of the bank’s investment policies caused its demise. Frederick Douglass tried to save the bank in 1874 by depositing $10,000 of his own money (equal to approximately $150,000 today), but by this time the bank’s reserves were exhausted.
It was forced to close on June 20, 1874. When the bank closed, over 60,000 people lost over $3 million in deposits (equal to approximately $54.5 million today).
Within 10 years, this gift from President Lincoln turned into a setback that would last many generations to come. W.E.B. DuBois said the failure of the Freedman’s Bank did more damage to blacks than an additional 10 years of slavery. The main lesson learned was not to trust the government.
This history has had a ripple effect of sorts, as many African Americans today are unbanked or underbanked. Here in the city of St. Louis, nearly a third of Africans Americans surveyed in 2012 by the FDIC were unbanked and/or underbanked. It is time to change our history and begin investing in the financial empowerment of African-American families throughout our region and across the country.
I applaud both Secretary Lew and John Hope Bryant, founder and CEO of Operation Hope, in recognizing the historical significance of the Freedman’s Bank and their work to create avenues to promote the bank’s original mission: economic integration and financial inclusion.
Tishaura O. Jones is the treasurer of the City of St. Louis. She is the first African-American woman to hold the office in the city’s history.
