OPINION – I recently attended the Operation Hope Forum, where I made great connections. More importantly I learned a great deal. One of the greatest things I learned was how the Freedman’s Savings and Trust played a major role to African American soldiers that fought in the Civil War and later to African Americans between the years 1865-1875.

I found a number of African Americans are not familiar with one of the first banks targeted to serve African American soldiers, and the African American community.


January 27, 1865, John W. Alvord, a Congregational minister and abolitionist met in New York with other leaders to explore the idea of establishing a savings bank that would benefit African American soldiers during the Civil War. African Americans were receiving back pay and bounties for serving in the war lacked the understanding, didn’t have a place to deposit their monies and/or were victimized by swindlers.  

After several attempts by Alvord to open a savings bank, a bill to incorporate the Freedmen’s Savings and Trust Company was brought before Congress.  On March 3, 1865, President Abraham Lincoln signed into law “An Act to Incorporate the Freedman’s Savings and Trust Company.”  However, in 1874 the effects of changes to its charter that changed the loan and investment policy, the panic of 1873 and overexpansion, mismanagement, abuse and fraud the Freedman’s Bank was on the road to collapse. Frederick Douglass invested $10,000 of his own money but soon realized the bank failure and recommended to Congress the bank to be closed.

One of the failures of the bank was the increasing speculative investment along with adding a new bank in Washington, D.C. Example: Freedman’s loaned Seneca Sandstone Company, Seneca Quarry held an unsecured loan, however the panic of 1873, Quarry defaulted on the loan. Henry D. Cooke authorized the loan as well as sat on the board of Freedman’s and Seneca.

June 20, 1874, Congress authorized the trustees, and upon approval of the secretary of the treasury appointed a three-member board to take charge of the company and report its finding. Only a short time later the bank was closed and a comptroller was appointed.

This was a devastating blow to the African American community. During this time there were 37 branches in 17 states. But the most demeaning economic nightmare was when the depositors believed their deposits were protected by the federal government. Not only did many lose their monies but lost their hope for the future, henceforth losing their trust in banks. Many of the depositors received only three-fifths of the value of their accounts, others nothing.

Freedman’s Bank & Trust concept begin with the African American soliders, farmers, African American churches, private businesses and the beneficial societies maintained accounts. These organizations encouraged its members to open accounts. When the bank failed these organizations were vital to the community had to discontinued services, adding to the economic downfall.

As of 2014, there are 21 African American owned banks, with $4.7 million, .43 percent of the $1.1 trillion buying power of African Americans.  However, in 1994, there were 54 African American banks.   These few banks are in fighting to survive. Some of them don’t offer modern services, branch networks and more. Few of them fell into a deeper hole during the recession and didn’t qualify for federal bailout funds.  

The dwindling number of Black banks

Source: The Federal Deposit Insurance Corp.

With the African Americans banks losing ground, African Americans are open to toxic loans, while losing wealth in their underwater homes. Black-owned banks are a must for the community. Should the government step in to save them? That is a question for the activist.  The other aspect to this issue is will African Americans support our Black-owned banks after not trusting banks. That is a question for the African American community.


About the Author: Anita R Johnson, Financial Psychologist couples the holistic approach to money with financial planning. 916-572-9033