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TONYA MOSLEY, HOST:

This is FRESH AIR. I'm Tonya Mosley. In July of 1874, waves of Black Americans rushed to their local bank branches to find out if the news they were hearing was true. The Freedman's Savings and Trust Company, a bank for newly emancipated Black Americans, was abruptly shutting down. And patrons at bank branches throughout the country were met with locked doors and cashiers who had to break the news. Most of their savings were gone. The rise and fall of the Freedman's Savings and Trust Company is the subject of a new book by my guest, historian Justene Hill Edwards.

In the years after the Civil War, tens of thousands of formerly enslaved people deposited millions into the Freedman's bank with high hopes that as free people, they too could create a piece of the American dream for themselves. Abolitionist Frederick Douglass even encouraged Black Americans to trust the banking system, but even his leadership as the president before its collapse could not save it. Hill Edwards' book documents how the bank's white trustees drove the bank to the ground by lending out millions in loans to white financiers and businessmen. Justene Hill Edwards is a historian and associate professor of history at the University of Virginia. Her research explores the intersection of African American history, the history of slavery and the history of American capitalism. Her book is called "Savings And Trust."

Justene Hill Edwards, welcome to FRESH AIR.

JUSTENE HILL EDWARDS: Thank you so much for having me, Tonya.

MOSLEY: The Freedman's Bank - let's get into how it was established. So white abolitionists established it in 1865. Take us back to that time period. Who were these abolitionists and why was a bank for newly freed Black people a priority?

HILL EDWARDS: So the Freedman's Bank was established by - well, it was really the brainchild of a white abolitionist minister named John Alvord. He was from ºÚÁϳԹÏÍø, and he lived in New Jersey during the Civil War. And in 1864, he was traveling with the Union army in the South, especially in the summer and fall of that year, following Union General William Sherman on his famed March to the Sea from Atlanta to Savannah. And he took the opportunity to talk to recently freed African Americans. And what he found, what he gleaned from his conversations with them is that they wanted a few things during this new and ripe period of freedom.

They wanted their families because a lot of them had been torn away from their families during slavery. But they also wanted the opportunity to live independently, and importantly, they wanted the opportunity to buy land. And so he figured that he could really contribute to their experience. He could help them in this, again, new period of freedom by establishing a bank for them. And so he gathers in New York in January of 1865 with a group of about 50 white prominent abolitionists, philanthropists, bankers and politicians. And they came up with the idea for the Freedman's Savings and Trust Company.

MOSLEY: John Alvord - he actually wrote letters talking about his fears around the future of freed people in the nation. But one of the things that you say is that he didn't understand that while Black people had little experience with investments and the like, they did know about money. They earned it and they saved it through their experiences as enslaved people. In what ways did they know that?

HILL EDWARDS: Absolutely. I think even though most enslaved people didn't have access to banking accounts, for example, or savings accounts - most Americans didn't in the 19th century - the enslaved understood what money meant. They understood the value of their bodies, because capital was held in their bodies, right? They were legally property. They understood what their work could garner, what they could be paid. They often worked for money, if possible. It was not uncommon for the enslaved to bargain with poor whites, with other enslaved people, even with their enslavers. And so, this idea that the enslaved and the newly free kind of entered the period of freedom without knowledge of money or savings or thrift, as they called it, was not true and really incompatible with the ideas that the white founders of the Freedman's Bank held at this time.

MOSLEY: Land was so important at this time. I mean, that was something that you found that many newly freed Black Americans expressed that they wanted. They felt like that was the way that they'd be able to be fully functioning members of society.

HILL EDWARDS: Yes. And I think it comes from the reality that for the formerly enslaved, again, they themselves were property. And they could see and they understood the power of property ownership, of land ownership. And so, in addition to, again, connecting with their families and rejoining their families, African Americans and the newly emancipated wanted access to land.

MOSLEY: What standards were created at the start to ensure people's money was secure? How were they telling them that they would be able to do that?

HILL EDWARDS: Well, this was one of the supposed benefits of creating a savings bank. And so the Freedman's Savings and Trust Company, what we call the Freedman's Bank, was established as a simple savings bank. The bank was supposed to operate with the least amount of risk as possible. The bank administrators were supposed to invest depositors' money in government-backed securities and bonds, which, again, were seen to be the lowest-risk possible financial product. And depositors, if they kept their money in for a specific period of time - about six months - then they would get a small amount of interest back on their money. At this time, it was 4% and 6%. And so it was seen to be very low-risk, very low-cost, and the best way to help African Americans in their transition to freedom.

MOSLEY: What was the average sum that people were depositing at the opening?

HILL EDWARDS: Small amounts of money, a few dollars. So we're not talking about hundreds of thousands of dollars. We're talking about thousands of African Americans depositing money. And I think it is worth saying too that one of the kind of seed funds for the Freedman's Bank came from the military savings banks established in 1864 for Black soldiers. And so even though most of the first depositors were depositing small amounts of money, a few of the branches, especially the ones in Norfolk, which was the first branch - Beaufort, South Carolina, and New Orleans kind of got their seed funding from the military banks established for Black soldiers in 1864.

MOSLEY: I'm really interested to know - in the book, you show some of these ads that were put in Black newspapers to get folks to deposit their money. What did some of them say and promise?

HILL EDWARDS: Yeah, the ads are a great source. Some of the terms - as I said, save the small sums was important. The idea that to be moral and to be godly is to save money. The idea that you can save a penny or a nickel, or 25 cents, and that will help you to buy goods that you want and need - to stop buying tobacco and liquor, whiskey in particular, and instead take that money and put it in a Freedman's Bank account. And so many of these ads were kind of moralizing. I think I call them too paternalistic - the idea that white bank administrators believed that African Americans needed lessons in how to save and why they should save. And that was a very strategic marketing campaign, especially in the former Confederate South, with these bank branches.

MOSLEY: You can't really tell this story without talking about the specter of white supremacy and violence at that time, too, because Black people were free. But what were some of the ways some white Americans struggled to cope with this new landscape of Black freedom, which also included earning, having money and saving money?

HILL EDWARDS: Yes, absolutely. The reality is that Reconstruction, although a period filled with the ideas of freedom, the expansion of the franchise to Black men, citizenship rights, the end of legal slavery, there was also white pushback. White violence against African Americans was rampant, especially in states such as Louisiana and Mississippi. And so the reality was that African Americans with money, African Americans exercising their own independence, especially financially, was a real threat, especially in the former Confederate South, where the Civil War was fought over the future of slavery in the nation.

And white Americans in the South had a hard time letting go of the idea of Black Americans as not being slaves but being free, as having the autonomy to live and choose to work where they want, the ability for especially Black women to decide not to work and to take care of their families. And so this resulted in, often, violent struggle between white Americans who had not fully accepted that slavery was over and Black Americans who were excited to exercise their newfound autonomy and freedom.

MOSLEY: You tell the story of a Houston branch of the bank from 1866. Someone documented all of the murders and brutal beatings that were happening and basically how freed people were afraid of retribution for any number of things from white perpetrators. It's always remarkable when we see documentation like this because, you know, it was pre-everything. We're just talking about things being written down. Where was this document? Who was this person writing to from the Freedman's Bank?

HILL EDWARDS: Sure. There is a great kind of digest of sources. It's called the records of murders and outrages. And when we talk about the violence of Reconstruction, you can go to these records and read about the sheer scale and the sheer severity of violence against African Americans. I think it's apt to call it white terrorism. And so there is this compendium of records composed by Freedman's Bank and Freedmen's Bureau officials. And it details the fact that, in some places like Houston, for example, one of the reasons why the Houston branch was closed within a year was that white Americans began to harass and vandalize the bank branch and white Americans began to harass the Black depositors who were using the bank for perhaps economic uplift purposes.

And so, again, one of the reasons why I use the term economic violence here is because economic violence is part and parcel with physical violence. And, again, I think it's important to underscore the fact that, again, Reconstruction was a period of extreme hope politically, economically and legally. But African Americans were - especially in the former Confederate South - were under constant fears of white retaliation for their willingness to exercise their newfound rights.

MOSLEY: So, Justene, this was a bank for Black people. But the people in charge, like the trustees - were any of them Black?

HILL EDWARDS: At first, no. When the bank was established in March of 1865 and opened its first branch in April of 1865, all of the bank's trustees and the first cashier were white. They were a who's who of abolitionists and politicians and bankers and philanthropists, mostly from New York. And it didn't take long, but it did take a couple years. It took two years for the first Black trustees to accept appointments to the bank's board of trustees.

MOSLEY: Let's take a short break. If you're just joining us, my guest is author and historian Justene Hill Edwards. We're talking about her new book about the rise and betrayal of the Freedman's Bank, titled "Savings And Trust." We'll continue our conversation after a short break. This is FRESH AIR.

(SOUNDBITE OF CLAUS OGERMAN AND DANILO PEREZ'S "RAYS AND SHADOWS")

MOSLEY: This is FRESH AIR, and today I'm talking to author and historian Justene Hill Edwards. She's written a new book that looks at the years immediately after the Civil War, when tens of thousands of formerly enslaved people deposited millions of dollars into the Freedman's Bank only to experience the bank's collapse a few years later. Her book is titled "Savings And Trust."

All right, now let's get into the mismanagement and ultimate demise of the bank. Take us to March of 1870. Freedman's total deposits at the time, according to your book, equaled out to about $12 million. That's about $292 million in today's money. How did the idea come about to loan out the money to white businessmen and investors?

HILL EDWARDS: Well, the bank was incredibly successful in its first few years. African Americans were depositing hundreds of thousands and millions of dollars into their bank accounts. But in 1867, John Alvord, who, at that time, was working with the bank as one of the administrators - he had convinced other trustees that it would be a great idea to move the bank's main office from New York City to Washington, D.C.

And at the same time, while he was encouraging the trustees to embrace this idea, he invited a group of bankers onto the board that would dramatically shape its history, led by banker Henry Cooke, the brother of Jay Cooke, who founded Jay Cooke & Company, the nation's first investment bank. He was invited onto the board and accepted a board appointment and more. He accepted the chairmanship of the bank's financial committee, the committee who decided what to do with the bank's deposits in terms of investment. He brought with him two of his colleagues who worked at the Washington, D.C., branch of Jay Cooke & Company, first national bank.

And these three men decided to kind of shift the bank's investment strategy. And so in 1869, Cooke embarks on a lobbying campaign to members of Congress, many of whom were his friends. And he convinced them to support a bill, an amendment to change the bank's charter to allow the bank to transition from being just a simple savings bank to essentially a commercial bank, which meant that the bank could then make loans and specifically make business loans.

And so the members of Congress, who were kind of on the bank's side or on Cooke's side, decided to approve the amendment. And so in 1870, the bank started to legally make loans, and that would dramatically change the ways that the bank's investment portfolio would kind of shake out. But it also shifted the bank's major foundational goal, which was to support the economic aspirations of newly freed African Americans.

MOSLEY: Right. And a lot of it - a lot of the loans went to real estate ventures, which is ironic because owning land and property was a major goal for many of the formerly enslaved and many people who had invested their money in this bank.

HILL EDWARDS: Absolutely. The bank started to make hundreds of thousands and then millions of dollars in loans to businessmen, even to politicians in and around D.C., to buy land, to buy property and to make those types of real estate investments. And a miniscule volume of loans went to African Americans. And this dramatically reshaped, again, the bank's fundamental mission.

MOSLEY: What kinds of ventures were those folks, the small numbers of Black folks who were able to get loans - what types of things were they using those loans for?

HILL EDWARDS: So the small number of loans - and we're talking, in terms of the overall loan volume, about 5% of the loans went to African Americans. Those loans went to, by and large, churches, and so a handful of Black churches in Washington, D.C., and Baltimore in particular.

MOSLEY: What made getting a loan from Freedman's Bank enticing to these white guys? - because I would assume that they could get loans from other banks, too, right? Was it the ease of them being able to get the money, the percentage on, like, the interest? What was it?

HILL EDWARDS: Yes, exactly. It was the ease with which they could get loans, the fact that the majority of the loans went to colleagues and business partners of members of the board of trustees. And so the loans had variable interest rates. Oftentimes very low or no interest would accrue on the bank loans. The borrower could write a letter or physically ask a member of the board of trustees if they could have an extension, and those extensions would be granted.

The amendment approved by Congress required that borrowers have collateral worth at least two times the loan amount, and oftentimes those who borrowed money wouldn't have to give collateral. And so the kind of foundations of these loans - the creditworthiness of those who wanted to borrow money was not fully evaluated or vetted by members of the finance committee. And so millions of dollars were just flooding out of the bank to these businessmen at the expense of the formerly enslaved who were putting their money in the bank.

MOSLEY: Our guest today is author and historian Justene Hill Edwards. We'll be right back after a short break. I'm Tonya Mosley, and this is FRESH AIR.

(SOUNDBITE OF TERENCE BLANCHARD "AIN'T YO STUFF SAFE HERE")

MOSLEY: This is FRESH AIR. I'm Tonya Mosley, and my guest today is author and historian Justene Hill Edwards. She's written a new book about the rise and betrayal of the Freedman's Bank titled "Savings And Trust." The book looks at the years immediately after the Civil War, when tens of thousands of formerly enslaved people deposited millions of dollars into the Freedman's Bank only to experience the bank's collapse nearly 10 years later. Edwards charts how members of the bank lost millions. And it was the bank's white financiers who caused its demise.

Justene Hill Edwards is a historian and associate professor of history at the University of Virginia. Her research explores the intersection of African American history, the history of slavery and the history of American capitalism. Her previous book, "Unfree Markets: The Slaves' Economy And The Rise Of Capitalism In South Carolina," dissects the economic lives of the enslaved.

There is this powerful illustration from Harper's Weekly titled "Blood Money" from 1876, and it illustrates a bank with money falling from it into a bag with the words KKK. That is such a powerful image. It also makes me think and realize that this was well-known what was happening, that it was wrong.

HILL EDWARDS: Absolutely. The idea that is conveyed in this Thomas Nast picture that I think is so provocative is that African Americans' money was going into the bank. But all of that money, all of that capital was being funneled, even stolen, by white Americans in the North. And one of the most powerful parts of this is that at the bottom, it says, KKK North. And so I think it is worth saying that members of the bank's administration, especially white members, would not be considered members of the Ku Klux Klan that had begun to emerge in this period.

But the reality was that the economic violence that the white bank administrators waged on African Americans, especially with their money, was seen as being a violent and extractive experience for African Americans not unlike the physical violence and terror that African Americans in the South were experiencing. And so that's why in the book, I make sure to use the term economic violence and plunder because for African Americans, that's absolutely what it was.

MOSLEY: How did people find out that their bank branch was going under?

HILL EDWARDS: Well, I think this is where the famed Frederick Douglass comes in. He's asked in 1874. After John Alvord steps down at the beginning of that year, he's asked in March to become the bank's president. And he is - he has a bit of trepidation, but he also understands the importance of the institution. He and his family - he and his sons were depositors. And so once he gets into the role of the presidency, he accepts.

And in April of 1874, he sits down for his first trustee meeting, and he learns that the bank's finances were in horrible shape. He learns that the bank is overleveraged. There are millions of dollars unpaid in loans, that the loan terms had been extended, that interest was not being collected, that Black depositors were not having access to their money, which was a problem for him. And news reports are starting to come out that the bank is underwater, that they cannot fulfill their obligations to depositors. And so while Frederick Douglass is figuring this out, depositors are starting to realize that, hey; I can't go to my bank branch and withdraw my money. I have to wait 60 or 90 days to withdraw the few dollars that I have in my account. And so this terrifies not only Douglass but the tens of thousands of bank depositors across the country.

MOSLEY: Remind us of Douglass' place in society at this point because his role had been promoting self-sufficiency for Black people.

HILL EDWARDS: Yes. He was by far the most famous African American. He was the most photographed man of the 19th century, which I think is a stunning fact. And he is incredibly recognizable. And he is well-respected among African Americans and many whites alike, especially white Republicans. And so his decision to accept the presidency of the Freedman's Bank - he took that very seriously. He had been considering moving more fully into political life. There were calls for him to move to a state in the South and run for a seat in the U.S. Senate. And so he saw this this decision to become the bank's president as a move in that direction. And as he writes in his autobiography that he publishes in 1881, it was one of the worst decisions of his life. And I think that is saying a lot given what he had been through in his life fighting for his freedom as an enslaved young man.

MOSLEY: Right. He actually writes, (reading) despite my efforts to uphold the Freedman's Savings and Trust, it has fallen. It has been the Black man's cow but the white man's milk. Bad loans and bad management have been the death of it. I was ignorant of its real condition to elect it as its president.

What did he do to try to save the bank, though? - because really, even after finding out all of that information, initially, he wasn't telling people to, hey; pull out your money. And he did not even pull out his money initially, right?

HILL EDWARDS: No. When he gets to that first board of trustees meeting, he is flanked by John Alvord, who was the outgoing president, and the bank's actuary, George Stickney. And he is basically shown the books and kind of looks in horror at the state of the bank's finances. And Alvord kind of jumps on him and says, well, there is a run on one of our branches, and so we need you to deposit $10,000 of your own money in this bank account.

And when I first read that, I was stunned. I was shocked because I'm thinking about Douglass getting to this very beautiful building. The building that they built in Washington, D.C., was one of the most expensive buildings at that time. It was one of the most stunning buildings in the city. And he's sitting there with the trustees. At that time, there are two other Black trustees. And he is looking around, I imagine, at the white faces and saying, of all of these men, none of whom have my background - minus the African American trustees - but the white men in this room could all gather money to loan. And they're asking me, the former slave, to do it. I just think about that, and it's kind of mind-blowing.

MOSLEY: Did he feel overall that he had been used?

HILL EDWARDS: I think so. I think he comes to that point fairly quickly. That year in February, there was a report issued by the Office of the Comptroller of the Currency, the first bank regulator, to examine the banks in Washington, and the Freedman's Bank was one of them. And the OCC examiner issues a pretty damning report of the bank's finances. They send out examiners to the various branches, and it comes out and depositors learn that the bank's finances were being mismanaged and that their money perhaps was not as safe as they had hoped.

And so Douglass comes in and essentially tries to right the ship. And what he does is he writes to try to assure depositors that their money is still safe and essentially not to pull their money out from the bank. And he ends up depositing $10,000 of his own money in the bank as a show of his confidence.

MOSLEY: You actually got a hold of some of the - this went before Congress, I should say, and you got ahold of some of the testimony. Douglass really showed a lot of anger towards John Alvord, who was responsible for actually founding the bank. What are some of the things he was able to say to Alvord? And how did Alvord respond or defend what was happening?

HILL EDWARDS: Well, so after the bank collapses in July of 1874, there are a series of congressional investigations. The most interesting, I think, occurs in 1879. The head of the investigation was the first Black senator to serve a full term, actually, Blanche K. Bruce from Mississippi. And he uses this as his last chance because he knows that he's not going to be reelected. And so he uses this as his last chance to make public what happened with the bank's collapse and its failure. And so he brings John Alvord, he brings Frederick Douglass to testify.

And Alvord is less forthcoming than Douglass and Bruce hoped that he would be. He claims that he's old - and he's in his 60s by this point - and he claims that he's old, and he's not sure what happened and that the bank's failure was really not his fault. He says that perhaps he should have been more forthcoming in terms of - or perhaps a sterner president, but he essentially tries to escape responsibility for the bank's failure.

Douglass, on the other hand, when he testifies, he is pretty clear about the fact that he came into the bank's presidency while the white administrators understood that the bank was insolvent and that it probably would not survive. He believes that he was strategically kept out of important conversations. Some of the bank's administrators were - are writing in code, a vestige of the strategies that Henry Cooke used in his own business. He would often communicate with his partners in code, and so there were communications in code that Douglass couldn't decipher. And so Douglass quickly, again, understands that the bank was not salvageable, and he was placed in that position to be the head of the Freedman's Bank when it failed and collapsed.

MOSLEY: Let's take a short break. If you're just joining us, my guest is author and historian Justene Hill Edwards. We're talking about her new book about the rise and betrayal of the Freedman's Bank, titled "Savings And Trust." We'll continue our conversation after a short break. This is FRESH AIR.

(SOUNDBITE OF STEFANO BOLLANI'S "ALOBAR E KUDRA")

MOSLEY: This is FRESH AIR, and today I'm talking to author and historian Justene Hill Edwards. She's written a new book that looks at the years immediately after the Civil War, when tens of thousands of formerly enslaved people deposited millions of dollars into the Freedman's Bank, only to experience the bank's collapse a few years later. Her book is titled "Savings And Trust."

You know, I'm thinking about if something like this were to happen today. One of the first things that probably would be brought up would be the idea of criminal charges. Was it ever on the table for anyone to be criminally charged for this?

HILL EDWARDS: No. Unfortunately, none of the administrators who were culpable for the bank's failure were brought on criminal charges. If anything, they used their testimonies before Congress to try to explain away their behavior. Henry Cooke, for example, is finally called in front of Blanche K. Bruce in his congressional hearing, and he evades. He says he doesn't remember. He testifies that his decision-making in terms of investments was sound. And so unfortunately, no one was brought on charges, and the bank's depositors, when the bank failed, were left to deal with federal authorities to - hopefully, they hoped - get their money that they still had in the bank when it failed in July of 1874.

MOSLEY: Did they ever get money back from those that they loaned to?

HILL EDWARDS: Well, there were five disbursements. The first disbursement was about 10%, and then it went up to, like, 10%, 10%, 15% and then 5%. And so there was a very complicated process, though, for depositors to get money. They had to submit their bank books, which was just a re-recording of how much they had in their accounts, how much they had saved and withdrawn. They had to submit their bank books within a certain period of time. They had to comport with certain guidelines to submit other information in terms of their identities, which, I'm sure you can imagine, in the 19th century, especially for African Americans, was very complicated.

And so it was a very complicated process that was made even more complicated because as the bank's commissioners, Congress appointed three commissioners to figure out how to liquidate the bank's assets and to figure out how to repay the depositors. They had a hard time selling off the banks assets, the buildings that they had purchased for bank branches across the country. The commissioners themselves were getting paid. And so all of this kind of chipped away at the money that African Americans could claim. So at the end, by 1900, Black depositors had claimed about 48%, 49% of what they had in their accounts - and so nowhere near the full amount of money that they had when the bank collapsed.

MOSLEY: Have you charted just how much wealth many of these people might have had if they hadn't lost their money?

HILL EDWARDS: It's in perhaps a trillion dollars. I mean, it's really hard to say. When the bank failed, their depositors had about $2.9 million in their accounts. At its height, though, the bank had taken in about about $57 million, and now that's about $1.5 billion. And the math on this is not exact, but if we think about how that money could have accrued - how interest could have accrued on that, we are talking about billions if not trillions of dollars in wealth that African Americans could have now if not for the failure of the bank.

MOSLEY: Are you making the case for reparations?

HILL EDWARDS: That is a good question. I think so. I think there needs to be a reckoning. I think one of the major aspects of not just this work but longer, broader conversations about the continued influence of slavery is that African Americans have been stripped of wealth. And that was strategic. It wasn't just with the failure and plunder of the Freedman's Bank. We're talking about discriminatory housing practices, lack of access to credit, being credit-invisible, not trusting financial institutions and so taking yourself out of the traditional financial marketplace.

And research shows that having and maintaining a relationship with a financial institution and trusting that your money will be safe with that financial institution is a vehicle to build wealth. And so if African Americans historically have both been left out of and, on the other side, don't trust these institutions, we're talking about one of the origins and roots of the racial wealth gap in America.

MOSLEY: Justene Hill Edwards, thank you so much for this book and this conversation and your research.

HILL EDWARDS: Thank you so much. This was wonderful.

MOSLEY: Justene Hill Edwards is an associate professor of history at the University of Virginia. Her new book is "Savings And Trust: The Rise And Betrayal Of The Freedman's Bank." Coming up, book critic Maureen Corrigan reviews Katherine Rundell's new book, "Vanishing Treasures." This is FRESH AIR.

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