Savings and Trust, Justene Hill Edwards

 

Savings and Trust:  The rise and betrayal of the Freedman's bank est. 1865 by Justene Hill Edwards

Started: January 7, 2026
Completed: January 15, 2026
Recommendation: Recommended
Media: Audio
Recommended By: Nobody

Review:

For some reason, I thought that this was a book about how newly freed slaves recovered from the collapse of the bank.  Instead, this is a fairly detailed look at how the bank collapsed--sort of a history of both the individuals and the structures that led to the collapse of the bank.  I learned here that the bank collapsed because of the Panic of 1873 when there was a worldwide depression.  Other banks collapsed at the same time.  What made the bank subject to collapse, however, was the trustees of the bank (Cook in particular, who was also the mayor of Washington DC and the brother of a New York banker) functioning as self-serving dealers instead of fiduciary care takers of the wealth of the freedmen.

This was capitalist white predation and the trustees failed to adhere to the requirements set up by Congress for offering loans.  They did not fail due to mismanagement (though most of the trustees were not bankers), they failed because they provided loans to themselves and their cronies with little or no collateral and were not held to account when their loans became due--they effectively stole from the bank.  At the time, the bank was sold to the community as a way to save up for land and that is what patrons did--they put their money into the bank until such time as there was enough to buy land, then they pulled the money out.  Since the fundamentals of the bank were based on US Bonds whose maturity time exceeded this cycle, the bank was illiquid and could not meet this cycle except by increasing the number of customers (this amounts to a Ponzi scheme).  Because this was an impossible situation, the already corrupt trustees convinced Congress to approve the bank moving from a US Bond investment approach (safe) to a loan based investment approach (risky) and the corrupt members of the trustees abused these loans.  A huge number of the loans were simply never repaid and those who took out the loans were never held to account.

As is too often the case, the bank spent money it did not have on lavish extras (like the most expensive building in Washington, DC) amidst the extreme corruption of its loan practices among the trustees and the petty corruption/incompetence of cashiers (think branch managers) who struggled to keep accurate records and provided loans on their own non-existent authority.  The black patrons of the bank were left with the losses rarely recovering over half they money they had put into their savings accounts.