The Freedman’s Savings and Trust Company, also known as the Freedman’s Bank, was established in March 1865 by white abolitionists, bankers and philanthropists. According to the Treasury Department, the bank was created to “help develop the newly freed African Americans as they endeavored to become financially stable.” Within the first few years, the bank flourished, with 37 established branches and more than 100,000 depositors in total.

However, the bank failed after less than a decade, due to a financial crash and mismanagement by an all-white board of trustees. More than 60,000 depositors, many of whom were Black, lost over $3 million (equivalent to $68.2 million today). Very few received a fraction of their money back after years of appeals to government officials. Many believe this bank’s failure created many Black Americans’ distrust of financial institutions. 

Justene Hill Edwards is an associate professor of history at the University of Virginia and the author of the forthcoming book, “Savings and Trust: The Rise and Betrayal of the Freedman’s Bank.” Edwards told “Marketplace” host Kai Ryssdal that there is a “generational memory of the Freedman’s Bank and its failure” that dictates the strenuous relationship between Black Americans and financial institutions.

The following is an edited transcript of their conversation.

Kai Ryssdal: For those unfamiliar, could you give a 30-ish second precis of the Freedman’s Bank?

Justene Hill Edwards: Sure. Well, the Freedman’s Bank, also known as the Freedman’s Savings and Trust Company, was a savings bank founded in March of 1865. And it was founded by a group of white politicians and philanthropists for the financial benefit of recently freed slaves. 

Ryssdal: As I was prepping to speak with you, it occurred to me that the phrase “well-meaning white philanthropists” should probably be appended here. Is that fair?

Edwards: That is absolutely true. The basic foundations of the Freedman’s Bank were created by white Northerners who, in some ways, really believed that they could economically help the nation’s almost four million freed African Americans. And so, they conceived of the bank as a vehicle to help them make the really dangerous transition from slavery to freedom, but in terms of their finances and economics.

Ryssdal: The reason this bank failed matters through, not just the history of that period, but up to today, right?

Edwards: It does. There was a financial crash, a financial crisis in the fall of 1873, and African Americans started to withdraw their money en masse. Frederick Douglass comes in, he becomes the bank’s president in March 1874. And he looks at the bank’s finances and realizes that the bank is overleveraged. The finance committee had approved of millions of dollars of bank loans that were not going to be repaid. And interestingly enough, the majority of those loans went to the white partners and businessmen who were affiliated with the bank’s trustees.

Ryssdal: We should point out here that was the Frederick Douglass. 

Edwards: Yes. The one and only Frederick Douglass, the most photographed man of the 19th century, was the bank’s last president.

Ryssdal: Okay. Alright. So with all of that, as context, I want to do a little prologue here. Was the supposition by the people who started this bank that Black Americans had not had, not necessarily financial institutions, but financial know-how and financial practices before emancipation?

Edwards: Yes, that’s right. And in many ways, they really didn’t understand the financial knowledge that African Americans were bringing with them into freedom, African Americans who were enslaved were cultivating ideas of how to make and save money in the period of slavery. And so they were bringing with them very concrete ideas about saving and what they wanted to do with their money, which was to buy property and buy land. 

Ryssdal: Well, that’s where I wanted to go next. Because, you know, one of the many, many, many tragedies of the Black American economic experience is the inability that Black Americans have had to build generational wealth, and in a way it kind of starts here. You relayed this story, either in an article I read or parts of your other writings, about during the Great Depression, a descendant of one of these people writing to FDR, saying, “It would be really great if I could get my hands on my grandmother’s deposit right now.”

Edwards: Exactly, and so we see that there is kind of a generational memory of the Freedman’s Bank and its failure. And I think in many ways, too, it’s dictated the oftentimes fraught relationship that we’ve seen between the financial services industry and African Americans in the 20th and 21st centuries.

Ryssdal: Well, say more about that, because this was 150-something years ago that this happened, and your theory of the case here is that it affects things today.

Edwards: Yes, I mean, we see, especially in the period after the bank ends, we see African Americans continue not to trust and engage with the financial services industry that becomes so important in building credit to be able to purchase homes to pass down generational wealth. And so, in some ways, it’s not surprising that the wealth gap is as staggering as it is today.

Ryssdal: As you have done the research for your forthcoming book on this subject, the title of which we’ll get to when we say goodbye here, I imagine there were so many instances as you were doing the research, where it was a ‘what if?’ moment. What if things had been different? What if they hadn’t expanded to white bankers? What if the loans had gone to some of the recently enslaved Black Americans? There must have been so many turning points where today it would have been so different.

Edwards: Sure. I mean, I have heard just in my own family the idea of saving money not in banks, but underneath the mattress. In many ways, I think that these kind of memories of the bank, even though we may not have the language to connect it to behaviors today, it’s there, which is why I think that the history of this bank is so important.