The $3 Million Swindle

On March 3, 1865, Congress incorporated the Freedman’s Savings and Trust Company, commonly called the Freedman’s Bank, primarily for formerly enslaved Black Americans. Although it was a private corporation, its congressional charter led many depositors to believe their money was federally protected — it was not.

The bank’s failure was not a failure of Black Americans to save. Over its nine-year history, more than 70,000 clients — farmers, laborers, churches, and businesses — deposited more than $57 million, evidence that newly freed Black Americans were actively building financial security. But after Congress loosened the bank’s charter in 1870, bad loans, mismanagement, and what the National Archives identifies as outright fraud put those savings at risk.

When the bank closed in 1874, it held nearly $3 million belonging to more than 60,000 depositors but possessed only about $32,000 in cash. Frederick Douglass, brought in as president to restore confidence, testified that he knew nothing about banking — and discovered he was the only trustee who had deposited his own money. By 1880, only about 40 percent of deposits had been refunded.