March 3, 1865 President Lincoln signed legislation to incorporate the Freedman’s Savings and Trust Company, commonly known as the Freedman’s Bank.
At its peak, the bank operated 37 branches in 17 states and the District of Columbia making it one of the first multi-state banks in the nation and by 1870 nearly all the branches were run by African Americans. The bank was closed in June, 1874 due to massive fraud by upper management and the board of directors and the economic instability resulting from the Panic of 1873. “The Freedman’s Saving Bank: A Chapter in the Economic History of the Negro Race” was published in 1927. Congress did establish a program to reimburse up to 62% of the depositors lost savings, even though many were never compensated. Many historians believe that the failure of the Freedman’s Bank led to distrust and fear of banks by the African American community.
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