An American Betrayal of Trust

Joel Wendland-Liu

Savings and Trust:
The Rise and Fall of the Freedmen’s Bank
By Justene Hill Edwards
New York, W.W. Norton and Company, 2024, 336 pages. $19.99 paperback (to be published).

JUSTENE HILL EDWARDS’ illuminating book examines the significant decline in Black wealth that occurred following the Civil War. Savings and Trust: The Rise and Fall of the Freedmen’s Bank painstakingly uncovers a neglected history: how the Freedmen’s Bank, envisioned initially as a secure institution for Black wealth accumulation, was systematically plundered by white financiers like Henry Cooke, who exploited its deposits for risky personal ventures.

Edwards reveals the bank’s transformation from a conservative savings institution into a corrupt commercial enterprise, with Cooke and his allies engaging in illegal loans, conflicts of interest, and speculative investments that would ultimately lead to its collapse in 1874.

Building on the efforts of various banks established during the war to securely store the earnings of Black soldiers, prominent political figures sought to create a national bank for African Americans. In 1865, former U.S. military chaplain and Freedmen’s Bureau administrator, John Alvord, convened with a group of businessmen at the American Exchange Bank in New York City to launch the Freedmen’s Savings and Trust Bank.

Banker and real estate magnate, Henry Cooke, brother and partner of Jay Cooke — the now infamous financial capitalist whose questionable dealings in the railroad industry contributed to one of the longest depressions in American history beginning in 1873 — took notice of the increasing deposits made by Black people into the bank.

Once he joined the bank’s board of trustees and leveraged his good reputation, Cooke persuaded the board to expand its operations to numerous Southern cities, relocate its central office to Washington, and grant complete control of the bank’s operations to the finance committee on which he and his associates sat.

As Edwards points out, the 19th-century concept of a savings bank was typically built on a conservative banking model. Bankers in such institutions viewed their primary role as securing deposits through investments in government bonds that provided a modest interest rate for depositors.

Risky loans and investments were out of the question, and, according to Edwards, this was the original plan. Such banks operated on a non-profit basis.

Cooke’s Slush Fund

Henry Cooke, along with his finance committee allies and business associates Daniel L. Eaton and William S. Huntington, took a different view.

Black depositors, who comprised ninety percent of the bank’s patrons, contributed the vast majority of the $57 million (equivalent to $1.5 billion in 2024 dollars) in deposits over the nine years of its existence. Those deposits were primarily generated by formerly enslaved people who worked to save money to purchase land or invest in agricultural equipment.

Cooke and his cronies saw this amassed wealth as a “slush fund” for their business ventures. In addition to their ties to Jay Cooke’s national banking concerns, they were major players in Washington’s real estate market, gaining control over materials companies, construction enterprises, and land speculation activities.

Edwards explores how they transformed the savings bank concept into a commercial one, illegally lending the bank’s deposits to themselves and their friends to fund their projects.

Cooke’s shady loans violated the bank’s charter and the law. He turned the bank’s original plan, to base a modest capital growth on conservative U.S. securities, into an undisciplined, unregulated system of lending based on purchasing Cooke’s railroad bonds — for which he also paid himself a handsome brokerage fee. These included stocks in enterprises like the Young Men’s Christian Association and Cooke’s own companies.

Cooke also convinced the bank’s trustees to allow the purchase of an expensive building in Washington, built by Cooke’s companies on land he had sold to the bank. He got the bank to hire consultants and actuaries who were tied to his businesses.

The range of conflicts of interest was both extensive and boldly corrupt, as Edwards documents. A final congressional investigation conducted several years after the banks’ final collapse showed that Cooke borrowed at least $600,000 using these illegal methods.

Cooke and his allies persuaded the board to broaden the bank’s operations, increasing the number of branches to 34 cities by the time it ultimately closed. In doing so, they amassed hundreds of thousands in new deposits to pour into their slush fund.

They advertised the bank through Black-owned newspapers, political organizations, and churches. Their message suggested that the bank was safe and backed by the U.S. government.

But government officials would later point out that since the U.S. government never provided its legal backing for the bank, it was not responsible for repaying the 61,000 depositors who remained on its records when the bank finally shut its doors just days before Independence Day in 1874. Indeed, politicians often blamed Black bank patrons for Cooke’s criminal behavior.

While Edwards is generous in her assessment of John Alvord’s role in the Cooke schemes, the data she reveals about him suggests he may have been more than simply naïve or overextended in his professional life. She notes that he held two other significant public roles, as superintendent of education at the Freedmen’s Bureau and a leading figure in the Congregational church.

Financial pressures and overwork, she suggests, led him to “abdicate” his responsibilities overseeing the bank. Still, she documents how he established business relationships with finance committee members and saw his personal fortune increase tenfold during his tenure on the bank’s board. Ultimately, when called to testify before a Democratic-controlled Congress in 1876, Alvord held a prominent position at Cooke’s building materials company.

To his credit, Alvord had advocated for hiring Black cashiers at the local branches, Although a handful were hired for those positions, the vast majority were white men.

Under the Cooke setup, the branches forwarded most of the deposits to the central office in Washington, where the cash could be easily accessed for risky lending purposes. Nearly ninety percent of the bank’s loans were made to white people. Investigations of the bank’s accounts in its final years of existence revealed that a large quantity of the loans were secured illegally, were often made “off the books,” or went unpaid.

When Cooke’s investments in the Northern Pacific Railroad collapsed in 1873,touching off  a downturn in the banking industry nationwide, Cooke took one last loan of $50,000 in a desperate attempt to shore up the Washington branch of Cooke’s First National Bank.

Freedmen’s Bank documents showed that at one critical moment in the crisis, it held only a few thousand dollars to repay depositors who decided to withdraw their money. More than $93,000 of its funds had been deposited by Cooke in the First National Bank.

As the Freedmen’s Bank teetered on the edge of collapse in early 1873, an audit of the accounts uncovered a $217,000 shortfall between its assets and liabilities.

A Congressionally mandated auditor proposed that several reforms could save the bank. Enforcing loan repayments, ending conflicts of interest, ceasing risky loans based on unsecured collateral, returning to more conservative investment practices, and liquidating assets such as consolidating some of the branches and selling the various buildings acquired by the bank, could protect deposits and prolong its financial health.

Alvord’s failure to act on that guidance, along with Cooke’s ongoing influence through the bank’s actuary George Stickney, ensured that it would continue down the path toward inevitable demise.

Rescue Efforts and “Revenge”

Several Black men had been added to the bank’s board of trustees. Dr. Charles Purvis, a medical doctor and professor at Howard University, along with John Mercer Langston, who later became the dean of Howard’s law faculty, served in this role.

Following the bank audit’s exposure of events under the Cooke regime, Langston and Purvis became more actively involved in the board, advocating for reforms that aligned with the recommended practices. They believed that, if taken seriously, those recommendations could save the bank and establish a more stable foundation. They were also crucial in bringing Frederick Douglass onto the board, and eventually, as the bank’s president in early 1874, just months before its final closure on July 2, 1874.

By September, however, the Cooke company’s vast network of holdings and its banks had gone bankrupt. The collateral securing loans to the Cookes was now worthless. Dozens of high-value loans remained unpaid. The real estate market in Washington declined, and the bank’s buildings could not be sold quickly for enough cash to stabilize the bank.

Douglass could do little to steer the bank away from its rapid descent into disaster. Indeed, he appeared surprised by the extent to which his predecessors had engaged in illicit practices, noting later that he was the only board member with an account at the bank. Choosing to go down with the ship, Douglass abandoned the $2000 he had deposited in the bank rather than withdrawing it in the final days.

Congressional Democrats exploited the bank’s failures to exact “revenge” on the Republican-led Reconstruction civil rights policies of the 1860s and 1870s. Guided by former Confederate officials and current KKK leaders who viewed Black political power and civil rights as anathema, the Democrats initiated investigations into the bank.

They cynically targeted the abolitionist impulse to support Black people, leaving the capitalists unharmed. No indictments were issued against Cooke and his associates. Instead, Democrats leveraged the situation to gain political advantage and portray Reconstruction policy as a facade for corruption — not as a capitalist problem, but one stemming from the alliance of white and Black abolitionists.

Indeed, opponents of Black freedom used the bank’s problems as part of a campaign to depict Black people as unprepared for the responsibilities of freedom, ultimately justifying Jim Crow’s implementation.

Despite efforts from Black trustees like John Mercer Langston, Charles Purvis and later Frederick Douglass to salvage the bank, the damage was irreversible, leaving tens of thousands of Black depositors unpaid.

Edwards emphasizes how the bank’s failure was tragically weaponized by political opponents to undermine Reconstruction and justify racial oppression, illustrating not only financial malfeasance but also the broader betrayal of Black economic freedom in post-Civil War America.

January-Febnruary 2026, ATC 240