Carl R. Osthaus' 'Freedman, Philanthropy and Fraud; A History of the Freedman's Savings Bank

By

Sampson Iroabuchi Onwuka

The primary attention of this article is Carl R. Osthaus' 'Freedman, Philanthropy and Fraud; A History of the Freedman's Savings Bank. The normal process involved in any recitation like this, is to treat argument to a large possible extent and add the sources of the information at the end, all of which may be expected to improve the readers percipience of the overall book from short discourses. There is nothing wrong in doing a review on a book with due attention to what the author wanted us to accept, to the probably reason that a book reviewed is not exactly the same as a book researched,  and that it a new research on an old book only fall short of the authors major-dome.

This book by Carl Osthaus is old, and the point he raised in the book is better rehearsed elsewhere, however, the topic is central to the growing demands of African American capital past, as a way to form the direct measure of the combative forces of the present and in prospects, serve a s a comparative yardstick between that past and present. The Bank had its headquarters in New York and eventually Washington D.C and then other branches such as those in Louisville, Richmond, Nashville, Wilmington, N.C., Huntsville, Memphis, and the proceeded to other places such as Mobile and Vicksburg. It is common history that the end of the 1866 and the 14 branches had opened and had a repository of $199, 283.43. And then by 1871, the Bank has opened 34 branches. The initial deposits from New York rolled a total of $700.00 initially and carrying from other banks $7, 956.37 and by 1874 it accounted for $57 million. These numbers are also discovered elsewhere.

Once more we need to mention that this book is not new and the book is not old, it does not stand out as the better books on the subjects on Freedman banking, but the content is vital or at least one central point proved to be a litmus paper in discharging the allegations of the Bank’s failure. At the center of this litmus paper is a certain Frederick Douglass, once accused to be the hand that doomed the bank, at least the last of the Presidents to grace the top of the Freedman savings and Trust Bank, but in comparative literature as from Osthaus', we are treated to a detailed portrait of the last days of the Bank which suffered from internal bleeding from earlier on, to die on as if the managers were not aware of it.

 

The Bank was however accused of being directly involved in the “mammoth” buildings in Washington D.C which was to have caved in the Bank financially in spite of the warnings from the Federal Government. But then the young company had seen the 'Credits Acts' 'era of Government subsidy brought to an in 1868. The notions of failures couldn't been any stranger to the economy that repaired paper with gold, and the windfall in profit came from all corners. But just as we witnessed a tidal wave of the rushing 1869, the new forces of financial assassination gathered for a feast. When the only source of provisioning a profit line for a bank and its credit is deposit, there is a tendency towards borrowing which no wise person may overlook. But this was not to be the case of Freedman's bank or a new bank, where as other Banks for profit may be backed for consumption by Government, this one wasn't, couldn't have, since it was designed with intentions of operating a bank model.  

It’s been said that mismanagement at the Bank and its apparent lack of initiative was central to the early sickness and eventually death but here and from the author, we begin to see that both Federal Government and the redeeming class of Freed Soldiers were already with problems of payment, and it is clear that either government did not have all the money to pay at the beginning or one point that seems to suggest this connection to the lack of full capacity by the Federal Government is that the black soldiers who served in the Civil War were already complaining of lack or delayed payment by the paymasters. It was not impossible to suggest who was exactly in charge of the payment for these black freed soldiers – literally meaning soldiers who are both free from institutional slavery and those discharged from army.

The argument about who was paid and exactly when and how was an issue that dragged the Army to the public and one of the means this was to be settled was through a centralized payment system in form of a Savings and Trust.  Historically, it is been said that it was A. M. Sperry who was Army general’s paymaster that suggested that a Bank can be opened ‘Freedman Trust and Saving that would help to solve this problem of payment through Federal Government takeover but in this book however, we learn that it was part of ongoing efforts towards helping the small business owners among the newly liberated slaves, who were primarily laborers, cooks, washers, town builders and construction, waiters, butlers, potters, and rail road workers. As theory goes, it was  

These men who that it borrowed too much from Northern Alliances of Andrew Carnegie, Jay Cooke, Louis Astor and Cornelius Vanderbilt who represented the first half of the Gilded Age were the principal architects of New York’s transformation as a preferred immigrant destination to the financial and banking capital of the world.  It was a good number of these unspecified group of mostly Whites and some Jewish, that truly had a formal knowledge of the demise of the Bank. At least in this book and on several official accounts, we learn that the first 50 board of directors who authorize investment and underwrite checks were all composed of non-blacks. In other words, the board had no single Negro on board.

As we are likely to discover, the Freedman Bank had at 420 thousand repositories, all of whom lost some portion of their money. While it seems clear that a good number of these first Bank Managers which does not mean that it covers all the necessary section. For that we are left with the purpose of making certain citation with view of archiving the broad strokes of Black American business and nothing more.

Freedman savings and trust company  had close to fifty (50 board of trustees, none of them Negroes, March 16th 1865, John W. Alvord, began the first tentative arguments, (1) According to Alvord, that the Freedman savings and Trust Bank was established  as a response to the need for Blacks, to save their money. (2) The only source of dividend was Interest rate but over time, it was seemingly clear that the "the road to wealth passed through the Freedman's Bank" and for a brief decade it may have stayed that way.

 

Alvord letter to the Bureau, April 1867 “They changed the By Laws, and bring the principal office here (to Washington) placing the Banks, for the first time being under the special auspices of the Bureau. This, I think accords by Gen’ I Howard as will relieve us very soon of the very embarrassment. The bounty moneys…will be passed over to the claimants to a great extent; and thus we hope, by right influence, to obtain a larger amount of deposits” opens and closely the ambiance that the Bank was deeply involved with deposit line only, there was no any report on the daily outcomes of the Bank that affected those outside the management of assets.

 

It has been suggested that operational dynamics of Banks/Company was different from the Bureau, which was headed A.W Alvord. In a statement released by A.W Alvord, he is believed as saying that “The Bureau will favor Bank in this business all it can – but how much this will be cannot be told, until we have some practical experience”, we may tend to witness a form of connection to the possibility of a ranking bureau in charge of the day to day operation of Bank, where as we may seen have read elsewhere, A.W Alvord was part of business and management model. The Bank Ownership  “Here at Head Qrs. , we look very much like one concern – a number of Bureau officers occupying the back room of our Bank, though, as before said, we are really only in fraternity as institutions.” 

 The books cited the words of Frederick Douglass that “There was something missionary in its composition, and it dealt largely in exhortations as well as promises. The men connected with its management were generally church members, and reputedly eminent for their piety. Some of its agents had been preachers of the ‘word’. Their aim was now to instill into the minds of the untutored Africans lessons of sobriety, wisdom, and economy, and to show them how to rise in the world.” This appears on Life and Times of Frederick Douglass, and It also appeared in the ‘Complete Biographies of Frederick Douglass.’

 

And in similar quotation from Robert Yancy ‘Federal Government Policies and Black Business Enterprises; we read of the citation that “One ‘Daddy’ Wilson, who later became cashier at Washington was used and misused by whites as a figurehead. He served as a fine ‘buffer’ for the whites to loot the bank. One Mr. Vanderbrung, for instance, borrowed $30, 00 (from him) on the verbal endorsement of the District of Columbia ‘boss’. Jay Cook and Company, financiers, borrowed $500, 000 at five percent interest, while depositors in this same institution were paid six percent interest on savings.”

 

 We are not sure who this Daddy Wilson is and whether the full quote can be attributed to Douglass, there is parochialism from the text that suggest that Douglass was probably the author of the statement. There is also something of the charge in the statement about Jay Cooke, that a statement or some account exist under the name Jane Cooke as Wife of certain William Cooke may have sent the message into all kinds of direction.

 

Was Cooke of Jane Cooke the same as the wife of the Jay Cook and it may mean that the Jay Cooke himself is not without explicating on how he managed to pull $500 000 at the time when it was obvious the Jay Cook and Company was going under following the Panic of the 1873. In another incident, there is a note fiefdom that was equally derived from that view of the bank as a form of a Charity and when this view is factored into the running of any business, you are left with that process of sympathy and not profit, and the business dies gradually. 

W.E.B Dubois in Souls of Black folks Chapter 2, that “Not even ten additional years of slavery could have done so much to throttle the thrift of the freedmen as the mismanagement and bankruptcy of the series of savings banks chartered by the Nation for their special aid.” And there were others such as Booker T. Washington that “This bank had agents all over the south, and colored people were induced to deposit their earnings with it in the belief that the institution was under the care of the United States Government.”

The argument is not that lending excesses of the Bank or vice associated with employee’s inexperience at the earliest stages presaged its failure, or that mismanagement as the Bureau and congressional hearing attempted to show, forced the early demise of the bank. While this view has proven central to the meaning and thesis of the failures associated with the Freedman Trust and Savings, it may seem only appropriate to the more dispassionate observer that such view is derived from the citizenry unsure about the power that was devoted to the newly redeemed.

 

Yet it is not without the roughing the vulture of the area presume to know now the bank, i.e, true structure is likely to survive with deposit as it ultimate profits ends and it drove the hired hands in fixing the thin sheet of the deposits as if the Bank was backed by the Federal Government.

"Tis little by little the bee fills her cell;
And little by little a man sinks a well
Tis little by little a bird builds her nest;
By little's a forest in verdure is driest'

 The statement is believed to hang in front of Freedman's Bank

'No good, Solid wealth comes in a day', ‘A tree grows very slowly. You cannot see it grow still it does grow. So with your deposits” 

Measured with failures of Banks at previous eras, the failure of Savings and Trust Company hold no special meaning, there will be banks that will fail and there were other banks that failed in the same period. But measured from the promises that the bank held for newly redeemed children of ex-slaves and ex-slaves, the damage to their credit proved impossible to prefigure. It was indeed a first Bank of a company type of its kind, and it was loosely held together by measly sum of the working majority of blacks – of course they were others – but in reality it was a young bank whose capacity would be redeemed only in a time and not in the 8-10 years. 

The end judgment is that the Bank was forced to do much too quickly, it was easily cornered by those who understood the inside workout of the Banking Sector and it was not never to be survived the first few decades. Its history is overstated, its rescue mission misdirected, and its lessons are better observed from the positions of United True Reformers of Richmond Virginia and probably nothing else. If one is willing to compare the true judgments of people, especially some with background in banking and industries , it will be conscientious title ‘True Reformers’  from Virginia Black Folks who gifted the Bank its highest repository and no doubt bear the lasting epitaph reflecting a episode involving Blacks and Business, the summary of the time.

                                                               II

Reginald Washington research on his ‘Federal Records and African History’ (Summer 1997. Vol.29, n0.2), “The act had a clear objective and purpose; a single savings institution created primarily for former slaves and their descendants. The deposits received by the bank...with the exception of a final set aside for operating costs and other emergencies...were to be invested in “Stocks, Bonds, Treasury notes, or other Securities of the United States.” The Charter suggested that “no loans would be made” and that “all the assets of the Bank were owned by depositors in proportion to the deposits of each.”’ These point appear in Carl R. Osthaus ‘Freedman, Philanthropy and Fraud’ and Osthaus placed emphasis on the point of the Bonds and Securities, suggesting that it was given the right to invest  the depositors money but not to loan it may mean that the ‘Freedman savings and Trust’ was not a Bank but a company.  And the maintained that ”Contrary to what many investors where led to believe, the Bank’s Assets were not protected by the Federal Government” but they had branches in Vicksburg, Richmond, Charleston, Savannah, New Orleans, and Houston. 

That they used advertisement bearing Abraham Lincoln and Senator Oliver Otis Howard, leading the depositors to believe that their money deposits in the Company – which they took for a Bank were backed the Federal Government. This we can understand was not true at all, for sure, the experts including the founders and bureau that managed it by names J.W Alvords and Company would have known that Banks in the United were backed at some level by Federal Government, especially when these Banks also issued Insurance. Historically, this continued till the 1930’s of the FDRs and the slitting of Insurance from Bank operation associated with Glass-Steagall Act. 

But we are looking at the turn of the 1900 century when majority of the Banks that made a difference, made a difference along the lines of Investment Banking, where it was not easily called a company in those years, it was called a company, for instance Jay Cooke and Company, which was the largest investment bank of the time, or what we call investment Banks now, was then not a Bank and not backed by anybody saving their own Insurance and their own notes baited against the Federal Debt. Yet it seems that the success of Jay Cooke coincided with the rise of Salmon P. Chase and eventually the Morgan men at the Treasury. It will be interesting to have shown how mismanagement from the side of those who were not even in the 50 man Board will become the reason why the Bank failed. Even as accurate as it may been from the long Q and A at White House, it would have made more sense for Washington to look at the Bank sheet and exit strategy of funds from their financial main event.  

As such we can now clearly understand the role of J.W Alvord in the whole evolution of the Company, that he like many people today still believe that  That they promoted the face of the Bank along the face of the President Abraham Lincoln suggest that Alvords either in kind or with the proper wish of transforming the company into a Bank, intended from the beginning to mislead the repository and as such many people – even today include Reginald Washington and Carl Osthaus, still think it was bank where as Goldman Sachs not unlike Lehman and Bear Stearn of today was only and very lately transformed into an ordinary Bank by Act of Congress and through emergent effort of the current U.S Treasury , Timothy Geithner and Former Treasury Secretary Hank Aaron. To be clear, Lehman at that last minute asked for the same vitae for daily Bank but it was turned and used for Goldman instead.

Apparently, the structure of the Company was set up in New York in such a way as to mirror the Investing Banks such as Jay Cooke and Company, who was the U.S number of ...agter and whose greatness along with those Andrew Carnegie was tied to the Rail-Roads. As we shall discover that the many areas of the business with Rail-Roads particularly tracking the routes of champion soldiers were tied to the investment position and Branches of the Freedman Company, for instance Vicksburg, Richmond, Charleston, Savannah, New Orleans, and Houston, became as it time went on, a trouble malice because of the quarrels in between the generals, one of which was proven instrument in the Panic of 1873, the opposition of Alexander St. Claire to Joseph E. Brown in the consummate struggle over the Western and Atlantic Rail line and the ending of Vicksburg Rail Road line. 

This point whose details are to be understood as birth of the Panic of the eventual1873 does not appear in Osthaus Book or in Washington’s comparative analyses, either would anyone find it the congressional hearing and oversight committee on the demise of the Freedman’s Savings and Trust Company. While the questions about the lending of Jay Cooke and Company $500,000

Carl  Osthaus we must indicate clearly mentioned that the structure of the ‘Bank’ began with the Federal  Government taking over the Military Savings Bank at Beaufort, South Carolina, which was known eventually as ‘South Carolina Freedmen’s Savings Bank’ a pacesetter if not the pacesetter to the Freedman Saving and Trust Bank. This was where the con began, from a name or page acquired from its inability to pay the Blacks on time and retained as a gratuity to the efforts of A.W Alvords as stated from his acclaimed position of his Fraternity concerning the unity franchise of Military accounts of Blacks, some of which was escrow some of which rendered to the receiver in pennies all of which resulted from unclear and unusual practices of the designated paymasters.  There was also the problems of Regiments and the squad leaders, some of whom did not feel obligated to release the compensation of their squadrons to other people from clearly different and nearly opposing party. 

Besides, the South after unification, did not feel obligated to any Northerner let along Blacks or Freedmen, and had no qualms in confiscating their pay.

One of these soldiers who went on to help their fellow soldiers so to speak was General Benjamin Butler, who established in Norfolk Virginia a similar Freedmen Savings and Bank, and in Louisiana, there was the popular incident of General Nathaniel Banks ‘Free Labor Bank”, received from its inception deposits from African American as well as White Plantation owners. The result was the rift which led to many issues of payment and the eventual actions of the Government including the takeover of the property and Abraham Lincoln singing into law on March 3^rd, 1865 “An Act to Incorporate the Freedman’s Savings and Trust Company.” There, and from the beginning and in very Blue Prints, it never said a Bank, it never said an insurance, it said a Company.

 

There is also a persuasion from these lines, that the incident described thus concerning the inefficacy of Banks to deliver on their payment on time to the Soldiers, may have been touted as a fault line towards the financial engineering on a new form of business or payment option, that (1) allowed the business to be owned and managed by the depositors and (2) to enforce transparency  the tuners of the new financial “were to open for inspection and examination to such persons as congress would appoint.” It may now also seem that the picture which the movers of the New Ideas, A.W Alvord and company showed to the public primarily had to do with new determination and policy from the adverse conditions of the fore-bearers, and was eventually used to plow the public of a new Bank instead of Company which would have the face and standing of the President. It may also seem that the President Lincoln would have inveighed against the indirect abuse of his names, had he survived the Ford Theater assassination. This important factor proves to be the weapon in the hands of New Yorkers.

                                                           

                                                                III

There is no doubt that Bank of England established in 1694 followed the Dutch model of Bank Funded through Debt.  That America founded its Colony in Virginia moved the country away from the school of Banking, but eventually as many Historians of Finance has mentioned that three Americans, (1) Robert Morris (‘born in Britain) (2) Alexander Hamilton (born in the Caribbean - ‘Nevis’), and (3) William Duer (English born from Antigua) will argue for the Anglo-Dutch system of Banking that is built from Debt or Credit. To be clear, we have to mention that while there is nobody who doubts Hamilton as the Chief Architect of the American Federation and Governance, it was William Duer who was his influence on the formation of American Banks and operational dynamics. Whereas Duer failed as a copy bond manager and speculator, it was Hamilton that finalized his views of the country setting America towards that part of Bank Institution that Funded Debt. This theory of Funding from the time of American Civil War and the consequence victory that handed the North a sweeping hands in redemption and the reform of the years to come.

 

Already in France, following the end of Napoleonic Wars, particularly his defeat at Waterloo, two Jewish French spectaculars Nathan and James Rothschild became richer than ever by accurately predicting the defeat of the French and consummated this defeat in money times through an information delivery process as with a Pigeon. But the story takes interesting turn when French soldiers had to return from defeat and turned their attention to the paymaster by name Gabriel Julien Ouvrad. His role in delivering the money through a Bank system which installed it made him popular and served as an incentive for American Soldiers half a century later.    

 

In a book by Kevin Philips ‘Wealth and Democracy’ 2002, he cited this peculiar American frontiers on Funding through Debt and realigned with the rise of Rail Roads in the decade following the U.S Civil war and went on to demonstrate that the country with the government expansion and the permanence of Anglo-Dutch Banking Model, came also the necessity of the Federal Government to call for money, that is the Banks had to purchase “new Federal Bonds” available to issue “Federal Banknotes”. After the victory of the Northern Unionist of the Southern Confederates, the country discovered itself indebted to several privateers; Robert Morris, William Bingham, Stephen Girard and John Jacob Astor. 

 

The only name lacking from the list was Cornelius Vanderbilt. These men who were mostly from New York home to both William Duer and Alexander Hamilton, and eventually home to Robert Morris as representing his British clients, simply became the first batch of American millionaires on account of profits from war and the rail roads and eventually part of the Gilded Class. But cannot fail perform the obvious that the disappearing of the money tree may or may not have gone under with these barons like Vanderbilt or is appears elsewhere as Vanderbrung, some of which confused both the questioning committee and the very outsiders as these porters of the new redeemed ex-slaves as other Americans outside the banking circle. The struggle of the 19th century per-mulled the seeming baser others into the bliss of ignorance as bonds rose and fail without their least reckoning of it. 

 

But then, some names are hard to miss and if only small sources express as they appeared in Robert Yancy's book are widened from the gilt of how they managed in the first place to appear on record perhaps so deep a hand should have gloves that be others. Fredrick Douglass after his denouement with Bank's ultimate end, he bemused his fate as being 'married to a corpse'. Yet the surreptitiously cruelty of the Company bad fate on the greater black managed in the end to choke Douglass into the riddle that Freedman's Saving and Trust Company was 'black people cow, white people milk'. But in his more dislocating dismemberment of the whole cruel dealings, the one banner held the light was already among the elite in Valhallas. The myth that accompanies a life 3/4 fulfilled offered a different echo that Lincoln had lived, perhaps.... The end was not an end, it was to the "Virginian Country" folks, a beginning, since they had always opposed the Anglo-Dutch model of Banking, of forcing the hands of profit through debt, or funded debt.         

 

The author also mentioned that “The principal financier of the North’s triumphant road to Appomattox the great bond-seller Jay Cooke went bankrupt in 1873, pulled down by overextended railroad underwriting as well as by the scheming of the House of Morgan to gain the preeminent role in its government finance. J.P Morgan and a second financier also much involved in under-writing and supporting government bonds, George F. Baker of New York’s First National Bank,….” These men at the end of Civil War took it upon themselves to oppose the controlling influence of Jay Cooke, who historically almost single handily re-wrote the selling of Bonds in U.S, and whose company was based in New York.

In that 1873, “Railroad prices peaked in March. By late summer the Wall Street bears were clawing in the biggest arena of U.S finance; railroad stocks and bonds had a combined value of between $3 and $4 billion in a year when the federal budget came to only $290 million.”

 

“Drexel, Morgan and Company was hammering at the Northern Pacific financed by the House of Cooke, the biggest investment Bank in the United States and Drexel Morgan’s great rival” In all reality, the author demonstrated in his book what led to the decline of these earlier Northern frontier men, especially Jay Cooke and Company, which brought the crash of 1873, and in the empty casket of the company was never investigated leading to the money they borrowed from an a young Company. That the coming of Drexel, Morgan or the Morgan Men opposing Investment Company, forced Jay Cooke and Company into obscurity and that what followed was a tidal wave of collapse and drowning of an already over-priced rail road bond, was entirely secondary to the process set in motion by officers who had the wherewithal. 

 

There, within the whole structure, lies the ‘Freedman Savings and Trust Company, never Bank.