Home > Black American History > Black Banks: Segregation’s Gift to the Black Community

Black Banks: Segregation’s Gift to the Black Community

There have been a multitude of stereotypes created to perpetuate the perception that African-Americans cannot band together economically in America.  This perception, is in fact, is supported among many within the African-American community.  In fact, African-Americans have done phenomenally well despite facing greater opposition than any other minority group in America.  Nowhere can this fact find greater support than in analyzing the history of African-American owned banks in the United States.

 During the Reconstruction period, African-Americans were faced with the monumental task of building themselves up economically without much help from the government, and while enduring discriminatory laws in the southern states known as the Black Codes.  These codes restricted the rights of Blacks to the point that they were almost returned to a state of servitude.  In states such as Alabama, Mississippi, and Florida, Blacks could be fined fifty dollars if they were deemed “lazy”, and if they could not make the payment, could be auctioned off for indentured servitude for six months.  In South Carolina, Blacks were forbidden employment in any other occupation other than field-labor.  At the same time, in Mississippi Blacks could not lease or rent land.  Meanwhile, White supremacist groups like the Ku Klux Klan and the White League wreaked havoc on southern Blacks and members of the Freedmen’s Bureau, in an attempt to use intimidation to curb Black economic and political growth.

 De jure, or legalized segregation, kept African-Americans excluded from public facilities such as theatres, hotels, and restaurants.  In response to segregation, Blacks found it necessary to establish their own businesses that they could patronize.  Among the institutions established in the Black community at that time were Black-owned banks. 

 Black-owned banks were important to the African-American community because White banks often refused to loan money to Blacks, or loaned money at high interest rates.  With the rise of Black banks, African-Americans could secure loans to purchase homes and start businesses.

 The first Black-owned bank to operate in the United States was the Capitol Savings Bank of Washington, D.C., which began in 1888.  The first chartered Black-owned bank in America was established in March of 1888, a mere eleven years after the end of the Reconstruction era.  A Fraternal Organization of African-Americans in Virginia founded the bank, The Savings Bank of the Grand Fountain United Order of the True Reformers (GFUOTR).  William Washington Browne, an ex-slave, founded the organization in 1881.  Browne ran the bank out of his own home for the first three years before moving into a building.  The GFUOTR owned a hotel, two farms, over a dozen halls, and had an insurance branch, which insured members of the African-American community.  By 1907, GFUOTR had assets of over one million dollars. 

 There was many other successful African-American owned banks in America.  One of the most successful of the early Black-owned banks was the Alabama Penny Loan and Savings.  Others included Mechanics and Farmers Bank (Durham, NC), Citizens and Southern Bank and Trust Company (Philadelphia, Pa.), and St. Luke Penny Savings Bank (Richmond, Va.), whose founder, Maggie Walker, was the first woman in America to become a local bank president. 

 From 1888 to 1934, African-Americans owned more than 130 banks in the U.S.  As a result, between 1867 and 1917, the number of black owned businesses rose from 4,000 to 50,000. 

 While the Great Depression affected the vast majority of American society, the affect was more magnified in the Black community.  African-American owned banks failed at a very high rate.  Only one Black-owned bank, Industrial Bank, was opened during the Depression.  By 1943, of the 14,621 banks operating in the United States, only 11 of them were owned and operated by African-Americans. The 1960s saw a rise in the number of Black-owned banks.  Between 1963 and 1988, 59 new Black owned banks were started.  However by the end of 1988, 33 of these new banks had failed.  The 1980s were difficult times for the banking industry at large.

Today, Black banks are suffering like the rest of the banking industry due to huges losses suffered from securities related investments.  In addition, according to a March 2010 Federal Reserve Board report, there are only thirty Black owned banks in the United States.  Economic power is the root to gaining political power, and Black banks can help facilitate income growth and stability in the Black community by creating loans for businesses which would create jobs for residents. 

Not having viable options to provide banking services in our own communities had forrced Blacks to create our own banking systems, and the current economic developments in theis country to cause the resurgence of the Black banks in America.

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