Banking Pioneers
"Let Us Muzzle the Wail and Think Straight"
[Reprinted from Issues & Views Fall 1996]
During the early decades of this century, black-owned newspapers played a
special role in the lives of blacks, whether they lived in small towns or
large cities. Wherever there was a black population, there was likely to be a
weekly newspaper, sometimes several, as in cities like Washington, DC,
Chicago and Philadelphia. The Norfolk Journal and Guide, Pittsburgh Courier,
Philadelphia Independent, Chicago Defender, the Bee newspaper chain, Memphis
Triangle, New York Age, Savannah Tribune, The World, Louisville News, The
Freeman, Afro-American, Nashville Globe, Boston Reliance, Black
Dispatch-these are names of just a few such publications. Some live on today
in reconstituted versions, but most have long since passed into history.
In the pages of these early newspapers, one can follow much of the social
history of black life-from the serious problems faced by a restricted group,
to the joys of individual successes and triumphs, to the trivial gossip,
intrigues and scandals of the day. Although newspapers were founded by people
of varied backgrounds, they were frequently initiated by established
businessmen. It is not surprising then that, in the pages of so much of the
black press during this period, we can learn about the rise, decline, and
sometimes resurrection of particular businesses.
Throughout these early decades, the black press was a chief promoter of
black enterprise, inspiring and even cheer leading the community on, as it
celebrated the initiation of new businesses. Typical of these sentiments is
an editorial in the June 1, 1927 edition of the Memphis Triangle:
The new Negro is the optimistic Negro. He believes in himself and, therefore,
in others of his race. He believes in Negro business and gives it his full
support. He believes in Negro institutions and lends his cooperation in
building them up. He believes in the future. The old Negro is the pessimistic
Negro. He does not believe in himself or any other Negro. He does not believe
in Negro business and hence does not trade at Negro stores or put his money
in Negro banks. He believes the case of his race is hopeless unless someone
else guides its destiny.
It is in the pages of the black press that we can follow the birth and
development of black banks, as well as the devastating collapse of most of
them throughout the years of the Great Depression. In following the story of
those who pioneered in establishing banks, we gain insights into the great
struggle between those blacks who were determined to help the race win
economic independence from whites, and those who opposed this pursuit.
Early Self-Help Institutions
Historian John Sibley Butler, in Black Entrepreneurship and Self-Help Among
Black Americans, describes how black-owned businesses prior to the Civil War
were augmented by a tradition of self-help institutions. Decades before the
war, church relief societies provided for sickness, health care and death
benefits. After Emancipation, these church societies would provide funding
for dozens of private schools (and help to subsidize underfunded state
schools), while often providing loans that capitalized small enterprises. Out
of these church societies grew the beneficial societies that eventually
spread throughout most black communities.
In Petersburg, Virginia, for example, in 1898, there were 22 beneficial
societies. Butler writes, "Membership ranged from 22 to 163 persons. Their
annual assessments ranged from 60c to $7.00. They paid sick and death
benefits to their members." Black lodges of secret societies, such as the
Masons, the Odd Fellows and the Knights of Pythias provided more formal
insurance benefits. In Arkansas, for instance, between 1892 and 1905, a
Masonic Temple paid out $125,000 to "widows and orphans." Butler writes,
"From the 1700s to 1915, fraternal and beneficial societies served the masses
of Afro-Americans and helped to bring a sense of security to a people who
were going through one of the most trying times in their history."
Although these societies were not businesses in the true sense, Butler
claims that they laid the groundwork for the many successful black-owned
insurance companies that would come later. As the result of the millions of
dollars collected in these organizations, "thousands of young Afro-American
families were helped in getting an education, hundreds of homes were paid
for, and mortgages were satisfied." One report tells about the members of a
particular fraternal society deciding that "their large collections in
endowment premiums could be utilized as a great agency for good." And
referred to their lending practices as "intelligent cooperation."
In 1920, newspaper columnist R.M. McAndrew wrote about the economic
significance of the various fraternities that had been organized by blacks
over the years. "Secret orders and fraternities among the Negro people have
in the past furnished amusement to the American public. These institutions
have been regarded more as outcropping of the Negro's desire for mystery and
fetish than as a source of internal strength through cooperation and
unification. The establishment of the Fraternal Bank and Trust Company
[Durham, NC] has resulted from the rapid growth and development of a
fraternal order, the Royal Knights of King David." He then went on to detail
the real estate properties owned cooperatively by the Royal Knights and the
reserve fund that was set aside "for the support of aged members and to
furnish paid-up policies to all who have held membership for 20 years." In
1920, the Royal Knights operated in six states with a membership of about
22,000 in more than 800 lodges.
Confidence Lost and Restored
The development of savings institutions was a logical outgrowth of fraternal
societies. Yet the path from beneficial society to lending institution to
chartered bank was not a smooth one. This was partly due to the earlier
experience of blacks with the Freedman's bank. In 1865, Congress incorporated
the Freedman's Savings and Trust Company as a banking institution for the
former slaves "to receive on deposit such sums of money as may be offered . .
. and investing the same in the stocks, bonds, treasury notes or other
securities of the United States." The bank was a massive failure, as corrupt
bureaucrats swindled its depositors out of millions of dollars. This was a
devastating loss that set back the movement toward thrift among blacks.
Booker T. Washington wrote, "It was years before the Negro people regained
sufficient confidence in banks and in themselves to make a Negro bank
possible."
Yet eventually that confidence was regained, and blacks came together in
towns and cities, determined to create their own private banks. Butler
writes, "Because they had been led to believe that the Freedmen's Bank was a
government institution, they lost a tremendous amount of confidence in the
whole federal apparatus in Washington. Even after the memories faded, they
turned to the creation of private banks in attempt to 'seek for themselves.'"
This ambitious effort turned out to be one of the most constructive phases of
black Americans' history.
Butler continues, "The history of this effort-as with the history of banking
in America-was filled with triumphs and failures, but it was this banking
industry which provided the seed money for business enterprises in the period
following the Civil War." Citing Abram Harris's 1936 study of the black
banking tradition, Butler claims, "From 1888 to 1934, no less than 134 banks
were founded and organized by Afro-Americans. Under this classification are
private banks doing a general banking business and banks operating under
state or national charters. It does not include credit unions, industrial
loan associations, or building and loan societies," of which there were many.
It was this banking tradition that made possible the impressive growth of
black businesses in the United States. Between 1867 and 1917, the number of
black businesses increased from 4,000 to 50,000. This could not have occurred
without the sources of capital provided through banks and similar lending
institutions. In 1907, Booker T. Washington wrote, "Nearly every colored
community of any size has a building and loan association, and these
organizations have been of the very highest value in teaching the people
habits of saving and enabling small wage earners to purchase homes. It is
said that one-half of the homes owned by colored people in Virginia were
built by the aid of building and loan associations."
In William Kenneth Boyd's 1927 study of Durham, North Carolina, he writes,
"The increase in wealth, the rise of institutions for public welfare, and the
spirit of cooperation have not been confined to one race. The progress of
whites has been accompanied by corresponding progress among the Negroes."
Encouraging Thrift
The first benevolent group that was granted a state charter to organize an
incorporated bank was the Grand Foundation of the United Order of True
Reformers. In 1889, this fraternal association opened the True Reformers Bank
in Richmond, Virginia. One of the most successful of the early banks was the
Alabama Penny Loan & Savings of Birmingham, which ultimately had branches in
three other Alabama cities. When, in 1899, William R. Pettiford became its
president, he set the tone for integrity and competent management [see Issues
& Views, Summer 1993].
Highly respected, Pettiford became a mentor for many others who would go on
to establish banks. He led Penny Savings through its prosperous years and was
an important presence in the black business community. Although his only
business experience had been as financial agent of Selma University, he
considered it his duty to create an institution that might educate
working-class blacks in the "wise use of money." He was determined to
"encourage our people not only to save their earnings but to make wise
investments as well."
The subject of thrift and investment was a frequent one in the pages of
black newspapers. An editorial in a 1916 edition of the Journal and Guide
expressed the attitude of many blacks:
Habits of economy and thrift-the saving something regularly each week out of
one's earnings no matter how small or how pressing the obligations-must be
learned and become fixed if our people are to play the great part in the life
of the nation their numbers entitle them to play.
There are now four times as many Negroes in America as there were Americans
on this continent at the close of the Revolutionary war. Twelve millions of
people are a big nation in themselves, larger than most of the nations of the
earth. . . . Suppose our people were to do all over the country like they
have been doing in Norfolk in the last year-save nearly a hundred thousand
dollars in a Negro bank alone, to say nothing of the nearly million dollars
they have in the white banks-they would become a mighty power in finance that
could not be despised.
The South will be better off, not worse off, if our people become thrifty
instead of spendthrifts, become sellers instead of buyers, become producers
and manufacturers instead of consumers only. A race that cannot buy and sell
will always play the second fiddle to the race that does buy and sell. There
ought to be a hundred stores owned and controlled by us in Tidewater. . . .
But we cannot get money until we acquire the habit of saving.
The Banking Movement Grows
The movement to found banks and other businesses picked up steam. In 1904,
in the teeth of segregation, the residents of the all-black town of Mound
Bayou, Mississippi, formed a bank so successful that it attracted many white
depositors from nearby towns and around the state. Some of these whites
bought shares in the bank. However, the bank's directors made certain that
such shares would be limited, in order to assure that the bank's assets would
not be controlled by whites. Like members of other ethnic groups, these
bankers recognized the importance of protecting the town's resources.
Historian Kenneth Hamilton, in Black Towns and Profit, writes that the Bank
of Mound Bayou played a significant role in the economic development of the
town, because it enabled blacks "to keep a great deal of their money
circulating in their own town and hinterland" and provided capital for new
investments.
By 1912, the states of Mississippi and Virginia vied for possessing the most
black-owned banks, with 11 each. Of Tennessee's four banks, two were in
Memphis, the Fraternal Savings Bank & Trust Company and the Solvent Savings
Bank & Trust. The Savannah Tribune of July 12, 1912, after recounting several
successful purchases of "stores and buildings" by the black-owned Wage
Earners' Loan and Investment Company and Mechanics Investment Company,
proudly proclaimed that these purchases attest to the fact that "in matters
financial, as well as in other fields, the Negro is able to hold his own."
The editorial went on to claim that such success was due to "the loyalty and
support that came to these institutions from the Negroes themselves."
In 1912, when officers of 61 black banks met in Chicago, there was reason
for optimism. This meeting of a loosely formed bankers association was a
promising one, since most of its members (representing banks in 16 states)
could report increases in yearly volume of business. Of the 61 banks, 52 were
in the South. One of the most prominent of them was Durham's Mechanics and
Farmers Bank, which was chartered in 1907 by a group of men from diverse
professional backgrounds-barber, doctor, educator, attorney, tinsmith.
Eventually opening a branch office in Raleigh, Mechanics and Farmers went on
to play an indispensable role in the economic life of Durham's black
population for a half century. It is one of the few banks from this
pioneering period that survives today.
In a March 1914 commentary in the Washington Bee, Ralph Tyler praises the
efforts of blacks to master the intricacies of the insurance and banking
businesses. First citing the fact that these were two areas of business where
blacks had little chance to "learn the ropes," since whites did not open
their doors to them, Tyler describes how black men took the initiative to
learn these fields from scratch. "That he has learned the banking and
insurance business, has developed them, and is now conducting these branches
of business with signal success constitutes one of the best possible answers
to the statements by anti-race men, and proves the wisdom of the National
Negro Business League."
Giving special kudos to William Pettiford, Tyler wrote, "When Dr. Pettiford
established his bank at Birmingham, incredulous white men did not regard it
as serious enough to last, and many colored men regarded it with distrust.
Today a magnificent building is the home of that bank, and over five hundred
thousand dollars in resources, and regular annual dividends paid, attests to
its wise and conservative management. Inspired by the success of this bank,
other Negro banks have sprung into existence, from Philadelphia to
Jacksonville, Florida."
In Boston, in 1913, the writer of a feature published in the Reliance
described the challenges faced by businessman David Crawford, who had
recently obtained a charter to open a cooperative bank. "Like all other men
who have an unshaken confidence in the ability of the Negro to make progress
in all business lines, he set to work with the necessary quota of pessimistic
cynical supporters. Some have remained steadfast and are with him today,
while others took fright at the first sight of reverses and dropped out by
the wayside and took their paltry savings to the white institutions who
already have control of too much of our money." After citing the many
accomplishments of Crawford, who was not only a member of the Massachusetts
Bar but also owned large tracts of real estate, the writer continued, "There
are 23,000 Negroes in Greater Boston. One dollar a month from them in the
Eureka Bank would give us the control of $276,000 annually."
A Good Thing for the Colored People
The road was hardly an easy one, however. Like white-owned banks, black
banks had their share of failures. Unfounded rumors could bring on a panic,
which could then result in a run on the bank. A 1913 Oklahoma newspaper
describes how bank directors worked to avert such a crisis. "Meetings were
held in every Negro church in the city and the Negro ministers preached on
the subject of the bank. They appealed to race pride and to cool judgment.
They pointed out that to get panicky and draw out deposits meant to break the
bank. For the bank to fail would be a sad commentary upon the Negro as a
factor in the business world, a thing that the Negroes could not afford to
have happen." The sermons appeared to have had a positive effect and the
crisis was averted.
In Nashville, in 1915, at a stockholders meeting of the One Cent Savings
Bank, its president, Robert H. Boyd, told about the skepticism and even scorn
he encountered, from blacks and whites, when the bank was first proposed.
(The bank was founded in 1904.) "Even when the doors of the bank swung open
and a throng of people gathered out of idle curiosity to look on the reality
of a thing known as the first Negro bank of Tennessee, all kinds of
predictions and prophecies" filled the air. "It might run three months," Boyd
said he heard someone say. Others thought it had opened merely to swindle
people out of their money, and still others thought it a conspiracy of white
men. But Boyd discovered many more Negroes "who were anxious to see such an
institution, and declared that it would be a good thing for the colored
people." After recounting some national and international downturns,
especially in the cotton market, he expressed pride that his bank was able to
hand every stockholder six percent on every dollar's worth of stock they
owned.
Boyd was tough in his opinions on the various "race movements" that he saw
developing. He questioned their merit if the leaders of these groups failed
to concentrate on creating jobs for fellow blacks. The Nashville Globe
reported, "He went on record as thoroughly opposed to any movement,
regardless of who was at the head of it, that did not have for its aim
constructiveness, and that failed to provide employment for the boys and
girls, men and women of the race." Boyd is quoted as saying, "Our women need
the protecting and guiding hand of the business forces of the race. They need
to be given employment. They need to be nurtured and encouraged in their
efforts to make an honest living."
Profiles of Industrious Men
A feature article in the March 4, 1916 Journal and Guide, ostensibly seeking
support for the newly opened Mutual Savings Bank in Portsmouth, Virginia,
explained the need for blacks to form their own banks. "Occasions have arisen
very frequently in the City of Portsmouth, where, because of inability to get
assistance, colored people have lost their property, the new owners obtaining
it for oftimes less than one-half of the real value. . . . It is the
intention of the officials of the bank, wherever possible, to see that the
colored people do not lose their property, and if it must be sold to see that
it brings a fair price."
What is special about this article is its impressive listing of black
businesses then in existence in Portsmouth. In stressing the convenient
location of the bank, the writer informs, "The Mutual Savings Bank is
situated in the heart of the Negro business section, across from the
Pharmaceutical Establishment of Dr. Eugene J. Bass, one of the pioneers of
Negro business in Portsmouth. Situated on the same street are the offices of
the Tidewater Building & Loan Association, the Southern Aid Insurance
Company, the Virginia Beneficial Insurance Company, the American Beneficial
Insurance Company, the Dental Parlors of Drs. J.L. McGriff and W.B. Anderson,
the offices of Drs. F.G. Elliott and J.D. Barnes and the Undertaking
Establishments of Mr. W.M. Grogans and Mr. Hamilton Jackson. . . . the
offices of Drs. J.J. France and W.E. Reid, the Undertaking Establishment of
Mr. J.T. Fisher and the Tonsorial Establishments of Mr. Forrest Walke, Mr.
James Choate and Mr. John White. The building in which the bank is located is
owned by the Portsmouth Cooperative Investment Corporation, some of the
directors of the same being also directors of the bank."
The article then gives profiles of some of the bank's officers. "Mr. J.
Frank Proctor, president, has large real estate holdings and is a strict
business man and because of his strictness in business matters, has won for
himself the sobriquet of 'Watch Dog of the Treasury.' Mr. Geo. W. Brandon,
vice president, has a large and valuable farm to which he has a dairy
attached." Among the board of directors, "Mr. James Terry, one of the largest
truck farmers of the Western branch section of Norfolk County, Mr. Julius
Mason, a truck farmer in the same section, Mr. J.A. Felton, a successful
contractor and builder, Mr. Solomon Vann, a stevedore and contractor for
waterway hauling." And last, but by no means considered least, the young
novice of the group, "Mr. Malcolm Holmes, clerk in charge of the Christmas
Saving Department is a graduate of Norfolk Mission College and a young man of
fine qualities and very promising."
William M. Rich, who was then cashier of the successful black-owned Brown's
Savings Bank of Norfolk, was credited with offering his valuable expertise to
help establish the new Mutual Savings. He was described as having "rendered
great assistance in personally conducting the opening of the bank. After
completion of duties at his bank, regardless of weather conditions, he could
be found at this bank giving the officers the assistance needed."
The Need for Black Banks
In spite of the outstanding success of many black banks, the majority of
blacks in the country continued to deposit their money in white-owned
institutions. A writer in the New York Age of January 11, 1917, tells of
ongoing fears brought on by previous bank failures. "It is a question of the
gravest moment that the failure of the Freedmen's Saving and Trust Company,
the Alpha Bank and the Capital Savings Bank, fifteen, twenty and forty years
ago, so undermined the confidence of the Negroes of the District of Columbia
that they are afraid as yet to deposit their money in a bank managed by their
own people."
The article went on to claim that Washington blacks had a very large amount
of money invested in white banks, where they were unable to obtain positions
and, therefore, could not learn the banking trade. Because of this, "the
colored people lose the advantage of large capital concentrated where it
can't be of the greatest help to them." Also, the writer pointed out, Negroes
miss out on the opportunity to develop critical expertise in the banking
field that would lead to greater self-reliance. Black banks provide both of
these advantages, claimed the writer.
Need Accountants, Not Preachers
In spite of the desire to put the best face on entrepreneurial efforts,
observers of the time could be painfully truthful about the lack of
managerial experience that led to several bank failures. In a 1914 article in
the Chicago Defender, Charles Hall writes about the consequences of
inexperience, as related to the failure of three banks in Mississippi. He
blamed this partly on the
tendency of blacks to turn out "inordinate numbers" of church preachers. Hall
wrote, "It will doubtless be a day of rejoicing on the part of many of the
progressive Mississippi Afro-Americans when the institutions for the
education of the youth of that state turn out a greater number of competent
accountants and bookkeepers-when the problems peculiar to this life receive
as much attention as is given to the preparation for the life beyond the
grave, for, after all, there is a great amount of work to be done in this
world before we pass into the next."
Hall observed that among the failed banks there had been enough deposits to
have kept them "in operation in splendid style." So, the trouble lay not in
lack of patronage from the black community, but in the lack of "practical,
experienced and trained officers." He claimed that in many cases "preachers
and teachers" were trying to run institutions they knew nothing about.
And yet during this same early period, there are accounts of men who, in
spite of disparate backgrounds, disciplined themselves to learn the banking
trade, and were quite successful at it. The president and treasurer of
Washington, DC's Industrial Savings Bank were two such examples. A newspaper
commentator describes an impromptu visit to the bank from a bank examiner, to
inspect their books. "The examiner called unexpectedly before the arrival of
any of the bank officials and demanded that the books be presented." More
than satisfied with what he found, the examiner praised the bank as "one of
the best managed and conducted banks in the United States." The writer goes
on to claim that "This commendation is evidence of its stability and the
honesty and integrity of its officials."
He then offers brief biographies of the bank's president, John Whitelaw
Lewis, and treasurer, John H. Simms. "Now, here are two men who have come up
from the lower walks in life, that one was a hod carrier [Lewis] and the
other a barber. The former didn't possess all of that refinement that is
generally credited to bank presidents, the latter possessed but a common
school education. Neither had any banking experience when they entered the
business. Here we have two men, not office holders, not society dudes, but
two men who are looking out for the interest of all the people and their
patrons."
Lewis, who never had a formal education, and started to work at age nine,
went on to success as a realtor, building the Whitelaw Hotel in Washington,
DC, in 1919 [see Issues & Views, Spring 1992].
The Steadfast Richard R. Wright
The single person who made the greatest impact on black banking spent most
of his life as an educator. Yet the extraordinary Major Richard R. Wright
made up for lost time. Born a slave on a plantation, Wright's family moved to
Atlanta after Emancipation, where he attended missionary schools. After
graduation from Atlanta University's first collegiate class of 1876, he
became an elementary school principal, organized farmers cooperatives, a
teachers association, and published a weekly newspaper. As a major during the
Spanish-American War, Wright was appointed army paymaster by President
McKinley. After the war, he held positions as an educator and served for 30
years as president of Georgia State College of Agriculture (later renamed) in
Athens.
Wright had always been concerned about what he considered the imprudent
thrift habits of the poor, whose children he had educated over the years.
When his son, Richard, Jr. (one of eight children), completed a doctorate in
economics at the University of Pennsylvania's Wharton School of Finance,
father Wright decided to follow in his son's footsteps. He enrolled at the
university and took courses in banking, convincing another son, Emanuel, to
do the same. In 1921, at about age 66 (his slave birth date is uncertain),
Wright, his daughter Lillian, and Richard, Jr. opened the Citizens and
Southern Bank and Trust Company in Philadelphia. His would be one of the few
black banks that had the durability to survive the Great Depression of the
1930s.
In 1926, with a group of other bankers, Wright founded the National Negro
Bankers Association. He was to serve as its president for the next 16 years,
which gave him the opportunity to assist in the development of many
black-owned banks. Over the years, hundreds of small enterprises, such as
groceries, bakeries, cleaning establishments, caterers, and even private
schools, got started thanks to loans from Wright's bank. And some averted
financial ruin thanks to him. "Negro banks are important," said Wright,
"because they're a source of education. They give experience to young Negro
bankers, they supply employment, and they encourage business."
He was a stickler for character and sized up a potential borrower on the
basis of his own special standards. He insisted that "character's more
important than collateral." He would sometimes go over the heads of the
bank's board of directors, to grant a loan to someone he considered a worthy
customer. Wright liked to tell the story about four young Negro men who
formed a corporation in order to open a laundry. Although they lacked
previous experience, when they came to the bank for a loan, Wright granted
it. Their management turned out to be poor and the business went broke. The
men were not legally liable for the corporation's failure, yet they pulled
together all their available assets and repaid the bank in full. Wright said,
"When I made the loan, I sized the men up as individuals. What I failed to do
was make sure the company had good management. But my estimate of the
character of those men was right."
Another man, who was considered a poor risk by every other bank in town,
needed $300 to get a sweater factory started. Wright granted him the loan and
a few years later proudly reported, "Last year, that man banked $219,000 with
us. He might have taken his account away to a bigger bank, but he's been
loyal to us." Richard R. Wright was to black banking what Booker T.
Washington had been to the overall self-help movement-mentor, counselor, and
guide.
Some Good Years
Under the Savannah Tribune's headline of November 22, 1919, "Negro Bank Buys
Valuable Half Block," we learn: "Through the purchase of one half of the
entire property known as the old English Block, the Laborers' Penny Savings
and Loan Company of this city [Waycross, Georgia], becomes the owners of one
of the most valuable pieces of real estate in Waycross. . . . The Waycross
Casket Company and the Walton Garage take up a portion of the property and it
is understood that the bank contemplates the erection of a modern bank and
office building on the unimproved part. . . . Officials of the bank are being
congratulated from every side on the transaction."
In 1918, a war economy benefited places like Norfolk, Virginia, a naval and
shipbuilding center. Edward Jones, writing in The Freeman reported, "The
biggest thing that has ever happened in Norfolk, Va. is the promotion and
organization of the Tidewater Banking & Trust Company. It is a by-product of
the war. . . . In normal times, Norfolk has a Negro population of some
thirty-five or forty thousand. But since the declaration of war the influx
has easily increased the population to 60,000. For
Copyright 1996 Issues & Views
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