African Americans have played an integral role in the financial and banking industries of the United States. Early on, African Americans realized the necessity of accumulating wealth and the subsequent benefits of collective financial security.
The Free African Society, the Free Labor Bank, and the Freedman's Savings and Trust Company laid the groundwork for black capitalism in America. This article explores the history of African American banks, highlighting key figures and institutions that have shaped the financial landscape for Black communities in the U.S.
Maggie Lena Walker, a pioneer in African American banking. Source: Wikipedia
Early Initiatives and the Capital Savings Bank
After the demise of Freedman's Savings and Trust Company, it would take 14 years for African Americans to rally behind another bank. The first bank organized and operated by African Americans was Capital Savings Bank in Washington, D.C.
Capital Savings Bank provided the capital essential to the growth of black businesses, capital that white-owned banks were unwilling to lend. The community proudly deposited its money in Capital Savings Bank. The public's confidence in Capital was rock solid in the early days, enabling the bank to exert a strong, positive economic impact on the community it served. During the Panic of 1893, the bank rode out the tide and was able to honor every obligation on demand. Capital Savings Bank helped many African-American businesses and property owners until it closed in 1902. Capital Savings Bank gave African Americans a venue in which to learn about and participate in the business of banking.
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The Rise of Black Banks
African-American churches and fraternal organizations built further on that foundation by serving as pooling places for the capital needed to open a bank that was sensitive to the needs of the African-American community. Between 1888 and 1934, 134 black banks were established, while from 1867 through 1917, the number of black businesses increased from 4,000 to 50,000.
Numerous reasons compelled African Americans to open and patronize banks within their own community. Racial stereotypes discouraged many white bankers from loaning money to African Americans, fearing that loans would never be repaid. If black customers were issued loans, they were often charged a higher rate of interest than white customers. While many white-owned banks accepted deposits from black customers, some did not. These white bank managers feared that black customers would scare away white patrons.
One of the greatest successes of African Americans in the financial sector was in the Greenwood District of Tulsa, Oklahoma, also known as Black Wall Street. Greenwood had become one of the most prosperous Black communities in all of America. Tragically, the neighborhood was destroyed by white supremacists during race riots in 1921.
The Greenwood District of Tulsa, Oklahoma, before its destruction in 1921. Source: Wikipedia
Key Figures in African American Finance
Several individuals have made significant contributions to the financial and banking industries, breaking barriers and paving the way for future generations.
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- 1879: Blanche Kelso Bruce was the first African American to appear on US Currency as Register of the Treasury.
- 1902: Maggie Lena Walker was the first African-American woman to establish and serve as president of a bank in the United States.
- 1905: Alonzo Herndon founded the Atlanta Life Insurance Company which is still one of the largest Black financial institutions in the United States. Herndon, a former slave, became a barber and eventually opened a barbershop that catered to white men. At one point in time Herndon owned three barbershops and 100 properties in Atlanta. He became Atlanta’s first African American millionaire.
- 1910: C.J. Walker became the first female African American millionaire founding her brand of African American hair products.
- 1927: Major R.R. Wright and 70 other black bankers founded the first professional organization of African Americans in finance called the Negro Bankers Association later it changed to the National Bankers Association and still operates today. Wright held to the idea that blacks are able to make significant contribution to the workforce and the world.
- 1970: Joseph L. Searles III is the first African American member of the New York Stock Exchange (NYSE). Searles paved the way for subsequent African Americans to work in stock exchanges.
- 1977: Azie Taylor Morton becomes the 36th treasurer of the United States and the first African American woman to have her signature on US currency.
- 1987: TLC Beatrice International, a chain of grocery stories owned by Reginald F. Lewis becomes the first African American owned company exceeding $1 billion in sales.
- 1993: Harry Alford and Kay Debow founded the National Black Chamber of Commerce. Today, the National Black Chamber is the largest Black business organization in the world.
- 1993: Ron Brown became the first African American Secretary of Commerce. He proved that he was a highly skilled negotiator and lobbyist.
- 2001: Robert L. Johnson, the founder of Black Entertainment Television (BET), is the first African American Billionaire alongside his wife Sheila who is the nation’s first African American female billionaire.
- 2009: Barack Obama becomes the first African American President of the United States.
Black Business Leaders Series: A Remarkable Legacy of Firsts, Maggie Lena Walker
Maggie Lena Walker and the St. Luke Penny Savings Bank
Maggie Lena Walker (née Draper Mitchell; July 15, 1864 - December 15, 1934) was an American businessperson and teacher. In 1903, Walker became both the first African-American woman to charter a bank and the first African-American woman to serve as a bank president.
As a leader, Walker achieved successes with the vision to make tangible improvements in the way of life for African Americans. Walker saved the Independent Order of St. Luke from the brink of collapse after the financial mismanagement of its previous leader, William Forester, doubling the number of members within her first year at the top.
Interior of St. Luke Penny Savings Bank, c. 1905. Source: walker.itc.virginia.edu
Establishment of the St. Luke Penny Savings Bank
In 1903, Walker chartered the St. Luke Penny Savings Bank. She wanted to help finance black home ownership and turn saved cents into dollars for black people. Walker served as the bank's first president, which earned her the recognition of being the first African-American woman to charter a bank in the United States. Charles Thaddeus Russell was Richmond's first black architect and he designed the building for Walker. The St. Luke Penny Savings Bank was designed by a Black architect and was one of few banks at the time whose board included a high percentage of women.
Walker provided children's savings initiatives through the bank, giving children in Richmond's Jackson Ward cardboard boxes for saving pennies. By 1920, Walker claimed that the bank had helped 645 black families completely pay off their homes.
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On September 14, 1886, in Richmond, she married Armstead Walker Jr. (1860-1914), a brick contractor. She spoke of her views on marriage: "And since marriage is an equal partnership, I believe that the woman and the man are equal in power and should by consultation and agreement, mutually decide as to the conduct of the home and the government of the children"
The St. Luke Herald
In a 1901 speech at the convention for the Independent Order of St. Luke, Walker proposed that the order should create a newspaper for publicizing its actions. In March 29, 1902, she published the first issue of The St. Luke Herald, a newspaper for the organization. She was motivated by the need to draw attention to black issues in the community and increase communication for the Order.
The first issue decried Jim Crow laws, a discriminatory justice system, and the restriction of public school privileges. The paper included a section for children, letting them publish letters to "The St. Luke Grandmother" and publishing her advice. The newspaper began as a weekly publication, edited and printed from the order's office headquarters. By 1916, it had 4,000 subscribers, and by 1929 it became Richmond's most popular black weekly newspaper, surpassing the Richmond Planet with 30% of black families in Richmond subscribed to the Herald.
Legacy of Maggie Lena Walker
Walker's daughter-law, Harriet N. F. Walker, honored Maggie Walker's memory and worked to preserve her legacy. The National Park Service operates the Maggie L. Walker National Historic Site at her former Jackson Ward home. In 1978 the house was designated a National Historic Site and was opened as a museum in 1985. The site includes a visitor center detailing her life and the Jackson Ward community in which she lived and worked and her residence of thirty years.
On July 15, 2017, a statue of Walker, designed by Antonio Tobias Mendez, was unveiled at the Maggie L. Walker National Historic Site.
Challenges and Continued Efforts
Thus it is especially troubling that our nation has seen a continuing downward trend in the number of community banks. Within this decline, and even more concerning, has been the disproportionate reduction in the number of African American community banks. Since 2001, the number of African American banks has declined by more than half - a trend that is not reflective of what we have seen in other categories of minority depository institutions (MDIs).
Overall, we know that MDIs are more likely than their peers to operate in neighborhoods with lower incomes and higher poverty rates than the national average. Additional research has shown that African American banks in particular may be located in areas where other banks are unlikely because other institutions view these communities as unprofitable. As a result, families and businesses without a local bank face the potential of falling victim to the exploitive practices of alternative financial services providers, such as payday lenders, when they need to borrow.
Efforts have been made on numerous fronts to address these issues, but progress has been slow. More needs to be done, but meaningful solutions have not yet become apparent.
It is a history of great struggle that highlights the hurdles minorities have had to overcome in order to achieve some level of success in today’s society. Hopefully, we will continue to work toward equity and equality in the future, not just in our industry, but across all parts of our society.
