The Color of Money: Black Banks and the Racial Wealth Gap (1/3)
A major compromise to white supremacy after Civil War was abandoning reparations and creating Black Banks argues Mehrsa Baradaran
JAISAL NOOR: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore. White House Chief of Staff John Kelly was widely condemned for recently saying, “The lack of compromise led to the Civil War.”
JOHN KELLY: Now it’s different today but the lack of an ability to compromise led to the Civil War.
JAISAL NOOR: Many have pointed out that since its inception, America has compromised with white supremacy by enshrining slavery into the constitution and ensuring its growth, but what’s gotten far less attention are the compromises with white supremacy that occurred both before and after the Civil War, including the failure to deliver on promise reparations for African-Americans and the premature ending of southern reconstruction.
Well, our guest today is uniquely positioned to discuss this. Mehrsa Baradaran is a Professor of Law at the University of Georgia School of Law and the author of The Color of Money and How the Other Half Banks, both published by Harvard University. Thank you so much for joining us.
MEHRSA BARADARAN: Thank you so much for having me. It’s a pleasure to be here.
JAISAL NOOR: After the Civil War, there were no reparations. There was no 40 acres or a mule given to African-Americans. Instead, Black banks were funded. As you mentioned in your book, the wealth of African-Americans at the time the Emancipation Proclamation was signed in 1863 was about half a percent of America’s wealth. Today, that number has barely budged, more than a century and a half later.
Can you talk about the early history of Black banks and how they were a compromise really, because the country refused to fund reparations.
MEHRSA BARADARAN: Yeah. I mean, if there’s any failure of compromise here, it was a problem for Black America that there was too much compromise. We really had, The Civil War was, it came to a head because the south refused to give up their exploitative labor extraction from the Black population and so, the Civil War tries to sort of take that away and right as it ends, that compromise comes back on the table, right, where you have Andrew Johnson and the New Republican Party saying, “You know what, okay, you can keep the exploitative labor contracts,” which turned into sharecropping and the whole concept of reconstruction, was this idea that the freed slaves who had been working the land for hundreds of years would get some share in the land.
But the problem for the south is they couldn’t give the slaves the land because they needed them to grow cotton and once they were able to own land, they would grow what most people who own land do is subsistence crops to feed themselves and their families, and the southern, sort of white supremacy, could not abide by that. They needed those cotton profits, which could only be accrued through the share cropping arrangement.
The compromise was, as James Baldwin says, “The north and the south, freeing the slaves and then delivering back up to their masters.” Once reconstruction essentially fails at Johnson’s veto and all of the land reparations, ideas and education, all the reforms that were put on the table are just thrown away. The one thing that remains is the savings bank that I write about in the book. It’s a Freedmen’s Savings Bank. This is the start of the black banking sector and it was a compromise and it was a weak one.
Freed slaves were just supposed to get land. Land, obviously, that they more than had earned, beyond earning, have worked for so long. Instead of getting that land, the republicans gave them, the republican/democrat compromise gave them this savings account. The idea was okay, we won’t give you land but you can save your money and buy the land yourself, but the problem was, the bank wasn’t actually a commercial bank. There was no loans. It was just a big savings bank, piggy bank.
So they took all the money of the freed slaves and then it was essentially looted by its white management, so white, Jay Cooke and Henry Cooke who were infamous speculators. You think of this as your investment bankers, but worse. They were gamblers and they took this money. There were no black managers. They took the money and they exploited it, speculated it away on railroad bonds and they lost it. So that was the initial compromise of reconstruction was, and the one thing that survives reconstruction is the savings bank and it was a disaster for the freed slaves.
JAISAL NOOR: One of the many things that I find fascinating in your book is you chart the relationship of some of the most prominent Black leaders of their time and their relationship to Black banks. Can you talk about the relationship of Frederick Douglass? He was a famed orator. He was a fighter against slavery. He helped convince Lincoln to make the Civil War about slavery, because before, when Lincoln ran in 1860, he was willing to let slavery exist, even make it permanent in America, but the south didn’t want it to be limited. So talk about his relationship with Black banks.
MEHRSA BARADARAN: Yeah, so Frederick Douglass is brought into the Freedmen’s Bank as it’s failing. He is the leader, the most prominent leader of the freed slaves at the time and a really activist leader and he is brought into the bank to, as slaves are losing their money, he’s brought in to shore up the trust of the bank, so to convince more of the freed men to keep their money in the bank because it’s being looted away and Frederick Douglass immediately gives $10,000 of his own money to the bank and knows immediately that it’s a disaster. That it’s failing.
So he tells congress that they need to shut down the bank and turn off its charter because otherwise more people will lose their money. Congress does do that, but Frederick Douglass has a very complicated relationship with the bank. He comes in, he understands that it’s been looted but he also sees this grand building in Washington D.C. He sees Black tellers who were former slaves who are now bank tellers.
He, himself, writes in his autobiography, “Look, I went from being slave boy to bank president,” so he understands that there’s this change in his people and that has brought about somewhat by banking and finance. He’s a reluctant sort of champion of Black banking. Reluctant in that he would’ve preferred, obviously, the land, but he also is a proponent of Black banking and he really tells the freed slaves that they need wealth before they can get any political power.
He says the way out of slavery is to get wealth and he has no idea about the obstacles that are about to be placed in the path of the free men in the acquisition of wealth, but he really says this is the most important thing, and starts a line of other Black leaders down this line. And black leaders during this era do not have a very easy role to play. I mean, you cannot be a radical black leader because there were some, and you’ll end up becoming lynched or killed or deported, as was Marcus Garvey.
So you can’t push it that far and you need the support of the white establishment and so you have these, you see these compromises of these leaders are making. Booker T. Washington is an example of that compromise that comes right after Frederick Douglass. He also pushes wealth acquisition and hard work, but for him it’s all about, just let us do our thing and we won’t ask for too much. He also pushes Black banking, a big booster of Black banks, but for him, it’s about segregation. Look, we don’t need integration, we don’t need the vote, let us earn our way into respectability and then political power.
I mean, he’s disastrously wrong, of course, because without political power, the Black community can’t even get economic fulfillment and so, he starts again. After the failure of the Freedmen’s Bank, this push toward Black banks and it’s part of Booker T. Washington’s idea of, “Look, cast down your buck, we can be segregated and take care of ourselves.” And so this idea gains momentum. Even W.E.B Du Bois who opposes this whole line of thought and he says, “No, we need integration. We need the vote.” Also supports Black-owned banks, because they don’t have integration and they don’t have the vote and it’s heavy Jim Crow. So, for people like Du Bois, there’s no other choice, so we have to have these banks.