Douglass Becomes President of Freedman's Savings and Trust Company
Becomes president of the troubled Freedmen's Savings and Trust Company. Works with the chairman of the Senate Finance Committee to save the bank, which ultimately fails.
For several years, the company remained stable and operated well. But in 1870, the company's new management encouraged the U.S. Congress to change the policy requiring that all deposits be invested only in government securities. As a result, the bank management began to make more speculative and riskier investments in the stock market and real estate. Poor management, speculation, dubious investments and corruption soon overwhelmed the bank, substantially increasing its debt burden while its assets shrank. In midst of crisis, leading African-American politician Frederick Douglass joined the bank as its president in 1874 to boost the morale of the organization, the depositors and its clients. However, a U.S. Treasury report found the bank heavily indebted when a severe national economic depression began in 1873. The bank could not call in its loans and account holders found it impossible to withdraw their money. The trustees faced not only a loss of credibility but also enormous debts. Realizing the full extent of the crisis, Douglass urged Congress to take steps to protect investors from further losses, and later recommended the dissolution of the bank itself. Subsequently, the U.S. Congress passed legislation authorizing the trustees to close the bank; the company was formally terminated on June 29, 1874.