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Full resolution (TIFF) - On this page / på denna sida - IV. Economics - 14. The Negro in Business, the Professions, Public Service and Other White Collar Occupations - 3. Negro Finance
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Chapter 14. The Negro in Business 315
I hear much of the Freedman’s Savings Bank, which failed with a loss of 4,000,-
000, which has never been replaced; and the loss causes much distrust among Negroes
inclined to save.^*
The Capital Savings Bank in Washington started In 1888 and failed in
1904, partly because of unwise and speculative investments and partly
because of misappropriation of funds. During the early 1900’s a great
number of Negro banks were founded, but most of them disappeared after
a short time. The bankruptcy rate of small white banks also was high during
this period. Conditions became somewhat better, however, after the organ-
ization of a state bank inspection system in 1910. In 1940 there were 14
members of the National Negro Bankers Association (organized in 1924).
Today many Negro banks, like almost all white-managed banks, have
their deposits insured by the Federal Deposit Insurance Corporation.
Although Negro banks certainly are much safer than they used to be, they
suffer from several shortcomings. For one thing, they are small, which
tends to make operating costs high. This is claimed to be one of the reasons
why they invest relatively less in low-yielding government securities than
do most other banks. Investments are made in Negro real estate, but they
are not easily negotiable, because of the restricted market for Negro prop-
erty. Financial interests in Negro business are often quite unsafe. A
comparatively large part of the borrowers use the loans for consumption
rather than for production purposes. Because of the poverty of the Negroes
and the relative weakness of most Negro banks, only a small minority of
all Negro families residing in localities where Negro banks exist have any
savings or checking accounts with them. Some writers believe, however,
that Negro banks have brought about certain secondary beneficial effects j
white banks are said to treat Negro customers with greater respect whenever
there is a competing Negro bank in the locality. It may happen, on the
other hand, that the presence of a Negro bank gives the white banks an
excuse for advising Negro customers to use their own bank.^®
The difficulties of the Negroes who wanted to build their own homes
and were almost entirely unable to get any assistance from white financial
institutions was one of the main driving forces behind the foundation of
Negro-managed building and loan associations. The first one started In
Virginia in 1883. These associations have shown great progress, but also
there have been a great number of failures. By 1930 there were some 70-
odd Negro associations with assets totaling $6,600,000, or less than i per
cent of the total assets of all American building and loan associations. The
depression hit the whole group of institutions severely. The Negro institu-
tions were hurt somewhat more than were the white associations, and, by
1938, there were about 50 Negro building and loan associations—22 of
which were in Pennsylvania—with combined assets of $3,600,000. It is
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