Banking, Slavery, and Race in Nineteenth-Century America
Endorsed by the Business History Conference (BHC)
Type: Paper Session
Tags: Antebellum; Civil War and Reconstruction; Slavery
This panel will use the lens of race and slavery to explore the complex history of American banking in the nineteenth century. The historians on this panel will take a deeper look at the evolution of slavery, finance, and banking policy during this tumultuous century in American history. Sharon Ann Murphy will discuss how antebellum bank failures effected not enslavers, but the enslaved. While historians often mention the negative impact on enslaved people when individual enslavers faced economic troubles, the more widespread impact of the failure of an entire bank is usually only discussed in broad, macroeconomic terms. Murphy will show how wide swaths of enslaved people experienced the same economic events. Rafael I. Pardo will consider a similar topic from a legal perspective, by interrogating the complexities of bankruptcy laws in the Eastern District of Louisiana, the federal judicial district in which New Orleans was housed. Pardo asks an important, and underexplored, question: What happened to enslaved people when enslavers were forced to file for bankruptcy? By interrogating the evolution of bankruptcy policy in the Eastern District of Louisiana during the antebellum period, Pardo will explore the process by which enslaved individuals were mortgaged by debtors to secure debts owed to the state’s largest banks. Justene Hill Edwards will examine the banking policies of the Freedman’s Saving and Trust Company, also known as the Freedman’s Bank, a private financial institution chartered by Congress and signed into existence by President Abraham Lincoln in March 1865. Hill Edwards will explore the policies that led to the bank’s demise in 1874, which devastated a generation of African Americans struggling to find economic stability after the end of legal slavery in America.
The Freedman’s Bank and the Challenges of Black Economic Equality during Reconstruction
White philanthropists and bankers contended that they created the Freedman’s Savings and Trust Company with one overarching purpose in mind: to usher former African-American slaves into the postbellum era through formal participation in the financial services industry. Signed into existence by President Abraham Lincoln in March 1865, the Freedman’s Bank represented the promise of the Civil War: full access to citizenship and the dream of capitalist enterprise for former slaves. Though the bank grew quickly, with African American depositors pouring their hard-earned wages into bank accounts, mismanagement by the bank’s white administrators precipitated the bank’s demise. In 1874, a mere nine years after the bank’s founding, the bank closed. The closing devastated a generation of African Americans who were struggling to establish economic stability. Though a small group of scholars have interrogated the Freedman’s Banks’ complicated history and ultimate failure, no historian has fully considered how the bank’s failure shifted African Americans’ relationship to America’s banks and financial institutions—a shift that had generational effects on African Americans. This paper will consider how former slaves’ understandings of capitalism informed their perspective on the Freedman’s Saving and Trust Company. This paper will explore how the Freedman’s Bank ultimately failed to live up to its intended purpose, and in the process, became a startling example for how the American government and the American banking industry perpetuated economic inequality at the precise moment when African Americans were yearning for a ladder to full economic freedom.
Justene Hill Edwards, University of Virginia
Bank Creditors, Slave Mortgages, and the Making of Modern Bankruptcy Law
This paper analyzes how enslaved individuals in the Eastern District of Louisiana, the federal judicial district that was home to New Orleans, were swept into the debate over whether the creditor recovery process in bankruptcy should be privately or publicly controlled. Bankruptcy policymaking has always entailed judgments about the treatment of debtor property securing a creditor’s claim. The question of whether the secured creditor or the government should control such property has been especially prominent, including under the legal regime established by modern bankruptcy law’s first forebearer, the 1841 Bankruptcy Act. That legislation was unclear on whether the bankruptcy estate’s assignee could sell mortgaged property free of its encumbrances. The Eastern District’s federal district court filled the statutory gap by promulgating a rule enabling assignees to extinguish, without creditor consent, mortgages on a bankrupt’s property, thus enhancing its liquidity and the potential for realizing more sales proceeds for the benefit of all creditors. This radical practice and its endorsement by the Louisiana Supreme Court constituted cooperative federalism aimed at creating a public-oriented collective proceeding for resolving financial failure. Importantly, assets in the Eastern District’s bankruptcy cases often included enslaved individuals mortgaged by debtors to secure debts owed to the state’s largest banks (e.g., the Union Bank of Louisiana). The Eastern District’s rule in such cases replaced banks’ state-law entitlements to enslaved collateral with federal public control of the enslaved in bankruptcy proceedings. This historical chapter accordingly reveals the racial dimensions of the dynamic relationship between secured credit and bankruptcy policy.
Rafael I. Pardo, Emory University
Collateral Damage: The Impact of Bank Failure on the Enslaved
As part of my book project on the relationship between banking and slavery, this paper examines the impact of bank failures on the enslaved. While historians often mention the negative impact on enslaved people when individual enslavers face economic troubles, the more widespread impact of the failure of an entire bank is usually only discussed in broad, macroeconomic terms. Yet while they did often occur during periods of economic contraction such as the Panic of 1837, the failure of a bank or set of banks had important implications for the individuals involved. Debtors who had routinely and repeatedly renewed their loans suddenly had to meet their obligations, as the bank called for the repayment of all outstanding loans. Whether or not their debts had been formally secured by enslaved property, any slaveholding debtors now faced the seizure and sale of their land and slaves. For example, in 1842 the legislature of Alabama placed all five branches of the state bank (chartered in 1832) into liquidation. While attorneys of the bank went to court to seize and sell enslaved property, many debtors sought to evade collection either through the “collusive transfers of property” to non-debtors or “by running off their negroes” to other states, including Texas. Similar episodes occurred when banks failed in other states. Even more disruptive than the failure of a large enslaver, these mass seizures and sales disrupted and displaced a significant portion of the enslaved population in the affected regions.
Sharon Ann Murphy, Providence College
Chair and Commentator: Stephen A. Mihm, University of Georgia
Stephen Mihm is the author of A Nation of Counterfeiters: Capitalists, Con Men, and the Making of the United States (Harvard University Press, 2007); and the co-author, with Nouriel Roubini, of Crisis Economics: A Crash Course in the Future of Finance (Penguin Press, 2010), which was named as one of the "Top Ten Books of 2010" by the New York Times. He is also the co-editor, with Katherine Ott and David Serlin, of Artificial Parts, Practical Lives: Modern Histories of Prosthetics (NYU, 2002); and the editor of The Life of P.T. Barnum (Bedford/St. Martin's, 2017). He is also the author of a number of peer-reviewed journal articles, book chapters, and academic essays.
Presenter: Justene Hill Edwards, University of Virginia
Justene Hill Edwards is assistant professor of African-American history at the University of Virginia. She holds degrees from Swarthmore College, Florida International University, and Princeton University. She is the author of the forthcoming book, Black Markets: The Slaves’ Economy and Capitalist Enterprise in South Carolina.
Presenter: Sharon Ann Murphy, Providence College
Sharon Ann Murphy is a professor of history at Providence College. Her research examines the complex interactions between financial institutions and their clientele in the nineteenth century. She is the author of Investing in Life: Insurance in Antebellum America (2010, The Johns Hopkins University Press), winner of the 2012 Hagley Prize for the best book in business history, and Other People’s Money: How Banking Worked in the Early American Republic (2017, The Johns Hopkins University Press). She also has several recent book chapters including “Agents, Regulations, and Scandals: US Life Insurance Companies in Late-Nineteenth-Century Latin America,” in Risk and the Insurance Business in History (2020, Jerònia Pons and Robin Pearson, eds.), and “Financing Faith: Latter-day Saints and Banking in the 1830s and 1840s,” in Business and Religion: The Intersection of Faith and Finance, (2019, Matthew C. Godfrey and Michael Hubbard MacKay, eds.). Among her latest projects is an investigation of the public perception of banks around the Panic of 1819, and an examination of the relationship between southern commercial banks and enslavement during the antebellum period. She has presented her work at numerous conferences including OAH, AHA, Society for Historians of the Early American Republic, Business History Conference, Southern Historical Association, and Policy History Conference. She has been an associate editor of Enterprise and Society: The International Journal of Business History since 2011. She was a fellow of the American Council of Learned Societies in 2018-19, an NEH fellow at the American Antiquarian Society in 2019, and is a 2020 fellowship recipient with the National Endowment of the Humanities (to be taken in the spring 2021).
Presenter: Rafael I. Pardo, Emory University
Rafael I. Pardo is the Robert T. Thompson Professor of Law at Emory University. His research and teaching interests are in bankruptcy, commercial law, and legal history. His current book project, The Color of Bankruptcy: Financial Failure and Freedom in the Age of American Slavery (under contract with Columbia University Press), is a history of how antebellum federal bankruptcy law simultaneously suppressed and protected the freedom of African Americans in a racially capitalist society. He has presented his research on this topic at various conferences and workshops, including the Annual Meeting of the Business History Conference, the Centre for Business History in Scotland at the University of Glasgow, and the Colloquium on Legal and Constitutional History at New York University School of Law. Professor Pardo received his B.A. in history from Yale College and his J.D. from New York University School of Law, where he served as an executive editor of the New York University Law Review and was a recipient of the Judge John J. Galgay Fellowship in Bankruptcy and Reorganization Law. He is an elected member of the American Law Institute and the American Bar Foundation, and he has testified as a bankruptcy expert before both houses of Congress. In 2015, he received the Emory Williams Distinguished Teaching Award, the highest university honor for teaching given by Emory University to a full-time faculty member.