I Knew Nothing About Banking: Testimony Delivered in Washington, D.C., on February 14, 1880
I KNEW NOTHING ABOUT BANKING: TESTIMONY
DELIVERED IN WASHINGTON, D.C.,
ON 14 FEBRUARY 1880
U.S. Congress, Senate, Report of the Select Committee to Investigate the Freedman’s
Savings and Trust Company, Senate Report No. 440, 46th Cong., 2d sess., 1880, 236-41
(hereafter cited as Report of the Select Committee).
The Freedman’s Savings and Trust Company, popularly known as the Freed-
man’s Bank, had closed its doors in July 1874 under a cloud of suspicion of
mismanagement and fraud by its trustees. At that time the Bank recorded
almost $3 million in deposits in over sixty thousand accounts but possessed
only thirty-two thousand dollars in cash. Under terms of congressional legis-
lation passed earlier in 1874, three commissioners oversaw the liquidation of
the Bank’s assets, largely real estate and unpaid personal loans, in order to
repay the depositors. By 1880, however, the commissioners had not yet
completed the process and there were loud complaints that they had run up
unjustifiably large expenses while managing to refund only 40 percent of the
original value of the deposits. A select committee of U.S. senators headed by
black Mississippian Blanche K. Bruce held public hearings to determine the
quickest and least expensive way to wrap up the affairs of the Bank. Among
those called to testify was Douglass, who had served as president of the Bank
during its final months. He appeared in a hearing room in the Capitol on 14
February 1880, along with Anson M. Sperry, former inspector of the Bank, to
answer questions from Bruce, Robert E. Withers of Virginia, and Augustus
H. Garland of Arkansas. Carl R. Osthaus, Freedmen, Philanthropy, and
Fraud: A History of the Freedman’s Savings Bank (Chicago, 1976), 208-12.
FREDERICK DOUGLASS sworn and examined.
By the CHAIRMAN:1Blanche Kelso Bruce.
Question. Mr. Douglass, will you state your connection with the
Freedman’s Bank; what position you held in that institution, when you
were elected to that position, and how long you remained in it?—Answer. I
was for a short time president of the Freedman’s Bank.2The trustees elected Douglass to the presidency of the Freedman's Savings and Trust Company on 14 March 1874, and he intended to assume his duties on 1 April, although he was apparently at his desk on 30 March. He held this position until the Bank's official demise on 2 July 1874. Walter L. Fleming, The Freedman's Savings Bank: A Chapter in the Economic History of the Negro Race (1927; Westport, Conn., 1970), 85-86; Osthaus, Freedmen, Philanthropy, and Fraud, 183; Douglass to Henry Highland Garnet, 19 March 1874, General Correspondence File, reel 2, frame 730, FD Papers, DLC. I was elected to
that position about the middle of March, 1874, but hesitated about taking
the office until about the first of April I then, under persuasion of different
members of the board of trustees, accepted the office, as they said it would
help to inspire confidence in the soundness of the bank. I remained in that
position until the bank was handed over or the institution was put in the
hands of the present commissioners. All told, I was in the institution about
three months.
Q. As president?—A. Yes, sir; as president.
CONDITION OF THE BANK WHEN PRESIDENT DOUGLASS TOOK CHARGE.
Q. In what condition, Mr. Douglass, did you find the institution as to
its solvency, when you entered upon your duties as president?—A. Well, it
is difficult to tell. I was there a number of weeks, and the first four or five
weeks, of course, I was ignorant of the actual condition of the bank and of
its management. It was not easy, stepping into an institution like that, to be
instantly made acquainted with its condition.
Mr. WITHERS.3Robert Enoch Withers (1821-1907), Democratic senator from Virginia and the son of a physician, was educated in private schools in his native state and awarded a medical degree in 1841 from the University of Virginia. He practiced medicine in Campbell County, Virginia, and then served as a surgeon in the Confederate Army of Northern Virginia until severe wounds forced him to abandon the profession. Withers turned to journalism after the war, founding and editing the Lynchburg (Va.) Daily News and, beginning in 1869, editing the Richmond Enquirer. In 1869 the Conservative party nominated Withers for governor, and he campaigned on an open appeal to whites to combat the political influence of blacks and carpetbaggers. In contrast to this stance, the “new movement” in Virginia politics advocated compromise as the means to avoid Radical Reconstruction, and its leaders persuaded Withers to withdraw in favor of a candidate unidentified with the Conservative party. After losing the Democratic gubernatorial nomination in 1873, he won election as lieutenant governor. In 1874 the Virginia legislature elected him to the U.S. Senate, where he served one six-year term. In 1885 President Grover Cleveland appointed Withers U.S. consul at Hong Kong, a position he held until 1889. He then returned to Virginia, was active in the Masonic hierarchy, and completed his Autobiography of an Octogenarian in 1907. Maddex, Virginia Conservatives, 59, 63, 70-71, 76-77, 99, 107-08; BDAC, 1947; ACAB, 6: 584; NCAB, 48: 185. No; that was impossible.
The WITNESS. There were thirty-four branches of the bank in constant
communication with the main office here, and these communications were
usually in cipher;4The Freedman’s Bank established thirty-four branch offices, all but two of which were in southern states. The Bank moved its main office from New York City to Washington, D.C., in March 1867. The Bank managers coded telegraphic communications between the branches for security purposes, especially in the event of a run on a branch. Fleming, Freedmen's Savings Bank, 39, 191-92; Osthaus, Freedmen, Philanthropy, and Fraud, i38-42, 176-80. and for a considerable length of time I was kept entirely
ignorant of the cipher communications between the actuary of the bank
here and the agents at the different branches.
THE CIPHER CORRESPONDENCE.
By the CHAIRMAN:
Q. You say that the communications between the actuary and the
branch banks were conducted in cipher?—A. Yes, sir.
Q. And you were not made acquainted with the character of the corre-
spondence?—A. No; not at first. I gradually got some light on the meaning
of the cipher between the actuary and the agents. I found everything in
motion, you know, doing business, receiving deposits, and paying depos-
itors all over the country, and I received assurances from the actuary that all
was right; and from a number of others that we could go on; although I
knew that there had been a run on the bank.5There had been runs on the Bank following the publication of the March 1873 report of the comptroller of the currency and during the widespread financial panic sparked by the failure of the firm of Jay Cooke and Company the next September. Douglass is probably referring to the response to the comptroller's report of March 1874. When released in April, it disclosed a deficit of $217,866.15 which many viewed as evidence of fraud and mismanagement. Panic among depositors ensued and runs on the Bank induced some branches to require sixty days’ notice before funds could be withdrawn. Osthaus, Freedmen, Philanthropy, and Fraud, 187-91; Fleming, Freedmen's Savings Bank, 87; Douglass to Editor of the New York Herald, 29 April 1874, in Report of the Select Committee, Appendix, 44-45. I gradually got my suspicions
aroused that we were in an unsound condition, and communicated my
views of our unsoundness or insolvency to the Banking Committee of the
Senate,6Douglass’s optimistic public posture apparently masked a growing skepticism regarding the Bank’s solvency. Withdrawals of deposits, resignations by trustees, administrative secrecy, and cognizance of the extent of the instability of the branches (inclusive of the Washington office) all reinforced Douglass’s uneasiness, originally generated by the comptroller’s report of March 1874. Especially telling, thought Douglass, was the Bank's inability to promptly repay a temporary personal loan he made to it in response to an immediate crisis. “The more I observed and learned the more my confidence diminished," he later recalled, concluding, “I felt it my duty to make known as speedily as possible to Hon. John Sherman, Chairman of the Senate Committee on Finance, and to Senator Scott of Pennsylvania, also of the same Committee, that I regarded the institution as insolvent and irrecoverable, and that I could no longer ask my people to deposit their money in it.” Fleming, Freedmen's Savings Bank, 87-88; Osthaus, Freedmen, Philanthropy, and Fraud, 191-93; Douglass, Life and Times, 444, 446. consisting then in part of the present Secretary of the Treasury7John Sherman.
and Senator Scott of Pennsylvania.8John Scott (1824-96), U.S. senator from Pennsylvania, was born in Alexandria, Huntingdon County, Pennsylvania. He studied law with a local judge and started his own legal practice in 1846. Beginning in 1857, Scott frequently represented the Pennsylvania Railroad Company in court suits. Originally a Democrat, he won a term in the state house of representatives on the Union party ticket in 1862 and subsequently became a Republican. Scott served a single term in the U.S. Senate (1869-75) where he worked hard for stronger legislation against the Ku Klux Klan. After leaving Washington, Scott became general solicitor for the Pennsylvania Railroad Company and declined an invitation to serve as President Ulysses S. Grant’s secretary of the interior. J. Simpson Africa, History of Huntingdon and Blair Counties, Pennsylvania (Philadelphia, 1883), 96; John W. Jordan, Encyclopedia of Pennsylvania, 6 vols. (New York, 1916), 6: 2114-16; BDAC, 1668; NCAB, 24: 187. In about five weeks after I was there—
five or six weeks—I became quite satisfied and convinced that the bank
was insolvent. I began to distrust it after reading the report of Mr. Knox
(Comptroller of the Currency).9John Jay Knox (1828-92) was the son of a prominent banker in Oneida County, New York. He worked as a bank cashier and attracted the attention of Secretary of the Treasury Salmon P. Chase when he published two essays, in 1861 and 1862, advocating the establishment of a national banking system. Chase brought him to Washington, D.C., to work for the Treasury, and he rose to become deputy comptroller of the currency in 1867 and comptroller of the currency in 1872. In 1884, Knox resigned his government post to become president of the National Bank of the Republic in New York City. The legislation of 1881 dissolving the Board of Commissioners of the Freedman's Bank placed the comptroller of the currency in charge of liquidating the Bank's assets. Knox recommended payment by checks drawn on the Treasury to the Bank's creditors. He believed that the government, in permitting its agents to act for the Bank, had misled the freedmen to consider it a government institution and to entrust their savings to it as such. Knox's codification of the U.S. mint and coinage laws in 1873, his annual reports, his lectures before business and financial groups, and his book, United States Notes: A History of the Various Issues of Paper Money by the Government of the United States (New York, 1884), won him recognition as a monetary authority. Abby L. Gilbert, “The Comptroller of the Currency and the Freedman's Savings Bank," JNH, 57: 134-37 (April 1972); ACAB, 3: 567-68; NCAB, 3: 15-16; DAB, 10: 447. I found that it was unable even by his
figures—and they were most favorable—to pay more, I believe, than
ninety cents on the dollar.
Q. I want to ask you, Mr. Douglass, whether you were furnished a key
to that cipher?—A. No, sir; I was not.
Q. The cipher was furnished by the actuary, Mr. Stickney,10George W. Stickney was the son of Clarissa, the older sister of Daniel L. Eaton (whom he succeeded as actuary for the Freedman’s Bank), and Jonathan Stickney of Maine. Later investigations revealed that Stickney embezzled and misappropriated thousands of dollars from the Bank's investments and deposits. Stickney initially argued against dissolution of the Freedman's Bank and helped found a short-lived People’s Savings Bank in Washington, D.C., as a local replacement. Nellie Zada Rice Molyneux, comp., History Genealogical and Biographical of the Eaton Families (Syracuse, N.Y., 1911), 449; Osthaus, Freedmen, Philanthropy, and Fraud, 152, 156-57, 159-60, 193, 20304; Whyte, Uncivil War, 255-56. I believe.
He was then actuary, was he not, or was it Mr. Eaton?11Daniel Lewis Eaton (1824-73) was born in Cape Elizabeth, Maine, and graduated from Bowdoin College in 1851. Before the Civil War he studied law, taught school, and worked as a journalist. He served as an army paymaster and became a trustee and actuary for the Freedman’s Bank when it moved its headquarters to Washington, D.C., in 1867. Eaton also was an officer of the First Congregationalist Church in Washington, D.C., and a partner with General Oliver O. Howard, the head of the Freedmen's Bureau, and John Alvord, the president of the Bank, in the American Building Block Company. This building company achieved notoriety when the patent brick, which it contracted to provide for the new Howard University hospital and other university buildings, failed, causing sections of walls to crack and collapse. A congressional investigation in 1870 found that the terms of the contracts for the bricks had been specified to give the company a wide edge in bidding. In the first few years of the Freedman's Bank, Eaton traveled widely in the South to promote it, stressing its social as well as economic purposes. With Henry Cooke and William S. Huntington, Eaton had virtual control over the Bank's finances from 1867 to 1872. His tenure was marked by preferential treatment for friends and decisions on loans that were casual, senseless, or directed by self-interest. Eaton doctored numbers in committee reports to produce quorums and accepted fees or stock shares for negotiating loans. The bonds of the Congregational Society, which were issued by the First Congregationalist Church, were among the most unsound of the Bank’s investments. A group of reformers among the Bank’s trustees finally forced Eaton's resignation in 1872. Paul Skeels Peirce, The Freedmen's Bureau: A Chapter in the History of Reconstruction (Iowa City, 1904), 110-11, 115-16; Molyneux, Eaton Families, 494-97; Fleming, Freedmen's Savings Bank, 32, 167; Osthaus, Freedmen, Philanthropy, and Fraud, 46, 152, 155-56, 163, 170.—A. Mr. Stickney
was then the actuary and Mr. Sperry12Anson M. Sperry from Illinois had been an army paymaster with the rank of major. He became the first field agent for the Freedman's Bank and traveled with black troops to solicit deposits. Sperry collected $120,000 in Texas and established a Bank branch in Houston. When appointed the first branch inspector, he repeatedly tried to reduce operating expenses and to replace unsatisfactory officers. In April 1874, Sperry was part of a group that argued in the House Committee on Banking and Currency for radical restructuring or liquidation. Congress incorporated some of his suggestions in the Charter revision of 20 June 1874. After the Bank’s demise, Sperry tried unsuccessfully to found a bank for black depositors in Washington, D.C. Fleming, Freedmen's Savings Bank, 22, 32-34, 83; Osthaus, Freedmen, Philanthropy, and Fraud, 27-29, 101, 104, 149, 168, 174, 181-82, 193, 203-04. was the traveling agent.
Q. And they used a cipher which you as president were not acquainted
with; do I understand?—A. Yes, sir.
Q. And you had no key to the cipher?—A. No, sir.
By Mr. WITHERS:
Q. Did you ask to be furnished with a key to the cipher?—A. I did ask
the meaning of two or three dispatches that came, and when I did so I
detected a look that told me that that was none of my business.
Q. You mean that it was not intended for you to know?—A. Yes; I
believe it was not intended that I should know that cipher, and that in-
creased my suspicion of the unsoundness of things about that bank.
By the CHAIRMAN:
Q. Well, did any one besides the actuary have a key to that cipher?—A.
I do not know. Mr. Stickney, who was the actuary, assured me, if I would
take the position, that he would do everything in his power to make me
acquainted with the real state of affairs there, and assist me in the discharge
of whatever duties might be devolved upon me. But Mr. Stickney at that
time was usually very much pressed with business—either selling property
or doing something else—and I seldom could get more than five or six
minutes at a time with him; he was running in and out all the while; so that it
was six weeks I was there finding out and becoming convinced of the state
of the bank. After that, after I began to discredit the bank in the eyes of the
Banking Committee of the Senate, I spent my time mostly in doing that sort
of business.
CIRCULARS WRITTEN BY PRESIDENT DOUGLASS.
Q. Did you not write and publish one or more circulars expressing your
belief in the soundness of the bank?—A. Well, I wrote two circulars almost
immediately upon going into the bank,13The Senate committee identified and published two documents as the circulars in question. A letter to the editor of the New York Herald dated 29 April 1874, designated “Circular No. 2," acknowledged a $217,000 deficit while adopting the optimistic outlook, attributed to other Bank officers, that these liabilities could be overcome in a few months. In this letter Douglass refers to a telegram that he dispatched the previous evening to the Bank's southern branches. The committee’s "Circular No. 1" was, in fact, an undated communication to the depositors that was printed in the Washington New National Era on 25 June 1874. In it Douglass attempted to explain the Bank's financial problems and recounted its historic mission. He also drew an optimistic picture for old and new depositors in light of legislation passed on 20 June 1874 that provided for the restructuring of the Bank, the protection of new deposits, and the establishment of mechanisms for dissolving the institution, should the trustees decide such a step was necessary. Osthaus, Freedmen, Philanthropy, and Fraud, 193-98; Fleming, Freedmen's Savings Bank, 94-95; NNE, 25 June 1874; Report of the Select Committee, Appendix, 42-45. upon representations that were
made to me by those that I supposed knew the true condition of the bank,
asking depositors and others to hold on, and expressing the belief that we
could weather the crisis and pay dollar for dollar in the end. Nevertheless, I
expressed myself in some parts of these circulars so doubtfully that I was
charged before the trustees with having destroyed the credit of the bank by
these very circulars.
Q. You believed, then, in the solvency of the bank at the time you
issued those circulars, and your belief was based upon information, if I
understand you correctly, from others?—A. Yes; I could not know any-
thing about it any more than the fact that I had confidence in the officers of
the bank.
Q. Were these gentlemen officers of the bank?—A. Yes, sir; Mr.
Stickney was actuary and Mr. Sperry agent of the bank, and I had a great
deal of confidence in my friend Wilson,14William J. Wilson. who was nominally cashier of
the bank, and he assured me it was all right. I had confidence also in several
other gentlemen connected with the bank, and I got from them assurances
of the same sort; and it was upon assurances of that kind that I signed those
circulars.
DOUBTS AS TO SOUNDNESS OF THE BANK.
Q. What caused you, Mr. Douglass, to doubt the solvency of the bank,
at last?—A. I found that it was in want of money, for one thing—very
much in want of money; and on one occasion the actuary came into the
bank and stated that we must have ten thousand dollars that day, or the bank
would have to close; and the question went around what we should do.
They said that they just wanted that amount to tide them over for that day;
and several trustees that were present were asked if they could raise that
amount, and one after another said he could not, till at length Mr. Alvord,15John Watson Alvord (1807-80), initiator of the Freedman's Savings and Trust Company and a Congregational minister, was an abolitionist who, after emancipation, devoted much of his labor to securing the welfare of freedmen. Born in East Hampton, Connecticut, Alvord was in 1836 a member of the first graduating class of Oberlin College. Ill health forced him to give up plans to do missionary work in Africa. Before the Civil War, he was secretary of the American Tract Society in Boston; during the war, he worked with both the Christian and the Sanitary Commissions. In 1865 Alvord helped organize freedmen's schools in Savannah, Georgia, and then returned north to lobby for the creation of a bank to help black soldiers handle their enlistment bounties and military pay. In 1866, after his successful lobbying effort for the Bank, he became superintendent of schools under the Freedmen's Bureau. One of the original trustees of the Freedman's Bank, he was its president from 1868 until his replacement by Douglass in March 1874. Alvord publicly defended the Bank’s soundness, although he protested to the trustees about some dubious transactions. He himself may have profited from compromised transactions—most suspiciously, from those with the Seneca Stone Company, of which he became president after he left the Bank. Samuel Morgan Alvord, comp., A Genealogy of the Descendants of Alexander Alvord, an Early Settler of Windsor, Conn. and Northampton, Mass. (Webster, N.Y., 1908), 285-87; Osthaus, Freedmen, Philanthropy, and Fraud, 1-5, 12-14, 165.
formerly president of the bank, turned to me and said, “Mr. Douglass, you
have ten thousand dollars here that might be used for this purpose, in
United States bonds, and if we could have these for a few days it would help
us through, and it will all be right in a few days.” “Well,” said I, “you can
take this ten thousand dollars.” So I loaned the bank ten thousand dollars;
and as week after week went on and I found it impossible to get back my ten
thousand dollars, I naturally enough began to doubt the soundness of the
bank; most people would under such circumstances (smiling); though I did
at last obtain my ten thousand dollars.
TRUSTEES’ PRACTICAL DISBELIEF IN THE BANK’S SOUNDNESS.
Another reason induced me to disbelieve in the bank. I found that l was
the only trustee of the bank that deposited any money in it.16Trustees were not obligated to have money on deposit and the few who did apparently made withdrawals during the several runs upon the Bank. Following the publication of the comptroller‘s report of March 1874, William H. A. Wormley and Dr. Alexander T. Augusta closed out their accounts, leaving Douglass as the sole trustee with personal savings deposited in the Bank. Anson M. Sperry recalled that Wormley's withdrawal of $10,000 “left us with about $600 cash on hand in the face of a pretty severe run." Osthaus, Freedmen, Philanthropy, and Fraud, 191-92; Fleming, Freedmen's Savings Bank, 68, 83, 88; U.S. Congress, House of Representatives, Freedman’s Bank, House Report No. 502, 44th Cong., 1st sess., 1876, 179-80; Douglass, Life and Times, 444. I went up
before this Banking Committee, at the other end of the Capitol, and stated
my belief in the insolvency of the bank, and forthwith a number of trustees
were brought together—they came before that committee—and they con-
tradicted all that I had said concerning the insolvency of the bank. They
said that we could go on.17Douglass refers to his report to Senators John Sherman and John Scott of the Senate Committee on Finance in which he said that he “regarded the institution as insolvent and irrecoverable, and . . . could no longer ask my people to deposit their money in it." This action, he later recalled, made him subject to “very bitter opposition on the part of the officers of the bank," a dozen of whom, under the direction of George Stickney, contradicted his testimony before the committee. Among them were some, he wrote, “who had assisted me by giving me facts showing the insolvency of the bank." Douglass, Life and Times, 446; Osthaus, Freedmen, Philanthropy, and Fraud, 193. Well, I was left out in the cold. However, it was
very soon believed by the committee that we were insolvent, and legisla-
tion was enacted which finally brought us, or very speedily brought us, to a
close.18Douglass refers to Congress’s last attempt to revitalize the Bank. A bill passed on 20 June 1874 was meant to reform the Bank’s internal structure and protect new income by treating it as “special deposits" not subject to old liabilities. The legislation also gave the trustees authority to close the Bank and to appoint three commissioners to oversee its dissolution if they decided it could not be saved. NNE, 9 May 1874; Washington Evening Star, 14 May 1874; Osthaus, Freedmen, Philanthropy, and Fraud, 192-99; Gilbert, “Comptroller of the Currency and the Freedman's Savings Bank,” 131-32.
Q. Did you, when you went before that committee, state that you
believed the institution to be insolvent?—A. I did; and I stated to them that
I could not conscientiously ask any of my friends, or people with whom I
was identified, to deposit money in that institution. But at the same time I
was a depositor there. I had two thousand dollars in the bank at the time,
and when I found it was to be closed up, since I had been partly instrumen-
tal, through my circulars, in inspiring confidence in the institution, I
thought I would not make myself a preferred creditor, and left my money in
there, although I had the same chance of taking it out that others had.
Q. And the trustees were not depositors? Did they not deposit their
money there, so far as you knew?—A. No; I believe that I was the only
trustee that had a dollar deposited there.
WHAT THE TRUSTEES WANTED.
Q. Mr. Douglass, please tell us whether or not the board of trustees co-
operated with you in your effort to secure the depositors when it became
apparent that the bank was insolvent?—A. I found this to be the case, sir—
that the trustees and the officers of the bank desired to have the bank closed,
but they wanted it closed in a particular way.19The trustees at first attempted to appoint a board of commissioners composed of their relatives-Charles B. Purvis's father and John M. Langston's and Zalmon Richards’s brothers-but the secretary of the treasury rejected their slate. They subsequently renominated Robert Purvis in addition to John A. J. Creswell and Robert H. T. Leipold to oversee the liquidation of the Bank. Report of the Select Committee, 186; Fleming, Freedmen’s Savings Bank, 101. They wanted the trustees of
the bank to have the management of settling up its affairs. To that view I
was opposed, and I stated to the Banking Committee that all of us who had
had any hand in bringing the bank into its present condition ought to be
excluded from settling up or managing its assets in any way, so that they
might be looked into thoroughly and by entirely unprejudiced persons.
Q. I presume, Mr. Douglass, you have kept an eye on the present
management of the institution, having been connected with the bank in
other days; will you please tell us whether you have been satisfied with the
management of the assets of the bank since the present commissioners have
been in charge?—A. I think the present commissioners have managed the
assets of that bank in every way judiciously and honorably. I believe in
them—in every man of them.
By Mr. GARLAND:20Augustus Hill Garland (1832-99) was born in Tennessee and taken by his family to Arkansas in 1833. He studied law with his stepfather and was admitted to the bar in 1850. Although he originally opposed secession, Garland went on to serve in both branches of the Confederate Congress. Pardoned by President Andrew Johnson after the war, Garland could not practice before the U.S. Supreme Court because of the “iron-clad oath" required by a congressional act of 24 January 1865. He argued that the law was unconstitutional, and the Court decided in his favor. A Democrat, Garland served as governor (1874-76) and then U.S. senator ( 1877-85). After duty as Grover Cleveland’s attorney general (1885- 89), he practiced law in Washington, D.C. Farrar Newberry, A Life of Mr. Garland of Arkansas (n.p., 1980); BDAC, 986; DAB, 7: 150-51.
Q. Mr. Douglass, had you given the institution any examination as to
the conduct of its business, before you were called upon to be president?—
A. Not at all, sir; I had no business there.
Q. You took the matter under advisement of consenting to become
president, some five or six weeks?—A. No, sir; some two or three weeks
only.
Q. Yes; some two or three weeks. Now, was that in consequence of
your doubt as to the stability of the institution, or that you didn’t care to take
the responsibility; or what was it?—A. One ground was that it would
occupy my time, which I could make more profitable to myself elsewhere.
Q. In other business, do you mean?—A. Yes, sir; by occupying my
time in other business. Then again, I had had no banking experience; I
knew nothing about banking; my life had been a theoretical one rather than
a practical one—on the stump—and I hesitated about it until I was per-
suaded that as the colored people of the country generally had confidence
in me, I might strengthen the bank after the run had been made upon its
reserve by consenting to occupy the position of its president.
PRESIDENT DOUGLASS’S CIRCULARS.
Q. Have you copies of those two circulars that you wrote?—A. I have
them somewhere, I believe, though not with me.
Q. Will you please make a search for them, and at some time furnish
them to the committee?—A. Yes, sir; I will do so with pleasure.
The CHAIRMAN. Well, copies of those circulars ought to be about the
bank somewhere.
Mr. DOUGLASS. Yes, sir; I have no doubt that some copies can be found
there.
Mr. SPERRY. I tried to find a copy in the bank, but I did not succeed.
Mr. DOUGLASS. Well, they were published at the time very generally in
the papers; but I will endeavor to get a copy and have it transmitted to the
committee.
By Mr. WITHERS:
Q. You stated that you yielded finally to the solicitations of others and
accepted the presidency of the bank; have you any objections to stating who
appeared to be most solicitous, who most influenced you in coming to that
conclusion?—A. Well, I will say that Mr. Wilson, the cashier of the bank,
was the most solicitous that I should take that position, and after I was
elected Mr. Alvord was very anxious that I should come forward and
assume the position, and expressed the belief that if I would do so, that
would strengthen the bank and make it all right. Indeed, nearly all the
trustees that spoke to me on the subject were anxious to have me accept the
presidency, believing that it would be for the best interests of the institu-
tion.
WITNESS’S OPINION AS TO CAUSES OF THE BANK’S FAILURE.
By Mr. GARLAND:
Q. What is your judgment, Mr. Douglass, in general and from your
information of the bank and the way business was conducted there—its
relations to the country; the operations of the business of the country upon
it, and it upon the business of the country; all things considered—what is
your judgment as to the causes of the failure of that institution to accom-
plish the purposes you had in view in its organization?—A. Well, I think
that there is one general objection to the institution, and that is that it
collected money at the extremities and invested it at the center. It borrowed
money in Mississippi and invested it here in Washington.21The Freedman's Bank was a centralized savings and security institution that required its branches to send all income, apart from that needed for operating expenses, to the Washington, D.C. home office, where a committee of the trustees made all investment decisions. Over the years the trustees proved very reluctant to make loans to black individuals or businesses, especially outside Washington, D.C. The reform legislation of 20 June 1874 attempted to redress this situation by mandating local investment of half of the deposits at each branch bank. Fleming, Freedmen's Savings Bank, 41; Osthaus, Freedmen, Philanthropy, and Fraud, 119-23, 193-94. These branch
banks furnished no business facilities in the quarters where the money was
collected. Then there was in the very nature of the institution the seeds of
ruin. It invited, as I think, all that was inimical to the race in the interest of
whom the institution was established to conspire against it. Then, too, of
course, I am aware that bad loans and the breaking down of the banking
institutions all around it had much to do with bringing it to its insolvency.22Douglass alludes to loans made after 1870 when a revision of the Bank's charter allowed it to make loans on real estate and when it also began to drain its reserve fund. Trustees authorized many speculative and dishonest transactions for their own or their friends’ benefit. Douglass also refers to the impact of the Panic of 1873, which brought about the failure of about twenty savings banks. Osthaus, Freedmen, Philanthropy, and Fraud, 150-72, 200; Fleming, Freedmen’s Savings Bank, 70-81.
I was out West that winter when there was a run upon the bank, just
previous to my election to the office of president,23Douglass delivered his lecture on John Brown to audiences in western New York, New England, and possibly elsewhere in the winter of 1873-74. Boston Daily Globe, 17 December 1873; Newport (R.I.) Mercury, 20 December 1873; Rochester Union and Advertiser, 27 January 1874. and the fact that it
survived the run upon it at that time was one element of my confidence in it.
I do not think any separate institution of that sort is advisable. The idea of
setting apart a bank for one particular class of people in the country, makes
it liable to have any and all hostile influences brought to bear against it. The
bad loans, though, were the secret, I think, of its failure.
Q. You have never, then, had revealed to you the full items of this
cipher dispatch business?—A. No, sir; and (smiling) the difficulty of
getting any information on that point was one of the elements of my distrust
of the whole thing.
WITNESS’S HIGH OPINION OF THE PRESENT COMMISSIONERS.
By the CHAIRMAN:
Q. Mr. Douglass, have you any opinion as to the reduction of the
number of the commissioners who now have charge of that institution, and
consequently the reduction of expenses?—A. Well, I have the fullest confi-
dence in the present commissioners, and think that they are giving their
time and services very reasonably to the bank. From the statements that I
have heard made as to the expense of managing the assets of the bank, I do
think that they could be reduced and ought to be reduced in the present
number. I think that one man could now perform the duties of getting rid of
the property and paying the depositors, if there is ever anything to pay, just
as well as three men.
By Mr. GARLAND:
Q. I will just here enlarge the question of the chairman, Mr. Douglass.
Have you examined the bill I had reported from the committee last May, but
which I had recommitted to the committee, with a view of closing up this
business?—A. I have seen the bill, I think.
Q. It was recommitted in view of the fact that this investigation was
going on, and there might be some additional facts brought out. I would be
glad to have you examine that bill and to get your opinion upon it; the
commissioners have expressed their opinion, and I would be glad to have
yours—A. (Clerk handing a copy of the bill to Mr. Douglass). I will, with
a great deal of pleasure, Senator, examine this bill and give you an ex-
pression of my opinion upon it.24Senate Bill 711, which became law on 23 April 1881, replaced the three commissioners established by the act of 20 June 1874 with the comptroller of the currency, who would henceforth be sole commissioner of the Freedman's Savings Bank. It also mandated that the solicitor of the treasury, at the direction of the commissioner, should initiate and investigate cases of mismanagement and fraud. In a letter to Senator Augustus Hill Garland, Douglass described the bill as “wisely drawn,” although he criticized a few of its details. Gilbert, “Comptroller of the Currency and the Freedman's Savings Bank," 125-43; Congressional Record, 46th Cong., 1st sess., 2254; ibid., 46th Cong., 2d sess., 7, 4462, 4507; ibid., 46th Cong., 3d sess., 1519, 1634, 1710; Douglass to Augustus Hill Garland, 19 February 1880, in Report of the Select Committee, 42-46.
By the CHAIRMAN:
Q. Mr. Douglass, if there is any further statement that you desire to
make, we will be glad to hear it.—A. I will say that I did take some part in
getting the present commissioners appointed. My motive in regard to one
at least of the appointments was to assure the colored people, especially the
colored depositors, that they would have a faithful and honest friend who
would protect their rights in the bank, in the person of Mr. Purvis.25Robert Purvis testified to the Bruce committee that he initially wanted to decline appointment as commissioner for personal reasons but “was waited upon by Mr. Frederick Douglass . . . and he said, ‘No; we want you here; you are known among this people; you have claims upon them and they recognize it.’" Report of the Select Committee, 49.
Indeed, I was in favor of all three of the commissioners from the first, and l
have had no cause to change my preference for them since. The most
valuable service that would be rendered by one of the commissioners
would be his knowledge of the law and his ability to advise us legally
(referring to Mr. Creswell).26John Andrew Jackson Creswell (1828-91) was born in Port Deposit, Cecil County, Maryland. Educated at Dickinson College, he joined the Maryland bar in 1850. A Whig until that party's demise, Creswell then aligned with the Democrats until the start of the Civil War. A staunch unionist, Creswell served in the state house of delegates (1861 -62) and as Maryland adjutant general (1862-63). Elected to the U.S. House of Representatives in 1863, Creswell became a U.S. senator in 1863 when the legislature elected him to fill a vacancy caused by the death of Thomas H. Hicks. As Ulysses S. Grant’s postmaster general (1869-74), Creswell expanded postal services while reducing rates. After leaving that post, he served as U.S. counsel before the Court of Commissioners of the Alabama Claims (1874-76) and as one of the commissioners in charge of the liquidation of the Freedman's Bank. Biographical Cyclopedia of Representative Men of Maryland and the District of Columbia, 624, 626- 28; BDAC, 801; NCAB, 4: 19. I was also equally strongly impressed with
the importance of having the business ability of Mr. Leipold
27Robert H. T. Leipold, an expert accountant in the Treasury Department, took office on 11 July 1874 as one of three commissioners elected by the trustees to close the affairs of the Bank. Each commissioner was paid three thousand dollars per annum, but from the beginning Leipold did most of the work, Creswell maintaining that he had been chosen for his reputation, and Purvis, that he had been picked to provide the board with a black member. The foreign-born Leipold was considered by Creswell and Purvis to be extremely disagreeable, abrasively eccentric, and anti-black. They agreed, however, that he was a good businessman and had the confidence and cooperation of the Treasury Department. Purvis and Leipold fought about the latter's smoking and they disagreed about disposition of the mounting evidence against the integrity of the Bank's trustees. Leipold tried to persuade Congress to prosecute, but Creswell and Purvis opposed such action. The Bruce committee found that Purvis and Creswell each paid Leipold five hundred dollars to do some of their work, although Purvis maintained that the money was a gift to make Leipold stop bemoaning his poverty. Leipold later operated a real estate and insurance business in Washington, D.C. [William H. Boyd, comp.], Boyd's Directory of the District of Columbia . . . 1897 (Washington, D.C., 1897), 592; Fleming, Freedmen’s Savings Bank, 101-06; Osthaus, Freedmen, Philanthropy, and Fraud, 198, 208-11. on the
commission as one of the commissioners, as his acquaintance with ac-
counts and his industry as shown by his clerkship in the Treasury Depart-
ment, I thought admirably fitted him for his place on the commission.
By Mr. GARLAND:
Q. And you have seen nothing to change your mind as to either of these
gentlemen?—A. Not at all; not anything at all; they have got about as much
out of the bank as I expected them to get by this time.