Hector Rivers Sr. was born into slavery on the Sea Islands of South Carolina, but in 1883, two decades after the Emancipation Proclamation, he was free and was able to buy what became 100 acres from his former enslaver’s widow, Susan B.V. Hay. Though he had little capital, the freed Black community where he lived pooled their meager savings to help one another buy land, and Rivers received an additional loan from Hay at 10 percent interest, which allowed him to afford the $250 farm. Rivers named it Pinefield, and the property stayed in the family for four generations, his descendants never once missing their tax payments. But in 2001, the family was forced to sell. One of Rivers’s great-grandchildren, approaching retirement age and no longer living at Pinefield, wanted to sell her share, but because of Jim Crow–era discrimination, Rivers’s son was unable to leave a will with the courts before he died in 1923.
The family could not agree on whether to sell the property, and without a will divvying up the land into smaller lots or an LLC with individual shares, the family dispute triggered what’s called heirs’ property law. If multiple heirs can’t agree on whether to sell, South Carolina law stipulates that the entire property must be sold as a single intact unit. In 2001, the property sold for $910,000, and, after deducting lawyers’ fees, each of the eligible family members received about $27,000. Several Rivers households lived on the property, five in trailers, and all were barely making ends meet. Johnnie Rivers, the great-grandson of Hector, was born on Pinefield and lived there until the sheriff evicted the entire family. The developer who bought the land quickly subdivided it and built two luxury homes. Designed in the plantation style, they sold in 2024 for a combined $3.5 million.
The Rivers’s story was not unique. Between emancipation and 1920, Black families across the country had acquired 15 million acres of land; by 2000, they had lost 14 million of those acres. This land loss points to a much larger national problem: the racial wealth gap. The average Black household today has 15 cents in total wealth for every one dollar held by the average white household. Though Black Americans are better off than their ancestors, the racial wealth gap remains stubbornly high and has only widened in the past four decades. In 2022, the average Black family had $211,596 in total wealth, a 150 percent increase from 40 years ago. But the average white family had $1,361,806, an increase of 237 percent. As of 2023, 18 percent of Black Americans lived in poverty, more than twice the poverty rate for non-Hispanic white Americans.
In the past two decades, there’s been an explosion of economic research on the racial wealth gap, and historians are catching up. The Plunder of Black America: How the Racial Wealth Gap Was Made by Calvin Schermerhorn and Savings and Trust: The Rise and Betrayal of the Freedman’s Bank by Justene Hill Edwards offer superbly rendered accounts of how centuries of racist exploitation got us to today’s inequalities. But they both leave open a question about the deeper causes of these inequalities—to what extent is the gap a narrow function of racism, and to what extent has it resulted from the broader system of capitalism in which it’s embedded?
Tracing 400 years of fully legal racial exploitation—from slavery and post-emancipation segregation to redlining and predatory subprime mortgages—The Plunder of Black America deftly illustrates how nearly every attempt by Black families to advance economically and pass down wealth has been undermined by a thicket of racist laws and practices, whether by intent or effect. Following multiple generations of Black families, including the Rivers, Schermerhorn shows how racially exploitative policies were not confined to the South but followed Black families to every corner of the country.
The story inevitably begins with slavery. One of Schermerhorn’s central characters is Morris, an enslaved man owned by George Washington. Washington acquired Morris in 1759 when he married Martha Custis, who, like Washington, was born into one of Virginia’s wealthiest slaveholding families. Morris was 30 and already a skilled carpenter, but Washington forced him to work under a new white overseer, Turner Crump, 10 years his junior. Nevertheless, Morris performed his duties diligently, and when Washington offered to promote Morris to a paid, though still enslaved, overseer position, it was hard to refuse. Though he would have to wield a whip over his fellow enslaved workers, it would enable him to move to the plantation where his enslaved wife, Hannah, lived. In effect, Washington made brutalizing other enslaved people a requirement if Morris wanted to live with his own wife.
Morris took the position, and, here as elsewhere, Schermerhorn meticulously details how widely the economic paths of Black and white workers who did the same jobs diverged. Washington paid Morris £2 10s his second year on the job, about one-tenth the salary of his white overseers. Moreover, Washington often supplemented the annual salary he paid his white overseers with shares of each year’s crop, but he did not do the same for his enslaved Black overseers. Crump received a £30 annual salary in 1762, plus his one-sixth share of the £100 in profit earned from work done by his enslaved underlings. At that rate, Crump was able to quit his job in just a few years, purchase slaves and land, and start his own carpentry business in what became Kentucky.
By contrast, Morris died enslaved at 66 with no money to pass on to his family. His labor, meanwhile, produced immense wealth not just for Washington, but for all the white heirs who inherited his fortune. Because slaveholders used enslaved people as collateral to access credit, Morris was also a “financial draft animal” for Washington, allowing him to buy more land and slaves with money he did not have on hand. All this wealth went to Washington’s descendants (his nieces and nephews, and Martha’s family, since he had no children). As for Morris’s wife, Hannah—she died broke.
Black Americans emerged from slavery with almost zero wealth, and Schermerhorn vividly captures how tenuous the grip on wealth was for those few Black families who managed to acquire some. Near the end of the Civil War, the Union Army confiscated 400,000 acres of land from Confederate slaveholders in South Carolina, broke it up into 40-acre parcels, and granted it to escaped slaves. But in less than a year, President Andrew Johnson revoked the order, and hundreds of Black families lost their “forty acres and a mule.” By contrast, Congress passed the Homestead Act in 1862, which along with its successors seized 270 million acres of Western land from Native Americans, divided it into 160-acre tracts, and offered it to any white family willing to farm it. By 1934, 1.5 million families, nearly all white, had acquired farms through the program, none of it ever taken away.
For Black families who escaped the South, the story was not much different. Harriet Goings moved to Grand Rapids, Michigan, in 1873, when she was in her mid-twenties. She was born free to self-emancipated Black parents who escaped to Canada before the Civil War. Though the city was less than 1 percent Black, it was becoming a hub for furniture manufacturing and attracting droves of American job seekers. Harriet took a job as a hairstylist, and even though few white companies hired Black men, Harriet’s husband, Jack Adams, a refugee from South Carolina, established a successful masonry business in the city. Harriet and Jack were the first in a long line of ancestors able to pass down wealth to their children. They gave $9,500 to their daughter Sarah, who in 1923 bought a modest home with her husband in an all-white neighborhood.
It did not take long for things to turn south. White families nationwide did everything they could to keep Black families out of their neighborhoods. In the 1930s, “pioneering” Black families like Sarah Adams’s were typically charged 28 percent more than white families for homes in urban white neighborhoods. The Federal Housing Act of 1934 made matters worse, as an FHA manual told underwriters that, for a neighborhood to “retain stability,” it should be “occupied by the same social and racial classes.” Real estate firms created maps that outlined in red neighborhoods that were becoming predominantly Black, discouraging banks from lending in those communities. Homes like Sarah Adams’s plummeted in value. In 1936, her home was appraised at $2,200, roughly one-third of its value six years earlier; by 2000, the neighborhood’s home values had still not recovered.
Legislation aimed at eradicating racial and economic discrimination crested in the 1960s, but the greatest economic advantages went to white Americans. The white poverty rate dropped at twice the rate of the Black poverty rate amid Lyndon B. Johnson’s war on poverty. The 1968 Fair Housing Act outlawed redlining, but the real estate industry substituted racial exclusion with “predatory inclusion,” Schermerhorn writes, in a nod to historian Keeanga-Yamahtta Taylor. The new law guaranteed mortgages to low-income buyers and required little down payment, but real estate brokers steered Black participants into dilapidated homes in the poorest Black neighborhoods. When these same neighborhoods were targeted for urban renewal, the value of homes still standing nose-dived, destroying what little equity Black mortgage holders gained.
A similar practice emerged at the turn of this century. Banks disproportionately steered Black and Latino homebuyers into subprime mortgages, even when they qualified for better loans. When the housing bubble burst in 2008, hundreds of thousands of Black families lost their homes, unable to pass on their most significant financial asset to their children. They were also unable to help their children gain access to credit. Most Black twentysomethings in majority-Black neighborhoods are designated “subprime,” in part because, like many young adults, they rely on their parents to co-sign on a car loan or credit card agreement. A parent’s lower credit scores are in turn factored into their own.
Where Schermerhorn goes wide, Edwards goes deep. Rather than focus on centuries of racial exploitation, Savings and Trust focuses on one particularly galling episode: the 1874 collapse of the Freedman’s Bank, created for freed Black Americans in the last days of the Civil War. The bank’s 61,000 active depositors immediately lost access to $3 million, or $78 million in today’s dollars. It took almost four decades to claw back some of that money, but by 1909 there was still $1.2 million outstanding ($40 million in today’s money); it has never been recovered.
The bank’s collapse contributed to the racial wealth gap not merely by immediately wiping out an average of 80 percent of each depositor’s savings. As importantly, Edwards argues, the bank’s failure cast a long shadow of distrust toward financial institutions among many Black Americans. “African Americans,” she writes, “lost what little confidence they had in the increasingly speculative nature of traditional finance” and “came to believe that bankers were voracious and immoral, willing to dupe anyone foolhardy enough to entrust them with their money.” It should come as no surprise that Black households rely far less on banks than white households to this day.
The Freedman’s Savings and Trust Company, the bank’s official name, was founded with good intentions. In the waning days of the Civil War, Union Army generals realized that Black soldiers had no place to keep their money. They were stuffing it under their beds and in the backs of wagons. In August 1864, the Army created a savings bank in Beaufort, South Carolina, for Black soldiers, and when the Connecticut-born abolitionist and minister John Alvord, who was white, visited the bank, he returned to New York “full of the idea,” he wrote, that a savings bank would benefit all freedpeople. He rounded up sympathetic bankers in New York and lobbied Congress to charter the Freedman’s Bank, one of several Reconstruction projects meant to fully integrate freedpeople into American life.
Signed into law by President Lincoln on March 3,1865, the Freedman’s Bank Act created the bank and imposed strict requirements on how it could invest depositors’ money. It was meant to be a savings bank, a kind of “nonprofit,” Edwards writes. Like all banks, savings banks attracted customers by promising depositors modest interest payments. But unlike commercial banks, savings banks were supposed to invest in conservative, low-yield assets, like government bonds. What they were not supposed to do, and what the original charter tried to prevent the Freedman’s Bank from doing, was invest in speculative commercial assets, like corporate stocks or railroad bonds. It was simply too risky.
An early sign of trouble was that Alvord, the bank’s main founder, had no financial acumen. Nor did he invite a single Black person to sit on the bank’s board of trustees. Instead, he relied on Wall Street associates (he went to Yale) to make the bank’s financial decisions. Only after two years of sluggish growth did he realize that just a couple of Black trustees might help gain the confidence of Black Americans. Even then, the overwhelmingly white managers ignored them. “They were willing to accept Black people’s money,” Edwards writes, “but not the idea of Black people being responsible for handling the bank’s deposits.”
Nonetheless, as branches kept opening, more and more Black people put their meager earnings in the bank. Promotional pamphlets repeatedly assured them that the “Government of the United States has made this bank perfectly safe,” and that there would be “no speculation” and “no risk in this Bank.” As deposits grew, however, the bank’s trustees were unable to offer depositors the 5 percent interest they had promised.
To meet those interest rates, Alvord brought on a financial titan of the Gilded Age—Henry Cooke—who, along with his more famous brother, Jay, was one of the wealthiest financiers in America. He also roped in D.L. Eaton, a major developer in Washington, D.C. Cooke and Eaton began making loans that directly violated the bank’s first charter. They stood to gain personally from many of them, too. Eaton took out loans for himself and received a large kickback for loans he gave to a major Washington, D.C., contractor. Cooke, among several other self-serving deals, invested $50,000 in bonds from the Northern Pacific Railroad, in which his brother’s company was the largest shareholder. In effect, Cooke was using Black people’s money to fund a railroad company from which he stood to make a large profit.
After Congress authorized the Freedman’s Bank to make commercial loans in 1870, the overwhelming majority—80 percent—went to white borrowers with close ties to the trustees. All of this was exposed when Jay Cooke & Company went bankrupt. By the fall of 1873, the Cooke brothers were unable to make the interest payments on the railroad bonds they sold to millions of investors through their own investment bank. That forced them to shutter their bank on September 18, 1873, triggering a nationwide financial panic that turned into a five-year depression. Black depositors, like countless other depositors across the country, ran to their local bank to get their deposits out.
In a last-ditch effort to restore confidence in the Freedman’s Bank, Alvord stepped down as president on March 14, 1874, naming Frederick Douglass, the most famous Black abolitionist in America, as his replacement. Yet as Douglass himself later acknowledged, “he was completely unprepared,” Edwards writes. Like Alvord, he knew little about finance, but wanted to prove to the country that Black people were responsible citizens. He issued several public statements plainly acknowledging the bank’s problems, but he promised that, under his leadership and with more Black trustees, it would no longer invest in “wild and visionary schemes.”
But it was too late. By July 1874, the bank was forced to close. It had $3.5 million in outstanding loans, far more than the $3 million that Black people had collectively deposited in active accounts. Of those outstanding loans, the vast majority were given to wealthy white borrowers. Ninety-five percent of the money was unpaid. “White borrowers made the strategic decision not to fulfill their financial obligations to the bank and to its African American patrons,” Edwards writes. Or as Douglass wrote privately, the bank had become “the Black man’s cow, but the White man’s milk.”
The legacy of the bank’s failure, Edwards concludes, was not only in seeding Black distrust of banks. Perhaps more importantly, Southern white Democrats used the bank’s failure to discredit the entire Reconstruction experiment in interracial democracy, and deepen the growing economic divide between ordinary Americans and a burgeoning industrial-capitalist elite. In 1876, the Democrat-controlled House ordered a public investigation to shame the bank’s anti-slavery Republican creators. The Freedman’s Bank was meant to embody the idea that “capitalism and democracy” went hand in hand. By encouraging Black people to work hard and save money, its success would prove that Black people could contribute equally to American society, fulfilling the promise of liberal democracy. When the bank imploded, conservative Democrats swept in and exploited its failure, helping to usher in a new era of racial apartheid and widespread economic inequality.
Savings and Trust relates this story expertly, but it’s sometimes hard to tell why the bank collapsed: Was it the white trustees’ racist practices and outright theft, or the risky nature of banking in a capitalist system? Before the bank closed, the trustees’ investments were resulting in even higher interest payments to depositors, at 6 percent, than what the bank’s original founders had promised. By that measure, the bank was doing well for its customers. Moreover, the institution’s demise, it seems, had less to do with the illegal loans than with the perfectly legal ones, however risky or unethical.
The depositors didn’t lose their money through theft, at least not in the literal sense; they lost it in a financial panic that forced more than 100 banks to close across the country, devastating working-class Americans of all racial backgrounds. Certainly, Black depositors were uniquely vulnerable because slavery left them with no assets to draw upon in an economic downturn, and because the bank’s paternalist trustees never asked for their consent, then shifted the blame onto Black leaders when the bank failed. But in the 1940s, W.E.B. Du Bois traced the bank’s downfall to a problem he saw as inherent to capitalism: “the sin of capitalism is secrecy,” he wrote, its profits made by “the deliberate concealing of the character, methods, and result of efforts to satisfy human wants.”
A greater focus on capitalism’s role in perpetuating racial inequality might also suggest ways to work toward closing the gap. Both books excel at showing how disproportionately Black wealth has suffered from both racist policy and financial shocks. But the emphasis on the economic divide between Black and white people can obscure the interests that working-class Black and white people share. In late-Colonial Virginia, over half of adult white men could not afford land, could not vote, and were forced to pay rent to a small cabal of elite slaveholders like Washington, who purchased tens of thousands of acres with money made off the backs of enslaved people. The exploitation of white people was closely linked to the exploitation of enslaved Black people.
There are countless other examples. The same exemptions for farm and agricultural workers built into the 1935 Social Security Act, with the intent of denying Black people benefits, ended up excluding far more working-class white people, even if at much lower rates. The same is true of the recent subprime mortgage fiasco. Making these connections is crucial, showing how important the broader struggle against economic inequality is to the fight to close the racial wealth gap.
Indeed, many of the reforms that would help close the racial gap—from baby bonds to a universal jobs guarantee, which are among several that Schermerhorn proposes—would benefit all working-class Americans, too. In our current era of racial backlash, framing them more broadly would make them less vulnerable to knee-jerk attacks from the right. In this sense, the Freedman’s Bank’s collapse offers a useful, if somber, lesson: Its liberal white founders trusted Wall Street bankers to lift Black Americans out of poverty. But when the financial system collapsed, white supremacists used the bank’s failure as an excuse to undo the modest racial gains of Reconstruction and unleash what became our first Gilded Age.
