The 61,000 people who had deposited $3 million (over $63 million in today’s dollars) into the system lost what they had when the bank closed in 1874 due to fraud, mismanagement and the panic of 1873. The bank also had an impressive structure, which cost $260,000 (over $5 million in today’s dollars) located across from the U.S. Treasury. That asset was also lost when the system went defunct.
Frederick Douglass was recruited to serve as President of the bank in 1874. Upon taking leadership of the institution, he ordered an audit which uncovered severe problems in the system. Members of the Board of Trustees had broken protocols and the banks charter by raiding the funds to invest in Wall Street schemes and their own personal business endeavors.
The Freedman’s Bank had become a beacon of hope for Blacks and other people of color who could not access mainstream financial institutions due to discriminatory behavior. When the Freedman’s Bank closed, people of color were relegated to high-cost financiers and other schemes in an effort to access credit for home and land purchases and other endeavors.