Financial History Issue 130 (Summer 2019)

Shennette Garrett-Scott is associate pro- fessor of History and African American Studies at the University of Mississippi. Her newly released book, Banking on Freedom: Black Women in U.S. Finance Before the New Deal from Columbia University Press, is the first full-length history of finance capitalism that centers on Black women and the banking institu- tions and networks they built from the eve of the Civil War to the Great Depression. She is featured in the PBS documentary, BOSS: The Black Experience in Business. Follow her on Twitter at @EbonRebel. and laudable ideas; among which are: to live a Christian life; to serve his fel- lowmen; to acquire sufficient wealth to gratify all normal desires; [and] to cre- ate eventually an estate for later years which shall inure to the benefit of those most immediately dear to him. The prospectuses of both finance com- panies made explicit links between finan- cial and civil responsibilities and rights. The fact that neither the AIFC nor the NNFC traded its stock on an exchange represented a glaring barrier for Black investors and the companies seeking their dollars. The various stock exchanges barred Black businesses’ participation. Thus, the AIFC and NNFC relied heavily on direct marketing to consumers and on personal and professional networks. To put the privilege and right in reach of their potential investors, the firms allowed buy- ing on the margins like most other finan- cial institutions in the period. Borrowers purchased stocks with borrowed money and on borrowed time. Even if subscribers fulfilled their stock subscriptions, there was no guarantee that they would ever see the promised windfalls. Any investment represented a risk for loss. The NNFC, however, reck- lessly dismissed the financial risks. Its prospectus read, “There has never been a better opportunity or a better reason offered to members of the race for invest- ment. Every safeguard has been thrown around the organization to protect and conserve the funds and insure the safety of the investment.” The NNFC was hardly alone in promising great riches for a small investment and limited risk. It joined other “blue-sky promoters” who endorsed all kinds of money-making schemes. The promise of a commercial emancipation increased the appeal of stock investment but downplayed the associated risks of any speculation. Gambling on the race was no gamble at all, promoters enthused, but rather an informed, rational and self- less decision. Charged racial appeals com- bined with the practice of buying on the margins reflected the reckless overconfi- dence that made the 1920s roar. Mismanagement and the inability to raise adequate capital spelled the demise of the AIFC in 1925. The NNFC followed closely behind. Stock subscriptions dried Drawing of the officers of the National Negro Business League (NNBL). Formed in 1900 by Booker T. Washington, the NNBL was the largest association of Black businesspeople and professionals in the country. up, and stockholders demanded not just dividends, but a return of their capital investment. A 1927 financial statement showed assets of a little more than $4,100 cash on hand, three mortgage bonds total- ing nearly $10,000, a bond for the Vir- ginia Theological Seminary and College in Richmond (present-day Virginia Union University) and a few stocks in other Black businesses. By 1928, the NNFC ceased any pretense of operation. The Allied Industrial Finance Corpo- ration and the National Negro Finance Corporation failed to effect a commercial emancipation for the race. Rhetoric about manhood and citizenship resonated with Black investors, who invested for complex reasons. They were not dupes who fell for questionable schemes, but rather calculat- ing and strategic economic actors trying to bend capitalism to their needs. Both ventures failed to raise sufficient capital to fund their ambitious schemes, but they should not be judged complete failures. They reveal the efforts of the Black finan- cial industry to boldly tackle the limita- tions of racial segregation and the contin- ued commitment to communal-focused approaches to economic development and wealth building. This article has been excerpted from Bank- ing on Freedom: Black Women in U.S. Finance Before the New Deal by Shennette Garrett-Scott; Copyright © 2019 Shennette Garrett-Scott. Used by arrangement with the publisher. All rights reserved. A Note on Sources Find news stories about the AIFC and NNFC in early- to mid-1920’s newspapers, especially Black newspapers including the Pittsburgh Courier, Chicago Defender, New York Age, the UNIA’s Negro World and the IOSL’s St. Luke Herald. Some digitized AIFC papers held by the Amherst Libraries, University of Mas- sachusetts are available online from Digital Commonwealth: Massachusetts Collections Online at https://www.digitalcommonwealth .org. A few remnants of the NNFC’s papers can be found in the C.C. Spaulding Papers in the Rubenstein Library, Duke University, and in the Albon L. Holsey Papers and the Robert R. Moton Papers in Special Collections, Tuskegee University. On the NNBL’s history, see John H. Burrows, The Necessity of Myth: A History of the National Negro Business League, 1900- 1945 (Hickory Hill Press, 1988) and Shennette Monique Garrett, “‘He Ran His Business like a White Man’: Race, Entrepreneurship, and the Early National Negro Business League in the New South” (M.A. Thesis, University of Texas at Austin, 2006). For sources on Marcus Garvey and the UNIA, see the 13-volume The Marcus Garvey and Universal Negro Improve- ment Association Papers, edited by Robert A. Hill and published by Duke University Press and Marcus Garvey: Life and Lessons, a Centennial Companion to the Marcus Garvey and Universal Negro Improvement Association Papers, edited by Robert A. Hill and Barbara Bair (University of California Press, 1987). www.MoAF.org | Summer 2019 | FINANCIAL HISTORY 23

Financial History Issue 130 (Summer 2019) | Page 25