A seminar by Dr Claire Celerier from the University of Toronto
Title: The Impact of Financial Inclusion on Minorities: Evidence from the Freedman’s Savings Bank
Abstract: Can access to formal financial institutions have adverse effects on minorities? This paper investigates this question through the lens of the Freedman’s Savings Bank, established in 1865 after the Civil War to collect deposits from recently freed African Americans. We show that the bank advertised itself extensively, relying on false promises and exhortations unlike any other bank at this time. The advertising intensified when the bank started offering fraudulent loans, leading to a transfer of funds from the freedmen to white businessmen. The failure of the Freedman’s Savings Bank induced depositor losses that have rarely been matched in the banking history of the United States. Our findings suggest that formal financial institutions might amplify discrimination in some contexts.
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