The Color of Money

by Mehrsa Baradaran

  The most successful was the North Carolina Mutual and Provident Association, later called the North Carolina Mutual Life Insurance Company. It was affiliated with the Mechanics and Farmers Bank. From the 1920s until the 1970s, the North Carolina Mutual Life Insurance Company was “the largest black-controlled business institution in the world."89 Charles Spaulding, the founder of the insurance company and its affiliated bank, grew both organizations in Durham.

  If black leaders envisioned a self-sustaining black economy, it came close in only two places: Durham, North Carolina, and Tulsa, Oklahoma. The fate of these two black business sectors reveals the environment in which black business operated. Durham held the most successful enclave of black business, banking, and insurance— it was called the “Negro Wall Street.” The black district in Durham was called “Hayti” and was created as an independent black community just after the Civil War. Businesses grew immediately to support the black population, and they named the black business core after Haiti, the first independent black republic. At the center of Durham’s Hayti stood two prominent black churches, St. Joseph’s AME and the White Rock Baptist Church, a black college, the North Carolina Central University, and the Mechanics and Farmers bank and insurance company.90

  In 1928, a Richmond newspaper writer urged black businessmen in need of inspiration to skip Europe and to go to Durham instead. “Go to Durham and see the industrious Negro at his best. Go to Durham and see the cooperative spirit among Negroes at its best. Go to Durham and see Negro business with an aggregate capital of millions. Go to Durham and see twenty-two Negro men whose honesty and business sagacity are making modern history.” When Booker T. Washington, on a tour of North Carolina, expressed enthusiasm for business development, the black leaders escorting him reportedly responded, “You haven’t seen anything yet. Wait ’til you get to Durham.” Du Bois noted enthusiastically alter visiting the city, “there is in this city a group of five thousand or more colored people whose social and economic development is perhaps more striking than that of any similar group in the nation.” The city had less of the creative life or flair of Harlem or South Chicago, but its business leaders were presented as men who “have mastered the technique of modern business and acquired the spirit of modern enterprise.”91

  Founded in 1907, the Mechanics and Farmers Bank was a pillar institution in Durham. Its founders were nine prominent businessmen who intended to start a small building and loan with $10,000 of capital, but ultimately created a bank that would operate for a century as one of the most successful black banks in the country.92 The bank served as the only source of financing for more than 500 black farmers and small borrowers during the 1920s, providing $200,000 in loans. The bank’s policy stated its conservative lending philosophy: “no large loans . . . to a few profiteers, but rather conservative sums to needy farmers and laborers.”93 The Mechanics and Farmers Bank even had a second branch in Raleigh, North Carolina, making it the only black bank to have two branches. Only 119 banks nationwide, or less than 1 percent of all banks at the time, had a branch opera-tion.94 Having a second branch likely contributed to the bank’s stability over time. In 1929, robbers held up the Raleigh branch of the bank and stole a considerable amount of the bank’s money.95 The bank’s president, Charles Spaulding, immediately transferred thousands of dollars in cash from the Durham branch to ward off a run induced by the crime. After Franklin Roosevelt’s mandated “bank holiday" in 1933, Mechanics and Farmers opened without any restrictions and met all of its obligations.

  Black business success in Durham owed much to the general prosperity of the city. Durham became known as “the Bright Tobacco Belt," and flourished due to its thriving tobacco enterprises. There were twelve companies manufacturing tobacco there by 1872, and these businesses, such as the Duke factory, began to hire black workers at the turn of the century. Textile factories also developed in Durham, and they too hired black workers. In short, widespread prosperity engendered a culture of inclusion; after all, there was plenty of work for all capable citizens of the town. The 1930 census revealed that 10,000 blacks had gainful employment in Durham (18,000 blacks lived in the city)—a remarkable number given the large-scale devastation that spread across the South during the Great Depression.96 Historian William K. Boyd noted that in Durham, “live and let live has characterized the attitude of the leading white men toward the colored race."97 A Durham newspaper, the Morning Herald, spoke of the city’s “hands-off" policy in criticizing the governor’s hostility to black businesses in the state: “If the Negro is going down, for God’s sake let it be because of his own fault, and not because of our pushing him."98 From the headquarters of the Mechanics and Farmers Bank, the mayor of Durham addressed a group of black bankers, saying: “You visitors go back home and tell your people that the whites and the blacks here are working shoulder to shoulder."99

  The well-being of a community and the economic health of its banks are usually correlated, and Durham’s black financial sector reflected general business health. Indeed, Du Bois noted that Durham differed from other black enclaves in that blacks had developed “five manufacturing establishments which turned out mattresses, hosiery, brick, iron articles, and dressed lumber. Beyond this, the colored people have a building and loan association, a real estate company, a bank, and three industrial insurance companies."100 These industries were successful in large part because they could and did attract a white clientele. Thus, black businesses in Durham did not have to take an “economic detour," but could compete in a larger market. A black hosiery mill, the Durham Textile Mill, even hired white agents. This firm became “the first large-scale black enterprise to hire whites, and the first firm owned by Afro-Americans where whites earned most of their income." As one commentator said of the firm’s products, “so far as I have heard, there has been no man to raise the color question when he put on a pair of socks made by Negroes."101 Local black businesses continued to flourish alongside the insurance company and the bank, lending support to a growing black middle class. Though certainly some of these accounts of racial harmony are exaggerated, there was widespread agreement that relations between white and black businesses in Durham were much better than anywhere else in the country, especially considering how strong the black business sector was allowed to get. Durham continued to be a vibrant business center until 1958, when the state of North Carolina built a freeway through the heart of Hayti, bifurcating the area.

  If the successful parallel black economy in Durham stood as a beacon for the black community, what happened in Tulsa sounded an ominous warning. After the land that now makes up Tulsa was acquired through the Louisiana Purchase of 1803, Tulsa’s first black settlers arrived as slaves of white and Native American homesteaders. More free blacks migrated there after the Civil War. By 1900, there were 18,719 black residents in the state of Oklahoma, and Tulsa with its post office and railroad became the business hub of the state. Business did not take off in Tulsa until oil was discovered nearby in 1905, but then it boomed. By 1910, blacks made up 10 percent of the population in Tulsa, and in the face of racial hostility, they developed their own financial district in the Greenwood section of the city. Soon black businesses were flourishing and black Tulsans began to accumulate wealth. When one of Booker T. Washington’s National Negro Business League agents visited Tulsa, he called it “a regular Monte Carlo." Others in the state dubbed it another “Negro Wall Street."102

  By 1921, there were some 860 stores and homes in Greenwood. The black community included a number of men who had acquired considerable wealth due to oil speculation. It may have been this wealth in the hands of prominent black citizens that precipitated the calamitous events of May 1921, or—as historian Scott Ellsworth put it, “death in a promised land.”103 It has been a difficult endeavor to piece together the events and circumstances that led to the riotous destruction of the Greenwood district because of a paucity of press coverage at the time and the likely desire of some participants to cover up the details. Though racial
hostility was on a low simmer in the town due to perceived inequalities of oil windfalls, the spark that lit the violence was the claim by a young woman that a black man had attacked her in an elevator. The man denied any culpability, but he was arrested and held in a town prison to await trial.104

  After a white lynch mob gathered outside of the prison, the black community in Tulsa responded with a show of force. The black citizens of Tulsa, having aligned with Du Bois and established an NAACP branch in 1917, were not passive with respect to race relations. A group of thirty armed black men came to defend the prisoner, which caused the white mob to swell to more than 2,000. Apparently, a white man tried to disarm a black war veteran who would not let go of his weapon and fired a shot into the air around 9:30 p.m . Then a few more shots rang out, and the blacks retreated into the Greenwood district. Throughout the night, whites began to loot the stores in Greenwood. The police were called and a race riot erupted. According to a leading account, the white mob began to “invade” Greenwood in order to “burn the nigger out.” The white mob set the city ablaze. By the time the destruction was over, 18,000 homes had been burned, 304 homes had been looted, 300 people—mostly black—had died with many more injured, and $2 to $3 million in property damage had occurred, including the lavishly built Mount Zion church, the heart of black Greenwood.105

  The National Guard arrived the next day and set up temporary camps to house the more than 6,000 displaced black residents. Two days after the riot, martial law was declared and the troops marched the displaced blacks through town with their hands above their heads. At the camps, they were given identification tags that they were forced to display prominently while moving through the city. The tags had a place where their white employers had to sign so that the blacks could return to work. Many black Tulsans fled to other parts of the country as a result of the riot. An NAACP office in New

  York explained that “refugees have come to this office in New York City . . . possessing little or nothing except the clothes they were wearing."106

  Upon reviewing the available evidence, the Tulsa grand jury blamed the riot on the unfortunate elevator encounter, although they also noted “that there existed indirect causes more vital to the public interest than the direct cause. Among them were . . . agitation among the negroes of social equality and the laxity of law enforcement."107

  Historians place the blame on white resentment at the success of black businesses in Tulsa. When blacks in Tulsa explained the riot, they did not focus on the elevator incident or the alleged assault. Instead, they claimed that they had been warned through printed cards placed in their homes months earlier to leave the state—a warning that many blacks interpreted as being linked to their economic success. A white newspaper in a neighboring town even published a similar warning. In a 1921 editorial, entitled “Blood and Oil," the writer linked the viol ence directly to economic pressures faced by whites and their use of black success as a scapegoat: “Every increase in the price of oil made the strife more bitter. With the depression of the labor market, white employers of labor at last thought they had the whip hand and ordered Negro employees to sell out or quit. Even housewives refused to continue to keep colored women in their employ. Petty persecutions, the refugees say, were common, though there had been no physical violence during the last few years."108

  By the time of the alleged elevator incident, racial tensions had reached the boiling point as blacks refused to heed threats that they should leave. Sometimes the hostility was directly apparent, as explained by one account from Tulsa in 1921:

  [T]he Negro in Oklahoma has shared in the sudden prosperity that has come to many of his white brothers, and there are some colored men there who are wealthy. This fact has caused a bitter resentment on the part of the lower order of whites, who feel that these colored men, members of an “inferior race," are exceedingly presumptuous in achieving greater economic prosperity than they who are members of a divinely ordered superior race. . . .

  In one case where a colored man owned and operated a printing plant with $25,000 worth of printing machinery in it, the leader of the mob that set fire to and destroyed the plant was a Linotype operator employed for years by the colored owner at $48 per week.109

  Throughout American history, there have been several examples of majority groups reacting violently when their economic power has been threatened—a theory of host group dominance that holds that the host group, or majority group, should benefit most if any money is to be made. Those groups that are not dominant “host groups" must occupy positions that the dominant group neglects so as not to compete with them for major business profits. Lower-status groups can compete for scraps or for middle positions, but must not occupy the most profitable rungs of the business sector. For example, the state of California passed laws against Japanese businessmen after they became economically successful. Land rights held by blacks during Reconstruction were another example. Native Americans were likewise expelled from their land when oil was discovered on it. What happened in Tulsa was a vivid example of the theory of host group dominance—the black business district was simply too successful to survive.110

  Tulsa was not the only black district targeted by organized violence. In Wilmington, North Carolina, according to Leon Prather, white business classes came to resent the “black entrepreneurs, located conspicuously downtown [that] deprived white businessmen of legitimate sources of income to which they thought they were entitled." Wilmington was also destroyed by a riot, and “immediately after the massacres, white businesses moved in and filled the economic gaps left by the flight of the blacks." The violence permanently derailed black business efforts and hard-won racial progress. According to Prather, “when the turbulence receded the integrated neighborhoods had disappeared."111 The violence in Tulsa also had a lasting effect, including the end of the Greenwood business district, the black Wall Street.112

  It is unclear why Durham escaped the fate of Tulsa, Wilmington, and other cities that became targets of white resentment.113 Most likely, it was because of the overall prosperity of the city and the complacency of the “host race," whose members did not feel threatened by black advancement. The black leaders of Durham were also careful to mute their wealth. For example, the North Carolina Mutual Company, when constructing its high-rise building, made sure it was not as tall as any building in the white community.114 The black community in Tulsa did not show such caution. In Tulsa, blacks took the center of town for their enterprise, owned guns, and built large, ornate churches and mansions. Coupled with inequalities caused by a fluctuating oil market, the result was a violent backlash that destroyed a thriving black community and likely sent a message to other such aspirants.115

  At the turn of the century, it was increasingly clear that blacks would have to rely on their own communities to advance economically. It was also clear that racial hostility would meet their efforts at self-determination every step of the way. On the national stage, even Republicans had stepped away from pursuing racial equality or fighting segregation for fear that they would not be reelected with such a platform because of the South’s adamant opposition. President Theodore Roosevelt learned firsthand the racial animosity of the South when he invited Booker T. Washington to dine at the White House in 1901. The southern reaction was severe, immediate, and ugly. Senator Tillman of South Carolina quipped, “Now that Roosevelt has eaten with that nigger Washington, we shall have to kill a thousand niggers to get them back to their places.” A Memphis newspaper called the dinner invitation “the most damnable outrage which has been perpetrated by any citizen of the United States.” Governor Mc-Sweeney of South Carolina revealed the fear at the root of the South’s problem with the visit: “It is simply a question of whether those who are invited to dine are fit to marry the sisters and daughters of their hosts.” Southern lawmakers quipped that the inevitable next step was that Washington’s daughter would marry Roosevelt’s son. Mississippi politician James K. Vardaman said that the White House was “so saturat
ed with the odor of nigger that the rats have taken refuge in the stable.”116

  In 1903, President Roosevelt addressed a crowd of former black Union soldiers at the Lincoln Memorial and exclaimed, “A man who is good enough to shed his blood for his country is good enough to be given a square deal afterward.”117 His words and his vague promise of a “square deal” created such an intense backlash that the president never followed up on his promise. Roosevelt could not have been more wrong when he declared in 1901, “I am confident the South is changing.”118

  What was changing in the South was their appraisal of the past. The Civil War was no longer an embarrassing defeat over slavery, but an honorable and patriotic war fought by the South for their right to autonomy and freedom. General Robert E. Lee was canonized and the Southern rebel became a national hero. The institution of slavery was whitewashed, as the slave plantation took on a romantic hue as an idyllic place where master and slave lived together in harmony. Slavery’s cruel history was muted in the name of national unity, and the victims, the black population, had to be recast in the national psyche in order to achieve peace about the past. For northern and southern whites to reunite, they had to suppress the “race issue" that had previously divided them.