FHA guarantees fueled the creation of the robust consumer credit market, the guarantees were no longer needed, and the market tumbled forward on its own with capital from private finance companies and banks. The same mechanism of government guarantees and secondary market networks was used to propel the consumer credit industry, attract capital, reduce risk, and increase profits. Interest rates were also lower because the risk was being shared across the market instead of by an individual seller. If suburban life was created by FHA home loans, it was enhanced by consumer loans that bought life-enhancing luxuries like cars, appliances, and apparel. The consumer credit market shifted from the rigid and expensive installment lending model to the flexible and less expensive “revolving credit" enabled by the credit card. Credit card companies allowed borrowers to “revolve" their debt, or roll over their balances. Credit cards also gave borrowers flexibility and significantly expanded purchasing power because they could be used at any retailer.54
Most of these consumer loans went toward making purchases that made life easier and more enjoyable, but credit also provided a buffer to protect wealth and livelihood against the predictable tumults of life. Small loans gave families flexibility in dealing with unexpected costs or tragedies. For example, if wages fell short one month, a car broke down, or the breadwinner lost a job, a family could shift some expenses onto a revolving credit line and protect themselves from hardship or bankruptcy.
There were two groups that did not rely on consumer credit in postwar America: the very wealthy and the poor black population— the wealthy because they did not need it, and blacks who desperately did need it but were excluded from the credit card market. Credit card and finance companies avoided the ghetto due to both racism and its risk-prone economy. Blacks had to keep relying on expensive and extractive installment credit that assured instability and continued poverty.55 This was another instance in which the New Deal credit reforms created an abundant and low-cost credit market for whites and an extractive and inescapable debt trap for blacks.56
The black community was neither ignorant of the effects of the exclusionary Jim Crow credit market nor passive in the face of it. However, the obvious solution—providing their own mortgage loans—proved extremely difficult, as revealed by the struggles of black bankers and mortgage lenders. Black banks were created to offer mortgages to the black community and to fill the void created by government credit policy, but their exclusion from the federally subsidized mortgage markets made their mission much more difficult than that of any other bank operating at the time. Their stories highlight this dilemma as well as the complicated relationship between the bankers and the growing resistance movement. Some saw their role as an integral part of the budding civil rights movement, and others were caught in a conflict between black banking success and the black struggle for equality.
In 1950s Chicago, Dempsey J. Travis tried to provide mortgages to the segregated black belt as Binga had done before him. In his book An Autobiography of Black Chicago, Travis explained that there was a lot of demand for mortgage loans by black families, but banks would not lend to them. He refused to get involved in contract selling, which he said had a “slaveship stench." “Exploiting an economically and culturally disadvantaged people in their efforts to seek basic shelter is vile." Instead, he “starved for months" in the business rather than becoming “a bird dog" for the speculators as they plundered the black community.57
Travis lamented that the majority of black savings were in white institutions and protested the injustice: “they can’t just take Negro savings and not offer loan services in return."58 He would testify to the U.S. Commission on Civil Rights in 1959 that out of 234 savings and loans institutions in Cook County (Chicago), only twenty-one were willing to make loans to blacks at all, and only one bank was willing to grant mortgages to black families buying in white neighborhoods. Commercial banks and life insurance companies were even worse.59 Travis told a Wall Street Journal reporter that “Commercial banks, union pension funds and life insurance companies are scouting all over the country looking for sources of higher investment earnings, but they’re almost completely overlooking a market that is screaming to be discovered—mortgage loans on Negro housing.60
Knowing he could not rely on any help from the government and “lily-white" mortgage companies, Travis was determined to create his own mortgage bank, and so formed the Sivart Mortgage Corporation (“Travis" spelled backward) in 1953. His ambitious aim was to raise “the ‘cotton curtain’ between the black community and the
FHA” and counteract the “mortgage bottleneck.”61 Travis explained that the magnitude of the discrimination and “the oppressive effect of the land contract on the black community” convinced him “that the only way a black man could survive in real estate and serve his people was by creating a source within the black community to use some of the community’s own wealth.” He hoped to harness the “85 percent” of black savings held in white institutions.62
Before he could make FHA-approved loans in Chicago, he had to be accredited by the FHA. His application was denied seven times before finally being approved in 1961. This was not uncommon. Edward Irons, founding dean of Howard University’s business school suggested that part of the reason that so few black banks formed during this era was that regulators “systematically discouraged [black banks] from seeking charters.”63 Travis’s next setback was immediately apparent: even with the FHA approval, banks would not provide him with capital for his business. He was humiliated when a bank executive at Exchange National offered him $15,000 after he had requested a $500,000 line of credit. Travis noted that these banks offered very generous loans to the white realtors in the area. But the bank must have felt that their small loan was an act of benevolence, writing to Travis, “May I also say that it is a pleasure to do business with people like yourself.”64 He rejected the loan and kept his selfrespect. When he asked the Drexel National Bank, the bank that his family had used since 1900, he was refused once again. But he said that the rejection hurt less than “the condescending tone of [the chairman’s] voice when he made the credit offer.” He recounted that it “offended me so deeply that I stormed out of the bank empty-handed, never to return except to close all my accounts.” These refusals were inexcusable to Travis because the loans would have been guaranteed through the FHA, which made them effectively risk free. “The cost of maintaining black pride and personal dignity,” wrote Travis, “can be extremely high.” Finally, through the intervention of a personal friend, Travis secured a $200,000 line of credit from a local immigrant Polish bank so he could start his mortgage business.65
Travis, like many other black businessmen, saw his role as both a businessman and a civil rights leader. “To this day, I cannot differentiate between economic problems and civil rights problems—they are irrevocably saddled with each other, more so in this country than anywhere else on planet earth.” He believed that social and political rights would be achieved through business success, explaining, “black-controlled businesses could bring more and more blacks into mainstream America." Travis observed the rise and fall of Jesse Binga, Anthony Overton, and cosmetics magnate Charles Murray, and considered these men personal heroes. “My attitude toward material success would always be bound up with my feelings about the situation of blacks in America."66
Though Travis’s outlook on business success was the modern embodiment of Booker T. Washington’s vision, his source of inspiration was Marcus Garvey. He explained that his desire for success came from hearing his family members talking about Garvey’s black power movement. He wanted to build a business that countered the white exploitation of the black community. The solution was to harness black capital and put it to use to build the community from within. He therefore opposed efforts to integrate the black community fully into the white one. He lamented that “the desire to integrate and to bury the black identity was very strong in the 1950s." He complained that the National Negro Business League considered deleting the wo
rd “Negro" from its title in 1954, and that the Chicago Negro Chamber of Commerce changed its name to the Cosmopolitan Chamber of Commerce.67
Travis was able to sustain his mortgage business, but he became convinced that without government help, blacks would never achieve equality. At the tail end of the civil rights era, Dempsey Travis proposed a plan he called “The 1970 Homestead Act," a new credit guarantee program targeted at black homeownership. When white Americans had been given land through the various Homestead Acts, blacks were left out, he reasoned. Nor had blacks been able to own land in America without fear of “being dispossessed by angry white individuals or mob[s]." He was speaking from personal experience as a realtor and longtime resident of Chicago.68 The proposal went nowhere.
In Harlem, too, there was a movement to harness black money to build the community. The most prominent black-owned banks formed during this period, and the first in Harlem was the Carver Federal Savings Bank, founded in 1948. A group of fourteen community leaders and businessmen formed the bank in order to help servicemen returning from the war, as well as “black working people [who] were effectively barred elsewhere from home loan financing."69
The bank raised $225,000 in investment capital from hundreds of Harlem residents. The bank obtained a federal bank charter alter the state denied it one. Carver Bank soon became the largest black-owned financial institution in the country, having amassed more than $24.4 million in assets by 1963.70
The Reverend Milton Moran Weston II, the bank’s president, was born in Tarboro, North Carolina, in 1910, the son and grandson of Episcopal priests. He left the South for New York, stating, “I knew I’d never live to be a man in North Carolina, so I left."71 In 1928, he enrolled in Columbia University and graduated as one of only five black graduates. Moran led one of Harlem’s most prominent churches, St. Philip’s Episcopal Church, which was created in 1818 when blacks were told they could not attend Trinity Church on Wall Street.
Weston believed that his experience as an Episcopal priest prepared him for banking. He told Ebony magazine in 1969 that “being in banking is consistent with the involvement of my parish in the life of my community. . . . A banker-priest is really no more strange than an educator-priest or a social worker-priest."72 Before becoming pastor, Moran had worked as a real estate broker. He noticed that white banks refused to lend to blacks even when they held substantial deposits at that bank, and he came to believe that these “white bank officers hadn’t understood that we were persons." Instead, they were relying on racist stereotypes in making lending decisions. “They had no understanding of the sense of responsibility of the hardworking [black] family that struggles to build itself, and grows up to acquire a piece of property."73 The Carver Bank was created to correct this injustice and help hardworking black families get mortgages. It was a bold move. The New York Times noted that before Carver opened as a storefront, only one black person was working above the rank of janitor in a New York bank.74
Moran, like many other black leaders, held many different leadership roles and moved seamlessly from one to another. He was a preacher, a civil rights advocate, a labor organizer, and a banker. He was active in civil rights demonstrations against lynching in the South and whites-only clubs in New York. He organized large civil rights rallies in Madison Square Garden and wrote a column called “Labor Forum" in the black Amsterdam News, in which he advocated for labor rights and collective action. His activism was done mostly out of the limelight. He was a quiet intellectual and told the New York
Times in a 1986 interview, “I cause things to happen. If I have a gift, it is to encourage people that they can do the impossible.”75
Moran was as significant a figure in the Harlem community as the more visible and outspoken Adam Clayton Powell Jr., who was pastor of the Abyssinian Baptist Church in Harlem before becoming a congressman. When Powell called for a boycott by schoolchildren to protest segregation, Moran publicly opposed him, arguing that they should prove their point by keeping children in the schools. Yet Powell and Moran worked together to promote Carver Bank. In 1955, Powell called for a boycott of the white Harlem savings banks that “practice ‘Jim Crow-ism’ and ‘economic lynching’ ” and urged his Abyssinian Baptist Church’s 15,000 congregants to withdraw their funds and place them either in the Carver bank or in the black-owned Tri-State bank in Memphis.76
Moran served the bank for nearly fifty years, finally retiring in 1997.77 And when he did retire, Moran and the other founders tried to choose community leaders instead of “businesspeople or bankers” as their replacements. These nonbankers were extremely risk-averse. In 1979 its president stated, “We are conservative. . . . We are not flamboyant or spectacular.”78 But this meant that the bank was not providing loans. In fact, the Times reported that they “made almost no loans, except to churches. Instead, like many other minority-owned banks, they simply accepted deposits and invested them in money market funds and mortgage securities.”79 As a federally chartered savings and loan association, Carver was statutorily required to invest a certain percentage of its loans in family dwellings, but it did so very cautiously.
In Birmingham, Alabama, A. G. Gaston opened the Citizens Federal Savings and Loan Association (CFS Bancshares) in 1957—the second black bank in Birmingham after the Penny Savings Bank had failed.80 Gaston’s sizable fortune had been built on a vertically integrated empire consisting of insurance, a funeral home, a hotel, and a black business college. He observed that black families were being denied residential mortgages, and he opened his bank so that he could fill that market need. He explained that it was very difficult to gain the trust of the black community as they were still reeling from the failure of the Penny Savings Bank in 1915, but he was able to use his reputation and support from the town clergy to boost the bank’s status.81
Martin Luther King deposited money in the bank and served on its advisory council. King was the most iconic, but certainly not the only black preacher who was also a civil rights leader and black bank booster. Supporting black enterprise had been one of King’s consistent messages, repeated in over a decade of leadership. Coretta Scott King had worked as a teller at Atlanta’s black-owned Citizens Trust bank, and King had formed a relationship with the bank early on. After the breakthrough success of the 1956 Montgomery bus boycott, King was launched onto the national stage. He immediately wrote a formative article outlining his goals and a road map for the movement called “We Are Still Walking." King expressed his ambitious agenda, which he said extended “far beyond the desegregation of the buses," but was “a long-range constructive program." He listed six of the group’s top goals for the future, and the top two were to organize banks:
1. To establish the first bank in Montgomery to be owned and operated by Negroes. We have found that in the present situation many Negroes who are active in the protest have been unable to secure loans from the existing banks.
2. To organize a credit union. As a result of the protest, there is a strong desire among the Negroes to pool their money for great cooperative economic programs. We are anxious to demonstrate that cooperation rather than competition is the way to meet problems.82
His third goal had to do with voting. In 1958, in a monthly advice column in Ebony, King said that every black community should have black-owned credit unions, savings and loan associations, and finance companies, and he urged blacks to “pool their economic resources." Doing so would “lift the economic level of the Negro which would in turn give him greater purchasing power."83
Though the civil rights leader was an unhesitant supporter of black banks, the black bankers did not always see their interests as being aligned with the movement. When Birmingham became the site of the civil rights movement’s most monumental battles, Gaston the banker was at cross purposes with King the activist. Gaston, with Booker T. Washington’s picture hanging in a frame in his office, was called the “accommodator" (many called him an Uncle Tom) for opposing what he saw as the King coalition’s inflammatory tactics. He urg
ed cooperation with the white leaders, as he had always done, and negotiations to achieve their aims. He spoke out harshly against the use of schoolchildren in the nonviolent campaign, which some believe led to the movement’s most significant public victory. In his “Letter from Birmingham Jail," King was likely addressing Gaston when he answered his critics urging negotiations instead of sit-ins.84 He responded that this was exactly the aim of the civil rights movement.
According to his biographer, Gaston was committed to civil rights, but believed that the movement should focus on economic issues and poverty alleviation instead of pushing for rights.85 Gaston himself had been following Booker T. Washington’s “cast down your bucket" philosophy and had built his empire in Birmingham instead of moving north. He and his wife were actively involved in the Tuskegee Institute. Gaston’s own autobiography, which was inspired by Up from Slavery, was called Green Power, and in it he advocated hard work and wealth-building as the only means toward equal rights. Had the promise that “green power" would lead to equality come to pass for Gaston? Andrew Young recounted watching the millionaire getting lunch at a Birmingham establishment and having to get it at the back door like all the other black customers.86
Though Gaston was uncomfortable with King’s methods, he also provided financial aid to King’s coalition and offered a suite of his motel as the headquarters for King and the SCLC. The A. G. Gaston Motel was bombed in retaliation. Gaston also bailed Dr. King and Ralph Abernathy out of jail when the county set the bail at the unreasonable rate of $2,500 each. King did not want anyone to pay for his bail because he believed that remaining in jail would be better for the movement’s long-term aims. President Kennedy sought a de-escalation of the conflict and dispatched Robert Kennedy to persuade Gaston to pay for bail against the civil rights leaders’ wishes. Gaston did so, perhaps because he too was eager to avoid provoking the white community. King’s coalition brought the race conflict to a peak in Birmingham, and it threatened Gaston’s business success, which relied on the blessing of the town’s white leadership. As a businessman who had built an enterprise on Washington’s philosophy and an uncritical embrace of the segregated economy, his relationship to the civil rights movement was ambivalent. When Gaston’s Birmingham home was bombed in 1963 and the perpetrator was not found, Gaston was torn between casting the blame on the Klan or on the black power movement.87
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