I Never Had It Made (21 page)

XVII

The Freedom Bank

A
side from my fund-raising efforts with the NAACP, the seven rewarding years I spent as vice-president of Chock Full O'Nuts taught me much of the inner workings of the world of finance. I became fascinated with the way big business was conducted, with the operation of the stock market and the power which exists in the board rooms of banks and corporations. Black people were coming to the point where they would be crying out in behalf of Black Power, but it was pathetic to realize how little we knew of money. The financial establishment of America was as much of a mystery to us as we were to the establishment. I recall that when I first joined Chock, after leaving baseball, my picture was used on the financial pages of the
New York
Times,
and a very knowledgeable newsman told me that it was the first time a black man's picture had been featured in that section.

During the post-baseball years, I became increasingly persuaded that there were two keys to the advancement of blacks in America—the ballot and the buck. If we organized our political and economic strength, we would have a much easier fight on our hands.

For some months, prior to 1964, Dunbar McLaurin, a businessman prominent in the Harlem community, had been trying to convince me that I should associate with him in his dream of creating a bank in the black community which would be owned and operated predominantly by black people. I knew McLaurin to be a brilliant man in the field of economics and finance.

At first I resisted McLaurin's suggestion that I become involved with his project. After all, what did I know about banking? But Rachel and I felt that my decision to join the business world put me into the center of the black business community and I had to go all the way. Also, McLaurin was a very persuasive man. He convinced me that there was a great need for the kind of bank he envisioned if for no other reason than to set up a competition with the white-owned and -operated banks. The white-owned banks were not doing very much to fulfill the needs of Harlem people. By and large, in the banking business, blacks were considered bad credit risks, not only because of their median low income as compared to that of whites, but because of the stereotype which had existed for many years that they were not to be trusted.

George W. Goodman, a Harlem leader, was quoted in a newspaper interview in the early sixties as saying that he remembered listening to a white bank president in Connecticut who said, in his presence, that “he had never known a Negro in whom he had confidence for more than a $300 loan.”

This was an attitude that was widespread in the financial community. When it came to mortgages to buy homes, business loans to enable blacks to become entrepreneurs, blacks were discriminated against. Yet they faithfully and religiously deposited their savings in white banks.

Dunbar worked on me persistently, and when I realized what effort he was putting into the project and the distinguished people he had involved, I reluctantly agreed to serve on the organizing committee. Reluctantly—because something in my personal radar told me to be cautious about my involvement with McLaurin.

The concept under which we planned to organize was a fine one. We were to capitalize at $1.5 million. In a letter that went out over my signature as chairman of the board, I emphasized that Freedom National Bank would be “a community enterprise which will in every way belong to the people it is to serve. . . . Moreover, it is intended that these people shall be represented in the formation and administration of the policies of this bank to assure its role in helping to eradicate those financing practices that restrict the economic growth of the community and erode the money power of its members.”

The letter also said that 60,000 shares of capital stock would be offered and that no controlling block would be permitted to emerge from the sale. Priority of purchase was to go to Harlem residents. The organizing committee was limited to 20 percent of the offering. To prevent any individual from gaining control, we limited the sale of shares to 1,000 for any single person. We had a really difficult job getting blacks to purchase stock. One reason was that we, as blacks, have had so little experience with investing and some of us have had bad experiences. Many of us are afraid to trust each other. To increase the skepticism in the black community, there were negative memories of an instance in the past when there had been an attempt to establish what Harlem people believed to be an interracial bank. This was the Dunbar National Bank organized by John D. Rockefeller on West 150th Street and Eighth Avenue in 1928. Dunbar closed after ten years of operation. What the public did not recognize was that the “interracial” character of this bank was that blacks were hired and black money was solicited. But the bank was controlled by Mr. Rockefeller, and the top five executives, including the president and the cashier, were white.

It was ironic that during the early years of Freedom, because I was politically involved with Governor Rockefeller, the rumor, in many different parts of the country where I campaigned for him for the Republican Presidential nomination, was that Freedom was really my bank and that the governor had given it to me as a present. Maybe I should have wished that was true. It wasn't.

As we got further into the organizing stages of Freedom National Bank, I began to feel very uncomfortable with the way Dunbar McLaurin was performing his duties. There wasn't really anything I could put my finger on except that he began making a number of trips and submitting bills for them, which, I suspected, had nothing to do with the bank's operation.

There was an interracial organizing committee; included were Judge Samuel Pierce, a black attorney now General Counsel for the United States Treasury Department; Herb Evans; Irv Altman; Alva Hudgins; myself; Frank Schiffman, the astute owner of the Apollo Theater on 125th Street; Jack Blumstein, a veteran businessman from 125th Street who heads Blumstein's Department Store; and Dunbar McLaurin.

The plan was that McLaurin would be president of the bank. I told some of my fellow-organizers about my uneasiness about McLaurin. In my opinion, unless the bank was to be operated with absolute dedication and integrity, it would fail. I had no basis, except for personal qualms, to doubt that McLaurin would supply those qualities. Yet something told me that I would be wisest to withdraw if he was going to be allowed to be president. I brought this up at a committee meeting of several members of the organizing committee in McLaurin's presence. I had hardly got my words out of my mouth when McLaurin produced resignation papers for me, already drawn up, indicating my withdrawal from the organizing committee and the proposed board of the bank. I was about to sign the papers when someone—I think it was Alva Hudgins—advised that I wait. He said that no one person controlled the whole organizing committee and that the whole committee should discuss whether I should resign. I agreed. We held a few more meetings and the majority of the committee members finally voted that Mr. McLaurin could not be president of the bank. He took his case to the newspapers, accusing me of stealing his idea for the bank, then having him ousted. Not long after we had rejected him as president, we all went to Washington, McLaurin included, and met with the United States Comptroller of the Currency. He told us that under no circumstances would his office allow Mr. McLaurin to be president. Having no other alternative, McLaurin resigned and the rest of us carried on.

Our next problem was the selection of a black president, and, of course, the history of black expertise within the financial community being such a sparse one, we had a difficult time finding a capable man. But we were determined that the president be a black man.

Looking over the field, we settled on a very successful real estate executive and businessman, William R. Hudgins. Mr. Hudgins had been connected, for some years, with the black owned and operated Carver Federal Savings and Loan Asso- ciation, which had been established in 1949 on East 125th Street. In 1964 Bill was chairman of the board of Carver. The Carver operation was a sound one. Under the dogged leadership of its late president, Joseph E. Davis, by 1964 the organization had made close to $50 million in loans and had extended many mortgages to people in the black community, most of whom could not have received them elsewhere. Bill Hudgins, for whom I had real respect in terms of his business acumen and who was also a personal friend, agreed to resign from Carver to run Freedom National Bank. Like the other organizers of Freedom I had great confidence that, under Hudgins, Freedom could enjoy a highly successful career.

I can recall now that several people whom I respected highly questioned the judgment of our board in selecting Mr. Hudgins, but I dismissed these comments as having no basis except possible personal prejudice against the man. As the bank opened with great acceptance initially from the community, I felt even better about the situation. Because of the publicity about disagreement with McLaurin, there were those who had doubted that we would ever open and that, if we did, our career would be short-lived. I felt very proud to be associated with the only interracially owned and operated bank in the Harlem community and also the only bank in Harlem which was black controlled. The attendance at the opening was heartening not only in terms of numbers but also because of the pride that so many Harlemites, young and old, seemed to take in the bank. Throughout the ceremonies, as people passed through, I heard several references to “our bank.”

Bill Hudgins really took hold. He delighted in saying that Freedom was a bank which is “color blind.” It was, for him and for all of us, a bank which would not discriminate against anyone because of color, but also it would make a real difference in the economic health of Harlem. And since Harlem is regarded as the black capital of the black national community, its success could become a very influential factor in this country.

Bill pledged that Freedom would also be a bank to which anyone could come to discuss a problem directly with the president.

I would find it hard to describe how hard Bill Hudgins worked at building our new bank. There were times when we directors feared he was seriously jeopardizing his health with the energy and industry which he applied.

Naturally, the growth of Freedom also did much to ease the problem New York City blacks have had for years in getting mortgage credit. As Carver president Joe Davis once said, “Where there is a lack of mortgage credit, there is no money to improve the ghetto, no money to get out of the ghetto.”

Bill Hudgins voiced well the philosophy of our bank when he said that we did not subscribe to the idea of chasing the white merchant out of Harlem. He felt that as Freedom became more competitive in quality, knowledge, and service, we would automatically move to the forefront and render a more competitive service. He felt that this would motivate the white banks to become more competitive, to hire more blacks, and to expand the services to the community which they had withheld while accepting the community's deposits.

A typical reaction about Freedom National Bank on the part of aware Harlemites was voiced by Clarence Funnye, a CORE leader. He said, “Before Freedom National, you went into the white bank with the distinct impression you went with what you had in your hand, begging the powers that be and generally you were turned down. With Freedom the community looks less like a colony, less of an area for exploitation.”

In February, 1966, Mayor Lindsay participated in our first anniversary, unveiling a plaque of the bank which honored more than two hundred “charter depositors” who opened major accounts with us. The list included institutions, corporations, individuals, agencies, and labor unions which had deposited with us a minimum of $10,000. When we marked that anniversary, we had gone from the initial $1.5-million capitalization to a volume of more than $9,000,000. We had loaned more than $300,000 to small businessmen. We could feel justifiably that the future of Freedom was assured.

During the years since its founding in 1964, Freedom National Bank had really become a source of pride for black people. It had grown in status to the largest of the black banks in the nation.

I was happy about that, but I had mixed emotions, which I had entertained for a couple of years. I finally began to feel convinced that, although we had made tremendous strides, we were approaching the brink of disaster.

Among those closest to me—family, friends, and close business associates—there are two schools of thought as to whether I should be talking about the behind-the-scenes story of how we at Freedom Bank narrowly averted a major crisis which could have wrecked the institution. Today, since we have successfully weathered the storm, some people think that it will do damage to public confidence in us to talk about the danger we confronted and overcame. I have given a great deal of thought to that point of view because I love the bank and what it has achieved and would not want to hurt it. But I think there are vital lessons to be learned by telling frankly what happened to us and why. I think that my own ego or that of any other individual is not as important as the need for maturity and stability in black business.

In the first place, I want to declare honestly that I, as chairman of the board of directors, and some other members of the board were guilty of a very serious mistake. I don't choose to confess for anyone else so I will focus upon my own shortcomings. I think that if I had taken more time to probe into the daily administration of the bank, I could have helped to avoid trouble long before we had to confront it the hard way. Even to me, a novice in banking and financial matters, it was becoming obvious in the latter part of the sixties that we were not being cautious enough with the processing of loan applications—auto loans and otherwise—that we were not doing enough research on applicants, and that we had a tendency to favor friends on the basis that one can trust one's friends in business—an utterly risky philosophy. I also began to get worried about the large amounts of money we were writing off in bad loans.