Societal Inequality and Financial Market Participation: Evidence from the Freedman’s Savings Bank

136 Pages Posted: 20 Apr 2018 Last revised: 22 May 2024

See all articles by Virginia Traweek

Virginia Traweek

Texas Christian University

Malcolm Wardlaw

University of Georgia

Date Written: May 21, 2024

Abstract

Using unique records from the Freedman's Savings Bank, we examine how heterogeneous depositor groups react to a bank's expansion and emerging financial distress. We find that White depositors begin providing significant funding as interest terms are enhanced, but respond more quickly to changes in the bank's perceived stability than the Black depositors who were the bank's primary philanthropic target. White depositors are then twice as likely to close their accounts prior to failure, mitigating their uninsured deposit risk. Our results show how the demand deposit structure of simple financial institutions can create systemic disadvantages for minority communities.

Keywords: banking, bank runs, financial participation, development economics, African American economic history, access to finance

JEL Classification: G21, N11

Suggested Citation

Traweek, Virginia and Wardlaw, Malcolm, Societal Inequality and Financial Market Participation: Evidence from the Freedman’s Savings Bank (May 21, 2024). Available at SSRN: https://ssrn.com/abstract=3164418 or http://dx.doi.org/10.2139/ssrn.3164418

Virginia Traweek

Texas Christian University ( email )

Fort Worth, TX 76129
United States

Malcolm Wardlaw (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

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