Maggie Lena Walker’s story, and the organization to which she dedicated her life, begins in 1867 with a nation struggling to repair the ills of slavery. At age 14, Maggie Lena Draper Mitchell (her birth name) joined the local council of the African American fraternal society that later became the Independent Order of St. Luke (IOSL). She swiftly rose through its ranks to assume leadership as its Right Worthy Grand Secretary-Treasurer in 1890, and, as a result, became a pioneering insurance executive, financier, and civic icon at the turn of the 20th century.

Prior to 1890, the IOSL had 3,400 members, no reserve funds, no property, and a small staff. By the mid-1920s, Walker, a woman of boundless energy and spellbinding oratorical skills, almost single-handedly brought the IOSL to solvency. In 1903, she established the St. Luke Penny Savings Bank, one of the nation’s oldest black-owned banking institutions in the United States. By 1924, at the peak of her leadership, she grew the IOSL membership to in excess of 70,000 in 1,500 local chapters. IOSL also boasted a staff of 50 working in its Richmond, Virginia, headquarters, with assets of more than $400,000, and payments of more than $1 million in death claims. Despite her failing health and limited mobility, Walker successfully shepherded St. Luke Penny Savings Bank through the Great Depression. She would eventually merge it with two other black banks based in Richmond to form Consolidated Bank and Trust (No. 20 on the BE BANKS list with $87.28 million in assets), the longest surviving black bank in the country.

This excerpt, from the book A Right Worthy Grand Mission: Maggie Lena Walker and the Quest for Black Economic Empowerment by the late Gertrude Woodruff Marlowe (Howard University Press; $29.95), professor of anthropology at Howard University, comes from chapter four, “Theory Into Action.” This chapter is but a snapshot of the life of Maggie Walker, a woman whose mother was born a slave. Walker spoke often about the financial empowerment of the Negro community. But she also did something practical toward creating economic wealth for that community. This month, we remember Walker, a true visionary.

– The Editors

As an incipiently revitalized and transformed [Independent Order] of St. Luke moved into the Progressive Era, the vision Maggie Walker so skillfully evoked in her speeches started to be shaped into, and enriched by, the experience of building business and service institutions. Walker and her colleagues spent these years crafting organizations, trying with minimal initial knowledge to learn rapidly enough to move on to the next step. In consonance with the national culture, their key developmental concept was business, a field that many black leaders and white well-wishers emphasized as a major potential avenue of upward mobility for the African American community. W.E.B. DuBois, in his report of the 1899 Atlanta Conference on “The Negro in Business,” called for the formation of a National Business Man’s League, an idea that Booker T. Washington made a reality in 1900 when he founded the National Negro Business League. …

Walker’s exhortatory approach to community development presents cooperative economics as a strategy arising from core community values, but one in need of the kind of policing DuBois describes. As her speeches show, St. Luke members also saw it as a confrontational response to segregation. Others observing racial and economic dynamics at the turn of the 20th century agreed, as evidenced by public statements such as, “The almighty dollar is the magic wand that knocks the bottom out of race prejudice.…”

By 1900, there were two African American banks in Richmond: the True Reformers and the Nickel Savings Bank. The Nickel Savings Bank was also known as “Dr. Tancil’s bank,” since physician Richard F. Tancil was its president, and it operated out of his East End home for many years after its founding in 1896. …Nickel Savings Bank was always small, not having started out as a depository for fraternal funds. Eventually, the Nickel Savings Bank’s cashier, Mr. Bass, organized a fraternal organization called the People’s Relief Association, and the bank became known as the People’s Bank. …

In the midst of the summer’s community turmoil, Maggie Walker made her big move at the 1901 St. Luke Convention. Besides reporting a modest net growth of the Order, less than 700 new members, she outlined a plan for expanding its activities. Couched in her best “Onward Christian Soldiers” style, Walker described the army, recruited from the ranks of professionals, businessmen, and working men and women, that was ready to march bearing aloft the cross.…

First, she called for a savings bank, to be run by the men and women of the Order. She painted a word picture of the growth of money — the first part of which is carved on the memorial stone in front of the present Consolidated Bank and Trust building: “Let us put our monies together; let us use our [monies]” let us put our monies at usury among ourselves, and realize the benefit ourselves. Shall we longer continue to bury our talent, wrapped in a napkin and hidden away, when it ought to be gaining us still other talents. …”

For several months in 1903, in preparation for the bank opening, Walker spent two hours a day at the Merchants National Bank of Richmond, studying the way things were done.…

Since everyone firmly believed that banks were the pinnacle of financial achievement, never mind their size, black banks were proof, and cited as such, that conditions were favorable for African Americans in the South. None of the black banks belonged to the clearing house system for check cashing because the fee was steep, but the white merchants of Richmond demanded of the national banks that the black banks be accommodated, on threat of withdrawing their own deposits; so each cleared through a member, either free or for a small fee.

James Hayes drew up the charter for the St. Luke Penny Savings Bank, which was granted by Virginia’s newly created Corporation Commission on July 28, 1903. The Executive Committee of the [Right Worthy Grand] Council (the one elected in 1901) was named as the board of directors. [Walker was a member of that Executive Committee.] Each member had to own $100 of paid-up stock. From the beginning, there was an attempt to attract money from outside the state, initially through the St. Luke network. From the beginning, Walker was considered to “enjoy the unique distinction of being the only female bank president in the United States.” Shortly after the charter was granted, she went north on a tour and gave several speeches about the bank, urging councils to make deposits. Walker had been invited to join the Virginia Bankers Association — an invitation none of the male presidents of the other three black banks had received. She accepted the invitation and remarked, “I shall hope to conduct myself so as to reflect credit upon my race and people. …”

The dream had been to have a bank run by women, but when the St. Luke Penny Savings Bank opened in St. Luke Hall on November 2, 1903, the cashier was Emmett C. Burke, recruited from the True Reformers Bank, where he had been head bookkeeper. He was paid $50 a month. Burke was an inspired choice, competent, and loyal. He had both “ability and character.” He worked very well with Walker and was able to confront her when necessary for the good of the bank, such as over the suitability of her sons’ behavior when they worked there. In contrast with the Order, there was never any serious question of succession at the St. Luke bank once Walker let go of the fantasy that one of her sons would take over. …

In fall 1904, the St. Luke bank bought a three-story brick building at 112 Broad Street for $13,500, payable in two years. Extensive renovations were necessary to fit it out for the bank (which needed a brick vault) and proposed store ([called the Emporium] which required an elevator). Rather than wait until the renovations were finished to open the Emporium, Walker decided to rent a building at 6 West Broad Street that belonged to John Mitchell. Broad Street was a choice location and was also the dividing line between black activities on the north side and white activities on the south. This division has been so much a part of Richmond social history that in 1985 when Richmond Renaissance asked the Rouse Enterprise Development Corporation to design a central shopping area for the city, the design featured a bridge across Broad Street because the mayor “realized that Richmond would not get anywhere as long as it was seen as a racially divided city.”

Of all the St. Luke projects, the Emporium was symbolically crucial because it was to provide the employment for women that [were] the cornerstone of St. Luke’s development program. The bank, after all, only employed two people besides the officers at this time. The Order was growing in the number of employees needed to process the endowment assessments, staff the printing shop, and manufacture regalia, but the new enterprise, to be managed and run almost entirely by women, was eagerly anticipated. On [Jan. 15, 1905], more than five hundred people came to a mass meeting held at St. Luke Hall and unanimously decided to proceed with the Emporium. The sale of stock started with each department of the Order subscribing to purchase shares. Maggie Walker was president; Joseph Meyers was vice president and probably managed the store, since he is shown among the employees; Emmett Burke, the bank’s cashier, became treasurer; and the bank’s assistant cashier, Mary Dawson, was secretary. This time, all 26 board members — 18 women and eight men — could qualify with the purchase of only $50 worth of stock. How many of them actually did is not indicated in the available record. James Hayes arranged for the Emporium’s charter, which was granted March 13, 1905. …

There was also discussion of how to instill race pride in school children, to increase their knowledge of African American history, leaders, and literature, an area many felt was neglected. Savings banks were praised as a major instrument for mobility of impoverished peoples. W.P. Burrell gave a paper reviewing the history of black savings and loan institutions and noted that most blacks in Virginia kept their money in white banks. He explained how building and loan associations worked and gave stern examples of the practices of loan sharks — which made bank loans much more preferable. …

The bank moved into its new building in October 1905, and the Emporium followed in late November. The bank was put in the dry goods department, a location, which some people criticized or ridiculed, but which was calculated to draw trade. The bank was growing slowly but steadily, having handled by January 1906 almost $170,000. Loans and mortgages had become a large portion of its business. Each one had to be passed by the St. Luke board, but it was possible for small depositors to be heard. Brown points out that many of the bank’s loyal supporters were laundresses. The classic tale is that of the one-legged shoeshine boy who by thrift, faithful saving, and judicious borrowing, was able to buy a parlor with three chairs, a house for himself, and one for his mother, all on 3% interest. The community function of George Bailey and his bank, and its precariousness, as portrayed in one of America’s favorite films, It’s a Wonderful Life, comes very close to the spirit of the St. Luke Penny Savings Bank. …

These had been years of extraordinary activity and a great deal of accomplishment for Walker and St. Luke, with the establishment of a newspaper and printing business, a new building, a bank, and a store. Things were about to change. While it was not yet apparent, the exciting era of St. Luke’s expansion into new business was over.

Postscript
In January 1919, the Commercial Bank and Trust Company was chartered. As a new African American bank, it grew rapidly and at the end of 1921 reported resources of $132,212. In April 1920, a second new African American bank, Second Street Savings Bank, opened. There were four African American banks in Richmond: St. Luke and Mechanics, associated with fraternal organizations, and the two new ones associated with long-established, local, commercial insurance companies. At the end of the year, Walker called a conference with all four presidents…to explore ways they could cooperate. At the time, St. Luke Penny Savings Bank announced it had passed the half-million mark in resources. By fall of 1930, she had initiated merger negotiations with Commercial Bank and Trust (and Second Street Savings Bank). Economic conditions were very threatening, and only if all the resources of the city’s African American community were combined would survival be possible. Intensive negotiations over the next months culminated in the final merger. The new Consolidated Bank and Trust opened on Jan. 2, 1931, with resources of $864,000. Consolidated Bank and Trust survived the Depression by pursuing conservative policies, and it … remains in business today. This year, Consolidated Bank and Trust ranked No. 20 on the BE BANKS list with $87.28 million in assets.

From A Right Worthy Grand Mission by Gertrude Woodruff Marlowe. Copyright © 2003 by Howard University. Published by arrangement with Howard University Press.

For transforming the original failed bailout plan into a winner for community banks, higher Federal Deposit Insurance Corp. insurance is a key change, says Steve Verdier, senior vice president and director of congressional affairs with the Independent Community Bankers of America (ICBA), a Washington, D.C.-based trade group.

While insurance for retirement accounts stays fixed at $250,000, coverage for all other accounts increases from $100,000 to $250,000.

“That’s something we have been asking for for years,” says George G. Andrews, president and CEO of Atlanta, Georgia-based Capitol City Bank & Trust Co. (No. 10 on the B.E. Banks list with $272.3 million in assets). This change is a plus for banks’ consumer and especially, business accounts. “It will be helpful in our efforts to bring in additional deposits,” says Paul C. Hudson, chairman and CEO of Los Angeles, CA-based Broadway Financial Corp. (No. 4 on the B.E. Banks list with $356.8 million in assets).

But bailout benefits come with caveats. The likelihood of increased governmental involvement and new regulations worries Michael Pierce, chairman and interim president of Mobile, Alabama-based Commonwealth National Bank (No. 25 on the B.E. Banks list with $66.2 million in assets). “It may make it very difficult for small community banks to continue to operate because of the sheer cost associated with coming into compliance with the increased regulation,” Pierce says. More specialist staff may need to be hired.

Community banks will face increased competition, with investment banks now able to become holding companies and start other banks, Pierce says. Broadway’s Hudson, however, predicts less competition, with fewer big- and mid-sized players. He says big banks are not right for everybody and that big banks’ safety reputation has been tarnished. “That will benefit smaller banks,” Hudson says.

Hudson says the bailout was somewhat misdirected. “The biggest risk to our financial system right now is less the financial structure than the consumer’s confidence in the financial system. Whatever is done has to be done in a way that builds consumer confidence,” Hudson says.

Capitol City’s Andrews, however, says what’s needed is to put together a plan that would stabilize the financial market for years to come. “We need a complete overhaul, not a Band-Aid. And what I’m seeing now is a Band-Aid approach.”

Other rescue package provisions favorable to community banks:

- The Securities and Exchange Commission is empowered to suspend mark to market accounting rules that record assets’ value at current selling prices.

- A nondiscrimination clause enables any bank of any size to participate in the loan buyback program. “It’s one thing to have favorable language included in the legislation, but it’s going to be up to the ICBA and others who represent community banks to make sure that the implementation follows the legislation,” ICBA’s Verdier says.

-For banks who held investments in Fannie Mae and Freddie Mac preferred stock became losses when the government took over these giants, capital losses from these investments may be deducted from ordinary income; and if a bank has dropped to a lower capital level, the Treasury can inject capital into the institution. The ICBA estimates nearly 22% of community banks made these investments, losing $5 billion.

None of the three B.E. 100s banks included in this article held preferred shares of Fannie Mae or Freddie Mac.

Swinton led a group of investors to purchase some of the assets of Victory Savings and Loan Bank.

Talk about putting your money where your mouth is. Fifty investors in South Carolina, led by Benedict College President and Black Enterprise Board of Economists member David Swinton, Ph.D., raised over $3 million to purchase some of the assets of the failed Victory Savings and Loan Bank in Columbia, South Carolina. The new bank has assumed responsibility for all of the old bank’s debts.

Victory, founded in 1921, was the only African American bank in the state, and was closed by the FDIC in March after posting losses of $798,883 at the end of 1998. But rather than let the bank fall by the wayside or be bought by others, a group of local investors that included Swinton, real estate broker Charles B. Gary and chemical company owner Martha Crawford, saw the bank’s failure as an opportunity. In petitioning for the bank’s assets, the investors had to present a capitalization plan, a business plan, appoint officers and file an application for a bank charter. They also had to have their money in place. In the end they beat out 13 other bidders for the assets of Victory. After acquiring $12 million in deposits and $13.9 million in assets, the institution was renamed South Carolina Community Bank. With a charter in hand, it’s already open for business.

“It was networking at its best,” says Gary. “Each of us contacted some people we knew. They, in turn, contacted people they knew, and we were able to quietly and effectively pull this deal together.” Gary enlisted Swinton as his first recruit in the bank acquisition effort. Benedict’s Board of Trustees decided to invest $600,000 for a 5% share in the new bank. “I’ve always thought that HBCU’s have a responsibility to cause economic development to happen in the communities they serve,” says Swinton. “If we don’t do things differently to build our communities, then how are we ever going to have different outcomes?” Swinton will serve as the bank’s chairman and CEO.

Swinton says the school already had a banking relationship with the institution and the money would have been invested in any case. It made sense to the board, he says, to invest the funds with a black institution. “We invest our endowment [$20 million] anyway,” says Swinton. “In today’s market, a safe investment in a sav-ings account would only net 5%, or $30,000, on the $600,000 we invested.” Swinton says Benedict stands to gain much more from investing in the bank and being an active participant in economic development. In addition, he said that the school has an exit option after five years.

All told, 95% of the 50 investors are African American and include a group of business owners in enterprises ranging from construction to sports management. Each member of the group invested anywhere from $10,000 to $100,000.

The bank’s new board of eight directors-seven men and one woman-say they will forego any compensation for two years as they attempt to get the bank up and running.