Banking Minorities: The Role of Targeted Advertising

This paper investigates how targeted advertising can affect the take-up
of financial services by vulnerable populations and its impact on racial in-
equality. We do so through the lens of the Freedman's Savings Bank, which
was established in 1865 after the Civil War to collect deposits from recently
freed African Americans. The bank enjoyed success in recruiting deposi-
tors over its almost decade-long tenure, in spite of extensive management
and governance issues, as well as missed interest payments. Using a com-
prehensive dataset of newspaper articles and advertisements published over
1865-1874, we show that the bank promoted itself extensively to African
Americans, making false claims and moral statements. This advertising
campaign stands out as being unique among other savings institutions at
this time in both magnitude and content. The bank lending practices and
the subsequent depositor losses suggest a transfer of wealth from African
Americans to white populations. Joint paper with Purnoor Tak.

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