Review of Banking on Slavery: Financing Southern Expansion in the Antebellum United States by Sharon Ann Murphy

By Sean Vanatta

Banking on Slavery: Financing Southern Expansion in the Antebellum United States. Sharon Ann Murphy. Chicago: University of Chicago Press, 2023.

In 2005, J.P. Morgan Chase revealed that two of its predecessor banks—legacies of earlier acquisitions and reorganizations—had been complicit in financing American slavery. Together, the banks had “accepted approximately 13,000 slaves as collateral for loans,” the bank explained, “and ended up owning approximately 1,250 of them” when borrowers failed to repay their debts. Chase apologized and established a scholarship fund for Black students in Louisiana, the first documented reparations payments made by an American company.

That few contemporary banks have made similar discoveries reflects in part the failure of most Southern financial institutions during the Civil War. More surprising has been the lack of historical analysis of the banking firms and financial practices that underwrote the expansion of slavery in the antebellum United States. In her groundbreaking new book, Banking on Slavery, historian Sharon Ann Murphy corrects this glaring omission.

In the first instance, Murphy’s book demonstrates the fundamental entanglement of banking firms and slavery in the antebellum South. In the introduction, she walks readers through downtown New Orleans in the early 1840s, guiding her audience in and through the banking offices and slave markets which jostled for space in the Crescent City’s commercial heart. What is more surprising than the physical proximity of these institutions—where else would they be?—is the number and variety of banking firms operating in the bustling capital of slavery’s capitalism.

Murphy’s point is not simply that southern banks financed slavery, but that southern bankers developed new financial practices and forms of business organization to accommodate traditional banking to the specific needs of the slave economy. She focuses on southern banks specifically because although northern banks provided trade finance for slave-grown crops like cotton and sugar, only southern banks lent directly against the land and human property necessary for large-scale plantation agriculture.

This transformation in southern banking unfolded slowly in the 1810s and early 1820s, before accelerating thereafter. Early southern banks, like their counterparts in northern states, tended to make short-term loans secured by commercial transactions. Southern bankers in the mid-Atlantic and tobacco-growing regions were reluctant to accept real estate or enslaved workers as initial collateral. Often, their state charters barred them from doing so. Yet these firms would collateralize real and enslaved property to secure pre-existing debts; they would also seize and sell these assets when borrowers failed to pay what they owed.

As the U.S. government violently opened the southwestern frontier in the 1820s and 1830s, would-be planters pressed for the financial means to push slave agriculture westward. Some traditional banks accommodated slave-owners by devising clever, extralegal means to evade restrictive charter provisions. Murphy is a business historian who expertly guides readers through (to borrow the subtitle of one of her earlier books) how banking worked in the early American republic.

Regulatory circumvention, however, could never fully finance capital-intensive slave agriculture. Real innovation came from states like Louisiana, which created bespoke banking institutions that enabled slaveowners to collateralize their land and human property. So-called plantation banks, like the Citizens Bank of Louisiana, transformed land and enslaved people into bank money, secured by the credit and taxing power of the state government.

Financial innovation fueled the manic growth of cotton and sugar cultivation across the southern frontier in the late 1830s, a bubble that burst with the twin panics of 1837 and 1839. The panics, Murphy shows, halted financial development in the frontier south, unleashing a twofold retrenchment. First, southern banks sought to recover what they could via foreclosure, liquidation, and creative efforts to secure their debts. Debtors, meanwhile, exercised their own creative powers, hiding assets or absconding, enslaved property in tow, often to the Republic of Texas.

The panics also encouraged political retrenchment. Anti-bank feeling, always simmering in the nineteenth century psyche, became official policy in many southern states. New state constitutions outlawed banking, while legislatures initiated the gradual liquidation of slave-finance institutions. In essence, slaveowners had embraced banking to fuel the 1830s boom, yet the bust revealed how speculative finance could undermine the entire socio-political project of slavery—pulling down the land prices, commodity prices, and human prices that collectively secured the economic and political power of the slaveholding elite.

In any case, the southern banking bans proved ineffective. Out-of-state banks and other financial firms filled the void for credit and currency. By the 1850s, with a new boom blossoming, the anti-bank backlash abated. Many southern states embraced free banking, but with explicit bans on real estate and enslaved collateral. The Civil War permanently ended experiments in slave finance without, critically, resolving the past debts secured by human property.

Murphy builds her account on an impressive foundation of court records, county deeds, and extant bank archives. She uses these sources to show financial practices in action, conclusively demonstrating the methods bankers used to financing slavery’s expansion. With this evidence, she painstakingly reconstructs the stories of individual borrowers as they pulled plantations from the swamp, ran up ill-advised debts, and often thrashed and sank beneath their feral ambitions. Murphy also gives close, sustained attention to the enslaved people whose lives and labor secured bank debts, and whose families and communities suffered when debts were satisfied on the auction block.

Murphy tells powerful stories. But the stories have important limits. In part, her analysis rests on legal cases, moments when banks and their debtors went to court to resolve disputes. As Murphy recognizes, such cases arise from exceptions—from broken promises and broken rules. The book’s focus on exceptions can make it difficult to appreciate the normal operating procedures—how the institutions worked when they worked as intended.

Likewise, the personal narratives also obscure the relative importance of southern banks to the expansion of the slave economy. Murphy suggests that these banks were “critical to the system” of antebellum slavery, but avers that their ultimate contribution is “impossible to calculate” (pp. 320-321). Readers may find this unsatisfying, in part because Murphy does show in specific cases how integral these banks were. To take one example; in the 1840s, the Citizens Bank of Louisiana—one of the firms J.P. Morgan Chase apologized for in 2005—held mortgages on almost 9 percent of enslaved workers in Louisiana’s most productive sugar parishes. We can see in this evidence the first steps toward a fuller engagement with debates, like those pursued by Gavin Wright and others, about the political economy of slavery and the course of southern economic (under)development.

Nevertheless, Murphy wrote Banking on Slavery because scholars simply had not examined the business history of these southern banks, nor the financial practices they developed to finance capital-intensive slave agriculture. Opening the field does not oblige her to answer all the questions that spring forth. Rather, Banking on Slavery shows how much work is left to be done, and points to sources with which to do it.

Speaking of sources: what the opening story about J.P. Morgan Chase highlights, at least for me, is the deep wellspring of historical evidence—records of long dead, buried, and worm-eaten banks—which remain locked inside living financial institutions. While some firms—and perhaps their government supervisors—might fear the reputational risks that could emerge from prying open the caskets of their corporate ancestors, this view is myopic. Our amalgamated financial firms have no functional relationship to their corporate ancestors, not only those with ties to slavery but to the thousands of preceding institutions that have been consolidated and conglomerated over the decades. U.S. banks should, therefore, dissolve their predecessor firms into the public trust, opening the records of these long-deceased firms while freeing the living banks from the dead weight of history. This is not, to be clear, a path toward absolution, but rather a recognition that so long as wealth generated by enslaved people continues to intermingle with the national wealth, we would do better to face the past than to bury it.

Sean Vanatta is a senior fellow at WIFPR.