USA > Tennessee > Davidson County > Nashville > History of Nashville, Tenn. > Part 28
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CHAPTER XII.
BANKS AND BUILDING ASSOCIATIONS.
The Nashville Bank, First in Nashville-First Suspension of Specie Payments-Second Sus- pension-Statement of Nashville Bank and Its Branches-Bank of the State of Tennessee -Its Branch in Nashville-New State Bank-Criticisms on the Legislature on Account of Its Establishment-Suspension of Specie Payments in 1819-Attempts to Establish a Branch of the Bank of the United States in Nashville-Their Final Success-The Farmers and Mechanics' Bank-Failure of the Nashville Bank-The Union Bank of the State of Ten- nessee-Western Credit-Planters' Bank-Bank of the State of Tennessee-Suspension of Specie Payments in 1837 and 1839-Winding up of the Ante-war Banks-First National Bank-Second National Bank-Third National Bank-Fourth National Bank-American National Bank-Commercial National Bank-Safe Deposit Trust and Banking Company- Nashville Savings Company-Nashville Savings Bank-Capital City Bank-Merchants' Bank-Bank of Commerce-Mechanics' Savings Bank-Nashville Trust Company-Bank- ing Capital in Nashville-Building and Loan Associations.
T' HE first movement among the business men of Nashville looking to the establishment of a bank was made in 1807. It is evident that the question had been discussed somewhat during the summer and early fall of that year, for on the 14th of October a notice was published, ad- dressed to the citizens of Mero District, requesting all who were disposed to promote the establishment of a bank in Nashville to meet at Talbot's Hotel on Saturday, the 17th of the month, at six o'clock, P.M. for the purpose of receiving the report of the committee appointed at the last meeting to draft a Constitution for the same. This Constitution was not published, but the result of the agitation of the subject was that the Leg- islature on the 26th of November of the same year passed "An Act to Establish a Banking Association at Nashville, the Name of Which Shall Be the Nashville Bank." This act was passed upon the petition of a number of the citizens of Nashville and its vicinity, and the petition stat- ed that the object in view in the establishment of the bank was the mak- ing of loans to the merchants, traders, and other citizens of the State on moderate and reasonable terms.
Section I of this act was in part as follows: "That all and every person or persons who are or who shall become subscribers to a banking associa- tion to be established in the town of Nashville, in this State, under the name and style of the Nashville Bank, and who are or shall be proprie- tors of the capital stock thereof, shall be and their successors and assigns are hereby created and declared a body politic and corporate by the name, style, and title of the Nashville Bank, upon the conditions hereafter
261
BANKS AND BUILDING ASSOCIATIONS.
specified, and by the same name shall continue until the first day of Jan- uary, 1818, and no longer."
The fundamental articles of the charter were: That the capital stock should be $200,000 in money of the United States of America, divided into shares of $50 each, $10 on each share to be paid at the time of sub- scription, in current coin of the United States, a further sum of $5 on each share to be paid within ninety days from the date upon which the company should commence its operations under its charter; the remain- der of each share to be paid as the Directors should determine. Three hundred shares of the capital stock were reserved to be subscribed for by the Governor of the State, who was allowed two years from the com- mencement of operations under the act, in which to subscribe.
There were to be nine Directors, one of whom should be elected Presi- dent, and five of the Directors, one of whom should be the President, should constitute a quorum for the transaction of business. Until the first Monday [2d] in January, 1809, G. M. Deaderick, William Tait, Washington Jackson, John H. Smith, George Poyzer, William Eastin, Alexander Porter, Sr., Joseph Park, and William Wright were to serve as Directors. The names of the first officers of this bank could not be ascertained.
The Directors made the rule that the stockholders should pay the bal- ance of their subscriptions in five-dollar installments as called on by the bank authorities, and in accordance with this arrangement the Cashier made calls as the money was required. December 3, 1814, the Cashier, John Anderson, called for an installment of five dollars on each share to be paid by the 9th of January, 1815. The last installment of the original stock of this bank was due July 29, 1816. During this year a two-story brick bank building, forty-four feet by thirty-four feet in size, was erect- ed. On the 19th of February, 1817, John Anderson gave notice that books would be opened for the sale of fifteen hundred shares of addition- al stock on the 3Ist of March. There appears to have been a temporary suspension of specie payments during 1816, which none of the writers on banking in Tennessee mention; for a few days before the publication of this notice of sale of stock in the Nashville Bank, the banks of this part of the State resumed specie payments, and it was said by the press that this step gave great satisfaction to the people. "The sound of the dollars jingling on every counter seemed like the joyful congratulations of prisoners released from long confinement." The conduct of the banks in taking this step was looked upon as very creditable to them, and it secured to them the confidence of the community, which had been withdrawn from them for some time. They had been among the last to.
262
HISTORY OF NASHVILLE.
refuse to pay specie, and they were now among the first to resume its pav- ment. The banks of New York and of Richmond, Va., resumed on e 20th of the same month, the banks in this part of Tennessee having re- sumed on the 12th. On the Ist of July, 1817, thirteen hundred and twenty-eight shares of stock in this bank were sold.
The Directors elected in January, 1818, to serve for that year were: Anthony Foster, John Childress, James Trimble, John Anderson, Joseph T. Elliston, George Shall, Joseph Woods, S. Cantrell, Jr., Josiah Nichol, John McNairy, and James Goodin. On the 14th of February Stephen Cantrell was elected President of the bank, in place of John Nichol, re- signed, and John H. Eaton was made a Director. On the 29th and 30th of June books were opened for the sale of $4,000 of the increased stock of this bank under the superintendency of John McNairy, John A. Eaton, and Joseph T. Elliston. In July there were branches of this bank at Murfreesboro, Winchester, Shelbyville, Gallatin, and Rogersville, the Legislature having in 1817 established individual banks, giving each of them the privilege of uniting with either the Nashville Bank or the State Bank at Knoxville, of which Hon. Hugh L. White was President, provided these banks were willing to accept the individual banks as branches, and the Nashville Bank had accepted the banks established at the above-named places as branches. The combined capital of the Nashville Bank and these branches was $2,400,000. At this time Wilkins Tannehill was Cashier of the Nashville Bank.
Following the lead of the Farmers and Mechanics' Bank, a history of which is elsewhere presented in this chapter, the Nashville Bank sus- pended specie payments on the 26th of June, 1819. The main reason given for taking this step was to furnish relief to the general embarass- ment and distress which then pervaded the commercial world. The sus- pension had not been resolved upon from any selfish motives, " but when they beheld themselves unceasingly pressed upon, and this pressure in- creasing every day; while to keep pace with the demands made and ex- pected, it became necessary to call upon the debtors to the institution, no other method could be discovered to redeem the citizens from ruin, than the one they had taken." The bank said it did not blame the citizens, for they had shown every confidence in the institution; but it did blame speculators in the precious metals, agents, and emissaries of that bank whose interests as well as object seemed to be to destroy every State institution. And to this trouble must be added a vast balance of Eastern indebtedness, which untimely policy or misfortune had produced against this part of the country. "Bills and notes at par in the Atlantic cities, being at an advance of four or five per cent. and silver and gold bearing
263
BANKS AND BUILDING ASSOCIATIONS.
a considerable premium, have rendered it an object for many to offer hoch prices for Tennessee paper, and often employ agents to ride through the country and hunt it up. In such a state of things the notes in bank in this State could not be kept in circulation, and in ninety days it was believed that the metallic capital remaining in the State would be wholly drained away. Suspension was determined upon with a view to the safety of the community, a course which under existing circumstances every State institution had been compelled to take. What evils to the country might arise when those balances and checks existing through the State banks should be swooped up by that institution whose capital was in the hands of many who were regardless of the interest and welfare of the nation must be left to time to disclose," etc.
This explanation of the suspension of specie payments in 1819 was signed by Stephen Cantrell, President, and by John H. Eaton, A. Fos- ter, George Shall, John Baird, E. H. Foster, W. B. Lewis, and Joseph Woods.
The following statement of the condition of the Nashville Bank and its branches on the 20th of June, 1819, was subjoined to the above expla- nation :
Specie i11
Hand.
Notes of
Other Banks.
Real Estate.
Discounts.
Individual
Deposits.
Notes in
Capital
Nashville Bank ..
$ 65,786 75
$30,017 $10,000 00 $ 692,591 64 $147,468 47 $ 140,476 $511,960
At Murfreesboro
37,177 38
2,940
2,417 00
204,898 50
26,322 14
IIO,770
105,510
At Rogersville ..
22,948 90
1,838
87,641 00
6,703 61
32,268
65,890
At Shelbyville. .
67,663 62
872
545 00
231,062 00
18,039.96
165,763
96,555
At Gallatin .
17,625 00
3,107
3,616 67
171,762 63
10,543 31
72,690
113,825
At Winchester ..
53,548 12
4,414
1,000 09
208,796 00
4,878 22
145,149
100,820
Total
$204,744 77
$43,188
$17,578 67 $1,596,751 77 $213,955 71 $667, 116 $994,560
The Directors of this bank for 1821 were: Stephen Cantrell, A. Fos- ter, Ephriam H. Foster, William B. Lewis, Thomas Claiborne, J. Gor- don, Thomas Yeatman, J. Shelby, George Shall, Boyd McNairy, and John Nichol. On June 1, 1821, the following were the various prices of different bank-notes in the country: Those of the United States Bank, and banks in New York, Philadelphia, Baltimore, Virginia, North and South Carolina, Georgia, Shawneetown, Ill., Missouri, Natchez, Miss., and New Orleans, as well as silver and gold, were from 13 to 17 per per cent. above par; those of the State Bank at Knoxville, as well as some of the Ohio banks, were 5 per cent. above par; while those of the Farmers and Mechanics' Bank at Nashville, of the Fayetteville Bank, and of the Cincinnati banks were from 45 to 75 per cent. discount. This was looked upon as a "delightful state of things !"
Circulation.
Paid in.
264
HISTORY OF NASHVILLE.
On July 1, 1821, the Directors of the Nashville Bank resolved that it was inexpedient to declare a dividend for the six months preceding. They said that since the suspension of specie payments bank-notes had been constantly depreciating. This policy of the bank was favorably commented upon by the newspapers. It would look bad, they thought, for the stockholders to receive dividends while they were refusing to pay the just claims of creditors.
On January 28, 1823, Stephen Cantrell, Joseph Woods, John Shelby, Thomas Claiborne, William B. Lewis, Robert Armstrong, Ephraim H. Foster, James Gordon, Boyd McNairy, George Shall, and John Baird were elected Directors for the ensuing year. On the 31st of March fol- lowing an order was made by the Directors for the burning of ninety thousand dollars' worth of their notes, the order extending to the branches of the bank. About the same amount was destroyed by the branches, of which there were five. This was done in order to enhance the value of the bank paper, and as was said in order also to destroy the means of importing large quantities of merchandise to tempt the luxury of the citi- zens, and thus induce them to contract debts which they would never be able to pay.
The Directors of this bank for 1824 were John Bell, James Trimble, George W. Gibbs, James Gordon, Ephraim H. Foster, Stephen Cantrell, George Shall, John Baird, Boyd McNairy, and William B. Lewis. About the time of the election of this Board the Directors declined to make a dividend to the stockholders for the last six months of the year 1823, and again this policy was praised in the public prints as being con- sistent with the principles of correct banking, because it was in accord- ance with the sound commercial rule of first paying debts before dividing profits. This course must necessarily tend to restore the bank to public confidence, even if the stockholders did suffer somewhat.
The charter of this bank had been twice extended-once on November 19, 18II, for ten years; and the second time on the 16th of November, 1813, until the end of 1838-and the last time its capital was authorized to be increased to $400,000. But a few years after the time to which its history has now been brought it was found necessary to bring its affairs to a close, which was done in 1827 with but little loss to the stockholders.
On account of the failure of the Congress of the United States to re- charter the first Bank of the United States, originally established in 1791, it was feared in Tennessee that the State would lose the advantages of a sound and abundant currency, and as a preventive of the anticipated evils, or as a remedy for those which were already felt, the Legislature of the State passed an act on the 20th of November, 1811, establishing
265
BANKS AND BUILDING ASSOCIATIONS.
the Bank of the State of Tennessee. This bank had an authorized capi- tal of $400,000, and was to go into operation on the Ist of January, 1812. Judge Hugh L. White was made President of the bank, and Luke Lea Cashier, and branches were established at Clarksville, Columbia, and Jonesboro. The act provided that branches might be established at other places, provided the Directors approved of their establishment. In accordance with this provision of the act, there was a branch of the State Bank established at Nashville, which commenced business in this city January 23, 1815, the Directors for which for 1817 were James Jackson, President; Robert Searcy, Thomas Ramsey, E. Pritchett, Peter Bass, Jenkins Whiteside, R. Farquharson, John Overton, John P. Erwin, Thomas Childress, and John Nichol. In 1818 there were branches of this bank at Franklin and at Carthage, besides the other places men- tioned above. This bank, under the able management of Judge White, was continuously successful, and never failed to redeem its notes in specie. On Tuesday, August 29, 1820, Thomas Crutcher was elected President of the branch here in place of Major Robert Searcy, deceased. The Di- rectors for that year were John Overton, Robert Farquharson, Henry Crabb, John P. Erwin, Jacob McGavock, John C. McLemore, and Rob- ert Woods. John Sommerville was Cashier, as he had been from the establishment of the branch.
Another State Bank was established by an act of the Legislature on the 26th of July, 1820. The purposes intended to be accomplished were to relieve the distresses of the community and to improve the revenue of the State. Section 3 of the act provided that this bank should be estab- lished in the town of Nashville, and be under the government of a Presi- dent and ten Directors-to be chosen by a joint ballot of both houses of the General Assembly, who should continue in office until the next stated session of the General Assembly, and until their successors, chosen in a like manner, should be qualified. The charter was to expire January I, 1843. The bank should issue notes not less than $1 nor greater than $100. The capital of the bank was fixed at $1,000,000 in bills payable to order or to bearer, all of which were to be issued on the credit and se- curity of the borrowers and to be warranted by the State on the proceeds of its unappropriated lands. There was provided an agent for the bank in each county, and to each county according to its taxable property a certain portion of the $1,000,000 was to be issued. The portion appro- priated to Davidson County was $28,000. No person was allowed to borrow more than $500 from this bank on personal security, renewable every three months, and upon substantial real estate security renewable in from six to twelve months.
266
HISTORY OF NASHVILLE.
The President and Directors of the new bank as appointed by the Leg- islature were: John McNairy, President; and George W. Gibbs, Jesse Wharton, Andrew Hynes, Nathan Ewing, Robert C. Foster, David Mc- Gavock, James Stewart, Joseph T. Elliston, Thomas Washington, and John Catron, Directors. Immediately after the organization of the bank an agent was sent to Philadelphia to secure the bank-notes. The bank went into operation in Nashville October 14, 1820.
Perhaps nothing was ever done by the Legislature that called forth such strenuous opposition as did the establishment of this new State Bank. Those who opposed the scheme could see no good to be derived from it, and by them it was severely arraigned as in violation of the Con- stitution of the State and of the United States, and wrong both in policy and principle; though of course the bank had friends. On Tuesday, November 7, 1820, a dinner was given in Nashville, in honor of Gov- ernor Joseph McMinn, at which the following toasts were drank:
I. "The New Bank: May it prove as great a blessing to the people of this State as its friends anticipate."
2. "May that blessing be promoted by a consolidation of all the banks."
3. "The Banks: May they all be annihilated by the people unless they resume and continue specie payments."
A writer in defense of the State Bank said that instead of its having too little capital, as its enemies said would be the case, there was danger of its having too much, and submitted the following figures to show that this would be the fact: (I) By the sale of lands authorized by the State, $250,000; (2) the first payment of the Hiwassee lands, $150,000; (3) money in the State treasury, $50,000: total, $450,000. This sum would be in the bank within three months from the time it went into op- eration, and the bank could not issue more than $500,000. Three- fourths of the amount of sales of the Cherokee lands were payable in ten years, with interest to be paid annually into this bank. This three-fourths was $450,000, and the interest on this sum was $27,000. The interest on the $1,000,000 capital, if all loaned out, would amount to $60,000, and the annual surplus revenue of the State was $25,000, making in all $112,- 000. Deducting $12,000 for expenses of the institution, there remained $100,000 annual income to the bank. In ten years this would amount to $1,000,000, and, adding to this sum the $450,000 mentioned above, it was clear that in ten years the capital of the bank would amount to the enor- mous sum of $1,450,000. There was danger, therefore, of the bank be- coming a powerful moneyed aristocracy-that is, if there were any dan- ger at all to be feared from its establishment.
267
BANKS AND BUILDING ASSOCIATIONS.
With all the banks, as has been said, everything went on smoothly un- til the spring of 1819, when they found that they had gone far beyond the limits of prudence in their issues. They had loaned large sums to men without capital, and had issued large sums in their own bills to pay their loans. When the reaction came in 1819 their eyes were opened to their true situation, but they found it impossible to recall their loans. Disasters in business had prostrated some of their largest debtors; a gen- eral demand for specie in their vaults arose, and they were compelled to suspend specie payments. For the next four years they tried to. collect their debts and to reduce their circulation, so that they could pay full value for what remained outstanding and repair their losses. In the meantime the Legislature thought it best to take a hand in regulating the business of banking, and on November 13, 1821, passed an act requiring the banks to resume specie payments on the first Monday in April, 1824.
On Friday, September 19, 1823, George W. Gibbs, President of this bank, submitted to the Legislature a report showing the condition of its affairs to be as follows: Specie, $44,091; notes of other banks, $55,131 ; real estate, $16,294; due from other banks, $48,972; notes discounted, $417,927: total, $582,475. Liabilities: Notes in circulation, $267,- 257; deposits by Treasurers, $215,231; individual deposits, $17,425; amount due the Knoxville Bank, $50,246: total, $550,759, leaving a profit of $31,716.
On September 23, 1823, Mr. Young introduced a resolution into the Legislature, to the effect that it was expedient to repeal the law of No- vember 13, 1821, compelling the banks to resume specie payments in April, 1824. Upon this resolution there was an earnest debate Septem- ber 25. Mr. Grundy was in favor of the banks being compelled to pay specie, in accordance with the law as it stood. Mr. Young said that the banks were established for the benefit of the merchants, and that before specie payments were suspended, in 1819, the specie had been packed off East by the merchants. The banks in the North and East first suspend- ed, and the banks in Tennessee were then compelled to suspend in self- defense. The people did not require specie. It was the merchants who made all the noise about specie; and if specie payments were resumed, there would be no specie in the country at the end of the next six months. Resume specie payments, and the people would not be able to pay their taxes, produce would not sell, and there would not be any money in the country. Give the banks time, and the people would get out of debt. Specie payments were not resumed until 1826.
On October 27, 1823, the rates of exchange in Nashville were as fol- lows: United States and Virginia bank-notes, 31 per cent. premium;
268
HISTORY OF NASHVILLE.
specie, 30 per cent. premium; South Carolina notes, 27 per cent. pre- mium; North Carolina and Georgia notes, 22 per cent. premium; Ken- tucky notes, from 30 to 35 per cent. discount.
On November 15, 1823, the Legislature elected the following officers of this bank: George W. Gibbs, President; John McNairy, Thomas Washington, Joseph T. Elliston, Jesse Wharton, Robert C. Foster, Mat- thew Barrow, James Overton, James Stewart, Andrew Hynes, and John P. Erwin, Directors for two years. Almost immediately afterward Mr. Gibbs resigned the presidency, and on the 29th of the same month the Board of Directors resolved that the thanks of the Board were due to Mr. Gibbs for able, faithful, and diligent discharge of duty.
While there was no branch of the United States Bank in Nashville un- til 1827, yet it is interesting to note the connection between that famous institution and banking affairs in this State at an earlier date. In order to make this connection clear to the reader, it is necessary to present the following table, showing the total amount of stock subscribed and the number of subscribers in the various cities of the United States:
PLACE.
Sub- scrib- ers.
Amount.
PLACE.
Sub- scrib- ers.
Amount.
Philadelphia.
3,566
$8,378,400
Middletown, Conn
2,474
$ 617,300
Baltimore
15,610
4,014,100
Wilmington, Del.
1,078
470,600
Boston.
364
2,402,300
Cincinnati.
707
470,000
Portland
22
203,600
New Orleans.
43
408,500
Charleston
1,588
2,598,600
Raleigh
266
258,300
New York.
2,64I
2,001,200
New Brunswick
34
130,200
Richmond.
1,287
1,698,706
Portsmouth.
I4
120,600
Washington
618
1,270,800
Nashville ..
I4
53,643
Lexington.
710
958,700
Burlington, Vt.
2
6,300
Augusta.
IO2
826,300
Providence.
I44
744,900
Total
31,284
$27,633,049
The Bank of the United States, it is well known, was rechartered by Congress in 1816, on account of the wretched state of the finances of the country, the notes of the various banks being in every possible state of depreciation. The bank was recommended by the Secretary of the Treasury, Alexander J. Dallas, and was warmly supported in Congress by Henry Clay (who had previously been opposed to a national bank), William H. Crawford, and John C. Calhoun, the latter of whom, as Chairman of the House Committee of Ways and Means, reported the bill, ably advocated it, and carried it through; though Mr. Calhoun afterward insisted that he had favored it merely as a matter of expedience. Gen- erally speaking, those in either branch of Congress who favored the chartering of the bank were what were then called "Republicans," but who would at the present day be called "Democrats," while " Federal- ists" generally opposed the measure; though some of the latter, among whom were Daniel Webster, then of New Hampshire, and General Sid-
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