USA > Tennessee > Davidson County > Nashville > History of Nashville, Tenn. > Part 29
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ney Root, of New York, were in favor of a bank of the kind, but insist- ed that a bank should be based upon nothing but cash.
The people in Tennessee were divided in opinion and sentiment in ref- erence to the constitutionality and policy of the establishment of such an institution as a United States Bank. Those who had subscribed for stock in the bank in Nashville were notified on December 4, 1816, by Jenkins Whiteside and James Trimble that they were duly authorized by the Pres- ident and Directors of the Bank of the United States to receive the sec- ond installment of said subscription, to wit: On each share of said capital stock $10 in silver coin and $25 in either coin or in United States stocks at the rate prescribed in the act of incorporation; that they would be in Nashville on January I, and remain until the 23d, for the purpose of re- ceiving the payments. The subscribers, they said, had the privilege of paying this second installment at the place of original subscription within the time mentioned, or at the Bank of the United States in Philadelphia. On or about June 1, 1817, the Directors of this bank gave notice that the third and last installment of stock subscription in this bank was payable on July I of that year. Those subscribing in Nashville were to pay either at the bank in Philadelphia or at its office in Lexington, Ky.
There was an effort made to establish a branch of this bank in Nash- ville, but for various reasons it did not succeed. Among these reasons was the action of the Legislature of the State, which on November 17, 1817, passed an act taxing all bank stock actually paid into any bank in the State ten cents on each $100, and taxing all banks not chartered by the laws of the State, or any branch of such bank, or any office of discount or deposit, $50,000 for each and every year that the same should be con- ducted or carried on in the State, the tax to be due and payable within twenty days from the time such bank or branch thereof should go into business or operation. The Legislature also adopted a resolution a few days subsequently, as follows :
" That the establishment of any bank, branch of any bank, or moneyed institution, within the limits of this State, not chartered by the Legislature thereof, is against the public interests and is not approved of by the pres- ent Legislature."
The people were still divided upon the question, some approving and some disapproving of the action of the Legislature. The latter class con- sidered it an outrage on the interests of the people of the country. The benefits which would have been derived from the establishment of this great bank were set forth by them as follows: I. It would have increased the industries of the country, and have augmented the aggregate produce for market. 2. It would have regulated the currency of the State and
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HISTORY OF NASHVILLE.
have facilitated exchanges. 3. It would have had a tendency to cement the Union. The deficiency of active capital which must necessarily exist was set forth as follows: The banks of Tennessee then in operation had only $4,000,000 in the aggregate, and about one-half of that amount was withdrawn from circulation, leaving only $2,000,000 as a circulating me- dium. It was estimated that there was a deficiency of $2,000,000 when the Legislature met. As proof of the existence of this deficiency atten- tion was called to the high rate of interest then ruling, which in some cases was as high as 20 per cent. The enterprising citizen was therefore at the mercy of the usurer, and a speedy remedy was earnestly demand- ed. But instead of securing the needed capital the Legislature had re- fused it admission into the State. William Young, a member of the Leg- islature, entered a protest against the adoption of the resolution, as quoted above, believing, as he said, that the Legislature had not the power to ef- fect the object intended to be accomplished ; and because, even if it had, it would be bad policy to exert it. A national bank was a substantial sup- port to the Government itself, a cement to the Union, and a benefit to the people at large. National credit would be secured, the mutual ties be- tween the several States would be strengthened by the ligaments of pe- cuniary interest, and the trade and prosperity of individuals would be en- larged by a medium of universal circulation. He also thought that if the State of Tennessee could prohibit the establishment of a branch of a United States Bank within her limits every other State could do the same thing, and thus the beneficial design of that institution would be thwarted and destroyed. The charter of the bank guaranteed to the subscribers thereto the liberty of establishing offices of discount and deposit at any point within the limits of their territory. This was a solemn contract, the Congress of the United States was a party thereto, and the Tennessee delegates in Congress had supported the measure and voted for it, etc.
Others took the ground that although the existence of the bank was the outcome of an aristocratic principle, and to be opposed on that ground, yet the bank was a necessity of the times, and should be weakened for harm as much as possible, and strengthened for good by the dissemination of its parts to all parts of the United States. The common good would in this way be promoted instead of injured. Offices of discount and de- posit had already been established at Portsmouth, N. H., Boston, Prov- idence, Middletown, Conn., New York City, Baltimore, Washington, Richmond, Charleston, Savannah, New Orleans, Cincinnati, and Lex- ington, Ky. Why should not Nashville likewise have a branch ?
Thus the people reasoned upon the great question of the times, and in July, 1817, their hopes were raised by the announcement that the officers
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BANKS AND BUILDING ASSOCIATIONS.
of the United States Bank had been considering the act of the Legisla- ture as above quoted, and had determined that it was inoperative and nuga- tory; and that, notwithstanding the opposition of the Legislature, they would establish a bank within the State. Those of the people who fa- vored the supposed proposed action of the Directors of this bank said that it must be gratifying to the people of Tennessee to find that the gentlemen at the head of the institution took the same view of the extraordinary ac- tion of the Legislature that was entertained by the great majority of the most enlightened citizens of the State. A writer for the Nashville Whig had the following remarks:
"In the State of Tennessee, where there is not one-third of the capital required; where all the existing capital is invested in trade and specula- tion; where the dividends on bank stock are only from 10 to 12 per cent. per annum, and the broking and shaving interest is from 30 to 50 per cent; where it is an acknowledged fact that in all the banks of Ten- nessee there is not $20,000 shifting capital; and where no man can be accommodated for any sum, however small; where the farmers are com- pelled to sell their products on long credit, for want of money in the coun- try to perfect prompt payments at the time they make their sales-that under these circumstances the people should be told that it would be to their disadvantage to receive into the State an increase of capital of $1,000,000, is certainly strange."
Such was the interest taken in the establishment of a branch of the United States Bank in Nashville that a meeting of the citizens of David- son and adjoining counties was held at the court-house in Nashville Jan- uary 31, 1818. Honorable Jesse Wharton was made Chairman; and O. B. Hays, Secretary. Felix Grundy stated the object of the meeting, dwelling at length on the beneficial effects that would certainly accrue from the establishment of a branch of the United States Bank at this place. After his speech was concluded, he presented the following res- olutions on the subject, which were unanimously adopted:
" Resolved, That it is the sense of this meeting that the late law passed by the Legislature, taxing banks to be established in this State by any au- thority other than the laws of this State, while the banks established by the authority of this State are not taxed, is impolitic and unconstitu- tional.
"Resolved, That it is the sense of this meeting that the establishment of a branch of the United States Bank in this place would be beneficial to the stockholders, acceptable to the people, useful in its operations, and greatly conducive to the prosperity and best interests of Tennessee.
" Resolved, That a committee of seven persons be appointed by the
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HISTORY OF NASHVILLE.
Chairman respectfully to address the President and Directors of the Unit- ed States Bank on this interesting and important subject, and request the immediate establishment of a branch of that institution in this place."
Whereupon Felix Grundy, O. B. Hays, John P. Erwin, George W. Gibbs, Jenkins Whiteside, Alfred Balch, and Andrew Hynes were ap- pointed the committee by the Chairman, for the purpose expressed in the above resolutions.
The communication of this committee was duly forwarded to Philadel- phia, but the object of the meeting was not accomplished. On April I, 1818, the Board of Directors of the National Bank at Philadelphia de- clined to locate a branch in this place, on account of the restraining act of the Legislature. On May 20, 1819, Felix Grundy, Jenkins Whiteside, and O. B. Hays again urged the establishment of a branch here, the Su- preme Court of the United States having then recently decided that no State had the constitutional right to tax the National Bank or any of its branches. The bank, however, again declined. Several years then elapsed before the next attempt to secure a branch of this bank in Nash- ville, and then only because the State Legislature of its own accord re- pealed the law which had been the means of keeping it away. This was on November 15, 1826; and on December I following Governor William Carroll transmitted to the President of the United States Bank at Phila- delphia a certified copy of the repealing act. On January 22, 1827, Gov- ernor Carroll wrote to Nicholas Biddle, urging the claims of Nashville to a branch of the bank, referring to the incompetency of the State banks to pay specie and at the same time afford the facilities necessary to the trade and business of the country. A petition followed the letter of Governor Carroll, signed by ninety-four of the prominent individuals and firms in business in the city. Among these signers' names were those of G. W. Campbell, Josiah Nichol, John Nichol, W. B. Lewis, Stephen Cantrell, Andrew Hynes, Wilkins Tannehill, Ephraim H. Foster, Robert Whyte, J. C. McLemore, and Boyd McNairy. The letter of Governor Carroll and the petition had the desired effect, and a branch of the United States Bank was established here in August, 1827. The President of this branch was Josiah Nichol; and the Cashier, John Sommerville. At first it was lo- cated in the brick building at the north-west corner of the public square and College Street. Later it moved to the building now occupied by the First National Bank, which is the oldest bank building now in the city.
In the meantime the Legislature of the State passed an act, on Novem- ber 15, 1817, establishing several banks in different parts of the State. Among these banks was one named the "Farmers and Mechanics' Bank" at Nashville, which was to continue until January 1, 1841. James
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BANKS AND BUILDING ASSOCIATIONS.
Stuart, Thomas Hill, William Carroll, Eli Talbot, Thomas H. Fletcher, Felix Robertson, Samuel Elam, Washington L. Hannum, and Jenkins Whiteside were appointed by the Legislature to serve as Directors until January 1, 1820.
Books were opened for the subscription of stock in this bank at the counting-room of Thomas H. Fletcher, on College Street, February 17, 1818, under the direction of Mr. Fletcher, James Stuart, and Washington L. Hannum. Ten dollars was required to be paid on each share. This sale was postponed, however, on account of the action taken by the citi- zens with reference to the establishment of a branch of the United States Bank; but it was soon learned that the officers of this latter institution had determined not to give the State of Tennessee a branch of the bank until the law of the Legislature should be repealed. On March 21, there- fore, they determined to proceed with the organization of the bank. Books were opened on April 13, 1818, at the counting-room of Mr. Fletcher, under the superintendency of himself, Jenkins Whiteside, Felix Robertson, and Thomas Hill.
Jenkins Whiteside was elected President of this bank; and M. Norvell, Cashier. By July, 1818, it had sold all its stock, and was ready to com- mence business. Its operations actually began on August 10, 1818. The stock was owned by about two hundred different individuals, and one- fifth of it was paid-not one dollar of it in paper. It was said that no other bank in the country had commenced business with so much solid capital. The names of the original Directors and officers have already been given. In June Samuel Elam, Eli Talbot, and Thomas Fletcher resigned, and were succeeded by O. B. Hays, Isaac Sitler, and G. G. Washington.
In 1819 the distress which followed the war of 1812-15 began to be se- riously felt in this State; and, as has been stated in connection with the Nashville Bank, suspension of specie payments became necessary. The Farmers and Mechanics' Bank suspended on June 18 of this year. The announcement was made in the interest of this bank that the step had not been taken because of the bank's inability to pay specie, but from motives of policy only. This was the first bank to suspend, and it was stated that the other banks were resolved not to suspend; but if this was their resolve, it was soon abandoned. The demand for specie was so great that it was believed there was not enough specie in the country to satisfy it. Upward of $30,000 had been withdrawn from this bank alone within the two months preceding its suspension. If it were to be kept in the coun- try, there would have been no cause for alarm; but when it was known that it was to be taken out of the State for exportation, or to supply the
18
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HISTORY OF NASHVILLE.
exhausted condition of other banks, and that nothing would be left but depreciated paper currency which no one could be compelled to take, the consequences must necessarily be serious. It was thought the sus- pension would maintain the credit of paper money.
With reference to the manner in which the country was being divested of its specie, it was stated in the public prints, in July, 1819, that within the previous four or five months there had been withdrawn from the bank at Fayetteville $40,000 of the precious metals by peddlers; and, taking this as a basis of calculation, it seemed easy to form an estimate of how much specie was being taken out of the State by venders of "shawls a yard square and an inch thick, three for a dollar." "Hence we see what the policy of our wise Legislature has led to, in encouraging vend- ers of goods, like Pindar's razors, made to sell, by taxing at a less rate peddlers of goods than they tax our own merchants."
At the time of the suspension of specie payments by this bank, in or- der to retain the confidence of the community its officers made a request that a committee be appointed by the branch bank of the State of Ten- nessee, for the purpose of examining its financial condition and making that condition public. The committee appointed consisted of Henry ' Crabb, Thomas Ramsey, and John P. Erwin. Their statement was sub- mitted to the public on June 25, 1819, by Jenkins Whiteside, President, and William Carroll, G. G. Washington, and Thomas Hill, and was as follows:
RESOURCES.
LIABILITIES.
Real estate.
$ 11,008 54
Stock paid in.
$160,350 00
Bills receivable.
310,240 4I
Circulation
94,092 00
Bills of exchange
13,860 73
Specie on hand.
20,006 52
Notes of other banks.
2,337 00
Deposits of banks 27,726 65
Deposits of individuals 30,931 25
Profits
13,453 20
Post notes due. 13,300 00
Post notes not due.
17,600 00
Total $357,453 20 Total. .$357,453 20
Immediately after this committee made its report, as noted above, an- other committee was appointed, consisting of John Harding, Michael Campbell, Robert Whyte, G. W. Gibbs, Andrew Hynes, Nathan Ewing, and Daniel A. Dunham, to examine into the affairs of the bank and to make a report to the stockholders. On July 6 this committee made its report, to the effect that the affairs of the bank had been judiciously man- aged, that the notes and other debts due to the bank were well secured, that the amount of notes in circulation was small in comparison with cap- ital stock paid in, and that the amount issued had never been equal to the amount authorized by the charter. They also approved the report made by the committee from the branch bank, and assured the stockhold-
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BANKS AND BUILDING ASSOCIATIONS.
ers that the bank was safe and entitled to the confidence of the commu- nity.
The failure of the Nashville Bank created suspicions that the new State Bank was not in the soundest possible condition. Every one could see plainly, too, that the bank had signally failed in all of its missions. It had not benefited the people; neither had it benefited the State. Debtors paid from 12 to 25 per cent. on the money they borrowed from the bank, while the State netted only 3 per cent. on the money invested, even if the bank were honestly conducted.
" Between the adjournment of the General Assembly, in 1827, and its re-assembling, in 1829, three hundred judgments against the debtors of the bank had been recovered in Nashville alone. In 1829 Governor Car- 'roll said: 'As, however, the avowed causes which induced the Legisla- ture to establish the Bank of the State of Tennessee have happily passed away, a fit occasion seems to present itself to inquire whether a due re- gard to sound policy and to the best interests of the country does not re- quire that measures should be taken to settle the affairs of the institution by calling in its debts with as little delay as possible, taking care not to injure or oppress those who are indebted to it.' In pursuance of this suggestion, a resolution was passed directing the Committee on Banks to inquire into the policy and expediency of closing the concern and wind- ing up the business, and repealing the charter of the bank. The commit- tee went earnestly to work. The managers of the bank became fright- ened. On January 2, 1830, the Capital was startled by the announcement that gross irregularities had been discovered in the State Bank, and that the Cashier, Joel Parrish, was a defaulter to a considerable sum. Being pressed by the committee, Parrish conceived the daring design of making away with the books of the bank, in order to destroy the only evidence upon which he could be convicted. He and the clerk were arrested, but not until the books had been secreted.
"The amount of the deficiency was declared to be very nearly $200,- 000, a large part of which had been drawn out by friends of the Cashier who had nothing to their credit. The clerk had embezzled about $15,- 000. The latter obtained an entire release by giving a lien upon real es-
tate. Parrish eventually returned the books of the bank, upon an agree- ment that he should not be criminally prosecuted. New officers were elected, and were instructed to bring the affairs of the bank to a speedy close. A law was passed, directing the funds of the bank remain- ing after paying all indebtedness to be turned over to the Public School Commissioners in the various counties. In 1833 the committee appointed to report upon the winding up of the affairs of the bank estimated the
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HISTORY OF NASHVILLE.
probable losses in closing up the bank's business to be about $153,344.05. The whole profits from the bank amounted to $341,639.62, and the entire expenses had been $153.884.26, leaving a balance of $187,755.36, a very little more than enough to cover the estimated losses." *
In this connection it may not be uninteresting to present some portions of the various reports made to the Legislature in detail, showing to some degree the amount of labor gone through with in order to get the affairs of the bank in definite shape before the public. Joseph Phillips, Pres- ident of the bank, made a report to the Legislature under date of Sep- tember 24, 1831, in which he made the statement that the late Cashier was charged with $1,120,059.56, and credited with $1,069,500.89, leav- ing a balance unaccounted for of $50,459.67; to which must be added ledger balances or overcheckers of $89,361.59, making a total defalca- tion of $139,820.59. This is what the books showed upon first examina- tion; but they had been so loosely kept that when cash balances were brought up, and proper credit was given to individuals who appeared upon first examination of their accounts to be indebted to the bank, but who were in reality not so; and when others who were really indebted to the bank, but who did not know that such was the case, had paid the amounts due by them, and these with other corrections made, there was found to be due the cashier on the above apparent defalcation a credit of $72,125.46, reducing the defalcation to $67,695.13. Other statements were made public at the time, one of which was that the most apparent demands against the bank were as follows: Notes in circulation, $27,- 862.83; due the Treasurer on deposits, $29,562.83; due individuals on deposits, $21,559.37; academy fund, $16,887.31. Total, $95,841.84. The means in possession of the bank to meet these demands were as follows: Specie, $64,553; notes on other banks, $6,293.16; deposits in other banks, $37,504.43; notes discounted, $122,642.76. Total, $231,- 093.35. The President said that it would be seen, therefore, that the bank could easily meet the demands that would be made.
Some time after the meeting of the Legislature, in the fall of 1831, the Committee on Banks, to which was referred that portion of the Govern- or's message recommending that the concerns of the Bank of the State of Tennessee be wound up, reported as follows :
"There will inevitably be considerable loss sustained. There is due the bank $226,476.96, including the $47,284.87 for which Joel Parrish, late Cashier, is a defaulter; also suspended debts amounting to $18,913. 62, and overcheckers and ledger balances equal to $66,197.89, and also $7,252.50-leaving of good debts $153,026.59 due at the principal bank.
# Phelan, p. 265.
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BANKS AND BUILDING ASSOCIATIONS.
The real estate owned by the bank amounts to $58,597.15, upon which there will be a loss of about 25 per cent., leaving the property really worth $48,949.94, which, added to the good debts, makes $196,974.53."
The final statement of the committee showed the total amount to which the bank was entitled to be as follows: Amount due at the principal bank, $226,476.96; amount due at the agencies, $267,531.86; real estate, $58,- 597.25. Total, $552,606.07. The bad debts were as follows: Due by Joel Parrish, $47,284.87; overchecking, $18,913.02; losses on notes and judgments, $7,252.50; loss on real estate, $14,649.31; balance against former agents who were delinquent, $9,394.91 ; balance in hands of acting agents unaccounted for, $12,486.05; loss in debts at agencies, $16,607.15: total, $126,587.81, leaving a balance of $416,018.26. The amount of capital received at the principal bank arising from land sale and land entry in the Hiwassee district was $392,908.59; that from the twelve and a half cent land sales north of the Congressional Reservation Line was $78,924.67: in all, $471,833.26, leaving the bank indebted to the State $45,815.19. But the State owed the bank for money borrowed to build the penitentiary, $53,657.67, and hence the balance in favor of the bank was $7,842.48. There had been received at the principal bank and agencies in interest $207,546.79, from which it was necessary to de- duct the expenses of the principal bank and agencies, $84,179.90, leav- ing $123,366.89, to pay which the bank had $126,587.81 in bad debts.
Taking into account, also, the branch bank at Knoxville, it was found that $624,796.05 had been received from sales of land and entries on land in the Hiwassee district, and $120,768.46 upon entries of land north and east of the Congressional Reservation Line, making a total of $745,676.24 as a net amount in the hands of the principal and branch banks; to pay which the principal bank had in good debts $426,018.07, and the branch bank $227,918.86, together with the amount of interest after deducting expenses, or a total amount of $653,936.93, to which must be added $63,994.20, the amount left in the two banks after paying all demands against them. This gave a total sum of $717.931.13; and de- ducting this from $745,676.24, there remained $27,745.II against the bank; but, taking into account the $53.657.67 which the bank had ad- vanced to build the penitentiary, there was a balance in favor of the bank of $25,911.56. In addition to this sum there was due the bank $503.50 which had been paid to the Board of Internal Improvements, which made an aggregate sum of $26,416.06 in favor of the bank at the close of the legislative investigation of its affairs. From this time on for several months the concerns of the bank were in process of settlement, and the people soon began to see and feel the necessity of other banking privileges.
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