USA > Tennessee > Davidson County > Nashville > History of Nashville, Tenn. > Part 30
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278
HISTORY OF NASHVILLE.
President Andrew Jackson vetoed the bill rechartering the United States Bank July 10, 1832. Almost immediately afterward, on account of the prospect of being comparatively devoid of banking institutions in the State, the question began to be agitated in Nashville and elsewhere of establishing another State Bank. The Legislature had on December 20, 1831, passed an act incorporating a State Bank, but no one was will- ing to subscribe to the stock of this bank, for the reason that " the public faith of the State shall be pledged for the redemption of all notes and the payment of all debts of said bank, in proportion to the amount which the State may have in said bank ; and the private property, both real and per- sonal, of each individual taking stock therein shall also be bound and lia- ble for his stock in the same manner."
Opinions differed as to the probable course of the Directors of the United States Bank and its various branches. Some thought that it would pursue a policy calculated to increase the financial pressure then felt throughout the country; while others, even among those who opposed the recharter of the bank, thought that the branch at Nashville would do all in its power to alleviate such pressure. Some advocated the adop- tion by the Legislature of a system for the new bank which all felt to be necessary to the financial prosperity of the community, similar to that upon which the Union Bank of Louisiana was founded.
A call was issued July 23, 1832, for a public meeting of those friendly to the establishment of a real estate bank in Tennessee, to be held at the court-house on Saturday, July 28, 1832, for the purpose of discussing the subject and of appointing a committee to draft a charter for the consider- ation of the Legislature. The bill passed by the last Legislature was too rigid in its requirements to induce capital to take stock in a bank, and hence the necessity for a movement independent of that law. The Leg- islature was therefore to be asked to pass a bill which should induce cap- ital to invest in such an enterprise. Of the meeting which was held in obedience to this call H. R. W. Hill was the Chairman; and John M. Bass, Secretary. The following resolution was adopted :
" Resolved, That a committee of seven be appointed to deliberate upon the expediency of adopting measures on the part of the citizens of Da- vidson County for endeavoring to secure the establishment of a bank under the authority of the Legislature of Tennessee, and to report in the form of memorial, resolutions, or otherwise, as they may think proper."
The Chairman appointed as the committee Robert Woods, Charles Biddle, W. G. Hunt, Eastin Morris, Harry L. Douglass, R. H. McEwen, and John R. Burke. This committee reported at an adjourned meeting, held August 4, 1832, of which Andrew Hays was made Chairman. This
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BANKS AND BUILDING ASSOCIATIONS.
report cannot be given here in full, as it occupies over a column of the Republican. They said in substance and in part: The State of Tennes- see ranked in point of free population sixth among her sister States, and was almost entirely without banking capital. The Bank of the State was rapidly withdrawing its funds; and thus, instead of furnishing aid to the people, was in reality adding to the pressure upon the community. Ex- cept the Branch Bank of the United States, a very small portion of the stock of which was owned in Tennessee, and a single private bank in Nashville, there was no institution of the kind engaged in the transaction of business in the State of Tennessee. Banks were essential to the transaction of business, and the sense of the committee found expression in the resolution that the establishment of a banking company upon liberal and correct principles was required by the business and commercial en- terprises and resources of the State-especially under the peculiar press- ure of the times and amidst the doubt and uncertainty involving the fate of the United States Bank.
The committee could not discern the justice or expediency of render- ing the private estates of stockholders liable for the debts of the institu- tion beyond the amount invested by them in the stock of the bank. No prudent or judicious business man would become interested in an estab- lishment if having a small amount of stock therein would put at hazard to an unlimited extent his entire fortune. They therefore proposed the sub- mission of a memorial to the Legislature, stating that in their opinion the withdrawal of banking privileges would produce incalculable distress and ruin to a large portion of the citizens, and expressing their conviction that no State in the Union should be without a moneyed institution in which the citizens thereof had an interest and over which they had control.
A Committee of Conference was then appointed to consult with such other committees as had been or might be appointed throughout the State upon the best means of accomplishing the ends in view. This committee consisted of Andrew Hynes, Robert H. McEwen, Charles Biddle, John R. Burke, John W. Campbell, John M. Bass, and George W. Gibbs. A Committee of Correspondence was then appointed, and also a committee to obtain the names of citizens in Davidson County to the memorial which it was proposed to submit to the Legislature.
Similar meetings were held in different counties in the State, at which delegates were appointed to a bank convention which was held in Nash- ville on Thursday, September 6, 1832. As the result of the popular de- mand the Legislature passed a bill, October 18, 1832, to establish "The Union Bank of the State of Tennessee." The real estate feature which was a portion of the bill as it was introduced into the Legislature was
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HISTORY OF NASHVILLE.
stricken out, and the law as it was passed provided that the capital stock of the bank should be limited to $3,000,000. Subscription books were opened at the office of H. R. W. Hill & Co., December 1, 1832, under the superintendence of Andrew Hynes, H. R. W. Hill, Harry L. Douglass, Francis Porterfield, and Robert H. McEwen. Subscription books were also opened at Knoxville, Jonesboro, Shelbyville, Pulaski, Columbia, and twelve other places in the State. There were required to be fifteen Direct- ors for this bank, ten of whom were to be elected annually at the banking house at Nashville, seven of these ten to be citizens of Davidson County, and the other five to be appointed by the Governor. Whenever five thousand shares of the stock should be subscribed the Governor was au- thorized to subscribe five thousand shares for the State, and to pay for the same in bonds of the State amounting to $500,000, one-fourth of which should come due in fifteen years, one-fourth in twenty years, one- fourth in twenty-five years, and the remaining fourth in thirty years. The stockholders were made liable in their property, both real and per- sonal, to an amount equal to the amount of stock by them respectively held.
By the 3d of December $370,000 had been subscribed in Nashville; by the 7th, $675,300; . exclusively of the $500,000 subscribed by the State. By the roth there had been subscribed in Nashville $967,- 000; in Columbia, $140,000; in Jackson, $59,200; in Franklin, $14,- 000; in Memphis, $6,500. By the 12th there had been subscribed in Nashville, by individuals, $1,147,000. By the 13th the subscriptions in Nashville amounted to $1,773,000, and the total amount subscribed in the State, including the half-million reserved to the State, was $2,273,000.
The Directors appointed by the Governor to serve for the State were: George W. Gibbs, Harry L. Douglass, and David Craighead, of Nash- ville; Benjamin S. Tappan, of Franklin; and Robert M. Boyers, of Gallatin. On Saturday, January 26, 1833, at a meeting of the stock- holders at the office of H. R. W. Hill & Co., the following Directors were elected: Andrew Hynes, H. R. W. Hill, James Woods, John M. Bass, Samuel G. Smith, William Nichol, Willoughby Williams, Robert H. McEwen, Matthew Watson, and Samuel Seay. On the 29th of the same month the Directors elected George W. Gibbs President, and on the 7th of February, 1833, A. Vanwyck was elected Cashier. At the same time Moses Norvell was elected Teller; and Thomas P. Adams and Samuel Hamner, clerks. A branch bank was established at Jackson, of which John W. Campbell was chosen Cashier. The bank in Nashville commenced business about the first of March, 1833, with a paid up capi- tal of $200,000. General George W. Gibbs, President of this bank,
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BANKS AND BUILDING ASSOCIATIONS.
went East in April, 1833, for the purpose of selling the State bonds, which he did sell in Baltimore at five per cent. premium, thus realizing a profit to the bank of $37,500. On January 6, 1834, the same Directors and officers were re-elected to their old positions. On July 29 following President Gibbs resigned .his position, and John M. Bass was elected President. January 5, 1835, John M. Bass was re-elected President, and Mr. Vanwyck was re-elected Cashier. October 27, 1835, this bank moved into a new building erected for its use the building standing on the corner of Union and Cherry Streets. On January 4, 1837, John M. Bass was re-elected President, and John Sommerville was elected Cashier.
An article appeared in the Republican on March 25, 1833, entitled "Western Credit," which was an attempt to defend the credit of the Western country and also at the same time the management of the United States Branch Bank at this place. This article was called forth by a re- port of the minority of the Committee on Ways and Means of the House of Representatives. The report seemed to render it necessary to make a statement involving the nature and extent of the business done at this branch bank, as well as to show that the citizens of Tennessee were able to meet their obligations with it. The minority report, published on the 23d of March, 1833, stated that seven-tenths of the bill debt at Nashville was secured by paper called " Race Horse Bills," and that to a great ex- tent the same parties who were engaged in the extensive business of drawing and redrawing were principals and securities in the notes dis- counted, which last were as difficult to collect as debts based upon bills. In order to defend the credit of this section of the country, the following statement of the condition of the United States Branch Bank was pub- lished at this time:
Notes under discount, March 17, 1832
$2,153,107 47
Protested notes in suit. $ 23,218 10
Notes deemed doubtful. 6,769 oc- 16,449 10
Total
$2,169,556 57
Bills drawn in anticipation of the crop of IS31 . .. $2,728,052 16
Balance of protested bills in suit. $5,795 96 One bill out
1,586 00- 4,209 96- 2,742,262 12
Total discounts
Amount of notes under discount March 30, 1833. . . .
$4,911, SI8 66 $1,430,011 92
Notes protested and in suit $ 61,301 08 18,605 50 42,695 58
Notes worth 50 cents
Total
$1,472,707 50
Bills drawn in anticipation of the crop of 1832 .. . .. Bills protested $2,797 94
.$2,180,661 53
One bill out
2,506 00- 291 94 2,180,953 47
Total
$3,653,660 97
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HISTORY OF NASHVILLE.
Subtracting the total aggregate March 30, 1833, from that of March 17, 1832, there remained $1,258,157.72, showing the decrease in aggre- gate discounts in twelve months.
Circulation, March 31, 1832 $2,898,635 00
Circulation, March 20, 1833. 1,446,130 00 Reduction $1,452,505 00
Real estate, March 20, 1832, banking house
$ 15,000 00
Town and country property received for debts
56,516 04
Total.
$ 71,516 04
Present estimated value.
$ 53,890 00
Probable loss $ 17,626 04
Probable loss and suspended debts. 10,888 75
Losses chargeable to the contingent fund.
405 28
Cash deficiencies for counterfeits received.
392 00
Total losses, actual and estimated, for the five years and seven
months of its work. $ 29,312 07
This statement established several facts with reference to the branch bank, as follows: I. That within twelve months preceding March 20, 1833, it had curtailed its aggregate discounts to the amount of $1,258,- 157.72; its notes, $696,849.07; and domestic bills, $561,308.65. 2. That within the same period its notes and drafts in circulation had been reduced $1,452,505. 3. That the entire amount of losses, actual and estimated, was only $29,312.07. It followed therefore that the bank had been judiciously managed and was in every way entitled to confidence.
With reference to the "Race Horse Bills," the Republican said that a "Race Horse Bill" or "Kite," as it was called in Europe, was a bill drawn by a person who neither had nor expected to have funds in the hands of the drawee with which to meet the bill, and this definition served to point out the error into which the minority of the Congressional Committee of Ways and Means had fallen. The minority regarded all redrafts as "Race Horse Bills;" whereas a redraft might be just as much a real transaction as the original bill. The redraft was really caused by a failure of the crop upon which the planter depended for payment of his original draft, and was based on the crop of the next year, just as the first draft was based on the one that failed. And the Cashier of the branch bank said that in point of fact of the $2,742,262.12 of domestic bills purchased in 1832, which matured between March and November of that year, not more than $600,000 was redrawn. Hence drafts to the amount of the difference were paid. It was forcibly argued upon the strength of this fact that the credit of the Western coun- try was good. The additional statement was made that the united ac- counts of the President and twelve Directors of the branch bank did not
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BANKS AND BUILDING ASSOCIATIONS.
amount to $1,000, which was adduced as another evidence that the stand- ing of the branch bank was good.
The question as to the security of the debts due the branch bank was of considerable interest to the public, and a meeting was held on the 28th of March, 1833, of which Andrew Hynes was made Chairman, and W. G. Hunt, Secretary, at which resolutions were offered by John P. Erwin to the effect that a committee of five persons be appointed to examine into the pecuniary condition, commercial credit, and actual resources of the Western country, and particularly of that portion of it in the imme- diate vicinity of Nashville, with a view of ascertaining if possible the true character of the ultimate security of the United States Bank in its branch bank in this place. The committee appointed consisted of John P. Erwin, H. R. W. Hill, James Woods, Harry L. Douglass, and W. G. Hunt. The report of this committee was presented to an adjourned meeting held April 2, and was a very strong one in favor of Western credit and of the branch bank. This report attracted wide attention throughout the country, and was published with severe strictures by the Globe newspaper at Washington, D. C. But notwithstanding this and other similar attempts to show that the report was in a measure self-con- tradictory, the confidence existing in this section of the country in the soundness of the debt due to the branch bank remained unshaken. Among the Directors of the branch bank were some of the old and well- tried friends of President Jackson, who could not have been induced to falter in their devotion to his fortunes. Even the famous veto of 1832 found among the Directors open, zealous, and influential advocates; and although the Jackson men in Tennessee could see a great deal in the conduct of the mother bank justly subject to severe animadversion, yet they believed the condition of the debt due the branch bank at Nashville was worthy of confidence and the conduct of its Directors worthy of all praise.
Josiah Nichol, President of the branch bank, fell a victim to the cholera on Friday, May 31, 1833. On the next day a meeting of the Directors was held for the purpose of taking suitable action with reference to his death. There were present at this meeting Henry M. Rutledge, Robert Farquhar- son, George Crockett, Francis B. Fogg, Thomas H. Fletcher, James P. Clark, James Bell, Jacob McGavock, and Henry Ewing. Henry M. Rut- ledge was elected President pro tem. John Sommerville was then Cashier. In September, 1834, the following gentlemen were appointed by the Bank of the United States, Directors of the branch bank in Nashville: Thomas H. Fletcher, Henry M. Rutledge, James P. Clark, Henry Ewing, John Shelby, Thomas Washington, Foster G. Crutcher, Robert Farquharson,
284
HISTORY OF NASHVILLE.
George Wilson, Joseph B. Knowles, Andrew Erwin, Jr., and Joseph P. Brown. Thomas H. Fletcher was elected President; and John Sommer- ville, Cashier.
On June 17, 1835, the United States Bank at Philadelphia ordered the branch bank at Nashville to collect its old debts by the 4th of March, 1836, and to close its new business within six months from November I, 1835, in order to enable the office at Nashville to be closed by May I, 1836. No new business was taken by the branch bank after January 4, 1836, and its affairs were soon afterward entirely wound up.
The Planters' Bank was incorporated by the Legislature, with a capital of $2,000,000, November II, 1833. Books were opened at Nashville for subscriptions to the stock of this bank, January 1, 1834, under the superintendence of Francis B. Fogg, Samuel G. Smith, Andrew Hynes, H. Petway, M. D. Cooper, James Erwin, Joseph Vaulx, John Williams, William M. Berryhill, Ephraim H. Foster, Thomas Washington, George Crockett, James P. Clark, John Shelby, and Foster G. Crutcher. Sub- scription books were also opened at Columbia, Carthage, Winchester, Athens, and thirty-six other places. The style of the corporation.was "The Planters' Bank of Tennessee," and its charter was to expire Jan- uary 1, 1863. The charter provided that there should be eleven Direct- ors, elected annually.
By the 7th of January, 1834, there had been subscribed in Nashville, to the stock of this bank, $1,036,500, and on March 3 the following Directors were elected: George Crockett, John Estell, Francis B. Fogg, Andrew Hynes, John M. Hill, E. B. Littlefield, Robert H. McEwen, H. Petway, Joseph Vaulx, Matthew Watson, and John Williams. On the 4th Edward B. Littlefield was elected President of the bank; and Nicho- las Hobson, Cashier. On March 2, 1835, the same President and Cash- ier were re-elected, and on March 6, 1837, Matthew Watson was elected President, and Nicholas Hobson was re-elected Cashier.
In 1837 there began to be felt another period of great commercial de- pression. This depression was caused in the main by the great extent of land speculation which had been going on for the past four or five years. This is sufficiently indicated by the following figures: In 1833 the re- turns from the sale of public lands amounted to $3,900,000; in 1834, to $4,800,000; in 1835, to $14,700,000; in 1836, to $24,800,000; in 1837, to only $6,700,000, on account of the stringency beginning to be felt. There were in fact other natural causes for the depression which at that time was so serious; but the discussion of them is not germane to the purposes of this work. But it is worthy of notice that the removal of the deposits from the United States Bank to State banks gave a great im-
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BANKS AND BUILDING ASSOCIATIONS.
petus to the formation of small banks in the several States of the Union, and these small banks could not be safe except under a system of convert- ibility. The Administration, therefore, in its attempt to introduce a specie currency pulled down the very institutions which it intended to build up.
On May 22, 1837, when the signs of trouble ahead in the commercial world became unmistakable, a meeting was held in Nashville at the court-house, of which Albert H. Wynne was made Chairman; and E. D. Hicks, Secretary. This meeting was called for the purpose of discuss- ing the advisability of the suspension of specie payments. This question had then been attracting considerable attention throughout the country for several weeks, but so far nothing had been done in Nashville. At this meeting the following preamble and resolutions were adopted :
" Whereas information has reached us that many banking institutions of the North, East, and South, from causes which it is not now necessary to detail; have suspended specie payments; and whereas it is certain that others, and especially the banks of New Orleans, with which the banks of the State of Tennessee are in a good degree connected, will also be compelled in a very short time to suspend payment of their notes in specie; and whereas by those relations which necessarily and inevitably exist and have existed between the various banking concerns of other States and those of our own, our own banks are driven to the alternative either of suspending specie payments for a time, or of greatly distressing the country by an immediate collection of their debts, and a consequent reduction of their circulation, which is in fact the only existing currency of the country; and whereas we have the utmost confidence in the sol- vency and ultimate responsibility of our banks, and in the main in the solvency and responsibility of the debtors thereto; therefore,
" Resolved, That we as a matter of prudence and policy, and with a view to the benefit of the country, do recommend to the several banks of the State of Tennessee to suspend specie payments for the present at the several places where their notes are payable.
" Resolved, That we recommend to said banks, as a course dictated by good policy, a course demanded by their own and the interests of the country, to give all reasonable indulgence to their debtors, and not from a vain point of honor, impartially to those who are involved in only tem- porary embarrassments.
" Resolved, That we recommend to the said banks to exercise a liberal policy in receiving on deposit the notes of each other, and in giving countenance thereto, and in receiving on deposit the notes of such South- ern banks as upon their investigation shall be deemed ultimately solvent and responsible.
286
HISTORY OF NASHVILLE.
" Resolved, That having a high confidence in the responsibility of all the banks of our State to meet their engagements, we will use our best endeavors to sustain their circulation and to justify and sustain the steps above recommended.
"Resolved, That the President, Directors, and Company of the Nash- ville Bridge be respectfully requested to issue to such an amount within their charter as they may deem expedient small change bills as a mat- ter of convenience."
Such was the attitude of the people toward the banks at the beginning of a crisis which all deemed inevitable. The next action of the State Legislature with reference to banking institutions was the incorporation of the Bank of the State of Tennessee, by a law passed in January, 1838. This was a bank on the same general plan as the previous State banks, with the principal bank at Nashville, and branch banks at various places in the State outside of Nashville.
The Board of Directors of this bank were originally as follows: Will- iam Nichol, O. B. Hays, John Shelby, H. Ewing, G. W. Campbell, of Nashville; J. W. Clay and J. W. Horton, of Davidson County; N. Per- kins, of Williamson County; J. Currin, of Rutherford County; S. R. Anderson, of Sumner County; B. T. Motley, of Wilson County; and T. F. Bradford, of Bedford County. The capital of the bank was fixed at $5,000,000. In February, 1838, William Nichol was elected Presi- dent; and Henry Ewing, Cashier. It went into business June 28, 1838, with a paid up capital of $1,000,000. The capital of the bank was owned by the State. The banking house was at the lower corner of the public square and Market Street. The Directors were appointed every two years by the State.
It was not long before the course of this bank in its dealings in ex- change began to give great dissatisfaction to the people. On July 18, it was made known through the public press that the Tennessee, Planters, and Yeatman, Woods & Co.'s banks were charging for Philadelphia ex- change 10 per cent. premium, and that the Tennessee Bank was charg- ing for New York exchange II per cent. The rates had been advanced within a day or two previous, and were considered very high. At first but little complaint was made, because it was confidently expected that the rates would very soon be brought down; but as the rates were main- tained, the dissatisfaction became quite pronounced. The Bank of the State of Tennessee, on account of the peculiar relation it sustained to the old banks, had virtual control of the exchange market, and was so held responsible in the public mind for the high rates of exchange. This pe- culiar relation was caused by the old banks having suspended specie pay
Marechal,
287
BANKS AND BUILDING ASSOCIATIONS.
ments. The course of the new State bank formed a striking commen- tary, it was thought by some, of the policy of resorting to State banks for relief in the absence of a National bank. But the exorbitant rates of exchange were not the only fault found with the banks. Their policy was not steady, rates of exchange and discount could not be relied upon as being the same to-morrow as they were to-day. The policy of the State Bank was also unsteady. When the branch bank of the United States was closed there was a substitute for it established; then another bank was created as a check on the first one, and finally a third bank was incorporated as a relief from the operation of the other two, and by this time the banking capital of the State amounted to $10,000,000. And all of this capital was to make up for the loss of a single branch bank operating with a capital of $1,000,000. The general result in the in- crease in the number of banks was the depreciation of the currency, to the injury of the merchant and the planter, the encouragement of specu- lation, and the involvement of the country in distress.
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