Business: Caldwell Crash

The financial South was excited fortnight ago by rumors concerning the big investment house of Caldwell & Co. (pronounced Cald-well), at whose head is Rogers Clark Caldwell, potent & popular banker, promoter, huntsman. Fears were partly alleviated by the announcement that a committee of the Nashville Clearing House had taken over the firm’s affairs (TIME,, Nov. 17). But last week it became apparent that the difficulties of Caldwell & Co. were too great for the Clearing House committee. As a result a financial storm swept over Tennessee, the wake of which was felt far & wide.

A bond-buyer for Caldwell & Co. was Fred Dean, Alabamian. Last week he said the firm owed him $7,000, asked for a receivership. The receivership was granted and by the end of the week Tennessee bankers had witnessed the following fearful sequence:

¶ In Nashville, Bank of Tennessee, a Caldwell & Co. subsidiary, was taken over by the Superintendent of Banks soon after the first Caldwell trouble. Although this bank did not carry individuals’ accounts, it ranked high in the South’s financial structure. Last week a report on its condition showed liabilities of $13.900,000, assets of $12.600.000 in securities, $32.55 in cash. Bank examiners announced that $4.800.000 of the Bank’s assets had been dissipated.

¶ Liberty Bank & Trust Co., Nashville, placed its affairs in the hands of the Superintendent of Banks, started to liquidate.

¶ Rumors and fear began spreading throughout the State. American National Bank announced it was going to merge with Fourth & First National Bank of Nashville. James Erwin Caldwell, bewhiskered 76-year-old father of Rogers Caldwell. announced that he would resign as president of Fourth & First National Bank, retire. The combined banks will have total assets of $86.000.000, be second in the South only to First National Bank of Atlanta. The deal brings the control of 17 branches. 18 affiliated institutions to American National’s fold, was viewed as the most constructive move during the troubled week.

¶ Armored cars and an airplane brought gold to Maury National Bank and stopped a run. In Knoxville, Holston-Union National Bank failed after a brief run, starting runs on other banks. Two of these hurriedly announced they would merge.

¶ In Jacksboro, Campbell County Bank, with $29.000 on deposit with Holston-Union, was forced to suspend.

The excitement spread to Memphis. Union Planters National Bank & Trust and Manhattan Savings Bank & Trust Co. announced that Rogers Caldwell and his son. Meredith Caldwell. had resigned from the directorates of these banks. Citizens of Memphis formed a “vigilance committee” of 100.

¶ Rumors in Nashville started a long, heavy run on Tennessee Hermitage National Bank. It was taken over by Commerce Union Bank of Tennessee, other banks cooperating.

¶ A group of stockholders in Inter-Southern Life Insurance Co. asked for a receiver, said Caldwell & Co. had cheated that company of $8.400,000 by buying stock for it in Missouri State Life Insurance at $88 a share when the market price was $32.

¶ “Protective measures” caused six banks in Louisville to close their doors. Notable among these was ancient National Bank of Kentucky. A bank in Franklin, Ky. closed.

¶ In Arkansas 35 banks closed in one day. Biggest of these was American Ex change Trust Co. of Little Rock which exercised the State law allowing a bank to close for five days.

Thus stood affairs at the end of a most memorable week in Southern banking. How much had been lost could not be estimated for a long time. A big loser was the State of Tennessee with some $5,000,000 on deposit in the embarrassed banks. Voters suddenly realized the significance of legislation last December by which the old law limiting the State’s deposits in any one bank had been amended. There was talk of impeaching Governor Henry Hollis Horton. State’s Attorney General L. D. Smith said he knew no “friend” when it came to investigating the bank scandal, would prosecute to the limit. From Manhattan came an offer for a $5,000,000 loan to the State by Chemical Bank & Trust Co., long Tennessee’s fiscal agent.

More interesting was the question of how much could be saved for the entire U. S. The Tennessee crisis was reaching into other States. Unchecked, it would have been much worse. Only unselfish foresight on the part of conservative bankers made possible the quick action which stemmed the aftermath of Rogers Clark Caldwell’s debacle.