Greg Tucker, Remembering Rutherford, Page 27
“The worst financial climate in decades,” according to federal regulators, has cause the failure of 150 U.S. banks since January 1, 2009. Others are expected, particularly among the smaller regional and local banks. None yet in Rutherford County, but rumors persist.
As a result of steps taken in the aftermath of the Great Depression, however, no bank depositors have lost their savings as a result of the recent failures, although investors and shareholders have suffered. The Federal Deposit Insurance Corporation, created during the Roosevelt years, has protected bank deposits.
It was a different story eighty years ago when millions of Americans lost their savings when the banks failed. From October, 2929 till the end of 1932, over 10,000 U.S. banks disappeared. Rutherford County’s largest and oldest bank, First National Bank of Murfreesboro, was among the casualties.
The First National Bank was established in 1869 with a capitalization of $100,000. J.T. Kimbro was the first president, W.N. Doughty was vice president and J.B. Collier was the cashier. John W. Childress soon replaced Kimbro as president. During this same period, William B. Earthman and his brother Ira, descendants of James Earthman, one of the first slave traders in the county, launched the Earthman Land and Lumber Company.
The Earthmans were among the early depositors with the new bank, and as their business grew and expanded into other endeavors, they became increasingly influential in the affairs of the bank. By 1900 the W.B. Earthman Company has expanded into a regional land and lumber enterprise with manufacturing and retailing division. (On August 3, 1900, the New York Times reported on a fire that destroyed the novelty mills of W.B. Earthman & Co. in Murfreesborough, Tenn.’)
In 1907 W.B. Earthman was president of the First National Bank and ‘was a man of large credit, who conducted a very large lumber business … and kept banking accounts in Murfreesboro, Nashville, Sparta and various other place.’ According to Tennessee Supreme Court records, Earthman ‘was considered by the business world as a very rich man and had a rating by commercial agencies of $500,000.’
But on October 31, 1907, the Earthman Company failed and the First National Bank was in trouble. ‘W.B. Earthman & Co. had been kiting checks through various banks for quite a period of time before their failure… On October 29, check son W.B. Earthman & Co. came into the First National Bank of Murfreesboro in large sums, as they had been doing for quite some time previous.’ The Murfreesboro bank paid on Sparta bank checks but two days later it was discovered that there were no funds available to cover the checks. The bank directors eventually forced their president and his company into bankruptcy.
Litigation ensured as the bank looked for someone from whom it could recover its losses. Finally, in 1913 the Tennessee Supreme Court ruled that the bank’s only recourse was against the assets of the failed Earthman company (basically a ‘dry hole’).
But the First National Bank survived the ‘Earthman affair’ and in 1917 was the surviving entity in a merger with the Stones River Bank. The new officers were John M. Butler, president; J.C. Beesley, vice president; and C.B. Bell, cashier. Once again regarded as the leading financial institution in the county, the First National Bank of Murfreesboro was ‘ready to play’ as the country and its economy entered the ‘Roaring Twenties’.
Then came ‘Black Tuesday’ (the 1929 market crash) and the American public learned the meaning of a ‘run on the bank’. (When hordes of depositors, with or without good reason, lose confidence in their bank and demand immediate withdrawal of their funds.)
The Rutherford banking community, like all others, was severely stressed by the economic collapse, but maintained depositor confidence through the first two years of the Depression.
In January 1932 the Murfreesboro Bank & Trust, a state-chartered competitor, published its financial statement for year end 1931 showing approximately $206,000 cash on hand with total assets of $1.2 million. The report for this locally-owned, state-charted bank included a relatively detailed explanation of its assets and obligations.
On January 4, 1932, the First National Bank published a report showing ‘Capital & Surplus’ of $300,000 and ‘Total Resources’ of $2,000,000. Unlike its competitor, the First National report included no details and did not explain the somewhat unusual terminology. The report did note ‘4% paid on savings’ and boasted: ‘We offer you the safety of a national bank.’
The banks actual circumstances and the rumors that circulated are long forgotten. But within ten days after the bank’s vague report the withdrawal activity began and built steadily. By mid-month the bank was facing a classic run and possible panic. On Monday morning, January 26, 2932, the doors to Rutherford County’s largest and oldest bank were locked.
On the following day a statement was issued: “Yesterday the directors of the First National bank of Murfreesboro decided in the interests of their customers to temporarily close that institution. During the period immediately prior to this week the demands upon the bank for funds accumulated more rapidly than the bank could realize on its paper, and for that reason the Board felt it would be to the best interest of all concerned to take this action. It is hoped that with the cooperation of their customers that the institution may be in the position to reopen soon and to continue its service of so many years to Murfreesboro and Rutherford County.”
Soon a committee consisting of S.B. Christy, T.H. Harrison and G.S. Ridley was appointed to develop ‘plans for the reopening of the bank.’ Meanwhile, federal bank examiners arrived and began sifting through the bank papers. Amid rumors and repeated reassurances Christy and Judge John E. Richardson flew to Washington to ‘confer with the Comptroller of the Currency.’ They came home empty handed.
A receiver was appointed, and in April a ‘statement of condition’ was prepared by the receiver and posted on the window of the closed bank. As of March 31, 1932, the bank had just over $4,000 in cash. The cash likely to be realized by the remaining assets was in the range of $50,000. Depositor claims against the bank totaled over $1 million. Bills payable amounted to approximately $200,000. It wasn’t pretty.
June 16, 1932, a notice appeared in the local newspapers from the Office of the Comptroller of the Currency: ‘All persons who may have claims against First National Bank of Murfreesboro must present legal proof to George E. Farmer, Receiver, within 90 days.’ Those who proved their claim were given a receipt which ultimately proved to be little more than a souvenir identifying the depositor’s loss.
Among those who lost their life savings were 14-year-old Lorraine Hunt from Blackman, 8-year-old Avent Dismukes, and 14-year-old Thomas P. Tucker from Jackson Street in Murfreesboro. Dismukes’ $55 account disappeared but someone gave him a heifer calf and told him it was from the bank. He raised it into a prize-winning show cow. Thomas lost the $2 that had opened his first savings account and nine cents in accumulated interest. Perhaps he learned something.