Remembering Rutherford, Daily News Journal, August 24, 2014, Greg Tucker
The old expression “phony as a three-dollar bill” indicates that something is believed to bogus, counterfeit, false, odd or peculiar. The obvious source for the phrase was familiar paper currency. There were ones, twos, fives, tens, twenties, fifties, hundreds and a few larger bills, but threes also were issued in Rutherford County.
Before the Civil War the only paper currency was issued by private banks, and these “bank notes” were good only to the extent the issuing bank was financially sound. Paper currency in use in Rutherford County before 1838 included privately issued “paper specie” or “change tickets” for small amounts (12 and one-half cents to three dollars). These notes, most issued by individuals or institutions in Nashville and Columbia, were dubbed “shin plasters.” They could be redeemed in coin or bank note from the issuer in sums of five dollars or more.
Rutherford County’s first bank was a branch of the Nashville Bank. It opened on the square in 1817 and failed in 1826. In 1838 the Bank of Tennessee was organized with branches in several cities. Although no branch was established in Rutherford County, the Bank of Tennessee currency was plentiful. In the same year, the Tennessee Legislature banned further issuance of private change tickets, and all currency was bank issue.
In 1852 William Spence, a former Murfreesboro alderman, and his brother, Joseph, established the Exchange Bank, the county’s first “hometown bank.” William served as president with Joseph in the role of cashier. The initial capitalization was $50,000, soon increased to $ 100,000.
The Spences posted the state-required Deposit Bond with the state comptroller and issued one- and two dollar bills dated November 1, 1852 (the bank’s first day of business). One-dollar notes, printed by Wellstood, Hanks, Hay & Whiting, New York, were one-sided with female and infant figures, the state seal, a portrait of Hugh Laws on White, a Tennessee senator credited with southern expansion of the Whig party, and signatures of William and Joseph Spence. The one-sided, two-dollar bill, printed by Danforth, Underwood & C o., New York, featured a farm scene, portraits of George Washington and Benjamin Franklin, and the Spence signatures.
A three-dollar bill issued in 1853 was printed on one side featuring three female figures, the state seal and a red overprint “THREE.” Five- and 10-dollar notes, engraved with horses, cattle, sheep and chickens, included bright red designs on the back side. The intricate engravings were intended to discourage counterfeit reproduction.
The Exchange Bank, located on the east side of the courthouse square in Murfreesboro, prospered for five years, but encountered problems in 1857. According to John Spence (“Annals of Rutherford County,” Vol. 2, p. 108), the problems arose from “mismanagement of the state bonds.” A portion of these securities were “misplaced” and “could not be accounted for by the cashier.” The Exchange Bank failed in 1859, and its outstanding bank notes were unredeemable. Those holding the currency lost the full face value of every outstanding note.
The failure of the Exchange Bank caused “inconvenience to the business portion of the community, retarding trade and commerce.”
In response to a petition from Murfreesboro residents, the Planters Bank in Nashville agreed to open a branch on the north side of the square. William Childress was appointed branch president, and William Ledbetter was named cashier. With these two and other prominent community leaders involved, the branch prospered and continued for three years. Although a branch, the Murfreesboro bank did issue some currency in small denominations (five cents to 20 dollars) printed in Nashville With the onset of war, however, the branch closed leaving Rutherford County without a bank.
During the Civil War, the Lincoln administration established a system of “national banks” empowered to issue “National Bank Notes” subject to federal requirements. The purpose of the National Banking Act of 1863 was (1) to finance the war; and (2) to protect the public from currency issued by fraudulent or poorly managed banks.
The First National Bank of Murfreesboro was organized by northern investors in 1869. In 1872 the Stones River National Bank was established by a former Union officer and others. Both banks issued National Bank Notes. The issuing of bank currency soon ended, however, when the federal government took responsibility for printing all currency in 1876.
A special thanks to Nelson Smotherman for research assistance. Rutherford County Historian Greg Tucker can be reached at firstname.lastname@example.org.