Wreck of the Tennessee Gravy Train Began with Collapse of a Nashville Firm

I've been delving into the history of the bank panics of the late 1920s/early 1930s  that kicked off the Great Depression of last century. I was not aware that a Nashvillian, Rogers Caldwell, played such a pivotal role in the collapse of banks and insurance companies across Tennessee, Kentucky, Arkansas, and North Carolina in November-December 1930. The collapse of the Caldwell and Company financial empire also contributed to bank suspensions across the southeast region in January 1931.

The ruin of Caldwell and Co. started with the closure of the Bank of Tennessee in Nashville in November 1930. Time Magazine reported on the 24th that the bank's liabilities were more than its assets, and that its total cash on hand was $32.55. (Elmus Wicker describes the Bank of Tennessee as "strange," because it did not have any individual depositors.  Instead, its clients were municipalities and corporations that did business with Rogers Caldwell). Nashvillians stampeded local banks, and panic spread to Tennessee's other urban centers. By the end of December 1930, 19 Tennessee banks had failed since the demise of the Bank of Tennessee.

Rogers Caldwell sounds like he would have been right at home among the precipitating factors of the 2008 financial crisis:

During the 1920s Caldwell expanded into other areas, buying insurance companies, banks, textile mills, oil companies, department stores, and assorted other businesses. He also expanded his bond operations into the private real estate market, underwriting the construction costs of hotels and office buildings. As Caldwell's financial empire and fortune grew, he developed a lifestyle that included racehorses, lavish entertainment, membership in exclusive private clubs, and Brentwood Hall, a magnificent Davidson County estate patterned after the Hermitage.

By 1921 Caldwell's financial empire was experiencing serious difficulties. Unknown to the public, Caldwell had never followed standard business practices, and his company was overextended, with no realistic cash reserves. His personal expenses far exceeded his annual salary, with the difference charged to the company.

One writer says comments that Caldwell spent the better part of 1930 "scrambling for cash and transferring assets" among his various holdings without telling those companies what he was doing. Insurance companies held by Caldwell charged that he cheated them by buying stock in other Caldwell holdings in Missouri for almost three times the latter's market price. The State of Tennessee lost $5 million it had in Caldwell affiliated banks.

Of course, this story wouldn't be complete without a corrupt newspaper publisher and dubious ties to state government. Caldwell's partner was the Nashville Tennessean's owner, Luke Lea. Together they had scooped up various banks and two newspapers: the Memphis Commercial Appeal and the Knoxville Journal, no doubt with the intention of guaranteeing that the Caldwell empire received positive press for their misguided endeavors. Lea used his influence with Tennessee Governor Henry Horton to leverage a state highway contract for a Caldwell-owned asphalt subsidiary without a competitive bid process. For his actions, Horton was impeached, but then acquitted by a majority in the Tennessee House.

In response to the bank panic, Uncle Dave Macon wrote the "The Wreck of the Tennessee Gravy Train," a depression-era classic that at least one person has recorded on YouTube: