Bank of East Tennessee
The Bank of East Tennessee by Johnnie E. Dillow
The Bank of East Tennessee had a life span of thirteen years, although actual operations were limited to about seven years. The history of the Bank, though brief, involved villains, honest men, politicians, a bitter dispute between one major stockholder and the directors of the Bank, a major run on the Bank and its recovery, and finally, the death of the Bank in the wake of the national depression of 1857. The Bank, with its main office in Knoxville on the corner of Main and Gay Streets and branches in Jonesboro and Chattanooga, is believed to be the first bank to operate independently of a Nashville parent and State ownership with its main activities, that is, its office and branches, solely in East Tennessee.
The State Legislature chartered the Bank on December 27, 1843. Two prominent Knoxvillians, James H. Cowan and Perez Dickinson are believed to have received the charter which was to remain in effect until January 1, 1875. The Bank was authorized by its charter to issue capital stock up to a total of $800,000. However, the Bank was permitted to open offices of "Discount and Deposit" in Jonesboro and Chattanooga, and the event these offices were established, the capital stock could be increased to $1,000,000. The charter provided that the affairs of the Bank would be administered by twelve directors who had to be stockholders and also citizens of Tennessee, four of whom had to be residents of Knox County.
The charter allowed, upon the subscription of 1,500 shares of stock, for the commissioners to proceed to organize the Bank and to continue to serve until the next annual election of directors. On April 15, 1844, the commissioners certified that 1,500 shares had been subscribed and that the minimum required 10% of the par value had been paid in gold, silver, or its equivalent. The stock was taken by 21 persons with Cowan, Dickinson, and Hugh A.M. White each purchasing 474 shares.
The initial stock subscription was made for the sole purpose of securing the charter and with the understanding that the Bank would not begin active operations until additional persons would come forth and invest in the Bank. The Bank continued in this inactive state, perhaps in the hands of the commissioners, until the middle of 1849.
The Bank's charter was amended on January 31, 1848 to reduce the number of directors from twelve to six. The first election of directors was held in May 1849 with all those elected being from Knox County. Shortly thereafter the Bank began active operations in February 1850. Dr. James Paxton, a medical doctor, served as the first of the Bank's three presidents, and Col. Hugh L. McClung was elected cashier. At the time, McClung was serving as Clerk and Master of the Chancery Court in Knoxville.
The credibility of the young bank was severely tested in mid 1851 during a very bitter dispute between the bank's stockholders. A New Orleans financier, Francis M. Fisk, had become the majority stockholder in the bank. The directors of the bank believed Fisk intended "--to issue a large amount of notes -- sell them at a discount of ten per cent, If need be -- and make a fortune--." The Bank's directors took steps to prevent this issuing of unredeemable paper and the conflict was brought to an end in April 1852. During this period, in September 1851, a banker from Mississippi, J .W .J. Niles replaced Paxton as president of the Bank. McClung continued to serve as cashier until his resignation on August 29, 1853. His successor was Azro A. Barnes who held that position until the Bank's final closing
The Bank's next test, perhaps its most severe to date, came in March of 1853 when a heavy run was made upon the institution. The Bank was able to sustain itself, however, and was able to continue its operations. Niles continued as president until late 1853 or perhaps into 1854. His successor was William Montgomery Churchwell, a "swashbuckling" young man of ambition , who was serving in the U.S. Congress from the Knoxville district. The Bank seemed to prosper under Churchwell's control but was finally forced to close in December 1856. The reason for the Bank's failure is speculative but suggests of mishandling of funds and the influence of the national depression of 1857.
Mr. Dillow, an executive with King College(Bristol, TN) has long been interested in early banking in Tennessee. His extensive research in the East Tennessee area surely makes him our foremost authority in this field. From TennCoin the magazine published by Tennessee State Numismatic Society.
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