"Rogers Caldwell dominated southern financial circles in the 1920's to the point that he was often called the 'J. P. Morgan of the South'. In a career that spanned only 20 years, he built a financial empire that collapsed abruptly in November 1930, shaking the foundations of Tennessee's economy and government."
The Tennessee Encyclopedia of History and Culture website, 2002.

“Gawd, this ain't a business. Who told you this was a business ? This is a Hindu rope trick."
Duckfoot Blake, explaining the bond business after a question from new company recruit and former college football star Jerry Calhoun, in the Robert Penn Warren novel At Heaven's Gate.

Rogers C Caldwell founded his business Caldwell and Company in September of 1917, with a view to marketing bonds, in particular, southern municipal bonds. The son of James E Caldwell, an already prominent Nashville banker, Rogers C had seen a niche in making available such bonds to investors. As noted already, post World War I saw a dramatic upsurge in persons seeking finance for construction and investment. Though the South had historically been regarded as risky because of its previous high default rate, the decided lack of competition in this area gave the young Caldwell an early advantage to benefit from the investment surge.

Caldwell specialized in surety bonds for county and municipal construction projects, and the bond sales handled by his company was a major impetus in the provision of capital for the state to build schools, highways and various other extensive southern state improvements. This activity brought Caldwell into extensive contact with State government authorities.

Caldwell's expansion really got underway with the founding, in 1919, of The Bank of Tennessee. This bank "functioned solely as a depository for funds raised through the company's bond sales. These funds earned no interest for the bond issuer and were dispersed only when construction projects required." (Tennessee Encyclopedia.) In other words, if the Tennessee State wanted to build some infrastructure, it raised the funds via a bond issue, some of which a bank like Caldwell would handle, the proceeds of which would sit in a bank – like Caldwell's bank – awaiting disbursement. And of course if Caldwell had the contract to build what the State wanted to finance, then the bonds would be paid out to one of Caldwell's building companies to finance construction. Such potential capital sitting in the bank could not have gone unnoticed by the new banker and was quickly exploited to his advantage. The deposits provided Caldwell with a considerable amount of investment capital.

During the 1920's, Caldwell expanded into numerous other fields, buying up insurance companies, other banks, department stores, resource companies especially oil, textile mills and even a baseball franchise. Crucially, Caldwell also expanded his business interests and bond operations into real estate by helping underwrite the construction costs of office buildings and even some hotels and apartment blocks. Business grew and Caldwell by 1925 had successfully opened 14 branch offices.

Around this time, Caldwell entered into business dealings with one Luke Lea, a major player in Tennessean politics and firm believer in building up the State's infrastructure. Together they purchased an interest in another bank, the Holston National, and two additional newspapers, the Memphis Commercial Appeal and the Knoxville Journal. Lea already owned the Nashville Tennessean. (Useful no doubt to extol one's views about State infrastructure.) Using Lea's political influence, Caldwell managed to supply road building material (asphalt, under the trade name Kyrock) to the State without going through the usual tender process. The extent of Lea's influence within banking circles is revealed by lea's subsequent election to the board of the Federal Reserve Bank of Atlanta.

Lea in particular made extensive use of the banks he now partly owned for personal loans in connection with his Nashville real estate operations. The new President at the Holsten National in 1928, J. Basil Ramsay, "proved to be an ideal bank President from the standpoint of Lea because after taking office he directed its policies to benefit Lea as much as possible." (McFerrin, Caldwell and Company, page 69.)

By the late 1920's, Caldwell and Lea had company men in key positions within the Tennessee State Banking department, who could tip him off to any looming state audit of his banks, and also within the Tennessee State Funding Board, responsible for the issuance of state bonds. After the Tennessee gubernatorial campaign of 1928, Caldwell's company "won a bid to sell millions in Tennessee bonds and (accordingly) the state dramatically increased its deposits in his Bank of Tennessee." (Tennessee Encyclopedia.)

Behind the scenes however, a less richer story was emerging. Only in 1925 did the bank's accounting department make its first successful trial balance. Up until that time, employees within the accounting area made entries they thought should be made, with the department "more or less running itself." (McFerrin, Caldwell and Company, page 33.) Things did however improve after 1926.

By now though, Caldwell had developed an expensive lifestyle; one that included lavish entertainment, exclusive club membership, connections to many of America's rich and famous, and a developing passion in fine blooded race horses; a lifestyle he was perhaps struggling to afford and which he was increasingly billing to his company. Never the less, in October of 1929, Caldwell, with associates Mason Houghland and John Branham - a Chicago advertising agency owner recently relocated, bought the 632 acre 'Fairview' for $74,000. The idea was simple; to permit a select group of millionaires membership of this property for $10,000 and then lease or acquire the eighty adjacent farms (28 square miles worth). This would create a vast hunting preserve and sportsmen's club on the land that would be then bounded on three sides by water and on the fourth by a paved road that no fox would likely cross. Despite the stock market crash a mere two weeks later - it affected mere stocks it was reasoned, in an area where wealth was measured by land, the plans were duly carried out and a prospectus released advertising the benefits of this 'island of sport'.

"Every imaginable sport was either provided for or planned, including: beagling, polo, dove and quail shooting, pheasant hunting, duck shooting, horse breeding stables and programs, fishing, boating, swimming, golf privileges…tennis, restaurants… and residential accommodations," with the inaugural steeplechase and fox hunt was scheduled for December 6 1930. (See billpuryear.com for more on Fairview)

But alas, Caldwell's debt bomb from the 1920's business expansion was ticking. In hindsight, a number of problems were easily identified: the bank's assets in which it had invested consisted of a number of much slower moving securities, a number of investments were in non liquid assets of a permanent nature that proved almost impossible to sell on short notice without loss, though may well have proved profitable in the very long run, and finally loans made on real estate that proved noncollectable when the market turned.

As it turned out, Caldwell's business was still afloat only because of the continued supply of state funds going into the Bank of Tennessee. Persistent rumors about the health of Caldwell's bank however, forced the Tennessee State auditors to examine the bank on November 7, 1930. They declared it insolvent and in default on its state deposits. This action saw runs develop on other Caldwell owned banks throughout the state and Caldwell and Coy, the largest banking concern in the South, went into receivership 7 days later on the 14th. Within two weeks, more than 100 other banks across seven Southern states were out of business. The collapse of Caldwell put the state of Tennessee into crisis as at least $3.4 million in state funds was now missing. This was reckoned to be about ten percent of the state's budgeted expenditure for the forthcoming year, and "virtually all the cash on hand." (tennesseehistory.org) The first banking panic of the great depression had begun.

Probably, the Caldwell banks should have collapsed some weeks before they actually did. Admitted Caldwell himself years later: "But it was the end of October 1930, and we were afraid of what effect the bank closing would have on Governor Horton's re-election. We held out. We stayed open until the day after Horton was elected." (McFerrin, Caldwell and Company, page xviii.)

In 1931, the states of Tennessee and Kentucky indicted Caldwell on several charges. He was convicted on one count of breach of trust in Tennessee, but the state court granted his appeal for a new trial. (Tennessee Encyclopedia.) That new trial was never held however, and Caldwell successfully avoided extradition to Kentucky. Caldwell, at the height of his power and worth an estimated $650 million (Tennessee Department of Agriculture website, state.tn.us) retired from business to live out his years in his purpose built mansion Brentwood Hall. The State finally caught up with the banker in 1957, when legal action by the State of Tennessee was successful in seizure of the Brentwood property, a house paid for not by Caldwell but by his bank, on his father's land, and included by the bank as part of its list of assets in the accounts.

Luke Lea eventually served a prison sentence (in North Carolina) for fraud, though he was later pardoned.

Fairview staged a second horse race in December of 1931, though to declining attendance. In March of 1932, unable to continue payments on the additional land being acquired, receivers were appointed.

Pulitzer Prize winning author, Robert Penn Warren, is believed to have based his book At Heaven's Gate on the empire of Rogers Caldwell and his bond trading house Caldwell and Coy. (Tennessean, October 10 2004, at cgi.tennessean.com.) Said the author; "I was living there (in Nashville) when I was 25 years old, and I was seeing those same things happen."

Further reading:

The Tennessee Encyclopedia of History and Culture website, 2002.

McFerrin, John Berry. Caldwell and Company; A southern Financial Empire, Vanderbilt University Press, 1969

Warren, Robert Penn. At Heaven's Gate, Harcourt Brace and Coy, 1943.