Why Are There So Many Dying and Dead Towns in Georgia? Help Needed from Readers!

I am researching one likely answer to the question in my title, that is, what was the long term impact of the 1926 banking crisis on Georgia. Please note that this research is NOT about the Great Depression of the 1930’s. The general public, as well as most historians, in referencing the South in the 1920’s, tend to conflate the 1920’s with the 1930’s, making generalizations encompassing the entirety of the interwar years. Rereading the major histories of Georgia seems to imply that historians have tended to brush lightly over the twenties, covering mainly “redneck” politics, racism and blaming economic problems on the boll weevil. While colorful, this approach trivializes important financial and economic events.

Doughty Manley, President of Bankers Trust ended up in federal prison, despite his expensive legal team’s efforts to prove him too sick to appear in court and suffering from mental illness.

The 1926 financial crisis dashed the aspirations of many ordinary Georgians who were struggling to create a secure world for themselves and their families. These tragedies were inflicted on Georgians because the state’s government failed to properly regulate the state-chartered banks under its jurisdiction. This story raises a question every citizen should consider: If our government cannot or will not properly protect us from the power and greed of corporations, especially those under corrupt leadership, then who or what will? The Bankers Trust scandal is a cautionary tale. The price of freedom is eternal vigilance, we are often reminded. To make this story real and impactful, I want to include examples of the kinds of tragedies experienced by ordinary depositors and their wives, their children. Perhaps you have stories, documents or memories that can help me do this.

If you have read my earlier pieces on the crisis, you will know that 183 banks in Georgia closed in a matter of weeks when a corrupt Atlanta deposit insurance scheme failed. . Most of the banks affected were in small rural towns across the state. At the center of the scheme that triggered this collapse was W.D. Manley, president of the Banker’s Trust Company in Atlanta. Functioning as the “fiscal agent” for a chain of banks , he operated a system not directly monitored by the state’s banking department- although Manley was on familiar terms with the state’s banking superintendent. Deposit protection for member banks allowed those banks to risk loaning money far exceeding the reasonable limitation suggested by their deposits and assets. The state’s banking superintendent, T.R. Bennett, received “loans” from Manley’s banks. These were in effect tax- free bribes, buying his willingness to ignore the criminal scheme under his nose.

The Atlanta banking community, the National Bankers Association and the U.S. Secretary of the Treasury in Washington were all quick to assert that the closing of a few rural banks in Georgia was only a financial hick up and that all the Bankers Trust affiliated banks were sound and would likely reopen soon. In fact, most of the banks in the Manley system did not reopen, or reopened only to fail again as depositors and their lawyers tried in court to recover what had been lost.

Small town newspapers, likely reluctant to embarrass their owners, subscribers and advertisers, gave little or no coverage to these events. Several such papers-often located in the county seats of government- went out of business because they lost the fees they charged for posting official bank reports required by law -as well as ads purchased by local banks. (The Cordele Dispatch was an exception.)

The Bankers Trust Officers were tried and convicted in Fulton County Superior Court, despite Manley’s efforts to refuse to appear in court, claiming illness and later insanity. The director of the newly formed FBI, J. Edgar Hoover, eventually had Manley and the other officers of Bankers Trust arrested on federal charges for using the US mail to carry out financial fraud. Manley had paid for an expensive team of lawyers to defend him before he was arrested, using money that never found its way back into the hands of bank depositors. And he transferred hundreds of thousands of dollars to his wife to preserve their ill-gotten fortunes, including a Rolls Royce and a mansion in the West Paces Ferry neighborhood of northwest Atlanta. Sound familiar?

The state trial before the Fulton County Superior Court made sensational headlines throughout the summer and fall of 1926. Interestingly, under the Georgia Banking Law, all the bank officers in the 183 banks affected could have been arrested and tried. But they were not. In fact, the Bankers Trust officers were the only ones arrested. It was left to hometown county prosecutors and grand juries to make the case against banks in their jurisdiction. So far as I can discover, no other county grand jury indicted a single local banker in Manley’s system. But more than fifty of these small town bankers were summoned to testify in the federal case against Manley and his fellow Bankers Trust officers. The towns from which bankers were subpoenaed to testify in the federal case tried in Atlanta. Of course, there were more than one hundred banks involved who whose officers were not subpoenaed.

What fascinates me and keeps me working on this story was the kill switch it threw on the progress that an emerging smalltown middle class had made in the preceding two decades. Bank loans were required to keep the system of farming-on-credit going from year to year. And credit was needed to start up the newest ventures that were becoming the drivers of local economies in the multitude of recently formed towns up and down the much expanded rail system in Georgia.

Every small town had its own hierarchy and its own aspiring “middling class” of men who were not necessarily farmers, mule merchants, or cotton gin owners. The proliferation of banks provided a way to concentrate wealth for capital ventures and bank loans were necessary in capitalizing the new businesses brought to life by consumer demands. It was on a small scale compared to businesses in Atlanta, but a new small town middle class was emerging, promising to remake the rural small towns of the south over in the image of consumer-driven economies in much of the north.

Opportunities abounded in small towns when startup funding was available. Automobile dealerships, service stations and repair shops, bottling plants that fed the wildly popular craze for soda pop (mainly Coca Cola), pharmacies where soda fountains helped make drug stores and theaters profitable, and public schools were becoming the engine for building the future of even the smallest town. Local power stations had to be built and operated with coal-fired steam or hydroelectric generators- to provide electricity for lighting and refrigeration. Despite the promise that rural Georgia would at last prosper, hopes were dashed by the Bankers Trust fiasco.

The boll weevil remains the imagined cause of the collapse of Georgia’s cotton farming industry. This legend has tragically allowed us to forget that there was real criminality involved in the credit collapse-a disaster that helped set off a chain of events resulting in the bursting of the Florida real estate “bubble” and lighting the fuse that would ignite the Great Depression of 1929. And, it crushed most of the small town commercial centers, leading to a one- hundred- year – long decline for many -perhaps most- of the towns in rural Georgia. I am hoping to document this as seen and experienced by Georgians who have family stories, papers, correspondence, or other evidence of how this crisis affected their families and their hopes for the future.

Do you have letters, records or family stories about the 1926 Banking crisis you would like to share? I could really use the help! Just to be clear-I am not researching the thirties which have been well documented by historians and by the New Deal agencies such as the Federal Writers Project -and stigmatized by the early novels of Erskine Caldwell, who sought to show the moral degradation wrought by poverty in the 1920’s Georgia in which he came of age, (Caldwell attended high school in Wrens, Georgia where his father was pastor of a church.)

I am trying to push awareness back a decade into the under-studied 1920’s. I believe students of Georgia history have focused for too long on the Civil War and Reconstruction, doing valuable work but keeping public understanding focused on the Lost Cause in a version of history in which the South Lost the War but won the memory, a memory only now beginning to be deconstructed by historians. I welcome opinion to the contrary, and hope that others will assume the challenge of reimagining what caused the decline of so much of rural Georgia.

President of the Bank of Gough. My grandfather, Cyrus White Kitchens (above left, here shown with my father Hugh), organized the Bank of Gough (pictured, above right) with the support of his father-in-law, Isaac Jackson Gay, a land-rich farmer. “White” or “C.W.” as he was called, served as cashier from about 1913 until the bank folded in 1924. It still stands, one of the last commercial buildings in the dying town. Many such banks of the era have been photographed by Brian Brown and posted on his incredible collection online at “Vanishing Georgia.” (Photo by the author.)