Luke Lea in the Great Depression

by Doris Boyce.

As Luke Lea and his son Luke Jr. entered the grim walls of the North Carolina State Prison at Raleigh in May 1934, they wondered how long it would be before they would pass through those gates again. Lea’s only request was granted: he and his son would share the same cell.

·         Luke Lea (Library of Congress photo, LC-DIG-hec-03657, Harris & Ewing photograph collection)

At one time Luke Lea had developed policies for the state of Tennessee and had influenced decisions on the national level. Now he could no longer direct even his own affairs or those of his son, but his absolute belief in their innocence made him determined to win their freedom.

After the stock market crash in 1929, Lea had learned that his political enemies would do almost anything to get rid of him. The foundation of his political power was the newspapers he published: Lea Sr. was president of the Tennessean Publishing Company, and his son was business manager.

Unemployed men line up outside a depression-era soup kitchen, 1931

Luke Lea was convinced that a certain Nashville banker, in a calculated political maneuver, had set out to destroy him while also working to impeach Governor Henry Horton. With Lea’s newspapers out of the way, the banker would be able to suppress unfavorable financial news; with a governor of his choice in office, he would be able to funnel badly needed state deposits into his bank.

As charges of banking violations were brought against Lea in both Davidson County and North Carolina, his Memphis and Knoxville newspapers were put into receivership. Not having been present in North Carolina at the time of his alleged offenses, Lea could not be extradited there. However, sure of his innocence, he voluntarily traveled to Asheville to clear his name. A special term of the Buncombe County Court had been appointed to try cases growing out of bank failures. It was commonly understood by attorneys across the state that the judge appointed to hear these cases was expected to obtain convictions.

Luke Lea’s sentence was for six to ten years, His son was fined $25,000 and was to be jailed until the fine was paid, but both men understood that paying the fine would have been an admission of guilt.

Inmate showers in Old Central State Prison, Raleigh, NC, in cell block, no date (c.1950-1960s); photo courtesy Keith Acree, NC Department of Corrections. State Archives of North Carolina, Raleigh, NC.

They appealed the verdict and entered into a lengthy but unsuccessful fight for a retrial.The Nashville Tennessean was put into receivership in 1933. The Davidson County case against the Leas was dropped when they entered prison. At last, while they were still incarcerated, an independent audit proved them to be innocent of the charges for which they had been convicted.

Luke Lea Jr. was paroled in July 1934, but it wasn’t until after the mass hysteria over bank failures had died down and a new North Carolina governor had been elected that Luke Lea was paroled in April 1936 and finally pardoned in 1937. He knew he faced an uphill fight to reestablish his status and reputation, and he prayed that “the will to win” would sustain him in whatever lay ahead. Unfortunately, however, he died while legislation to allow him to regain control of the Tennessean was still incomplete. (1998)

1930: Caldwell & Company Fails

by Carter G. Baker.

In the 1920s Nashville’s Union Street was called the “Wall Street of the South” because of the many banks and brokerage houses had located there. The most famous of these was Caldwell & Company, founded by Rogers Clark Caldwell in 1917 to help Southern municipalities sell bonds. By the time of the Great Crash in 1929, Caldwell & Company was a regional investment banking powerhouse doing $100,000,000 a year in securities sales alone.

Soon Caldwell was involved in investment banking, hotel and newspaper ownership, and the sale of municipal bonds. With the end of World War I the Federal government ceased monopolizing the bond market and the states were able to move in to the market. The South, meanwhile, enjoyed a boom not seen since before the Civil War. Agricultural prices increased every year from 1920 to 1927 and infrastructure that had been untouched for sixty years could now be improved. In short, for most of the “Roaring Twenties” Caldwell & Company enjoyed ideal conditions for profitable expansion. By 1925 most buyers of Southern bonds knew the House of Caldwell and its slogan, “We Bank on the South.”

The next expansion of Caldwell was into bank and industrial ownership. Two Nashville banks, the American National and the First and Fourth National, came under his control. Other banks in Knoxville, Little Rock, Memphis, and various small towns in Tennessee also came under the aegis of Caldwell.

Soon the House of Caldwell controlled department stores, manufacturing and mining companies, and a Nashville baseball team, among many other businesses. Two newspapers, The Commercial Appeal in Memphis and the Knoxville Journal, were under his ownership and an unsuccessful attempt was underway to gain control of the Atlanta Constitution.

The Nashville Tennessean was owned by Colonel Luke Lea, Caldwell’s partner in many of these deals. Lea was a colorful character who had been a U.S. Senator and a World War I colonel who had led an unauthorized attempt to capture Kaiser Wilhelm of Germany, who was in exile in The Netherlands. He was instrumental in donating the land for Percy Warner Park, which is named for his father-in-law. In the 1930s Lea and his son were both jailed for fraud in connection with the failure of Caldwell & Co.

Long before the company’s collapse, there were many signs that all was not well. In 1925 the loosely managed accounting department was in trouble.  Customers were complaining of not receiving bonds and payments, and a trial balance hadn’t been made in years. Timothy Donovan was hired to sort out the mess and by the time of its bankruptcy the Caldwell & Co. books were straight, but the business wasn’t.

In a short article, it is impossible to describe all the interlocking directorates and movement of money that went on. Thanks to Luke Lea and the demand for bond sales, the company had excellent political connections. In fact, when the failure came, the State of Tennessee lost about 50% of the money it had deposited in various Caldwell banks. Municipalities all over the South lost deposits and individual depositors faced serious losses in those days before the Federal Deposit Insurance Corporation.

A good example of the chicanery that went on was the series of road contracts given to the Kentucky Rock Asphalt Company, known as Kyrock. Pressure was put on the state road commissioner to award the company contracts outside of the bidding process. When the commissioner refused, Lea was able to influence the governor to replace him with someone more amenable to seeing things Lea and Caldwell’s way. After that, Kyrock received many contracts for road construction without having to go through the inconvenience of bidding.

After the failure, reported in two Time magazine articles in November 1930, there were many cries for the impeachment of Governor Henry Horton (which did not happen) and jail time for Lea and Caldwell. As mentioned, Luke Lea did go to jail in North Carolina, but he was fully pardoned in 1937.

Caldwell had built a house called Brentwood Stables in 1928. Designed to look like The Hermitage, the building was owned by one of his companies. The State of Tennessee went to court to gain title to the house in partial payment for money Rogers Caldwell owed the state. The process took years of litigation, and it was not until 1945 that Caldwell finally relinquished his home. The State had intended to sell it, but, since the title was not clear, chose to keep it. The property is now the 207-acre Ellington Agricultural Center on Edmondson Pike.

Sorting out the various body parts of Caldwell & Co. and its related company, The Bank of Tennessee, was a long process not completed for nearly 20 years. Many of the related firms were salvaged and continue to exist today, though often as subsidiaries of other corporations. Caldwell & Co. was Tennessee’s first major financial bankruptcy, but it was certainly not to be its last.


McFerrin, John Berry. Caldwell and Company: A Southern Financial Empire. (Nashville: Vanderbilt University Press), 1969.

Time magazine: “More Aftermath,” November 17, 1930, and “Caldwell Crash,” November 24, 1930. From

“Luke Lea (1879-1945). Wikipedia. 

My personal recollections of conversations with John Donovan, Vice-President of First American National Bank in the 1970s.  John, the son of Timothy Donovan, mentioned in the article, was also my boss at First American.

Two novels also touch on the Caldwell story. These are At Heaven’s Gate by Robert Penn Warren and A Summons to Memphis by Peter Taylor. I read both for background on this article. Peter Taylor’s father was Hillsman Taylor, an executive at Caldwell & Co.