Article Twenty-one:

The Great Depression of the 1930s

Economic Collapse

     The Great Depression of the 1930s became the greatest economic catastrophe of the twentieth century, quickly spreading from the United States around the industrialized world. Coming so soon after the tragic strike at the Loray Mills only a few months earlier, its impact on Gaston County and its extensive textile industry was devastating, causing untold economic and human hardships for almost every family, regardless of race, class or color. 

Excesses of the free-spending, over-consuming decade of the 1920s finally brought the national economy into a deep depression. Structural weaknesses were exposed. The stock market crashed on October 24, 1929, “Black Thursday” it was called, when massive selling struck the New York Stock Exchange and triggered a huge sell-off. Money started drying up and many were caught in the middle. Banks, already on shaky ground, began calling loans in an attempt to maintain their own survival and meet depositor demands. 

     Business and consequently profits and cash flow, declined precipitously, and soon the economy was in a downward spiral. Tens of thousands of businesses, large and small, went under, and investors were wiped out. Fear permeated the nation. As a result, faith in the system was lost. From Wall Street it quickly spread to Main Street. Unemployment soared to levels never before known. President Herbert Hoover tried his best to stop the downfall, but old policies and remedies simply did not work anymore. It was no ordinary downturn – this one seemed to have no bottom and no end. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U. S. Smoot-Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. 

     In Gastonia and all of the surrounding towns, most of the mills, with only a few notable exceptions, were facing bankruptcy by 1933. Workers had been laid off, pay had been halved, and it permeated through the economy to all the other businesses. It was a disastrous debacle and conditions kept getting worse. As one aging Gastonia textilist who had seen and weathered many downturns before put it, “The [golden] heavens had turned to brass.” Fortunes were literally lost overnight; they simply evaporated.

     The entire American textile industry had been in a serious recession of its own for nearly two years prior to the onset of the national depression. Inventory buildup was followed by cutthroat price-cutting. Consequently, most mills were barely eking out an existence. Then, as the Depression deepened, cotton prices dropped from 25 cents to five cents a pound, causing some mills further withering losses on high-cost inventories. When the magnitude of the economic situation finally became evident, consumers stopped buying, and orders for Gaston County yarn fell precipitously. The mills of the county were geared to support a capacity of 1,500,000 spindles and tens of thousands of workers. Conditions deteriorated quickly, and weaker mills soon found it necessary to cease operations entirely; others were operating on substantially reduced work schedules.

     The carnage became dreadful. The Armstrong group of mills was the first to fall, and so, too, did its stockholders. They were followed in 1930 by Manville-Jenckes Co., which owned the Loray Mills. By 1931, the economic domino effect eventually overwhelmed the Gray-Separk mills as well, and then spread to the others and to the banks, and the merchants, and the service sector. As a result, tax revenues, the ones that could be collected, fell and with them many of the services expected of the city and county. The six Rankin-operated mills were barely holding on through a plan of restructuring and the five mills run by W. T. Love were to fail or be taken over by others before it was all over.

     Unemployed workers with families to feed and support had no means to do so. That was the saddest condition of all to endure. There was no safety net of unemployment insurance in those days to see them through rough times. These people had to depend on menial, part-time work, the pity of friends or the charity of the community. The hush of the great mills, the deafening silence of whirring spindles was eerily frightening. It meant no jobs and no money. The extreme distress in seeing so many unemployed people, pain chiseled into their faces, was crushing to the soul and affected people in different ways, emotionally and psychologically. Still everyone held to their faith, hoped against hope and found numinous beauty in the everyday. 

     Of the Gastonia mills only seven family-controlled independents – Dixon Mills, Groves Thread Co., Parkdale Mills, Ragan Spinning Co., Ruby Cotton Mills, A. M. Smyre Manufacturing Co. and Trenton Cotton Mills, representing ten plants – were able to weather the storm successfully under their ownership and management initiative, without being wrung through reorganization or bankruptcy. Their finances were comparatively strong and they had little or no long-term debt with which to contend. Somehow, they found sufficient orders to keep their mills running reasonably well and profitable straight through the Depression, until better times returned.

Bank Runs and Failures

     The mills’ troubles were not the only problems facing Gastonia. The banks, too, were suffering and teetering on collapse. Commercial Bank & Trust Co. failed and was liquidated in April 1929, followed by Peoples Bank of Gastonia in 1931. Gastonia’s First National was in trouble early on because of the direct problems of the Gray-Separk mills and other businesses, and the indirect problem of the bank’s close association with its former president and largest shareholder, L. L. Jenkins. Irregularities radiating from the American National Bank in Asheville, which Jenkins headed, and federal banking indictments against him and other prominent bankers brought the Gastonia bank under suspicion. Asheville’s once shining land boom had gone bust by 1930 and every bank in that city had been closed. In addition, Jenkins was treasurer of Buncombe County, which had defaulted on millions of dollars of bonded debt floated in better days to support the mountain resort’s unsustainable expansion. 

     Faith had been lost and when faith disappears, banks fail. Concerned customers, fearing the loss of their deposits, streamed into First National each day for weeks to withdraw their hard-earned money. In effect, it became a classic “run” as the undercurrent of rumor spread until depositors became panicky. Conditions worsened and Gastonia’s largest and oldest bank was forced to close on December 15, 1930. It was the greatest financial crisis in the city’s history. J. Lee Robinson, its president, and his associates made a valiant effort to rescue the institution and keep it open by raising $500,000 in new capital and reorganizing under a new federal charter. Under the pressure, he became so distraught that he suffered a nervous breakdown and committed suicide at his home on January 4, 1931, a tragic example of the Depression’s destructive power.

     First National Bank reopened March 12, 1931 with former Vice President Samuel N. Boyce as its new president. To try to restore confidence it announced that it was bringing in one million dollars in cash, which soon arrived under guard by train. State policemen, sheriff’s deputies and city policemen formed an almost 200 or 300-foot armed line between the Southern Railway’s depot and the bank, where the money was visually and ceremoniously deposited in its secure vaults. The public display was an exciting display to ordinary people on the streets, who were said to be “goggle-eyed with wonder.” It helped restore confidence, as was its intention, and temporarily stopped the run on the bank. On December 11, 1932, as the Depression continued unrelentingly, total deposits of Gastonia’s two principal banks stood at $2,026,000, down from $7,688,000 twelve years earlier, on February 10, 1920, the peak of the textile boom. 

     There were three distinct banking panics during the Great Depression, each resulting in a rash of bank failures. The first, in 1930, was a tough, garden-variety crisis, which started in the Midwest after big crop failures in the Corn Belt. The second, tougher crisis hit in 1931 after the Federal Reserve Bank pushed up interest rates to stop a gold exodus. The final crisis, which began in 1932 and rolled along to 1933, was the most devastating. At first, state orders closed many shaky banks, and then President Franklin Roosevelt closed all U. S. banks on March 6, 1933 for a period of time for examination. This was called the Bank Holiday. Both banks in Gastonia were closed. A week after the Holiday began, 127 banks across North Carolina – over half the total numbers – had not reopened. After two weeks seventy of the state’s one hundred counties lacked adequate banking facilities.

President Roosevelt attempted to give the country a sense of hope and security during this difficult time and garner support for his New Deal policies with a series of radio addresses between 1933 and 1944. They became known as his “fireside chats.” The first one aired on March 12, 1933 in which he assured the American people that “The only thing we have to fear is fear itself…” As the Depression wound down, he continued his fireside chats with explanations of major wartime policies and events. Nearly every home had a radio and the broadcasts became a political marketing bonanza for the Democrats, helping to keep Roosevelt popular, despite the continuing depression.

     Citizens National Bank survived the first wave of deposit runs in 1930-31 and remained, for a time, the only bank in Gastonia able to carry on the community’s financial requirements. Its executive management moved quickly and decisively to restore confidence. President Albert G. Myers arranged with the Federal Reserve to have large amounts of cash shipped through the postal service to meet anticipated withdrawals. Appeals were made at public meetings for cooperation in avoiding panic. The bank was saved, at least for the time being.

     Notwithstanding, two years later, during Roosevelt’s Bank Holiday, although Citizens National of Gastonia was considered solvent, it was deemed expedient to reorganize with a capital of $200,000 and greatly reduced deposits of $812,000. It was also necessary to borrow substantial amounts from the Federal Reserve to sustain its liquidity. On September 23, 1933, under the continued leadership of Myers as president and Allen H. Sims as vice president, a new organization, The Citizens National Bank in Gastonia, was ready to open, taking over 100% of the old bank’s deposits and paying its former stockholders 69% of par value. For almost a year, while First National Bank completed its liquidation, Citizens National was again the only financial institution in Gastonia capable of conducting normal business.

     National Bank of Commerce of Gastonia was chartered October 20, 1934 under the executive leadership of Kay Dixon as president and Joseph G. Reading as vice president. It had a capital stock of $200,000 and abysmally reduced deposits of $811,000. Seventy percent of the deposit liability of the defunct First National Bank was assumed, but former stockholders were not so lucky. It is noteworthy that seven years later, on December 31, 1941, following two years of war-induced recovery, total deposits of Gastonia’s two banks reached $8,263,000, for the first time exceeding deposits of $7,688,000 on February 10, 1920, the peak of the World War I textile boom.

Textiles-Incorporated Created During Depression

     It was in this bleak depression environment that a group under the leadership of Gastonia banker Albert G. Myers devised a plan to rescue those mills that were on the verge of bankruptcy. Closing them would have caused appalling hardships for the thousands of workers depending upon them for their livelihood, not to mention the huge losses facing the banks and mill stockholders. Keeping them open, despite the reality that wages must be reduced and that most of the mills were only going to be able to run part-time at best, meant bread on the table and keeping the family together until times got better.

     The idea for some type of consolidation was in fact not a new one. It had been discussed and considered individually by the Armstrong, Gray-Separk and Rankin groups for several years, but for a lack of strong commitment and direction by either group, and for a complexity of intransigent personal reasons, it never materialized. Myers now emerged as the one who had that commitment and direction. It was his dedication and firm leadership that made it possible to put together this divergent, sometimes warring faction of independent yarn mills. 

Textiles-Incorporated was chartered under North Carolina law on June 1, 1931 by A. G. Myers, J. H. Separk, J. L. Gray, C. C. Armstrong, A. K. Winget, R. G. Rankin and S. N. Boyce. Myers, president of Citizens National Bank, a major creditor of many of the mills, and executive head of four of the merged mills, emerged as the company’s first president and chief executive officer. Each of the top executives of the merging groups was given a title and important position. The charter set the authorized capitalization of the company at $17,500,000.

     There was a sense of great hope for success in the new arrangement, born for the purpose of consolidating 15 individual combed yarn mills in Gastonia and the Gaston County area and acquiring operating control of eight others. The combined capacity of the 23 mills was 303,740 ring spindles, or approximately 22% of the total sales yarn spindles in the South. Textiles-Incorporated thus became the greatest combination of combed yarn spinning mills in America.

     With only one reorganization in 1933 and a name change in 1978 to Ti-Caro, Inc., Textiles-Incorporated survived the Depression and the ever-changing American and world textile markets to continue for 56 years as Gastonia’s and Gaston County’s largest and most recognized employer. Until its sale in 1987 to outside interests, its significance in the life of Gastonia and Gaston County was substantial and should not be underestimated. Every division of community improvement was recipient of its financial contributions and human resource involvement. [INDEX]