Source: Reports from FDIC Division of Research and Statistics.
The failure of the United American Bank (UAB), Knoxville, Tennessee on February 15, 1983 initially made headlines because its owner, Jake Butcher, was the principal organizer and promoter of the 1982 World’s Fair and twice was a candidate for governor of the State of Tennessee. The deposit liabilities and assets of UAB were transferred to First Tennessee Bank of Knoxville, a subsidiary of First Tennessee Corporation, Tennessee’s largest bank holding company. The transaction was noteworthy because it marked the first use of the extraordinary acquisition provisions of the Garn-StGermain Depository Institutions Act of 1982.
Before the year was out, seven more Tennessee banks controlled by Jake Butcher or his brother, C.H. Butcher, Jr., failed. There were almost daily reports of an excessive volume of classified loans, loans to insiders, loans far from the bank’s trade area, and evidence of inaccurate or deliberately misleading accounting.
The Butcher organization of approximately 40 loosely affiliated banks and savings and loan associations operated in two FDIC regions and three Federal Reserve Districts. A total of seven different regulatory agencies were responsible for supervising the institutions, making the detection of problems within the combined organization extremely difficult.
The insolvency of United American Bank and, subsequently, of other Butcher-related institutions, was discovered only because the FDIC undertook a simultaneous examination of the major Butcher-affiliated banks, committing to the task nearly 10 percent of its field workforce for almost three months. At the end of 1983, the FDIC estimated that its losses in connection with the eight failed Butcher banks would amount to approximately $382.6 million.