In 1929 the state legislature voted to give the university the $400,000 that it held as the remainder of the funds Tennessee had received under the Land Grant Morrill Act of 1862. The university, rather than the state, would then invest the funds, and income from the principal (which was not to be touched) would be used for capital and operating expenses.
The university invested in bonds, which at that time required that coupons be clipped from the bond and presented at the bank to obtain the interest due. The bonds were bearer bonds, meaning that whoever had them could present the coupons for interest payment or cash the bonds. Clipping coupons and holding bonds in safekeeping was a routine service of banks. The university placed $250,000 in bonds in Knoxville’s City National Bank for safekeeping and clipping services. In 1933, when this bank appeared financially shaky, Assistant Treasurer J. J. Walker met with UT Trustee William S. Shields, the bank president, and asked about the whereabouts of the university’s bonds that were in the bank’s safekeeping. Shields admitted that they were not in Knoxville, but in Atlanta, serving as collateral for City National. He admitted also that, while this was wrong, President Morgan knew of the arrangement. While Walker waited, Shields had a bank employee replace the bonds sent to Atlanta with other bonds owned by the bank pending return of the UT bonds from Atlanta.
When the bonds were returned from Atlanta, Treasurer Walker placed them in a safe-deposit box at the bank. When the bank failed, a bank receiver tried to keep the bonds, but quickly withdrew his objection to the university’s ownership. The bonds remained in a safe-deposit box until at least the late 1960s, with one of the duties of the treasurer being to go to the safe-deposit box on a regular schedule to clip the coupons and present them for payment of interest.