When the Bank of Australia Went Bust.

THIS STORY FOLLOWS ON FROM AUSTRALIA’S FIRST BANK ROBBERY

At the beginning of March, 1841 there was a devastating fire at the Albion Mills, in Sydney’s Darling Harbour. The owners, Messrs Hughes and Hosking, were shipping agents and importers. Many Sydney  merchants  had produce stored at the mill and suffered serious losses.

 

Albion Mills Sydney

Albion Mills Sydney

Hughes and Hosking took out large loans from the Bank of Australia after the fire, and also during the drought fuelled  economic depression of the early 1840s. Their debts reached over £150,000  and would be a  major factor in the failure of the bank in 1843.

The Bank of Australia  was nowhere near  as egalitarian as its older competitor, The Bank of New South Wales, which was established during  the Macquarie era. Its share register was full of the names of the plutocracy.  Dubbed The Pure  Merino Bank because it catered to wealthy pastoralists,  it received strong  support from the government of the day when founded in 1826.

George Street Sydney 1820s

Lower George Street Sydney. The bank was located in the row of buildings  on the right.

Needless to say, the press were scathing in their commentary regarding the collapse of the bank  and its aftermath. An editorial in The Morning Chronicle of February 8 1845 did not hold back;

THE BANK OF AUSTRALIA, OR “PURE MERINO BANK.”

On Thursday, a special meeting of the proprietors of this once great pillar and agent of squattism was held, of course in conclave, and with closed doors; for the manoeuvres of those pure merino or  squatting bankers never have loved the light – the public never had access to their councils – never have seen the secret workings of their machinery, nor have been allowed to peep behind the scenes, Neither would they have heard of the private working of wheels within  wheels of the thing, but that the CRASH arising from the fall of the flock of kites which floated in the air, and at which men gazed in admiration so long, rendered certain disclosures inevitable.

By now the assets of the bank were worth very little. However, depositors received their money back after a carefully managed, albeit  unorthodox liquidation involving a lottery. After much argument about the  morality and legality of such a thing, the politician William Charles Wentworth introduced a bill into parliament allowing it to proceed. It thus  became Australia’s  first, state approved lottery.

William Wentworth

Shareholders  were  issued with  tickets  in proportion to their number of shares. However, they were able to sell them at four pounds each. Many  working class  people were in with a chance of winning  some real estate.

Bank of Australia liquidation lottery ticket

Liquidation lottery ticket.

 

Bank lottery ticket, 1849

A ticket issued to William Wentworth

Mind you, this all took time, and initially people panicked and started a run on the rival Bank of New South Wales.  Fortunately the run was stemmed when the government stepped in and  guaranteed its funds.

Meanwhile, the public were incensed when the Bank of Australia’s  directors complained about their names being broadcast. A letter to the editor of the Sydney Morning Herald in April 1843 read;

‘If a man steals a pound of cheese, there is clatter enough made about it at the Police Office, and we should laugh in his face if he were gravely to express a wish that publicity should not be given to his name in the newspapers. Why should we act differently towards men, who, taking advantage of a place of trust, use other people’s money with the profuseness of dishonest gamblers?”

It was not until  January 2 1849 that the lottery (approved by Royal Assent)  took place at the City Theatre in Market Street. The playhouse was at the rear of Burdekin’s ironmongery store.   It was quite an occasion. The stage was decorated with flowers and greenery, with plans of the prime properties on display.  The first day’s draw was followed by a self-congratulatory, cold collation dinner for the organizers.  An account of proceedings  appeared  in Bell’s Life In  Sydney;

The drawing of this much spoken of Lottery took place at the City Theatre, occupying the whole of Monday, Tuesday and Wednesday last. The utmost order was preserved among the agitated expectants of Dame Fortune’s favours, and the arrangements of the Committee were unanimously approved by the ticket-holders. Lists of the drawing, with the prizes allotted to each ticket, will be published in a few days, and in the meantime, parties anxious to ascertain the ‘magnitude of their estates’ will be furnished with the desired information, at the moderate charge of ‘one shilling per head’ on application to Mr Grocott of George Street. A large proportion of the principal prizes fell to the lot of persons in indifferent circumstances; while the ‘nobs’ who sported a hundred or two on the hazard of the  wheel, grumbled bitterly…

Years later another newspaper  report  (Sydney Morning Herald) gave an idea of the excitement generated;

The transferring of titles was free of charge to the prize winners. This caused amusement  when unsophisticated  folk  misunderstood. They thought they  would receive  free ‘conveyance’ to their new properties by coach.

AND THE WINNER WAS…….

First prize went to ticket number 3374, held by  a young  tenant farmer. Thirty four year old  Angus McDonald suddenly  found himself owning an 8,000 acre property, complete with mansion house, nearly 4,000 head of cattle and 40 horses. It read like the  final chapter in a Charles Dickens’ novel.  But life is full of both happiness and heartbreak, and so  it would be  for  the lottery winner  (story to follow soon.)

The Bank of Australia was officially wound up in 1851.  Ironically, this was the  year gold was discovered, bringing great prosperity to New South Wales.

 

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