THE COURSE OF THE CRISIS OF 1893 71 
epidemic of reconstruction followed ; and within thirty days the 
E.S. & A., Australian Joint Stock, and London Chartered had 
closed their doors, with liabilities totalling 30 millions; and it 
seemed little short of a certainty that the National of Australasia 
with 13 millions of liabilities would supply the dramatic climax. 
At this juncture the government declared a moratorium which 
the banks, despite their lack of a common policy, totally dis- 
regarded. The worst was now over, and calmer conditions soon 
returned, although the National along with six other banks went 
through the mill of reconstruction! The devastation wrought 
may be judged from the fact that, of thirty-two institutions 
which traded as banks in Australia in 1890, only ten survived. 
Of the purely Victorian banks only one—the Royal—weathered 
the storm ; while of the English banks two only—the Austral- 
asia and the Union—avoided suspension and reconstruction. The 
total losses are estimated by Coghlan to have been not less than 
114 millions through reconstructions alone ; but this estimate is 
very far from covering the total casualties, since many private 
companies of sound reputation and long standing came to grief.2 
This tremendous financial convulsion was finally stayed by 
a measure that could have been employed from the first if the 
government had shown intelligence and leadership instead of 
weakness and vacillation. The Bank Issue Act of 1893 made 
bank-notes a first charge on the assets of the banks, and 
authorized the Governor in Council to proclaim them as legal 
tender. This declaration acted magically. The banks met all 
demands by the issue of notes; and, although a phenomenal 
amount of bank paper was in circulation for some time, the 
panic soon died away. 
* The reconstruction schemes are probably unique in the history of banking. The 
restraint from criticism, and the evident desire on the part of bankers and depositors 
to make the best of a situation for which they were jointly responsible, helped a 
speedy readjustment. The average time taken for reconstruction was two months, 
although the two English banks took four. In the light of the action of the depositors 
themselves Coghlan’s assertion that their rights were totally disregarded is neither 
fair nor true. 
3 Note the comment made by Powell, Evolution of the Money Market, p. 640: 
‘There was also a reversal of the policy in pursuance of which the Australian 
banks gathered deposits in the United Kingdom for use in Australia. Since then the 
financial relations of London and Australia have been wholly reversed. The 
(Australian) Banks keep large balances in London with a resulting accentuation of 
their dependence on the central store of gold, and of their susceptibility to be in- 
fluenced by the opinion of the financial hierarchy which protects and administers it.’