AND THE CRISIS OF 1878 43
purpose of being wound up’. It was, for banks and other in-
stitutions, a period of isolated, incoherent, and chaotic finance
that very quickly brought about its own remedy by eliminating
the unfit in drastic fashion.
Warnings of a coming storm had already been noticed, but
the shock came with dramatic suddenness in the failure of
Overend, Gurney & Co. for ten millions.! It was a mercantile
rather than a banking disaster, although bank reserves dimin-
ished with alarming speed. Failure followed quickly upon
failure, and only the most soundly based institutions came
safely through. This catastrophe was in many ways a proto-
type of that of 1893 in Australia. English bankers learnt in
1866 the lesson that their Australian confréres failed to agsimi-
late for another thirty years, i.e. that safe banking depends upon
a unity of interest among the banks, and on the exclusion of
excessive and adventurous competition with its mischievous
industrial reactions. Co-operation, absorption, and amalgama-
tion was the note of the new period in English banking ; but the
experience of 1893 was necessary to harmonize the Australian
financial orchestra.
The Overend-Gurney crash had an immediate reverberation
in Australia. Although quite solvent, the Agra and Masterman’s
Bank was forced to close its doors.2 News of this failure and of
the disastrous drop of 3d. a pound in the price of wool reached
Australia on the same day; and a period of the most acute
distress for Queensland in particular began immediately. It
will not serve any useful purpose at the moment to trace the
history of the crisis further, but the impaired government
credit, following upon the heels of somewhat similar happenings
in the other colonies, caused an immediate check to the flow of
capital that landed almost every colonial government in diffi-
culties: New South Wales was in such urgent need that a
5 per cent. loan could not be placed at a figure higher than 70,
redeemable at par, which made the rate of interest equivalent
to 71 per cent. per annum—=a very distressing figure indeed. So
1 The firm of Overend, Gurney & Co. were bill brokers handling £60 to £70
millions of commercial bills per annum; and their failure ended, at least for a time,
the ‘fatal facility of credit’ which was responsible for the collapse.
3 Agra and Masterman’s was quite solvent, and in the panic paid £3,000,000
across the counter. The actual suspension was due to & run on its Indian branches
caused by false telegrams advising that the bank had closed its doors.