CAUSES OF THE RECENT DISTRESSES—CONDUCT OF THE BANKS—MANIA FOR SPECULATION—LONG-ACCOUNT SYSTEM—BAD SEASONS.
I will now proceed to offer a few remarks on the causes of the late terrible distresses in New South Wales, and on what I consider as the best means of preventing the recurrence of such lamentable scenes.
The three main causes of those distresses were, undoubtedly:—
First, Harsh and illiberal conduct on the part of the Banks.
Secondly, A wild speculation-mania that took possession of the entire population.
Thirdly, The system that had obtained, of giving long credit to purchasers of stock, &c.
While I look upon these three as the primary and principal causes of by far the greater part of the suffering the Colony has recently undergone, I must specify another, though certainly a secondary cause; namely, two successive bad seasons. This last cause is, I am aware, by many persons, regarded as the chief source of all their distresses and losses; but I think I can shew that those parties are wrong in this opinion, which springs from their anxiety to frame an excuse for their very imprudent speculations.
In the first place, then, I accuse the Banks of harsh and illiberal conduct; and I will state my reasons for this charge.
When I arrived in Sydney in 1836, the Banks, without exception, but more particularly the Commercial Bank (then under the management of a would-be shrewd Aberdonian), were doing every thing in their power to induce parties to open accounts with them. Bills for discount were eagerly sought after, and little attention was paid to the respectability of the names of either drawer or endorser. Cash-advances were publicly advertised by the Commercial Bank. Parties, to my certain knowledge, were stopped in the street by the Aberdonian just alluded to, who solicited their business with a very bland smile. In short, no stone was left unturned by these money-seekers to add to their half-yearly dividends. This system went on till the latter end of 1839. I need scarcely say, that this unbecoming and greedy canvassing for business, tempted many an unwary merchant and settler to venture beyond his depth, and ultimately led to ruin and a prison. The amount of money represented by absolutely valueless paper at this time, is quite beyond calculation. Renewals were a matter of course. Cash payments, even in part, were the reverse of common. Bank-directors overdrew their accounts with perfect impunity to a large amount; and the whole Colony seemed intoxicated with the fond notion that the Banks would never fail them, and that, in those fountains, they would at all times find a never-ending supply of "the needful." In the midst of this mad career, the day of reckoning came suddenly upon them. The Banks took the alarm: they began to think they had allowed the kite-flying system to go too far; and they commenced a system of unparalleled harshness and oppression towards their gulls. Cash advances were not merely stopped, but those previously made were called in. Renewals would no longer be accepted, even for half or a quarter of the amount due; and the unfortunate "kite-flier" was, in hundreds of cases, ruined by the very men who had in the most unprincipled manner led him into the mire, and then left him.
The Banks now took up a position the very opposite of that hitherto occupied by them; and, instead of trusting everybody, put no faith in any one. This conduct ultimately recoiled upon themselves; their shares fell in value; some of them became bankrupt, while the others had a hard struggle to avoid that catastrophe; and the public lost all confidence in banks and bankers. The worst part of the tale remains to be told; namely, that many widows and orphans, whose all was invested in bank shares, were utterly ruined and reduced to destitution by the failures alluded to.