310 A HISTORY OF THE COLONY OF VICTORIA 



1,500,000 on the 31st of December, the future seemed blank enough 

 to stagger the most hopeful. 



The year 1893 opened to an attitude of strained expectancy. 

 Before the first month had passed the Federal Bank of Australia 

 closed its doors. It was the youngest of the "Associated Banks," 

 so called from their being the joint custodians of the public account, 

 and united in agreement as to rates of interest and exchange. Be- 

 yond this there was no affiliation, and their respective aims and 

 policies were often distinctly antagonistic. But the public had been 

 led by some vague and injudicious announcements, communicated 

 to the press, to believe that the association covered the mutual 

 support and assistance of all within the charmed circle. Hence, 

 when the Federal Bank suspended, and it became known that a 

 proposal for its liquidation under the guarantee of the other banks 

 had been refused, the panic was intensified by wild charges of 

 breach of faith, and by the rude sweeping away of one supposed 

 line of defence, which the association was credited with having 

 erected. Since the closing of the Mercantile there had been a steady 

 drain on the deposits of the Federal. Its antecedents told some- 

 what against it. In its early stages it was a hybrid cross between 

 a bank and a building society, and though eventually the businesses 

 were separated, its position as a bank was impaired by the associa- 

 tion. Nearly all its Directors were known as prominent speculators 

 in the property market. Mr. James Munro, ex-Premier, Agent- 

 General, and founder of the Eeal Estate Bank, had been for some 

 time its manager, and was believed to be heavily involved with it 

 by his companies and connections. Its deposits were being with- 

 drawn as they matured, and by the date of its suspension the drain 

 had been so complete that after providing for Government balances 

 and other preferent claims, there was barely 2,000 left in the safes. 

 A scrutiny of the share list revealed a very poor prospect of calling 

 up further capital, therefore any satisfactory reconstruction was 

 hopeless, and liquidation was the only course. 



The preliminary report of the liquidators revealed involvements 

 with defunct companies and insolvent speculators that implied 

 serious loss to the depositors, and the chronic distrust of the past 

 six months suddenly became acute. The rivulet of withdrawals, 



