312 A HISTORY OF THE COLONY OF VICTORIA 



mercial Bank consulted the Government in the persons of the 

 Premier and the Treasurer, and subsequently at a meeting of the 

 associated banks, which Mr. G. D. Carter attended, proposed that 

 it should be placed in a position to publicly notify that it had been 

 promised the combined financial support of the Government and 

 the banks to such extent as might be required. The proposition 

 was too far-reaching to be entertained, but any promise of limited 

 assistance would only have induced an acute scramble to get in 

 before the limit was reached. Mr. Carter's proposed alternative 

 showed how little he had grasped the seriousness of the position. 

 It was the formation of a temporary fund of 1,800,000, to be raised 

 by each of the nine banks lending 100,000, and the Government 

 then drawing upon each of them for a further 100,000, from the 

 credit balance of the public account in their hands. Had this pro- 

 posal been accepted, it would, instead of averting the crisis, have 

 undoubtedly precipitated it, for some of the banks would have had 

 to part with half their coin to meet this demand, at a time when 

 all were intent on watching the metallic barometer. In any case it 

 only meant a temporary postponement, and it was declined. In 

 the interest of the bank's far-away depositors it was resolved to 

 suspend further payments, and to submit immediately to its share- 

 holders and depositors a proposal for reconstruction. This embraced 

 the calling up of the whole of the subscribed capital, the conversion 

 of about one-fifth of its entire deposit liabilities into preference shares, 

 the immediate release of current account balances under 100, and 

 an extension of time for payment of the remainder, spread over 

 some years at current rates of interest. 



Desperate as was the remedy, and drastic its provisions, the 

 shareholders and creditors accepted it with generous unanimity. 

 It was admittedly an infraction of the unwritten law and honour- 

 able traditions of the English banking system. It was fully open 

 to the charge of being oppressive and inequitable. But the only 

 alternative was not to be contemplated. Liquidation meant the 

 conversion of 12,000,000 of advances into cash. Such a proceeding 

 would at least need a market, and there was none. Further, as all 

 the other banks were rigorously restricting advances, it meant ruin 

 to a large proportion of the Commercial Bank's borrowing customers. 



