"With Faith And Courage"

The Bank of adelaide 1865 - 1965

(Written by the late Ron A. Potter)

Chapter 11 : Adversity and Austerity

The guttering candles of appeasement were to burst into flames of war soon after Oscar Lionel Issaachsen became General Manager. In the years of adversity and frustration that were to follow the rate gift of leadership was the greatest patriotic contribution that any man could make. A great admirer of Churchill, Isaachsen was to show in his own smaller sphere many of the qualities of his idol. Like Churchill, Isaachsen knew the value of the symbolical gesture, running up the Union Jack over the Bank on the morning of September 4th, 1939 and flying it daily on a "symbol of hope" throughout the dark days of war, until peace was announced in August, 1945.

Democracies get their wartime strength from the fusion of the many independent cells in the tissue of the body politic, which may be mutually opposed in peace, into a unified structure with a common and inflexible purpose. As General Manager during war Isaachsen was to play a leader's role in this process. His influence was to be most direct upon the Bank itself where half the male staff was to be with the services, leaving the remainder to carry the added burden of successive War Loans, Savings Certificates and Ration Coupons. Disillusionment and despondency could be dangerous enemies when the tides of disaster were at their peak or when, with ultimate victory in sight, fortunes were to be made in the black and gray markets outside and unskilled process workers could earn twice the wages of a bank officer.

Born in 1885, Isaachsen was a third generation South Australian, grandson of a Norwegian merchant and of a Yorkshire pastoralist. He had been educated at Pulteney Grammar School, Prince Alfred College and the University of Adelaide, and before joining the Bank had been a teacher at Glenelg Grammar School. The first General Manager to be appointed from the Australian staff, the satisfaction that such promotion gave must inevitably have neen tinged with some degree of envy and with the disadvantages of personal familiarity. The years he had spent as Assistant General Manager had however prepared his fellow officers for the appointment.

Recognising his attainments and undoubted ability, his officers gave him loyally of their best and his reputation for hardness was tempered by the knowledge that he was prepared to give his colleagues responsibility and to support their decisions. In the lean years of war and the stringencies of post-war re-construction it was unthinkable that hard earned profits should be eroded by any avoidable expenditure. Forced economy meant that there was much lee-way to be made up later, but husbandry, amounting almost to parsimony where the Bank was concerned, was characteristic of a man who as a younger officer is said to have discouraged his less provident fellow workers from applying to him for a loan by requiring a shilling in the pound interest, payable next pay day.

Since the inception of the Commonwealth Bank of Australia the role of General Manager had become larger than that of chief executive officer of a single institution. The old established banks, mutual rivals for business, found a common unity of purpose in evolving an equitable and practicable relationship between the new Government bank and themselves, which would preserve Australia's traditional freedom of choice and yet give to the Government full monetary control, without the suspicion of possibility of political interference with the bank accounts of the individual citizen.

The evolution of this relationship was to take many years and to include the bitter political and legal battles over nationalisation. Isaachsen with his firm grasp of the principles of central banking and his intense convictions of the need to preserve the independent status of the banks in the community not only played an important part in forming the policy of the private banks and attracting the profit shackles imposed upon them, but also as Chairman for the Associated Banks in South Australia was their spokesman in the State, losing no opportunity of hammering home the dangers of political interference with the banking system.

South Australia had its own particular grievance with the administration of the Commonwealth Bank as it had not been accorded a representative on the Bank Board. Suspicion and jealously of the Eastern States was still strong and it was hoped that when Prof. L. F. Giblin retired in 1942 that a South Australian would be selected to the vacant seat. It was with disappointment that they learned that the Government had selected Dr. H.C. Coombs as the new member, little foreseeing the dominant role he was to play in Australian banking from that time onwards.

In the wider world of commerce and industry, beyond the confines of the banking circle, Isaachsen's influence was less direct but scarcely less positive. As President of the Adelaide Chamber of Commerce from 1945 to 1947, he spoke for business in general in the difficult transition years from war to peace, and was untiring in his endeavours to encourage the growth of sound industrial enterprise in the State. A born organiser, he was honorary Treasurer of the Lord Mayor's Food for Britain Appeal, which raised over a quarter of a million pounds, and chairman of the finance committee of the Lord Mayor's Cancer Appeal. These and other public services and his contributions to commerce and banking earned for him a Knighthood in the 1951 New Year Honors List.

A man for all men, he made strong and lasting friendships for himself and his Bank. A keen sportsman and a convivial comrade he had an eye for a good horse and a pretty face. At the same time his wide experience and incisive understanding placed him on an equal footing with the best of his contemporaries. It is little wonder that even today so many claim with pride "I was a friend of Ike" South Australia's industrial contribution to the nation's war effort would have been impossible without the foundations that were laid in the late thirties. A stagnant economy with a declining population and a large scale drift to the metropolis needed the injection of secondary industry to stimulate activity. J. W. Wainwright, the Auditor General, was the architect of the new policy, which was ardently adopted by the Premier, Sir Richard Butler, E. W. Holden, and by other industrial and commercial leaders, including predominately Isaachsen. With Sir Thomas Playford's advent to his record term of 27 years in office as Premier in 1938, the policy was intensified. The State's first blast furnace was "blown" in at Whyalla in 1941 and ship-building begun, Murray River water being supplied through 240 miles of pipes, mostly supplied by the Bank's customer Hume Steel Ltd. In 1942 statutory authority was given to the development of the Leigh Creek sub-bituminous coal-field, which was to provide fuel for the State's power needs increasing steadily at an average rate of ten per cent each year. The Bank's earlier interest in Leigh Creek had been aroused by copper mining in the district but the branch had long since been closed. Industrial customers of the Bank were helping to supply not only Australia's war requirements but also to equip the beleagured mother country. John Shearer & Sons Pty. Ltd of Kilkenny, who supplied agricultural machinery on a large scale to the United Kingdom, was only one case in point.

The South Australian industrial revolution was to be reflected less dramatically, but perhaps no less importantly in the rejuvenation of agricultural and pastoral industry where the Bank's main interests traditionally lay. Drought in 1941, when rainfall during the growing period was the second lowest on record, added to the hammer blows of blitz krieg in Europe and the Middle east and the mounting certainty of war with Japan. Farmers struggled with the bad season and with the critical shortage of labour. Drought relief from the Federal Government helped to alleviate the worst losses but a new approach to both farming and sheep raising was required to restore prosperity to the rural community. It had been shown that super phosphate could bring new life to worked-out farms and fertility to barren areas. The worth of subterranean clover in improving pastures and increasing carrying capacity had been recognised and the first steps taken to put improved techniques into practice. The depression years had proved that farmers who had diversified their products had met adversity best, and the Bank consistently advocated the curtailment of wheat and the introduction of side lines on the property. The work of the Marginal Lands Committee which combined small uneconomic holdings into larger living areas was supported by the Bank, which also favoured the Federal Government's long-term plans for the stabilisation of the wheat industry and depreciated the high U.S. tariff on wool.

The interests of the Bank in the welfare of the farmers were expressed in direct recommendations and it was typical of Isaachsen that he did not surround them with contingent qualifications. In 1939 and in 1941 the Bank urged its farmer customers to undertake pig raising as a profitable side line and many followed this advice only to find that shipping difficulties caused the British Government to cancel its purchases of baconers. The Bank naturally received harsh criticism from a number of its farmer customers and the Chairman in his next address was to complain of "an inclination to castigate those near at hand who encouraged them to embark on pigs." In recommending fodder conservation, however, the Bank was on safer ground for, in the driest state of the world's driest continent, fodder was ever needed.

The war years were difficult ones for the Bank. Short handed the staff carried extra burdens and in one year alone dealt with twelve and a half million clothing coupons for the Government as unpaid service to the country. Forbidden to subscribe to war loans itself, as this would merely have added to the already swollen volume of money, its managers were active in every country town cajoling advance subscriptions to each new issue and at the same time endeavouring to protect their fixed deposits from falling. With the advent of a Labour government under John Curtin, the banks were to find themselves bound by stringent National Security Regulations to comply with compulsory special account requirements which corresponded in practice with voluntary arrangements already entered into with Menzies-Faddern government, but with the difference that control was now vested in a party which had already shown its intentions to nationalise banking in the minority recommendations of the Royal Commission on Banking.

It was not without misgivings that the Bank loyally and implicitly carried out its part in monetary policy, hampered by the government's decision that profits should not be allowed to exceed the average of the three years immediately preceding the war, without taking into account the subsequent fifty per cent increase in federal taxation. The new government was convinced that low interest rates were desirable in all circumstances and, having learned half a truth from Keynes, it was to be many years before politicians of any party were to comprehend the stultifying effects of an unvarying "cheap money" policy. Banking profits were anathema to socialists and the source of little or no concern to conservatives. No votes were to be won by espousing the cause of equity for bank shareholders for whom no political alternative existed. It was in vain that Sir Howard Lloyd stressed the unfairness of a five per cent maximum overdraft rate, which was on a par with current rates for fixed mortgages where no element of risk was involved. Time after time he was to emphasize that the Bank did not seek excessive profits but merely to obtain a yield on its shareholders' funds more in keeping with returns experienced in other fields of commerce and industry.

It is difficult to assess what effect such statements had on public opinion. Certainly there was no immediate public reaction in favour of justice for the banks, but the constant reiteration of uncontrovertible facts gradually created a conviction in the minds of the majority of Australians that the banks were the victims of political expediency. In order to foster this conviction and to prepare for the frontal assault upon the traditional banking system, the inevitability of which was becoming increasingly clear, Isaachsen, through his Chairman, publicly advocated a "banking secretariat or information bureau generally to protect the common interests of the banks against the unwarranted attacks of ignorance and prejudice". With so many other and more immediate problems to face, the suggestion was welcomed but shelved by the banks as a whole and not put into effect until after the crisis of nationalisation which it had been designed to meet.

In the furtherance of the war effort the banks were invited to rationalise their branch system with the aim of employing their officers more efficiently. Such a move was unpopular amongst the banks themselves who could see little virtue in sacrificing good will and a connection that had been built up slowly over many years merely to make an empty gesture. It was "a retrograde step", reported Sir Howard Lloyd to his shareholders, putting an extra burden on the farmer customer and achieving no practical results at a time when effectively all male staff who were fit and of military age were already in the services. To comply with the Government's wishes and after consultation with the other banks, the branches at Snowtown, Tanunda and Saddleworth were closed.

The efficiency created by the exigencies of war is frequently accompanied by its converse, and in Australia, where the absence of actual physical experience of war dulled the sense of urgency, there was always a suspicion that political considerations and prejudices played too large a part in decisions reached. In the absence of a national government, party policies were ever present and the Bank could rid itself of the feeling that the Government was using its position not only to prosecute the war, but also to change the whole social structure to conform with its political ideas. "The war provided an excellent subtefuge for the attainment of ends out of reach in time of peace". Sir Howard Lloyd told his shareholders in 1941 and later could find no better words of warning than those of Winston Churchill. "We must beware of trying to build a society in which noboby counts for anything except a politician or an official, a society where enterprise earns no reward and thrift no privileges". It was almost certainly Isaachsen's blue pencil which underlined the passage for the Chairman.

In London the vulnerability of the City to air attack made it necessary to evacuate the depleted staff to a country mansion at Harpenden in Hertfordshire, 25 miles away, leaving 11 Leadenhall Street in charge of a staff of two. Later the Bank moved to 17 Cunningham Hill Road, St. Albans, until 28th May 1945, when the staff returned to the City. In spite of the hail of high explosives and incendiaries to which London was subjected throughout the war, damage to 11 Leadenhall Street was confined to windows smashed by bomb blast and was far less than that caused by random hits from a Zeppelin in Arnold's day.  In Australia, plans had to be made for possible evacuation of the capital cities in the event of an enemy landing. Records were duplicated to enable work to proceed should the original books be destroyed and arrangements were made to transfer the Adelaide Clearing House to Burra in an emergency. Had evacuation been necessary, the Bank's Head Office would have been at Saddleworth, Adelaide Office at Kapunda, the Branch Department at Balaklava, while North Terrace Office would have found itself translated to Booborowie.

Immediate emergencies did not preclude the need for planning for the future growth of the Bank. In April 1941 the Bank's Keswick Office was opened in the Chrysler, Dodge Distributors Building on Anzac Highway to service the business of an undertaking which today as Chrysler Australia Ltd. is a major manufacturer of motor cars and one of the Bank's most highly esteemed clients. The breaking of the drought in October of the same year, with torrential downpours leading to severe flooding at Jamestown and two drownings, brought relief to the farmers. A guaranteed price for wheat ensured their incomes, although the mounting labour shortage was to be a crushing burden throughout the war. The arrangements for the purchase of the Australian wool clip for the duration of the war and one year afterwards at appraised values by BAWRA gave the pastoral industry a secure basis.

Looking to the future, the Board visited Loxton in August, 1944 and returned greatly impressed with the prospects of the irrigation area. It had a population at that time of 850, but with a planned 9,000 acres under irrigation, it was expected to support a future population of 4,500, on the basis of one person to each two acres. This estimate has already proved conservative. War brought some permanent changes to the Bank. The girls engaged to fill the places of released officers had shown that they could capably carry out the routine responsibilities of banking. The growing use of ledger machines enabled their numbers to be increased until today they form one third the total staff. It was not until 1926 that the first accounting machine was introduced into Adelaide Office. Working purely with numerals it had no typewriter keyboard and the inclusion of narrative details on statements required a separate operation. By the outbreak of war, machine accounting had been installed at Adelaide where the Bank was the first in the field and in other capital cities where some other banks were still persisting with hand-written, leather-bound ledgers.

The appearance of the Bank's balance sheet had altered over the war period. From 1939 to 1945 deposits had risen from 7m. to 13m, reflecting the wartime growth in the money supply, while advances had fallen from 6 million to 4.3 million. The asset structure was balanced by a rise in investment in Government securities from 700,000 to 3.2 million, the low return on which depressed profitability. Outside the Bank there was talk of the abolition of fixed deposits which, with the plethora of money and low interest rates, now formed a much smaller proportion of trading bank deposits than before the war. The suggestion that fixed deposits were outmode was firmly contradicted by the Chairman in his 1944 report in which pointed out that the primary producing customer in particular found them a convenient reserve against a poor season and that these deposits were rising in spite of "the extremely low level to which rates have been forced by National Security Regulations". He went on to suggest that "if the fixed deposit system were eliminated in Australia, trading banks might well have to consider operating savings departments".

Fixed deposits remained a feature of Australian banking and when the Bank did establish its Savings Bank subsidiary in 1962 other considerations were to prevail.

The post war years of Isaachen's regime were to be dominated by the bitter struggle over the nationalisation issue. The Commonwealth's banking legislation in 1945 abolished the Bank Board and gave permanent sanction to the controls imposed on banking under the wartime National Security Regulations. Challenged in the High Court by the Corporation of the City of Melbourne and declared invalid as to Section 48, which required local government bodies to bank with the Commonwealth Bank, it was replaced by the Banking Act of 1947 nationalising the banks, which in turn found unconstitutional by a majority of the High Court and by the Privy Council.

While the larger issue was in doubt the Adelaide itself was in May 1947, subject of a fresh rumour that it was to be taken over or merged with another institution. With the recent examples of the amalgamations of the Union Bank of Australia Ltd. and the Bank of Australasia, and of the National Bank of Australasia Ltd. and the Queensland National Bank Ltd. it was only to be expected that market gossip would centre on the Adelaide. Remembering the degree of ill-will engendered by their silence under similar circumstances in 1927, the Board wrote to all shareholders, almost 3,000 in number, declaring their determination to preserve the identity and independence of the bank and also announcing an increased interim dividend at the rate of 5 per cent per annum.

Changes were taking place both on the Board and amongst the staff. Sir Edward Holden, who had been a director since 1928 and a pioneer of secondary industry in South Australia, died in 1947, his place being taken by the late Mr. Sidney Powell. Sir Howard Lloyd was approaching his eightieth birthday. To mark his record term of twenty years as Chairman and thirty one years as Director of the Bank his portrait, painted by Ivor Holes, was unveiled in the Board room in 1946. Four years later at the age of eighty two he retired. Sir Howard was a member of a famous banking family, the Lloyds of Birmingham, which founded the first bank in that city and which today as Lloyds Bank Ltd. is one of England's "big five". The uncle after them Sir Howard was named, was the first secretary and for many years general manager of Lloyd's Bank Ltd. Sir Howard had married the grand daughter of Sir Henry Ayers and was that linked with the very foundation of the Adelaide. His contribution to its progress from his appointment as a Director in 1914 until 1950 cannot be fully gauged. To a whole generation of South Australian's he represented the Bank, in which he took the greatest pride and to whose interests he was constantly alert. Four general managers had served the Bank during his term of office and his wide experience and understanding must have been invaluable to them. At the same time he was a forthright man, never afraid to point the finger at injustice to the Bank or to weak-nesses in the economy, and prepared to support whole heartedly his general manager.

Sir Howard Lloyd's retirement made it possible for Isaachsen to take his place on the Board as Chairman. An antisocialist Government had been returned at Canberra and the general threat of nationalisation removed. The task of combatting the dangers to the Banks inherent in the earlier legislation could be left to his successor.

For a few brief months only was Sir Oscar Isaachsen to enjoy his distinguished position as chairman and the honour of knighthood conferred upon him. His sudden death in Sydney on 1st May, 1951, when calling upon the General Manager of the United Insurance Company Ltd., was untimely and yet in keeping with his decisive character.

NEXT CHAPTER 12 : THE MASTER BUILDER

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