Scope

This series contains the records of the Commonwealth Bank’s New York Agency for the period 1927 to 1929, during which the Agency was established, opened for business, and then closed.

Significant Correspondence

The most significant correspondence is between the Governor of the Commonwealth Bank, Ernest Riddle, his Deputy, Hugh Armitage, and the Bank’s Agent in New York, Alfred Mason. This correspondence commences in August 1927, during the initial review and planning stages. Once the Agency opened in December 1927, most of the correspondence is then between Riddle and Mason and includes letters regarding the financial conditions in the USA, which were sent to Sydney on a regular basis. The series concludes in July 1929, when the Agency was officially closed.

In addition, there are a small number of letters from the New York Agency to the Bank’s London Office. This correspondence mainly relates to banking business, loans, the work of the Agency and staffing (some London Office staff were transferred to the New York Agency).

Financial and Administrative Functions

The records also reflect the financial and administrative functions of the Agency and include ledgers, vouchers, loan documentation, office procedures and instructions, press cuttings, correspondence with individual banks, advertising, staffing and income tax negotiations. The Bank applied for an exemption from New York State Income Tax, which was denied, and there is an individual file relating to this, as well as numerous letters within the General Correspondence files regarding this topic. In addition, there are individual files relating to loan negotiations and correspondence with the Federal Reserve Bank of New York, JP Morgan & Company and the National City Bank of New York. A request from the General Motors Acceptance Company for the Commonwealth Government to grant an overdraft facility to its Melbourne branch is also documented, as the request came through the New York Agency.

Agency Records

At its closure in 1929 the Agency’s records were shipped to the Commonwealth Bank’s Head Office in Sydney. In 1960 they were transferred to the Reserve Bank of Australia.¹ They are retained as part of the Bank’s Archives, and are classed as Commonwealth records under the Archives Act 1983.

Background

In the 1920s the United States of America, considered the richest country in the world, emerged as a growing market for international loans. The Australian Government had historically raised funds through London, but with the growth of markets in the USA, began to look beyond the United Kingdom for Government and semi-government loans.

At the Australian Loan Council² meeting held in May 1927, when the question of Government borrowing was raised, a resolution was passed to consider the establishment of a branch of the Commonwealth Bank of Australia (CBA) in New York for the purpose of raising loans. The Bank’s Governor, Ernest Riddle, after consultation with the Bank’s Board, agreed to this and in July 1927 the Bank’s Deputy Governor, Hugh Armitage, and senior staff member Alfred Mason, left for New York. They were to review the viability of setting up an office there, as well as to liaise with financial institutions (including the Federal Reserve Bank of New York and its Governor, Benjamin Strong Jr). Their recommendations would then be considered by the Commonwealth Bank before a final decision regarding an office in New York was made.

Opening of the New York Agency

After several weeks of discussions and reviews, Armitage cabled his report to Head Office on 18 August 1927, in which he stated that it would be both desirable, and in the interests of Australia, that a representative office of the Bank be opened in New York. Armitage’s main recommendation was that, with regard to future borrowings in the US, loans coordinated under one entity (the CBA), would give the American markets greater confidence and security, and would enable the Commonwealth, on behalf of the States, to achieve better market rates. An office in New York, where direct representations could be made on behalf of Australia, was preferable to using intermediaries or coordinating from Sydney or London. The Bank’s Board approved Armitage’s recommendations and preparatory work commenced to establish the office, called an Agency in the USA.

While the Bank had considered employing an American with a knowledge of the local markets to manage the Agency, it was decided that an Australian would carry as much weight and have access to ’… all the right people.’³ Alfred Mason was duly appointed Agent for New York and remained in the USA to begin setting up the Agency.

Agency staff were mostly sourced from London Office. Miss Winifred Barnett, originally from the UK but living in New York, was the first woman appointed to the staff as the Agency’s stenographer on a salary of £35 per week.

The Agency opened for business on 12 December 1927. Advertising material to accompany the Agency’s opening noted that the ‘… Commonwealth Bank of Australia is the first Australian Bank to establish direct representation in the United States. It is in recognition of the fact that New York is now such an important centre of International finance …’⁴

Premises

Mason was tasked with establishing the Agency in premises close to financial markets and institutions. A lease was obtained from the Hooker Electrochemical Company for the ground and first floor of a building at 25 Pine Street, New York, a site regarded as advantageous as it was very near to Wall Street. A lease, at an annual rental of $14,000 for an initial five-year period from 1 October 1927, was signed but with an option for the owner to cancel the lease after 2 years, if a decision was made to sell the property. At the time, offices near to the financial district of New York were difficult to obtain and the Governor agreed to this clause.

Agency Business and Raising of Loans

While the CBA was permitted to undertake almost all the business of a bank, the one exception was the taking of deposits. This was not allowed under the State Banking Department of New York’s banking licence for foreign banks. General banking business, including remittances to and from Australia, letters of credit, the purchase of Australian bonds and coupons, investing of funds, the management of Commonwealth Government accounts and the participation in loan issues, were allowed under the terms of the licence.

Three major loans were issued between 1927 and 1929 and one loan, on behalf of the City of Sydney, was not raised. A Commonwealth Loan for $40,000,000 was floated after Mason’s arrival in New York, but before the Agency officially opened, with ongoing management undertaken by the Bank. One of the vouchers within this series of records is for this amount.⁵ The Agency then acted as agent for a $50,000,000 Commonwealth Loan and a $7,500,000 City of Brisbane Loan, with assistance from New York issuing houses, including JP Morgan & Co. While both Commonwealth Loans had been successfully listed on the Stock Exchange, the Brisbane Loan raised questions as to the legality of the Bank’s role as fiscal agent and the matter was referred to the State Banking Department of New York, with the Bank voluntarily withdrawing as agent for the loan. In addition, the Bank’s application to be exempt from paying income tax in the State of New York was refused. Although the Bank appealed the decision, it was upheld. Both these rulings affected the workings of the Agency.

While the main purpose of the Agency was to raise loans on behalf of the Commonwealth, Mason also sent regular reports to the Governor of the Bank in Sydney, keeping him informed of the economic conditions in the United States. These reports, ‘Financial Conditions’, although often brief, detailed the Agency’s operations within the financial markets of New York, and more broadly within the United States economy. While they pre-date the Wall Street Crash of September 1929, they capture some of the volatility of, and concerns about, the financial markets leading up to it.

Closure of the New York Agency

The volume of general business conducted by the Agency remained small and the difficulties in working under a restricted licence made the Agency at times ineffective. In 1929 the owner of the building in which the Agency operated also notified the Bank of the proposed sale of the premises. Both these points influenced the ongoing operations of the Agency.

The future of the Agency was first discussed at a Board Meeting on 7 January 1929, after which the Australian Government was advised of the Bank’s decision to close the Agency by Riddle. Alfred Mason was notified by Cable on 15 March. A confidential explanatory letter dated 20 March from Riddle to Mason outlined the Bank’s decision:

             ‘When the New York Agency was opened it was anticipated that the Bank would be largely entrusted with the work of floating Commonwealth Loans in the United States but, as you are aware, certain legal difficulties have cropped up, which preclude us from functioning there in the manner in which the Bank was intended, and it does not appear likely that the results obtained by keeping the Agency open will be sufficiently beneficial to Australia to justify continuance. The advisability of continuing the Agency has been exercising the minds of the Administration for some little time past, and your recent cable intimating the sale of premises, which you occupy has brought matters to a head.’⁶

Further correspondence dated 26 April 1929 alluded to the …

’…unsatisfactory state of the money market, particularly in regard to foreign loans, seeing that the reason for our establishment here was to assist in the negotiation of such issues for Government and other borrowers in Australia.’⁷

The Agency closed for business on 10 June 1929. Staff were each paid a gratuity equal to 3 months’ salary. Amongst the staff, Mr SC Maslin, the Agency’s Accountant, returned to the Bank’s London Office. The Agency’s stenographer, Miss Barnett, also accepted a position in London. Alfred Mason was transferred to the Head Office Inspection Staff in Sydney from 8 August 1929.

The Federal Reserve Bank of New York agreed to keep the Commonwealth Bank’s Head Office informed by taking over another of the Agency’s former functions: that of cabling information on market prices of Australian and other British Dominion issues, as well as New York call money rates on a regular basis.

Postscript

In the 1940s the Bank considered re-establishing an agency in New York. By the mid 1970s, a number of central banks and Australian banks were represented in New York. The opening of a branch of the RBA in New York was discussed at the Bank’s May 1977 Board Meeting and the decision was made to investigate the matter further. In September 1977 the Bank’s Economic Policy Advisory Committee tasked the International Department with investigating the formalities of the process. The official decision to establish a representative office in New York was made in January 1978 and by October 1978 the Bank had opened an office at 70 Pine Street, New York, in the same street as the original Agency. The Bank continues to have a representative office in New York.⁸

¹ The Reserve Bank Act 1959 separated the Commonwealth Bank’s central banking functions from its commercial banking activities. The Commonwealth Bank was renamed the Reserve Bank of Australia and was constituted separately from the newly created Commonwealth Banking Corporation, which would operate as a trading bank.

² The Australian Loan Council, established in 1923, is a public sector borrowing council comprising the Commonwealth of Australia and the States and Territories

³ RBA Archives, BRN-15-1-2

⁴ RBA Archives, BRN-15-8

⁵ RBA Archives, BRN-12-1

⁶ RBA Archives, BRN-15-19

⁷ RBA Archives, BRN-10-1

⁸ The term ‘Bank’ refers to the continuous entity of the Commonwealth Bank of Australia which was renamed the Reserve Bank of Australia in 1960 when it commenced operations as Australia’s central bank.

The records are arranged by an Alpha/Numeric numbering system. BRN refers to the New York Branch.  Indexes to most of the correspondence exist, either as a discrete record or at the front of the bound volume. Letters in the series are individually numbered and can be cross referenced to the numbers in the indexes.

Some letters were missing or not included when the records were bound. These have been contained within the two supplementary volumes (BRN-15-1-15 and BRN-15-1-16). These letters have been given their original letter number, as per the indexes, but have been numbered in red, to indicate they are out of sequence.