Collapse
In early 1990 there was a sudden run on Pyramid as depositors rushed to withdraw their money. The reasons behind this were never established, though it was suspected some rumours might have been started by rival institutions. On 13 February 1990 the state treasurer Rob Jolly and attorney general Andrew McCutcheon held a press conference and assured the public that Pyramid was sound, all but telling them to stay in. In fact Pyramid wasn't sound, but the office of the Registrar of Building Societies hadn't been particularly assiduous and so didn't know that.
After the run Pyramid mounted an advertising campaign to attract more deposits, offering markedly higher interest rates than competitors. Behind the scenes it was borrowing money, selling assets, and trying to find a merger partner. The ANZ Bank was about the only major potential partner. The group's value was in the branch network and strong customer loyalty, but the question was how many bad loans it was carrying.
A second run of withdrawals began in May 1990 and at that time premier John Cain apparently tried to get a deal up with the ANZ by offering a $90m government guarantee, but the ANZ had lost interest. In June the government suspended withdrawals for a week and appointed an administrator. Cain announced there was no government guarantee of deposits, unleashing a storm of outrage at the contrast with the government's initial advice.
The administrator's report on 1 July 1990 was that the societies had to be wound up. On the morning of 3 July the premier was still saying there was no government guarantee, but by the afternoon he'd been rolled by his own caucus and had to announce that there would in the end be a guarantee.
Read more about this topic: Pyramid Building Society
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