The creditanstalt crisis of 1931 and the failure of the austro-german customs union project

Historical Journal

Volumn 44, Issue 1, 2001, Pages 199-221

  Aguado, Iago Gil ^a  

^a ST JOHN S COLLEGE   (United Kingdom)

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EID: 84967260250     PISSN: 0018246X     EISSN: 14695103     Source Type: Journal    
DOI: 10.1017/S0018246X01001728     Document Type: Article

References (104)

1. Despite the central role played by the Creditanstalt's collapse in the European banking crisis of 1931, literature on the subject is not abundant. This, together with the refusal of the Creditanstalt to open its archives, means a definitive account of the collapse of the bank remains to be written. None the less, several useful recent studies by Austrian historians exist. The works of D. Stiefel, Die Grosse Krise in einem kleinen Land: Österreichische Finanz- und Wirtschaftspolitik 1929–38 (Vienna, 1988)
2. Finanzdiplomatie und Weltwirtschaftskrise - Die Krise der Credit-Anstalt für Handel und Gewerbe 1931 (Frankfurt am Main, 1989) have provided valuable insights into the crisis. Stiefel's work has shown that the hypothesis that the French provoked the collapse of the bank by withdrawing short-term funds must be discarded, and highlights the questionable practices of the bank's management.
3. F. Weber, ‘Vor dem groβen Krach. Die Krise des österreichischen Bankwesens in den zwanziger Jahren’ (unpublished habilitation dissertation, University of Salzburg, 1991), unfortunately as yet unavailable to the general public, provides perhaps the most detailed study of the internal causes of the bank's problems, providing valuable information on the judicial investigations conducted into the bank's collapse.
4. Similarly H. Kernbauer, Währungspolitik in der Zwischenkriegszeit - Geschichte der Oesterreichischen Nationalbank von 1923 bis 1938 (Vienna, 1991), provides a careful insight into the Austrian central bank's role during the crisis.
5. A. Schubert, The Credit-Anstalt crisis of 1931 (Cambridge, 1991), provides an interesting application of modern economic theory to the crisis. As far as the Austro-German customs union is concerned, modern literature is exceedingly rare, specially that referring to the situation in Austria.
6. The seminal work by E. W. Bennett, Germany and the diplomacy of the financial crisis, 1931 (Harvard Historical Monographs, Number 50, Cambridge, 1962)
7. does not rely on Austrian archival material, material only partially studied in W. Goldinger, Das Projekt einer deutsch-österreichischen Zollunion von 1931 (Graz, 1965), and a gap which this article aims to fill. To date nobody has adequately incorporated the valuable financial and diplomatic information available in the archives of the Bank of England, the Austrian Nationalbank and the Archiv der Republik in Vienna to understand the extent to which these two crises were linked. This is the fundamental objective of this article.
8. H. James, ‘The causes of the German banking crisis of 1931 ’, Economic History Review, 37 (1984), p. 81.
9. P. Temin, Did monetary forces cause the great depression? (New York, 1976), p. 2.
10. Creditanstalt to Nationalbank, 5 June 1931, Vienna, Archive of Oesterreichische Nationalbank (hereafter ANB), Bankakte 1536/1931. The Creditanstalt's foreign debts at the beginning of June amounted to 71,240,400 dollars, of which 26,826,200 were held by British creditors, 23,871,000 by American ones, 6,190,000 by French ones, 6,140,000 by Dutch ones and 5,561,900 by Swiss ones, the remaining 2,651,300 were held by creditors from other countries (including Germany). The exact figure for German-held debt is not available, but it was clearly negligible. The agreement to stop withdrawals reached with the Creditanstalt's foreign creditors was signed on 16 June, so Temin's claim lacks any empirical basis. Similar figures are provided by A. Lackner, ‘Der Zusammenbruch der Credit-Anstalt 1931 - eine Literaturübersicht’ (unpublished dissertation, Wirtschaftsuniversität Wien, Vienna, 1992), pp. 65–66
11. Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. 37.
12. K. H. Geng, ‘Der Zusammenbruch der Creditanstalt und die Sanierungsmassnahmen der Bundesregierung’ (unpublished dissertation, Institut für Wirtschafts- und Sozialgeschichte, Vienna, 1969), p. 75.
13. C. Kindleberger, The world in depression, 1929–1939 (London, 1973), p. 149.
14. Bark to Harvey (deputy governor of Bank of England), 19 May 1931, London, Bank of England Archive (hereafter BoE), OV28/3 Doc. 45.
15. Spitzmüller, 27 June 1931, Vienna, Archiv der Republik (hereafter AdR), Ministerratsprotokoll Nr. 707.
16. Ministerratsprotokoll.
17. BoE, OV28/75. Folder title: ‘Credit Anstalt: cross deposits. Deposits by Austrian National Bank with three London houses and then re-lent to Credit Anstalt.’ The folder contains a large number of documents relating to the matter, including large numbers of telegrams from 1929 onwards documenting the operations which took place. The majority of the documents are not numbered.
18. Kernbauer, Währungspolitik in der Zwischenkriegszeit, pp. 280–1, 357–60.
19. This episode is also mentioned briefly in Weber, Vor dem groβen Krach, p. 631, although he does not seem to have come across the documents at the Bank of England either.
20. New York Trust Co. to Bank of England, 5 June 1931, BoE, OV28/75 no number.
21. Bank of England memorandum signed C.A.G., 4 June 1931, BoE, OV28/75 Doc. 110.
22. Bank of England memorandum signed C.A.G.
23. Bank of England memorandum signed C.A.G.
24. Rodd to Siepmann (memorandum of telephone conversation), 2 June 1931, BoE, OV28/75 Doc. 104.
25. Bank of England memorandum signed B.G.C., 23 May 1931, BoE, OV28/3 Doc. 51.
26. Bank of England memorandum signed C.A.G., 2 June 1931, BoE, OV28/75 Doc. 104.
27. New York Trust Co. to Bank of England, 5 June 1931, BoE, OV28/75 no number.
28. Rothschilds (London) to New York Trust Co., 6 June 1931, BoE, OV28/75 no number. The telegram reads ‘Understand three London Banks totalling $6,000,000 will continue deposit to Oest. Credit Anstalt Vienna without corresponding arrangement with Oest. Nationalbank Vienna.’
29. Kernbauer, Währungspolitik in der Zwischenkriegszeit, p. 281. Kernbauer's figures refer to the deposits by the Austrian Nationalbank in foreign partners of the Creditanstalt. We know, however, from the example of the New York Trust Co. that not all these deposits were then forwarded to the Creditanstalt.
30. In this particular example, of the 3 million dollars deposited by the Nationalbank in the New York Trust Co., only 2 million were placed at the disposal of the Creditanstalt. New York Trust Co. to Bank of England, 5 June 1931, BoE, OV28/75 no number.
31. Economist, 16 May 1931.
32. Weber, Vor dem groβen Krach, p. 631.
33. Kindleberger, The world in depression, 1929–1939, p. 149
34. Kernbauer, Währungspolitik in der Zwischenkriegszeit, pp. 281–282.
35. W. Federn, Der Zusammenbruch der Österreichischen Kreditanstalt (Berlin, 1932), p. 416.
36. Schubert, The Credit-Anstalt crisis of 1931, p. 25. Schubert notes that the bank's published statements had been manipulated as far back as 1925.
37. Federn, Zusammenbruch der Kreditanstalt, p. 414.
38. Kernbauer, Währungspolitik in der Zwischenkriegszeit, p. 279
39. Federn, Zusammenbruch der Kreditanstalt, p. 414.
40. Kernbauer, Währungspolitik in der Zwischenkriegszeit, p. 293.
41. Geng, Zusammenbruch der Creditanstalt, p. 77.
42. Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. 122.
43. Weber, Vor dem groβen Krach, p. 548. Fritz Weber claims that the management of the Creditanstalt must have been aware of the problems by the second half of 1930 at the latest. The cross-deposits, as well as the evidence on the rigging of accounts, suggest that they must have been aware of the bank's problems much earlier.
44. Internal foreign ministry legal report, undated and unnumbered, AdR, BKA-AA Karton 401, p. 347. The Austrians and Germans strenuously denied that their actions contravened Austria's obligations under article 88 of the Treaty of St Germain, and the Protocol for Austrian Reconstruction of 1922, under which Austria agreed to abstain from any negotiations or from any economic or financial engagement calculated directly or indirectly to compromise her independence. A legal report meant only for internal use, found in the foreign ministry archives in Vienna, highlights that they well were aware of the fact that this was not the case. This document states that: ‘Even if we assume that the Court's [the Permanent Court of International Justice in The Hague] report will be completely unbiased, it is not to be assumed that it will declare that the proposed Customs Union is no threat to Austria's independence.’
45. F. Fischer, Germany's aims in the First World War (London, 1967), pp. 10–11.
46. Phipps to Vansittart, 9 May 1931, Cambridge, Churchill Archive Centre (hereafter CAC), the Phipps collection 2/16 p. 55.
47. Vansittart, foreign office confidential report (13878) ‘An aspect of international relations in 1931’, CAC, Archives of Lord Vansittart of Denham, 1/4 p. 11.
48. Neue Freie Presse, 24 Mar. 1931.
49. Phipps to Vansittart, 1 Apr. 1931, CAC, the Phipps collection 2/16 p. 52.
50. Marek to Vienna, 15 Apr. 1931, AdR, BKA-AA 2251–13/1931.
51. L. Zimmerman, Deutsche Aussenpolitik in der Ära der Weimarer Republik (Göttingen, 1958), p. 413.
52. L.J. Götzhaber, ‘Der Versuch einer Zollunion vom Jahre 1931 ’ (unpublished Ph.D. thesis, Karl Franzens University, Graz, 1969), p. 82.
53. F. Siebert, Aristide Briand 1862–1932, ein Staatsmann zwischen Frankreich und Europa (Stuttgart, 1973), p. 582.
54. The Austro-German customs union was discussed in Geneva, and an avis consultatif was requested from the Permanent Court of International Justice in The Hague. The ruling, however, which although not binding would have had immense political significance, was made public in September 1931, when the customs union had already been abandoned, and was thus of little relevance to the outcome of the affair. We can thus reject Fritz Weber's claim that ‘The greatest success of French diplomacy followed in September 1931, when the Court at The Hague declared, with a narrow majority, that the customs union was incompatible with the Geneva Protocol of 1931.’ Weber, Vor dem groβen Krach, p. 532.
55. Internal foreign ministry report (I), 30 Apr. 1931, AdR, BKA-AA 22772–13/1931.
56. Marek to Peter (general secretary at Austrian foreign ministry), 13 May 1931, AdR, BKA-AA 22867–13/1931.
57. Marek to Peter, 21 May 1931, AdR, BKA-AA 22950–13/1931.
58. See W. A. Lewis Economic survey, 1919–1939 (London, 1957), p. 63
59. H. Luther Vor dem Abgrund 1930–1933. Reichsbankpräsident in Krisenzeiten (Berlin, 1964), p. 158
60. Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, pp. 75–6. Both Lewis and Hans Luther, the then President of the Reichsbank, consider French withdrawals of short-term capital to be the immediate cause of the Creditanstalt's collapse. Stiefel provides an interesting analysis of why this view has persisted for so long.
61. K. E. Born, Die deutsche Bankenkrise 1931 - Finanzen und Politik (Munich, 1967), pp. 64–65
62. Weber, Vor dem groβen Krach, p. 567. According to Fritz Weber, the loans by French banks to the Creditanstalt amounted only to 20 million schillings, or 4–5 per cent of the Creditanstalt's total overseas debts.
63. Federn, Zusammenbruch der Kreditanstalt, p. 417.
64. Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. 77.
65. Brauneis, 13 May 1931, ANB, Generalratssitzung Nr. 97.
66. Kernbauer, Währungspolitik in der Zwischenkriegszeit, p. 295
67. Schubert, The Credit-Anstalt crisis of 1931, p. 17. Kernbauer believes the overall losses to have been over 900 million schillings. Schubert claims they amounted to about 1,070 million schillings. Although these figures include the losses which accrued after 11 May, it is clear that the losses before the problems were made public by far exceeded the Creditanstalt's own claims.
68. Confidential Bank of England memorandum on Austria, 30 July 1931, BoE, OV28/4 Doc. 131.
69. Nationalbank to chancellery, 23 May 1931, ANB, Bankakte 1550/1931
70. Kernbauer, Währungspolitik in der Zwischenkriegszeit, p. 307.
71. Walley to Cattern, 18 May 1931, BoE, OV28/3 Doc. 38.
72. Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. 44.
73. Frank to Vienna, 5 June 1931, AdR, BKA-AA 23259–13/1931.
74. Phipps to Sargent, 26 May 1931, CAC, the Phipps collection 2/9 p. 22.
75. Bruins to BIS, ANB, Bankakte 1534/1931. Bruins notes in his report to the BIS that accounts had been fiddled even before the publication of the Nationalbank return on 15 May (the first after the start of the run on the schilling), so as to avoid showing the real extent of losses of foreign exchange.
76. Rodd to Siepmann (memorandum of telephone conversation), 12 June 1931, BoE, OV28/3 Doc. 183.
77. Rodd to Siepmann, 20 June 1931, BoE, OV28/4 Doc. 44.
78. Rodd to Siepmann.
79. Rodd to Siepmann.
80. Nationalbank to finance ministry, 13 June 1931, ANB, Bankakte 1555/1931.
81. Ender, 15 June 1931, AdR, Ministerratsprotokoll Nr. 701.
82. Norman to Harrison (memorandum of telephone conversation), 16 June 1931, BoE, OV28/44 Doc. 8.
83. Norman to Harrison (memorandum of telephone conversation).
84. Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. 158.
85. For an up-to-date account of the issue, see Stiefel, Finanzdiplomatie und Weltwirtschaftskrise.
86. Rodd to Siepmann, 20 June 1931, BoE, OV28/4 Doc. 44. Francis Rodd forwarded to Harry Siepmann at the Bank of England a copy of this memorandum he had written for the BIS describing the situation in Austria between 8 and 16 June 1931.
87. Nationalbank to Avenol, 4 Sept. 1931, ANB, Bankakte 1094/1931.
88. Phipps to Foreign Office, 19 June 1931, PRO, FO C4362/61/3.
89. O'Malley to Hadow, 16 July 1931, PRO, FO C5389/61/3. In fact, British intelligence on the crisis was quite good. The Bank of England was receiving privileged information from both Francis Rodd, the BIS representative in Vienna (and a former employee of the Bank of England), and Sir Robert Kindersley (a director of the Bank of England), who represented the interests of the foreign creditors of the Creditanstalt in the ‘Austrian Credit Anstalt International Committee’. This explains the valuable insights into the crisis provided by the British archives. None the less, it appears that the Bank of England and the foreign office did not share all the information available, which might help explain the above claim.
90. Schober in ‘Übertragung der stenographischen Aufzeichnungen über die Verhandlungen des Ministerrates in der Sitzung vom 9. September 1931’, 9 Sept. 1931, AdR, Ministerratsprotokoll Nr. 721. Appendix.
91. Rodd to Siepmann (memorandum of telephone conversation), 19 June 1931, BoE, OV28/4 Doc. 35
92. Bruins to Siepmann (memorandum of telephone conversation), 20 June 1931, BoE, OV28/4 Doc. 36.
93. Lewis, Economic survey, 1919–1939, p. 63.
94. Sargent to Hadow, 24 Aug. 1931, PRO, FO C6429/61/3.
95. Sargent to Hadow. The Bank of England and the foreign office do not appear to have shared all the information at their disposal, a fact which might help explain the above claim by the foreign office that it was poorly informed.
96. Sargent to Hadow.
97. Phipps to Henderson, 17 June 1931, in R. Butler and E. L. Woodward, eds., Documents on British foreign policy, 1919–1939: second series volume II 1931 (London, 1947), Nr. 59.
98. Bennett, Germany and the diplomacy of the financial crisis, p. 295.
99. J. Curtius, Bemühung um Oesterreich - Das Scheitern des Zollunionplans von 1931 (Heidelberg, 1947), p. 63.
100. Ender, 15 June 1931, AdR, Ministerratsprotokoll Nr. 701.
101. Nationalbank to finance ministry, 13 June 1931, ANB, Bankakte 1555/1931.
102. Phipps to Henderson, 16 Apr. 1931, CAC, the Phipps collection 1/11 p. 2.
103. Phipps to Henderson.
104. Austrian foreign ministry report, 30 Apr. 1931, AdR, BKA-AA 22772–1 3/1931.