The Allmänna savings banks and the crash of 1929

Description

The project is about the relatively unknown but historically interesting bank crash that occurred in Sweden in April 1929. Eight Allmänna savings banks were discovered to be insolvent due to extensive financial crimes committed by the banks' founder and his associates.

The banks had been created in the late 1910s as banks "run for and by" workers and the labor movement, segments that the established savings and commercial banks were neglecting. The savers' deposits were supposed to be used for loans for the construction of affordable housing in Stockholm's new suburbs, but instead the money was used by the founders for failed land speculation, high salaries and fees, and bribes to appraisers and supervisors.

The crash led to large deposit losses despite the fact that the government intervened with a form of deposit guarantee. It also led to the creation of the Savings Banks Inspectorate and a gradual tightening of supervision of all savings banks. Around 20 people, including the bank's founder, were sentenced to prison terms and fines for a long list of financial crimes.