In the Eye of a Storm: Manhattan's Money Center Banks During the International Financial Crisis of 1931

71 Pages Posted: 21 Sep 2011 Last revised: 23 Feb 2025

See all articles by Gary Richardson

Gary Richardson

University of California at Irvine; National Bureau of Economic Research

Patrick Van Horn

Scripps College

Date Written: September 2011

Abstract

In the summer of 1931, a financial crisis began in Austria, spread to Germany, forced Britain to abandon the gold standard, crossed the Atlantic, and afflicted financial institutions in the United States. This article describes how banks in New York City, the central money market of the United States, reacted to this trans-Atlantic trauma. New York’s money-center banks anticipated the onset of a financial crisis, prepared for it by accumulating substantial reserves, and during the European crisis, continued business as usual. New York’s leading bankers deliberately and collectively decided on the business-as-usual policy in order to minimize the impact of the panic in the United States. New York banks’ behavior changed only after the Federal Reserve raised discount rates to stem gold outflows in the fall of 1931.

Suggested Citation

Richardson, Gary and Van Horn, Patrick, In the Eye of a Storm: Manhattan's Money Center Banks During the International Financial Crisis of 1931 (September 2011). NBER Working Paper No. w17437, Available at SSRN: https://ssrn.com/abstract=1931209

Gary Richardson (Contact Author)

University of California at Irvine ( email )

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HOME PAGE: http://www.socsci.uci.edu/~garyr/welcome.html

National Bureau of Economic Research ( email )

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HOME PAGE: http://www.nber.org

Patrick Van Horn

Scripps College ( email )

Claremont, CA 91711
United States

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