Too big to survive? The Norwegian reaction to the 1920s banking crisis

Did Norway willingly cut down its own business elites in the 1920s? During the banking crisis, Norway’s two largest banks ceased to exist. Both of them had roots in early nineteenth century private banking, and they represented important Norwegian capitalist families as shareholders, managers and lenders. As joint-stock companies, evidence that family members of shareholders had had easier access to loans did not go down well with the investigators. The two banks were not necessarily doomed, though. The particular Norwegian reaction to the emerging banking crisis in the early 1920s was a hastily written law that demanded banks in a certain situation to be placed under the administration of the National Bank of Norway. Thus the two largest banks had to seek protection under the National Bank well before they were insolvent. The Norwegian business elite – led by former prime minister Christian Michelsen – fought against the law, arguing that once banks came under administration they were doomed. Sweden and Denmark made other choices to meet their own grave banking crises, and seemingly had a much stronger banking sector to deal with the many individual business problems at the time. In Sweden, banks consolidated businesses, in Norway a lot of companies were sold to foreign interests. The loss of these two banks were of possible great consequence for the structure of the Norwegian business. The paper discusses the thesis put forward by Norwegian historian Francis Sejersted that Norway was characterized by skepticism toward big corporations.