Opera Omnia Luigi Einaudi

Banking Affairs – Stock Exchange Boom

Tipologia: Paragrafo/Articolo – Data pubblicazione: 24/05/1924

Banking Affairs – Stock Exchange Boom

«The Economist», 24 maggio 1924, p. 1057




Turin, May 12



Banking affairs have been prominent during the past month. In mid-April a sudden burst of buying sent up the prices of Credito Italiano’s shares from about 900 lire to 1,100 lire and more. It appears that a competition in buying had been started between the board of directors of the bank and a group of industrial Turinese magnates. A generation of rivals of the late German industrial leader, Herr Stinnes, is growing up in Italy. The Turinese leaders are Senator Agnelli, chief of the Fiat motor-car company, Signor Gualino, head of a gigantic artificial silk concern, with 600 million lire capitalisation, and Signor Abegg, a leading cotton man. They complained of credit difficulties, and strove to obtain the majority of the shares in Credito Italiano, so as to be able to control this great fountain of credit, with over 4,000 million lire deposits and current accounts. Five years ago, Credito Italiano and Banca Commerciale Italiana were made the object of a similar attack. On that occasion the banks saved their independence by the device of two financial holding companies, to which were entrusted the majority of shares of the banks, and which were ultimately controlled by bank directors. Signor Nitti, then Premier, induced, by moral pressure and promise of credit facilities, the two attacking groups to sell their shares at a profit to the holding companies. It appears that the Banca Commerciale Italiana has never lost control of its holding company, so that directors are sure of a majority in the shareholders’ annual meetings. Not so with the Credito Italiano directors, who, having persuaded themselves that all peril of losing control of their bank was past, let their shares be freely negotiated on the market, with the result that in the first ten days of April directors awoke to the painful truth that the Turinese group had almost gained control of a majority of shares. At this point began a fierce struggle between bank directors and would-be conquerors of the bank; of which few particulars are known. The ultimate result was that the Government, by a decree of April 15, suspended the right of buyers of banking shares to call on sellers for immediate surrender of shares sold for end-of-month settlement. This right, called “diritto di sconto”, was invented in 1907 to oblige speculative bears, who had sold securities for end-of-month settlement in the hope of covering themselves before settlement at a lower price, to buy precipitately the securities of which immediate surrender was called. In the present case, however, buyers of Credito Italiano shares who hoped to get, in virtue of the “diritto di sconto”, immediate possession of bought shares, were prevented, by the suspension of the same right, from obtaining material possession before May 2nd. In the meantime, directors of the Credito Italiano called for an extraordinary meeting of shareholders at April 28th. At this meeting the old directors easily persuaded the assembly to vote an increase of capital from 300 to 400 million lire, of which 50 were to be offered to shareholders and 50 were left at the disposal of the board of directors. It seems that the Turinese group, when they saw that their manoeuvre had failed, sold their shares with a good profit to a reconstituted holding company, and received a new promise of credit facilities. All is well which ends well, but this strange episode of a banking fight gives an instructive glimpse into methods of obtaining credit facilities. Credito Italiano is a most conservative and trusted bank, and we can be sure that credit facilities will be given to the Turinese group with the utmost care for the interest of depositors. In future, bank directors will take great care not to let a similar attack develop.



While this drama was being acted in Milan and Turin, another banking drama was recited before the Senate acting as the High Court of Justice. Two Senators and many banking men, all connected with the late Banca Italiana di Sconto, were tried before the High Court of Justice under the accusation of having issued in 1921 a false balance-sheet, with the purpose of distributing to shareholders and among themselves profits not truly gained. By virtue of the Statute of the Kingdom, when a Senator is accused of some criminal offence, he and all his accomplices are not sent to ordinary Courts of Justice, but appear before the Senate as High Court of Justice. Senator Marconi, who was president of the Banca Italiana di Sconto, did not appear, because he was found, in the preliminary stage of the proceeding, entirely innocent and unaware of balance-sheet malpractices conducted in his absence. After a week of abundant eloquence proceedings were suspended, as the High Court of Justice resolved to call an investigation into the true state of the Banca Italiana di Sconto at December 31, 1921, so as to ascertain whether the Banca was truly in default, or whether, with a little courage, the bank could have been saved. The affair has thus, from being a trial of the men responsible for the fateful end of the Banca di Sconto, been turned into an investigation against past Ministers (Bonomi and Belotti), who dared not save the bank.



Amid these banking turmoils Italian Stock Exchanges continue to be highly optimistic. The campaign for the so-called valorisation of securities in consequence of the depreciation of the lira is as yet in full swing. For a week, towards the end of April, it appeared as if the upward movement had come to stay; banks endeavoured to restrict prolongations, and increased very strongly the charges for speculative accounts up to 7, 7/2, and even 8 per cent., but all in vain. Money is too abundant, and is anxiously seeking investment. Bona fide investors are sending up prices of 5 and 3.50 per cent. Consols, the first reaching 99 and the second 87. What a long way from the prices of 67 and 62 quoted in 1920! The Treasury is planning, it is said, an issue of nine-year bonds at 4 3/4 per cent., and they will find an easy market.



General commodity prices and the cost of living are being maintained at a high level.





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