Public Banks, Private Banks and Crisis: Banco de la Nación Argentina as Lender of Last Resort between the First World War and the Postwar Period

In 1914 the outbreak of the First World War gave place to a great commercial and financial crisis in the Argentine economy. The interruption of the external capital flows, already diminished since the Balkan’s crisis, brought about serious repercussions on the financial system, on the real estate and other connected activities, resulting in a wave of bankruptcies and huge unemployment. On the other hand, the downfall of fiscal revenues and the difficulties in the international financial markets discharged over the local market the burden of public financing. After an important recovery between 1918 and 1920, a new international crisis heavily afflicted the balance of payments, public finance and those activities previously more profitable, such as livestock. The Banco de la Nacion Argentina experienced in those years its greatest expansion, and was called to perform new functions, financing both the public sector and a large range of productive activities. However, the most outstanding aspect, but less studied, was its new role in the banking system, acting as lender of last resort in different critical moments, in the manner of a Central Bank. This paper revisited such questions, with special attention to the case of the Banco Espanol del Rio de la Plata, when the BNA rescue assumed —about 1923-24— a fuller and more massive character, trying to close the postwar cycle of disturbances.