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Evolution of Credit and Banks in France

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Evolution of Credit and Banks in France 61s~CONGRESS SENATE 2d Session } { "::%2"' NATIONAL MONETARY COMMISSION Evolution of Credit and Banks in France From the Founding of the Bank of France to the Present Time PROFESSOR AT THE CONSERVATOIRE NATIONAL DES ARTS ET M~TIERS AND AT L'ECOLE DES SCIENCES POLIT1QUES.-MEMBER OF THE INSTITUT INTERNATIONAL DE STATISTIQUE, ETC. Washington : Government Printing Office : 1909 TABLE OF CONTENTS. E'age. Preface: Purpose and arrangement of this study ---------_------ 5 THE BANK OF FRANCE AND THE DEVELOPMENT OF CREDIT, 1800 TO 1848. Introductory------------------------------------------------ Chapter I.-Founding of the Bank of France ------------------- 11.-The charter or privilege of the Bank of France-Crisis of 1805---------------------------------------- 111.-The fundamental statutes of the Bank of France--It comes into closer relations with the State, 1806- 1814-Panic of 1814----------------_------------ 1V.-The Bank under the Restoration-Founding of depart- rnentalbanks---------------------------------- V.-The Bank under the Monarchy of July-Founding of NELSONW. ALDRICH.Rhode Island Chazrmarr. comptoirs or branch offices, and the competition with ED~ARDB. VREELAND. New York, Vzce-Chairman. departmental banks---------------------------- JULIUSC. BURROWS. Michigan. Jssss OVERSTREET.Indiana. V1.-The beginnings of the railroad industry-The panics of EUGENEHALE. Ma~ne. JOHNW. WEEKS,Massachusetts. 1846, 1847, 1848-The departmental banks of issue PHILANDERC. KNOX,Pennsylvania. ROBERTW. BONYNGE,Colorado. are incorporated with the Bank of France, which THEODOREE. BURTON.Ohio. SYLVESTERC. SMITH.California. becomes the sole bank of issue --------------_- .-- JOHNW: DANIEL,Virginia. LEMUELP. PADGETT,Tennessee. VI1.-A brief survey of the general course of business in the HENRY M. TELLER.Colorado. GEORGEP. Bu~csss,Texas. first half of the nineteenth century in France- HERNANDOD. MONEY.Mississippi. ARSBNGP. PUJO,Louisiana. Credit and industrial beginnings ---_..------------- JOSBPHW. BAILEY,Texas. ARTHURB. SHELTON.Secrelary. PARTIT. A. PIATTANDRBW. Special Asswtant fo Commisszon. THE BANK OF FRANCE-THE CRSDITMOBILIER-THE FIRST COMP- TOIR D'ESCOMPTE. Introductory--_--------------------------------------------- Chapter I.-The Bank of France, sole bank of issue-Its operations with the State-Founding of establishments called " Haute Banque"-Industrial loans'and speculation- 11.-The Soci6t6 Generale du Credit Mobilier and the Pereires, 1853-1866------------------------------------- 111.-The first Comptoir dlEscompte and the development of commerce-The laws of May 23-29 and July 24, 1867,on companies-----------------,---------- TV.-The Bank of France from 1860-1875: I. Before the Franco-Prussian war ------------ 11. The Franco-Prussian war and its results- - - - - 111. The great loans and the payment of the war indemnity - - - - - - -,- - - - - - - - - - - - - - - - - - - - National Monetary Commission FROM 1875 TO THE PRESENT TIME. Page. Introductory------------------------------------------------ Chapter 1.-The situation of France after the war-A glance at the PREFACE. development of saving and savings institutions- ---- 11.-The crises of 1882 and 1889-A brief outline of the operations of the Bank of France, 1875-1889-The Comptoir d'Escompte - - - - - - ---- - -.- --- - ---- ---- The object of this study is to afford a connected view 111,-The crisis of 1890-91-Intervention of the Bank of of the basic facts and most noticeable features of the France in behalf of the Bank of England- --- ------ 1V.-The credit companies and their development-&~- ,-redit system and banks in France from the year 1800 to tension of their operations-Their general method- the present time. It is designed, therefore, not as a history Their present situation-- ........................ V.-The credit companies and the local banks-- _ - - -- ---- in which multiplicity of detail is apt to obscure a view of V1.-The Bank of France-Renewal of its privilege-Present the subject as a whole, but as a coijrdinated outline of the situation-Its r6le in thecrisis of 1906-7 - _.- - - - --- - Generalconclusions------------------------------------------ successive stages in the development of credit and of the institutions which distribute it. 1.-Note on the Credit Foncier de France -.------..------------- 241 This outline is divided into three very unequal periods: 11.-Note on the Credit Agricole Mutuel 255 The first--a period of beginnings, of slow growth, of formation, during which the Bank of France succeeds in gaining a complete monopoly--extends from the foun- dation of that establishment until about 1848. The second and shorter period is a time of transition. It extends from 1848 to about 1875. During these twenty-five years new institutions and new forms of credit associations make their appearance. Better laws facili- tate the organization of these credit associations as well as of all kinds of associations, both industrial and com- mercial. It includes the war of 1870-71 and its immedi- ate results. This event seems to have hastened the development of the credit system or at least to have given it a stimulus, arising from the consequent reaction against the misfortunes which had overwhelmed the country. France begins to recover and finds, in her sturdy National Monetary Commission spirit of economy and her ability to save, the elements productive of new vigor and potency. The third period, which might be called the period of EVOLUTION OF CREDIT AND BANKS full maturity, extends from 1875 to the present time. In IN FRANCE FROM THE FOUND- this interval the organization of the credit system is put on a firm footing as the result of a century's evolution. ING OF THE BANK OF FRANCE In this evolution the various critical movements are TO THE PRESENT TIME. described and explained-the political, economic, and financial crises-constituting, as it were, the pathological growth of the credit system and banks in France. THE BANK OF FRANCE AND THE DEVELOPMENT The study is supplemented by the addition of two OF CREDIT, 1800 TO 1848. appendices, of which the first portrays the development of the Crddit Foncier and its results, while the second out- EVOLUTION AND DEVELOPMENT OF CREDIT AND CREDIT INSTITUTIONS IN FRANCE FROM THE YEAR 1800. lines the rather recent organization of the Crddit Agricole; thus completing a series of observations, impartially set INTRODUCTORY. Law's bank.-The bank compromised in certain undertakings.-Failure of Law's forth, and designed to assist specialists seeking the solu- bank and "system."-The liberty of issuing bank notes in Prance from 1721 on.- tions of problems along these lines. The Caisse d9Escompte.-Dangerous relations of the Caisse d'Escompte with the State.-Its difficult situation.-Its liquidation.-Commercial banks during the Rev- ANDR~LIESSE. olution.-Prudence of the commercial bankers.-Pounding of free banks of issue, 1796-1800.-The Caisse des Comptes Courants, 1796.-Conditions of discount.- PARIS,March 30, 1909. Its issues.-A difliculty overcome.-The Caisse dVEscompteCommercial, 1797.- Origin and nature of this establishment.-Capital.-Issue.-The Comptoir Com- mercial, 1800-General Commercial Association of Rouen, 1798.-Services per- ' formed by these banks of issue during the last few years of the eighteenth century. The son of a Scotch banker named Law succeeded in obtaining from the Regent on hlay 2, I 716, permission to organize a bank of issue. It was called the Banque Gbnkale, and was opened the following month. If Law, the president of the bank, had kept within the normal bounds of operations of banks of this kind, it is probable that he would have rendered a real service to commerce and industry. Instead of this, he soon associated the bank with vast and uncertain National Monetary Commission Evolution of Credit and Banks enterprises aimed at the exploitation of the colonies; under the name of Caisse d'Escompte. This concern and presently the Banque Generale was brought into was chartered as a limited liability partnership (sous closer relations with the State, and on June 4, I 718, took forme de commandite), and, after some difficulties at the the name of the Banque Royale. All the departments start, succeeded in doing a moderately good business. of private and public finance fell into Law's hands. The However, it was not long before the Comptrollers of Fi- issue of bank notes by the bank and the issue of shares nance, d'ormesson first and afterwards Calonne, being by the different companies that he founded soon became short of money, borrowed from it. From this moment an abuse. Neither bank notes nor shares represented in dates the first blow to the soundness of the credit of the reality any certain value. Stock-jobbing and wild specu- Caisse d'Escompte. Except for these dangerous rela- lation hastened the downfall of what was called Law's tions with the State, the Caisse d'Escompte engaged in system. The Banque Royale closed its doors in I 72 I, and a normal and regular banking business, including the the various companies founded by 14awwere liquidated at issuance of bank notes. But repeated state loans and great loss. It was a disaster which caused the ruin of a government interference in its management completely large number of people. The memory of this failure altered its character. Yet the directors were men remained fresh in the minds of all classes of people, even of ability and worth; Lavoisier, the celebrated chemist, the poorest, during the whole of the eighteenth century, was one of them. The National Assembly, which had and
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