Cyclopædia of Political Science, Political Economy, and the Political History of the United States
CRÉDIT MOBILIER. In the preceding article we have given some account of a species of banks which have been found to be of the most beneficial nature, and to have immensely developed the productive powers of the earth. The increasing attention paid to industrial subjects in France since the accession of the emperor Napoleon III., gave rise to a new species of bank, whose organization we must now endeavor to explain.
—On Nov. 18, 1852, the government sanctioned the statutes of the Société Générale de Crédit Mobilier, which received a privilege for 99 years. Its objects, as stated in its statutes. tit. ii, are—1. A souscrire ou acquerir des effets publics, des actions ou des obligations dans les différentes entreprises industrielles, ou de crédit, constituées en sociétés anonymes, et notamment dans celles de chemin de fer, de canaux et de mines, et d'autres travaux publics, déjà fondées ou à fonder; 2. A émettre pour une somme égale à celle employée à ces souscriptions, et acquisitions, ses propres obligations; 3. A vendre ou donner en nantissement d'emprunts, tous effets, actions et obligations acquis, et à les échanger contre d'autres valeurs; 4. A soumissioner tous emprunts, à les céder et réaliser, ainsi que toutes entreprises de travaux publics; 5. A preêter sur effets publics, sur dépôts d'actions et obligations et à ouvrir des crédits en compte courant sur dépôts de ces diverses valeurs; 6. A recevoir des sommes en compte courant; 7. A opérer tous recouvrements pour le compte des compagnies susénoncées, à payer leurs coupons d'intérêts ou de dividende, et généralement toutes autres dispositions; 8. A tenir une caisse de dépôts pour tous les titres de ces entreprises.
—Until the whole of the share capital was taken up, the obligations of the company were not to exceed five times the amount of the paid-up capital. When it was all paid up they might be ten times the capital. But they must always be covered by an equal amount of public securities, shares and other securities. They were to be payable either at sight, or at not less than 45 days. The united amount of the sums received on current accounts, and of obligations created of less than a year's currency, were not to exceed twice the amount of the paid-up capital. The capital was fixed at 60,000,000 francs, divided into 120,000 shares of 500 francs, transferable by delivery.
—The crédit mobilier arose out of the necessity we have described in the preceding article as being felt in any country in which a spirit of commercial enterprise is suddenly developed before the system of credit is fully understood. We have already said that the Scotch banks, during the last century, by means of their cash credits, anticipated the system of crédit foncier; we may also say that they did the same with most of the objects contemplated by the crédit mobilier. The banks of crédit foncier were especially designed to promote agricultural improvements. The bank of crédit mobilier is especially designed to promote industrial enterprises of all sorts—railways, canals, docks, mines, gas, etc., etc. Now all these things are done by means of the system of cash credits.
—But the crédit mobilier had more ambitious aims than these, which are detailed in its reports for 1854 and 1855. In the first year of its existence it subscribed largely to the crédit foncier, it aided the consolidation of several railways. The companies of the Midi and the Grand Central made them their bankers. They advanced to all subscribers to the new shares of the Compagnie de l'Est 200 francs per share at 4 per cent., besides various other operations. In the next year, besides subscribing to a large amount to the public loan required to carry on the Russian war, they subscribed to a loan to the Grand Central railway and the Compagnie de l'Est and various other industrial operations were promoted under their auspices, such as the Société des immeubles de la Rue de Rivoli and the Société Maritime. They also assisted a mining company in the Loire, which had for several years been in difficulties; the General Omnibus company of Paris; the Salt company of the East; a railroad from Dale to Salines, and some Austrian railways.
—Besides detailing these operations, the report of this year contained an exposition of their ulterior projects regarding paper currency. They wished to form analogous institutions in every country in Europe, all in correspondence with each other, so as to issue obligations having a European circulation, to facilitate the flow of capital from one place to another, and ultimately the assimilation of moneys in Europe. This year the company declared a dividend of very nearly 12 per cent.
—In the following year, 1855, the French government opened a still larger loan than in the preceding one, to which the crédit mobilier subscribed two sums of 250,000,000 and 375,000,000 francs. Its commercial operations were also greatly extended, and need not be enumerated, consisting chiefly of advances to numerous railway and other companies. In consequence of this extension of its operations, the dividends declared exceeded 40 per cent. for the year 1855.
—Similar institutions were also founded in Austria and Spain.
—The extraordinary success of the company determined the directors to commence the issue of their obligations, which they were authorized to do by their statutes. These were of two sorts, one at short dates corresponding to their temporary investments, the other at long dates, redeemable by installments, corresponding to their permanent investments in stocks, shares, etc. These obligations were to be guaranteed by the investments which they represented, as well as by a capital appropriated to the purpose. They proposed to issue these obligations to the amount of 240,000,000.
—The extraordinary dividends declared by the company, and the boldness with which it published its plans of embracing all Europe in its operations, directed the attention of the financiers in every country to it. Their alarm was excited by its scheme of issuing so vast an amount of paper currency, and they dreaded the revival of the days of Law. A note inserted in the Moniteur in March, 1856, forbade the creation of the proposed obligations. This blow deprived the company of much of its public interest, and from that time its dividends greatly declined. They fell to about 22 per cent. for 1856. The great commercial crisis of 1857 still further reduced them, so that in that year they were only 5 per cent. They were the same for 1858. For 1859 they rose to 7½. In 1860 they were 10 per cent., and in 1861 the same.
—The prohibition by the government of the creation of its paper obligations, saves us the necessity of examining them at length. The crédit mobilier has no doubt been eminently useful in developing industrial associations, but the securities which it receives are much more liable to fluctuation in value than those of the crédit foncier, and for that reason its operations are more hazardous. This is fully shown by the remarkable variations in the dividends.
H. D. MACLEOD.
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