Credit Mobilier (May 1857)

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The title is given in accordance with the entries in Marx's Notebook for 1857: "May 12. Crédit Mobilier (I)", "May 15. Crédit Mobilier (II)".

For the bulletins of the Grand Army the present French Empire makes up by the reports of the Crédit Mobilier. At the last general meeting of the shareholders, on the 28th of April, Mr. Isaac Péreire, in the name of the Board of Directors, presented a report, purporting to comprise the summary history for the year 1856 of this remarkable Bonapartist institution. From this grandiloquent document, mingling, in a manner peculiar to its author, financial statements with theoretical propositions, figures with sentiments, and stock-jobbing speculation with speculative philosophy, a cautious research may elicit evidence of decay, which the apologetical varnish covering the whole exposes rather than conceals.

The profits of the Crédit Mobilier continue, indeed, to dazzle the public eye. Its shares being originally fixed at 500 francs, there was paid on them, for the year 1856, 25 francs by way of interest and 90 francs by way of dividend, making together 115 francs, a sum which exactly represents 23 per cent on the funds of the Company. Yet, to arrive at safe conclusions, one must compare the Crédit Mobilier, not with ordinary commercial enterprises, but with itself, and then we shall find that, during one single year, its profits have decreased nearly one half. There are two elements to be distinguished in the net revenue of the Company the one fixed, the other variable—the one settled by statute, the other dependent on its commercial movement—the one figuring under the head of interest, and the other under the head of dividends. The interest of 25 francs, or 5 per cent per share, forms, therefore, a standing item in the accounts of the Company, while the dividend declared is the real test of its progress. Now, we find that from 178 francs 70 centimes, to which the dividend amounted in 1855, it has dwindled down to 90 francs in 1856, a movement which cannot very well be called an ascending one. If it be considered that the smaller fry of the shareholders have, on an average, bought their shares at 1,500 francs, the real dividend they received in 1856 will hardly exceed 7 per cent.

Mr. Isaac Péreire thinks that "it would be superfluous to endeavor to point out the causes of the difference which exists between the dividend of 1856 and that of 1855." Still he condescends to intimate that the profits of 1855 bore "an exceptional character." True enough; but then it is only by keeping up the exceptional character of its profits that the Crédit Mobilier can lay claim to any character whatever. The exceptional character of its profits results from the enormous disproportion between its capital and its operations. That disproportion, so far from being merely transient, forms, in fact, the organic law of its existence. The Crédit Mobilier pretends to be neither a banking nor an industrial company, but rather the representative, on a national scale if possible, of other banking and industrial companies. The originality of its conception is founded on this representative office. Its operations purport, therefore, to be circumscribed, not by its own capital and the usual credit derived from it, but solely by the vastness of the interests it actually represents or attempts to represent. If the disproportion between its capital and its operations and consequently its "exceptional" profits were to disappear, the Crédit Mobilier would not dwindle to a common banking-house, but would miserably break down. In pursuing the enormous operations in which, by the very nature of its organization, it finds itself involved, it must rely on the progressive execution of new plans on a still more enlarged scale. With such an institution, any stagnation, and still more any regress, is a symptom of fatal decay. Take even the report of 1856. There we find on the one side the modest capital of 60,000,000 of francs, and on the other, operations involving the enormous sum of more than 6,000,000,000 of francs. Mr. Péreire himself gives the following sketch of these operations:

"Our subscription to the last loan was not only preserved intact, but it increased to the amount of 40,000,000 f. by purchases intended to facilitate the installments of the subscribers.

The movement in our cash amounted to the sum of	3,085,195,176 f. 39 c.
That of our account current with the Bank was	1,216,686,271 f. 33 c.
That of our accounts current attained the amount of	2,739,111,029 f. 98 c.
Our Company has received installments on 1,455,264 shares and bonds, which have produced together the sum of	160,976,590 f. 98 c.
It has paid both on its own account and for that of the Companies to which it has acted as bankers 3,754,921 coupons, amounting to	64,259,723 f. 68 c.

The movement of our caisse of securities has been on 4,986,304 shares or bonds."

Mr. Péreire does not deny that the part performed by the Crédit Mobilier in 1856 was of a somewhat different kind from that it had performed before. During the first three years of its existence, it had to "inaugurate important undertakings in France," to "systematize the creations of great affairs," and, consequently, to prove inexhaustible in piling fresh securities upon the stock market. But, in 1856, a sudden change occurred. As "peace had opened a new era of social activity," speculation threatened to overshoot the mark. Under these altered- circumstances the conscientious gentlemen of the Crédit Mobilier, the Péreires, the Foulds, the Mornys, exclusively bent on fostering public prosperity, felt it "an imperious duty" to bridle where before they had spurred, to moderate where they had urged on, and to maintain an attitude of "reserve" where "boldness" had before been "an intelligent prudence." As all France was becoming mobile, the Crédit Mobilier, for conscience' sake, resolved upon becoming stationary. It is, however, true that this virtuous resolution was to some extent forestalled by a note inserted in the Moniteur of the 9th of March, 1856, which "indicated the bounds the Government wished to trace out to the issue of fresh securities." Even "if" the propensities of the Crédit Mobilier had all been the other way, "this publication," says Mr. Péreire, "would have been an order, particularly for us; it was a forced halt, which must interrupt the creation of new undertakings." This forced halt seems sufficiently to account for the self-imposed duty of moderation.

At the very moment when the Crédit Mobilier found itself thus curbed in its career by a Government halter, it unfortunately happened that unprincipled competition was busily engaged in circumscribing its sphere of action and impairing its resources. While the Moniteur's note of March 9, 1856, was directly aimed at the so-called Anonymous Societies whose formation and operation in France are, by law, subject to Government approbation and control, and to the starting of which the Crédit Mobilier is restricted by its statutes, French speculation now found a larger outlet under the form of Sociétés en Commandite, which are exempt from Government approbation, and almost from all control. Speculation thus merely changed its channels; the stunted growth of Anonymous Societies being more than compensated by the luxuriant crop of Sociétés en Commandite. Instead of obstructing speculation, Napoleon III., with all his "exalted wisdom," as Mr. Péreire calls it, had only withdrawn a great part of it from the control of his pet concern. During the first nine months of 1856, when all France was intoxicated with speculation, and when the cream of it should have been skimmed by the Crédit Mobilier, that devoted company was thus, by a mere misunderstanding on the part of the "exalted wisdom," condemned to act upon "a restricted scale," and to humbly "wait for the official signal for the resumption of activity." It was still waiting for the official signal and "a transition to better times," when an event occurred quite beyond the control even of the "exalted wisdom" of Napoleon himself.

—The consideration of that event we will postpone to another day.

II

The financial crisis which, in September, 1856, broke out simultaneously on the Continent of Europe and in England, found the Crédit Mobilier, as Mr. Péreire says, in the attitude of "the intelligent sentinels of finance and credit," taking in "a more extended horizon" than other people "on different steps of the ladder," "capable of avoiding alarm as well as overexcitement," turning its undivided solicitude to the lofty end of "maintaining national labor and credit," indifferent "to interested or jealous criticism," smiling at "violent or calculated attacks," and towering high above vulgar "misrepresentations." At that critical epoch, the Bank of France, it seems, proved rather restive against the demands which the Crédit Mobilier, prompted by its exclusive zeal for public prosperity, found itself induced to press upon it. We are, therefore, given to understand that "the crisis owed its violence and its rapidity to the measures which the Bank of France adopted under the empire of the constitution which governs it," and that "that institution is still highly imperfect from the absence of any bond, and of all harmonic combinations." While the Bank of France on one hand declined helping the Crédit Mobilier, it refused on the other to be helped by it. With characteristic boldness of conception, the Crédit Mobilier considered a financial crisis the true season for great financial strokes. At the moment of general confusion, you may take a fortress by storm which, for years, you have failed to take by regular maneuvers. Accordingly, the Crédit Mobilier offered to purchase, with the cooperation of several foreign houses, the rentes or public debt held by the Bank of France, so as to enable the latter establishment "effectually to increase its metallic reserve, and continue its advances on rentes and railway shares." When the Crédit Mobilier made this disinterested and philanthropic proposal, its treasury was encumbered with rentes to the amount of about 5,475,000 francs, and with railway shares to the amount of 115,000,000 francs, the Bank of France holding simultaneously rentes to about 50,000,000 francs. In other words, the Crédit Mobilier held more than twice the amount in railway shares which the Bank of France held in rentes. By throwing its rentes on the market, in order to strengthen its metallic reserve, the Bank of France would not only depress the rentes, but still more all other securities, and particularly railway shares. The proposal amounted, therefore, in fact, to an invitation to the Bank to keep the rentes held by itself off the market, in order to make place for the railway shares held by the Crédit Mobilier. Besides, the Bank, as Mr. Péreire says, would then have had an excuse for discontinuing its advances on railway shares. Thus it would have secretly come to the rescue of the Crédit Mobilier, while publicly owing vassalage to that magnanimous institution, and appearing to be saved by its aid. However, the Bank smelled a rat and turned a cold shoulder to the "intelligent. sentinels."

As firmly resolved to save France from the financial crisis as its protector had been- to save her from Socialism, the Crédit Mobilier made a second proposal, addressed not to the Bank of France but to the private bankers of Paris. It generously offered

"to provide for the wants of all French Railway Companies by subscribing to the amount of 300,000,000 francs to the loans which they had to issue for 1857; declaring that it was ready to engage itself in those loans to the amount of 200,000,000 francs, if the sum of 100,000,000 were subscribed by the other banking houses."

Such a subscription was sure to effect a sudden rise in the price of railway shares and bonds, the very, commodity of which the Crédit Mobilier was the principal holder. Moreover, the latter, by one bold stroke, would have installed itself as a great proprietor in all Finch railways, and drawn all the great Paris bankers into some sort of forced partnership with itself. Yet the scheme failed. Compelled "to renounce the idea of any united measure," the Crédit Mobilier had to shift for itself. The lofty conviction that "the sole fact of its having made such propositions doubtlessly contributed not a little to allay uneasiness," consoled it not a little for the tendency the crisis had "to reduce in a material manner the profits on which the Company thought it might calculate."

Quite apart from all these untoward events, the Crédit Mobilier complains of having till now been precluded from playing its trump card, namely, the emission of 600,000,000 francs in bonds—a paper money of its own invention; payable at very long dates; based, not on the capital of the company, but on the securities for which it would be exchanged.

"The resources," says Mr. Péreire, "which we should have derived from the issue of our bonds, would have allowed us to absorb such securities as had not yet found their definitive investment, and to give an immense extension to the benefits rendered to industry."

In 1855, the Crédit Mobilier was just about emitting 240,000,000 of francs in such obligations, an issue authorized by its statutes, when "the exalted wisdom" of the Tuileries cut short the operation. Such an issue of fiduciary money the Crédit Mobilier calls augmenting its capital; common people are more likely to call it augmenting its debts. The forced halt, then, imposed on the Crédit Mobilier by the Government in March, 1856, the competition of the Sociétés en Commandite, the financial crisis, and the non-issue of its own paper money, all these circumstances will sufficiently account for the fall of its dividends.

In all former reports of this great swindling concern, the substitution of industrial joint-stock companies for private industry has been trumpeted as the specialty, and novelty of the institution. In this last report, the faintest allusion to this subject will be sought for in vain. Of the 60,000,000 francs which form the capital of the Company, 40,000,000 were once, during the year 1856, invested in State funds; and of the sums which credit placed in its hands, by far the greater part was employed in "continuations" in rentes and railway shares on the settling days of the Stock Exchange; such operations having been effected, in 1856, in French rentes to the amount of 421,500,000 francs, and in railway and other shares to the amount of 281,000,000 francs. Now these continuations mean nothing but advances of money to stock-jobbers in order to enable them to continue their operations, and give a bloated aspect to the fancy stocks of the Bourse. Upon this operation of turning a great part of the national capital from productive industry to unproductive gambling, the Crédit Mobilier rests its main claim to the gratitude of the nation. Louis Napoleon, indeed, derives an immense support from Messrs. Péreire & Co. Not only do they impart fictitious value to the Imperial funds, but they are constantly fostering, drilling, propping, propagating that spirit of gambling which forms the vital principle of the present empire. On the most cursory view of the operations so complacently detailed by Mr, Péreire, it must become evident that the gambling maneuvers of the Crédit Mobilier are necessarily blended with fraudulent transactions. On the one hand, in its public function as the protector of the Bourse, the Company borrows money from the public and lends it to stock-jobbing companies and individuals, in order to keep up prices of the national shares and funds. On the other hand, as a private concern, it is constantly speculating for its own account on the fluctuations of the very same securities, on their fall as well as their rise. To apparently harmonize these cross-purposes, fraud and imposture must be recurred to.

Like all professional gamblers, Louis Napoleon is as bold in the conception of his coups as slow and cautious in their execution. Thus he has twice checked the Crédit Mobilier in its unscrupulous career—first in 1855, when he forbade the issue of its bonds, and again in 1856, when his warning in the Moniteur brought it to a forced halt. But while he obstructs,. the Company is pressing on. In point of fact, if full swing be given to it, it will break its neck. If Bonaparte continue to bother it with moderation, it will lose its soul. From Mr. Péreire's report, however, it appears that the "exalted wisdom" and the "intelligent prudence" have at last come to a compromise. Should the already discredited Credit Mobilier not be intrusted with the dangerous power of issuing its own paper money, the means it can no longer live without are to be tendered to it under the more respectable cloak of the Bank of France. Such is one of the secret ends of the new Bank law now laid before the "learned dogs and monkeys" of the Corps Législatif. "We do not fear," says Mr. Péreire, "to proclaim it, but it would be in vain to seek elsewhere than at the Bank of France for the means of giving effectual assistance, by advances to public credit, to great undertakings, to commerce and to industry"—in other words, to the Crédit Mobilier.