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Jacques Laffitte and the Beginnings of Investment Banking in France

Published online by Cambridge University Press:  24 July 2012

Fritz Redlich
Fritz Redlich
Affiliation:
Belmont, Mass.
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Extract

At the close of the Napoleonic era, the banking business of France except in one respect had not advanced much over what it had been in 1789. At that time it had been dominated by Protestant Swiss, the best known of whom was Necker. Some of them like the Mallets, Delesserts, and Thélussons, descended from French Huguenots who had fled to Geneva and other places and in a later generation returned to France as Swiss. The business of these bankers consisted in lending their own funds and those entrusted to their care to worthy applicants for loans, probably merchants as well as noblemen. They administered fortunes for their owners, which is especially true of the court bankers who were charged with the financial affairs of the king and his family. In addition, like all eighteenth-century bankers they had a flourishing business in bills of exchange, including the accepting of drafts of bankers and merchants in other cities and countries. Necker is said to have organized these bankers and their foreign correspondents so as to provide by a system of short-term drafts the funds for French participation in our Revolutionary War.

Type
Research Article
Information
Business History Review , Volume 22 , Issue 4-6 , December 1948 , pp. 137 - 161
Copyright
Copyright © The President and Fellows of Harvard College 1948

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References

Author's Note. This paper owes much to the knowledge and the suggestions of Professor Arthur L. Dunham, with whom the author closely coöperated over a period of several months. Without such coöperation this excursion of the author into the field of French economic history would hardly have been successful.

1 Capefigue, Jean Baptiste Honoré Raymond, Histoire des grandes opérations financières (Paris, 1855–1860), vol. I, p. 244.Google Scholar (The payment of Prussian contributions to France in 1806 and following years was still financed in the same way.) The existence in Paris at the outbreak of the American Revolution of a large business in international finance bills is proved by Ehrenberg's, Richard material published in Das Haus Parish in Hamburg, 2d ed. (Jena, 1925), pp. 38ff.Google Scholar The material is especially interesting, showing as it does the very moment when the business in bills of exchange was cutting loose from trade in merchandise which originally underlay the drawing and accepting of those international bills. Or to look at it from a different point of view, the material shows how the banker was cutting loose from the merchant.

2 The above data are taken from Capefigue, op. cit., vol. I, pp. 241, 242, 244; vol. II, pp. 81, 112, 183, 204, 323, 330. As to the Mallets, see Deux siècles de banque: Mallet Frères et Cie, 1723–1923 (privately printed in 1923).

3 Marion, Marcel, Histoire financière de la France depuis 1715 (Paris, 1914–1931), vol. IV, pp. 334ffGoogle Scholar; Vührer, A., Histoire de la dette publique en France (Paris, 1886), vol. II, pp. 32, 46.Google Scholar

4 Récamier was, next to Perregaux, the leading French banker of the period and the husband of the famous beauty. He was the guiding spirit of the Caisse des Comptes-Courants, founded in the 1790's as one of the first French banks of issue and later merged into the newly founded Bank of France. Thus Récamier became one of its earliest régents. Récamier had been one of the biggest speculators in assignats. As late as 1803 he played a leading part in handling the crisis of that year, but he failed shortly thereafter.

5 See Marion, op. cit., vol. IV, pp. 79, 389; Vührer, op. cit., vol. I, pp. 417, 418, vol. II, pp. 49, 50; Capefigue, op. cit., vol. II, pp. 198, 199; de Nervo, Baron Gonsalve, Les Finances françaises sous la Restauration (Paris, 1865–1868), vol. I, p. 96Google Scholar; Ramon, Gabriel, Histoire de la Banque de France d'après les sources originales (Paris, 1929), p. 93Google Scholar; Wolff, Otto, Die Geschäfte des Herrn Ouward (Frankfurt am Main, 1933), pp. 174, 284Google Scholar; Lévy, Arthur, Un Grand profiteur de guerre sous la Révolution, l'Empire et la Restauration, G. J. Ouvrard (Paris, 1929), p. 200.Google Scholar

6 Vührer, op. cit., vol. I, p. 355; Gorges, , La Dette publique: histoire de la renie française (Paris, 1884), p. 136Google Scholar; Capefigue, op. cit. vol. II, p. 195.

7 By 1815 the British public debt was twenty times as large per head of the population as was that of France where it amounted to 50 francs per head. See See, Französische Wirtschaftsgeschichte (Jena, 1930, 1936), vol. II, p. 147.

8 Nervo, op. cit., vol. I, p. 344; Vührer, op. cit., vol. II, pp. 47, 57.

9 Laffitte's, Mémoires, ed. by Duchon, Paul (Paris, 1934)Google Scholar must be used with even more caution than other autobiographies, but they are most interesting; see especially, Introduction, pp. xi, xii, xv, xviii, and 1ff, 55, 56, 60, 64, 70, 75, 80, 81ff, 90ff, 100ff, 114ff, 117, 118, 119ff, 295, 331ff, 337ff.

Material on Laffitte's economic and business activities is furthermore to be found in Comte de Montalivet, “Le Roi Louis Philippe et sa liste civile,” Revues des Deux Mondes, 1850, pp. 112–145Google Scholar; Paul Duchon, “Les Mémoires de Jacques Laffitte,” ibid., 1930, pp. 289ff; Capefigue, op. cit., vol. II, pp. 244, 321, vol. III, pp. 9, 21, 25, 51, 66, 73, 82, 85, 90, 113, 136, 137, 145, 146,165, 166, 170ff; Marion, op. cit., vol. V, pp. 115,120,121; Ramon, op. cit., see Index; Vührer, op. cit., vol. II, pp. 52, 53; Sée, op. cit., vol. II, p. 148. Lhomer, Jean, Le Banquier Perregaux et sa fille, la Duchesse de Raguse (Paris, 1926), pp. 17,18, 39ffGoogle Scholar; Liesse, André, Evolution of Credit and Banks in France from the Founding of the Bank of France to the Present Time (Washington, 1909), pp. 42, 43Google Scholar; the same, Portraits des finançiers (Paris, 1908), pp. 247ff; [Charles Marchai], Souvenirs de J. Laffitte (Paris, 1844), vol. I, pp, 216, 230ff; Nigohosian, V. A., La Libération du territoire française après Waterloo, 1815–1818 (Thesis, Paris, 1929)Google Scholar, see Index; Nolte, Vincent, Fifty Years in Both Hemispheres (New York, 1854), pp. 291, 303.Google Scholar Laffitte had business relations with Stephen Girard; see Sakolski, A. M., The Great American Land Bubble (New York, 1932), p. 203.Google Scholar

10 About Perregaux see Ramon, op. cit., Index; Lhomer, op. cit., passim; Capefigue, op. cit., vol. I, pp. 87, 88, 243, 244; Bouchary, Jean, Les Manieurs d'argent à Paris à la fin du XVIIIe siècle (Paris, 1943), vol. III, pp. 11ff.Google Scholar

11 Thomas Coutts in London was Laffitte's correspondent.

12 'Nigohosian claims Laffitte bought rentes with a capital value of 2,000,000 francs; op. cit., p. 17, footnote and p. 26, footnote.

13 Ibid., pp. 21, 22, seems to refer to these transactions.

14 Capefigue, op. cit., vol. II, pp. 245, 321.

15 Nigohosian, op. cit., p. 2, footnote.

16 See his mémoire of 1816 or 1817 in Roux, Vital, Analyse historique de l'établissement du crédit public en France (Paris, 1824), pp. 56ff, 151, 160.Google Scholar

17 Nighohosian, op. cit., p. 22, footnote. For a description of these transactions, see Jenks, Leland H., The Migration of British Capital to 1875 (New York, 1927), pp. 33ff.Google Scholar

18 Roux, op. cit., pp. 154ff, 195ff.

19 About Hottinguer more will be said later. Greffulhe was a banker who specialized in investments in urban real estate and mortgages and was a close personal friend of the royal family, which fact gave him social prominence. His partner was or was soon to become Urbain Sartoris, an able and exceptionally well informed engineer whose rôle in the promotion of internal improvements was considerable.

20 Bayard, E., La Caisse d'épargne et de prévoyance, 2d ed. (Paris, 1900), pp. 13ffGoogle Scholar; Grande Encyclopédie; Ramon, op. cit., Index; Bouchary, op. cit., vol. III, pp. 91ff.

21 Nigohosian, op. cit., pp. 200, 201, reprints the contract in question but is not aware of the change which took place when the time came for its execution.

22 Gorges, op. cit., p. 219; de Joinville, Pierre, L'Armateur Balguérie-Stuttenberg (Paris, 1914), p. 184Google Scholar; Bayard, op. cit., pp. 13ff.

23 Corti, Comte Egon Cesar, Der Aufstieg des Hauses Rothschild 1770–1830 (Leipzig, 1927), pp. 317, 318.Google Scholar

24 Ibid., p. 347. The other members of the syndicate were J. Hagermann, Blanc-Colin et Cie, Ardoin Hubbard et Cie, César de Lapanouze, Paravay et Cie, and last but not least, the Syndicate of the Receivers General. The group defeated another consisting of Delessert et Cie and André et Cottier. See Bresson, Jacques, L'Histoire financiére de la France depuis l'origine de la monarchie jusqu' à l'année 1828 (Paris, 1829), pp. 400, 401.Google Scholar

25 Laffitte's pamphlet was bitterly attacked, for instance, by Fazy, J. J., Opuscules financiers sur l'effet de privilèges, des emprunts publics et des conversions sur le crédit de l'industrie en France (Paris, 1826), pp. 107ff.Google Scholar The second part of this booklet is entitled Examin et réfutation de l'ouvrage de M. Lafitte [sic] sur le remboursement et la conversion de la rente.

26 Réflexions, p. 48.

27 Nigohosian, op. cit., pp. 151, 152. The other participants in the group were L. Durant, Boucheret, H. Hertsch et Blanc; Martin d'André et Fils; Thuret et Cie.

28 Bresson, op. cit., vol. II, p. 346; Nervo, op. cit., vol. I, p. 500; Vührer, op. cil., vol. II, pp. 538, 539.

29 Op. cit., vol. II, pp. 394, 395; René Stornai, Le Budget, 7th ed. (Paris, 1913), pp. 444, 451ff; Surleau, Georges, Les Réformes Financières de M. de Villèle (Thesis, Paris, 1901), pp. 87, 1425Google Scholar; Capefigue, op. cit., vol. III, pp. 88, 89,113,115; Marion, op. cit., vol. IV, pp. 1179ff.

30 The Receivers General passed out of existence in 1889; see Stourm, op. cit., pp. 457ff.

31 This firm was then administered by Guillaume Mallet (1747–1826) and his sons Adolphe-Jacques (1787–1868) and Louis-Jules (1789–1868). The house was especially active in the field of insurance. See also Bouchary, op. cit., vol. III, p. 155.

32 Lefebvre, born in Riom in 1773, a Paris banker, was a député for many years. See Laffitte, Mémoires, p. 118, footnote.

33 Nervo, op. cit., vol. II, pp. 193ff; Capefigue, op. cit., vol. III, p. 114.

34 The conversion of 1824 is described in detail by Surleau, op. cit., pp. 51ff.; Vührer, op. cit., vol. II, pp. 115ff.; and Nervo, op. cit., vol. II, pp. 215ff., especially 219, 251, 252, 294ff. See also Laffitte, Réflexions, pp. 132, 133; Capefigue, op. cit., vol. III, pp. 127ff.; Villèle, , Mémoires et Correspondence (Paris, 1890), vol. V, pp. 1ff.Google Scholar

35 Corti, Aufstieg, p. 306; Capefigue, op. cit., vol. III, p. 113.

36 Bresson, op. cit., vol. II, pp. 402, 403, 406.

37 Société commandite par actions—limited liability stock company.

38 In fact, Biddle and Laffitte were the founders of a new type of bank which gained importance many decades later in Germany. The Caisse Laffitte made an abortive contract for the flotation of Texas securities; Gouge, William M., The Financial History of Texas (Philadelphia, 1852), pp. 107ff.Google Scholar

39 See Redlich, Fritz, “Bank Money in the United States during the First Half of the Nineteenth Century,” Southern Economic Journal, vol. X (1943/1944), pp. 212ff.Google Scholar

40 The memorial is entitled Réflexions sur la Banque générale du commèrce et de l'industrie sous la raison Jacques Laffitte et Cie (Paris, 1837).

41 This Colot may be the same as the previously mentioned Receiver General.

42 Laffitte, Mémoires, pp. 335ff; Liesse, Financiers, pp. 289ff; idem, Evolution, pp. 73ff; Capefigue, op. cit., vol. III, pp. 221, 222.

43 A French banker, Mirabaud, was an ally of the Rothschilds in a loan to Parma; see Corti, Aufstieg, p. 389.

44 Cohen, Bernhard, Compendium of Finance, containing … (London, 1822), pp. 108, 119Google Scholar; Appendix, pp. 120ff, 182ff, 196ff.

45 Corti, Blüte, pp. 130ff; Gilbart, James William, History and Principles of Banking (London, 1834), p. 59.Google Scholar

46 See Grande Encyclopédie; Capefigue, op. cit., vol. III, pp. 122, 209, and vol. IV, p. 156.

47 As to the provincial incorporated banks see Courtois, Alphonse, Histoire des banques en France, 2d ed. (Paris, 1881), pp. 148ff.Google Scholar The foundation, organization and activities of one of them, of the Bank of Bordeaux, are described in de Joinville, op. cit., pp. 164ff. These pages are recommended to every student ot American banking history as an indication of how different the conditions were which brought banking into existence on the two sides of the Atlantic.

48 The contemporary French distinction, corresponding to that of the Anglo-Saxons, between banks of discount and banks of issue, is banque particulière and banque publique. See d'Esterno, Ferdinand Charles Philippe Comte, Des banques départementales en France … (Paris, 1838), pp. 15, 23.Google Scholar

49 We are not sufficiently informed to what extent French bankers took deposits. customary in the Anglo-Saxon countries at that time; one has to keep in mind, however, that even in the latter countries deposits were then mostly time deposits. (Redlich, Fritz, The Molding of American Banking, New York, 1947, p. 52.Google Scholar)

50 The founder of the firm which, according to Sée, broke down in 1839 through speculations in cotton but was reorganized with funds provided by the Barings, must have lived between about 1760 and 1835. He was a régent of the Bank of France from 1803 to 1833, although not an active one; but among other bankers he played a leading rôle in the crisis of 1818. He has been described as timid and as “le moins hardi dans les affaires de crédit particulier.” In fact, when in 1817 Laffitte and Alexander Baring were on the point of clashing because the latter would not concede to the former such a share in the pending issue of rentes as he demanded, Hottinguer tried to placate Laffitte by offering a sacrifice on his part, which Laffitte refused to accept. Hottinguer, who in 1820 was a member of the Commission des Colonies, was succeeded in his enterprise and as a régent of the Bank of France by his son, Henry, who was also on the board of James Rothschild's Chemin de Fer du Nord. See Ramon, op. cit., Index; Capefigue, op. cit., vol. II, pp. 81, 112, 204, 232, 323; and vol. III, p. 185; Laffitte, Mémoires, pp. 70, 80, 107; Nolte, op. cit., pp. 48, 295; Lhomer, op. cit., p. 51; See, op. cit., vol. II, pp. 201, 215, 335; De Joinville, op. cit., p. 241. After the organization of the firm one Labouchère appears as its head; see Jenks, op. cit., p. 145.

51 See the very interesting rare pamphlet, Report of the Committee of Investigation … appointed by the Direction of the Citizens Bank of Louisiana in Conformity with the Resolution of the Board of 18th October, 1838 (New Orleans, 1839). The item is in the Library of Tulane University and a microfilm is in the Baker Library of Harvard University.

52 Hammond, Bray, “The Chestnut Street Raid on Wall Street, 1839,” Quarterly Journal of Economics, vol. LXI (1946/1947), pp. 609ff.Google Scholar

53 Sée, op. cit., vol. II, p. 201, includes Ternaux in his list, which is erroneous.

54 Gabriel Odier et Cie floated a loan for the City of Paris in 1820. See Bresson, op. cit., vol. II, p. 348.

55 Regarding the term Haute Banque see Courcelle-Seneuil, J. G., Les Opérations de Banque, 13th ed. (Paris, 1929), p. 344.Google Scholar