Crédit Mobilier
Encyclopedia
Crédit Mobilier was a French
banking company, and one of the most important financial institution
s of the world during the 19th century. It had a major role in the financing of numerous railroads and other infrastructure
projects in Europe
, North Africa
and the Middle East
by mobilizing the savings of middle class French investor
s as capital for vast lending schemes. The Crédit Mobilier investments created vast debts for the countries which accepted these infrastructure loans, however, and was thus involved indirectly with the European occupations of countries the governments of which defaulted on these loans during the worldwide economic depression of the 1870s.
, which are land banks, and lend money on the security of real or immovable property
, while the Crédit Mobilier proposed to give similar loans to the owners of movable property. The declared object of the new bank was especially to promote industrial enterprises of all kinds, such as the construction of railways and the opening of mines, by making loans and handling stock. Various privileges were conferred upon it by its charter; among others it was allowed to acquire shares of public companies, and to pay calls made upon it in respect of such shares by its own notes or obligations; also to sell or give in security all shares thus acquired. The operations of the society were conducted upon a very extensive scale. A joint-stock company operating on a principle of limited liability
, its initial investments came from large industrialists, but its capital was increased vastly by accepting investments from the general public.
During 1854 it subscribed largely to the war loan of the French government, raised during the Crimean campaign
, to the Grand Central Railway Company, to the General Omnibus Company of Paris, and to various other important projects. The dividend declared for 1854 was 12%. During 1855, it loaned two sums to the government — the one of 250,000,000 and the other of 375,000,000 francs. Its operations were vast during this year, and the net dividend declared amounted to 40%. The directors then proposed to avail themselves of their privilege of issuing their own obligations, and thought to issue two kinds of notes — the one at short dates, the other at long dates, and redeemable by installments. The proposed issue was to amount to 240,000,000 francs, but the public became alarmed at the prospect of so vast an issue of paper money, and during March 1856, the French government deemed it necessary to prohibit the proposed scheme.
The prohibition harmed the institution. During 1856, its dividends did not exceed 22%; during 1857 they were only 5%. Several attempts to resuscitate its credit failed, and finally, during November 1871, it was reorganized with a new board of management. During 1877 its assets were 77,000,000 francs, but its shares, the par value
of which was 500 francs, sold for 200 francs only. During 1878-79 the capital was first reduced to 32,000,000 francs, and then increased to 40,000,000. During 1884 it was a second time reduced to 30,000,000 francs, but the company never regained its losses.
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
banking company, and one of the most important financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
s of the world during the 19th century. It had a major role in the financing of numerous railroads and other infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
projects in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
, North Africa
North Africa
North Africa or Northern Africa is the northernmost region of the African continent, linked by the Sahara to Sub-Saharan Africa. Geopolitically, the United Nations definition of Northern Africa includes eight countries or territories; Algeria, Egypt, Libya, Morocco, South Sudan, Sudan, Tunisia, and...
and the Middle East
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...
by mobilizing the savings of middle class French investor
Investor
An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...
s as capital for vast lending schemes. The Crédit Mobilier investments created vast debts for the countries which accepted these infrastructure loans, however, and was thus involved indirectly with the European occupations of countries the governments of which defaulted on these loans during the worldwide economic depression of the 1870s.
History and objectives
On November 18, 1852, the French Government sanctioned the statutes of a new bank with the name of the Société Générale du Crédit Mobilier, with a capital of 60,000,000 francs. The name was intended as a contrast to the Sociétés du Crédit FoncierCredit Foncier
Credit Foncier is the name of* Crédit Foncier de France, a mortgage bank in France.* Credit Foncier of America, a defunct real estate company in the U.S....
, which are land banks, and lend money on the security of real or immovable property
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
, while the Crédit Mobilier proposed to give similar loans to the owners of movable property. The declared object of the new bank was especially to promote industrial enterprises of all kinds, such as the construction of railways and the opening of mines, by making loans and handling stock. Various privileges were conferred upon it by its charter; among others it was allowed to acquire shares of public companies, and to pay calls made upon it in respect of such shares by its own notes or obligations; also to sell or give in security all shares thus acquired. The operations of the society were conducted upon a very extensive scale. A joint-stock company operating on a principle of limited liability
Limited liability
Limited liability is a concept where by a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability. If a company with limited liability is sued, then the plaintiffs are suing the company, not its...
, its initial investments came from large industrialists, but its capital was increased vastly by accepting investments from the general public.
During 1854 it subscribed largely to the war loan of the French government, raised during the Crimean campaign
Crimean War
The Crimean War was a conflict fought between the Russian Empire and an alliance of the French Empire, the British Empire, the Ottoman Empire, and the Kingdom of Sardinia. The war was part of a long-running contest between the major European powers for influence over territories of the declining...
, to the Grand Central Railway Company, to the General Omnibus Company of Paris, and to various other important projects. The dividend declared for 1854 was 12%. During 1855, it loaned two sums to the government — the one of 250,000,000 and the other of 375,000,000 francs. Its operations were vast during this year, and the net dividend declared amounted to 40%. The directors then proposed to avail themselves of their privilege of issuing their own obligations, and thought to issue two kinds of notes — the one at short dates, the other at long dates, and redeemable by installments. The proposed issue was to amount to 240,000,000 francs, but the public became alarmed at the prospect of so vast an issue of paper money, and during March 1856, the French government deemed it necessary to prohibit the proposed scheme.
The prohibition harmed the institution. During 1856, its dividends did not exceed 22%; during 1857 they were only 5%. Several attempts to resuscitate its credit failed, and finally, during November 1871, it was reorganized with a new board of management. During 1877 its assets were 77,000,000 francs, but its shares, the par value
Par value
Par value, in finance and accounting, means stated value or face value. From this comes the expressions at par , over par and under par ....
of which was 500 francs, sold for 200 francs only. During 1878-79 the capital was first reduced to 32,000,000 francs, and then increased to 40,000,000. During 1884 it was a second time reduced to 30,000,000 francs, but the company never regained its losses.