The American Cyclopædia (1879)/Crédit Mobilier

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The American Cyclopædia
Crédit Mobilier
Edition of 1879. Written by Rossiter JohnsonSee also Crédit Mobilier and Crédit Mobilier of America scandal on Wikipedia, and the disclaimer.

CRÉDIT MOBILIER, a joint-stock company founded in Paris Nov. 18, 1852, under the lead of the brothers Émile and Isaac Péreire, and on the principle of limited liability, for the transaction of general banking business, to facilitate the construction of public works, and to develop national industry. Its capital of 60,000,000 francs was divided into shares of 500 francs. It was authorized by its charter to hold public securities and shares and bonds of industrial corporations, and to issue its own bonds to an amount equal to its subscriptions and purchases, and, after its original capital was all taken, to issue bonds to the extent of ten times that amount. The charter conferred unlimited power to engage in financial operations, except that it forbade the selling of public securities in advance and the buying of them on time. The annual profits of the company varied very widely; the highest dividend being about 41 per cent., in 1855, and the lowest 5 per cent., in 1857-'8 and 1865-'7. The average for 15 years (1853-'67) was nearly 17 per cent. Among the enterprises achieved by this company were the consolidation of the Paris gas and omnibus companies, the creation of the company of the Grand Hôtel du Louvre, and of the maritime company of clippers, immense railway operations in Austria, Spain, Russia, and Switzerland, and heavy loans to French railway companies. From the first it met with powerful opposition. M. Fould, minister of finance, was strongly against it. M. Berryer called it “the greatest gambling house which the world has ever seen.” In 1867, having for three years paid but trifling dividends, it lost the confidence of the shareholders, and the stock fell to 28 per cent. of its par value. Its managers retired with immense fortunes, and the concern went into liquidation. — On the model of this company, similar organizations were created in Geneva, Leipsic, Amsterdam, Madrid, and London. The title “Crédit Mobilier of America” was adopted by a joint-stock company organized in May, 1863, with a capital of $2,500,000. In January, 1867, the charter having been purchased by a company organized for the construction of the Union Pacific railroad, the stock was increased to $3,750,000, and afterward rose to a great value, paying enormous dividends. In 1872, in the course of legal proceedings in Pennsylvania respecting the ownership of stock, it appeared that several members of congress, as well as the actual vice president and one of the candidates for the vice presidency, were more or less secret stockholders. This caused a great political scandal, as it was held to be highly improper for a member of congress to be pecuniarily interested in a corporation whose profits might be so largely and directly affected by his vote on bills concerning the railway it was building. The fact that a presidential canvass was in progress, in which several of the persons implicated took an active part, added interest and excitement to the subject. The result was a congressional investigation in the session of 1872-'3. On Feb. 27, 1873, the senate committee made a report, which closed with a resolution to expel one senator; but no action was taken on it, and five days later his term expired. In the house of representatives resolutions censuring two members were passed.