cancelled. Hence its capital amounted, down to 1848, to 67,900,000 fr. (2,716,000), with a reserve fund, first of 10,000,000 fr., and more recently of 12,980,750 fr. Since 1806 the bank has enjoyed the privilege of being the only institution in Paris entitled to issue notes payable on demand ; and, as will be afterwards seen, it is now the only authorized issuer of such paper in France. Its charter and exclusive privileges have been prolonged and
varied by laws passed at different periods.The bank has established, at different periods since 1817, offices or branches (succursales) in different parts of the country. They are managed nearly in the same way as the parent establishment ; but their operations were long on a comparatively small scale. These are exclusive of the departmental banks united, as will be immediately seen, to the bank in 1848.
Notwithstanding the skill and caution with which its affairs have generally been conducted, the revolution of 1848 brought the bank into a situation of extreme danger. It had to make large advances to the Provisional Govern ment and the city of Paris. And these circumstances, combined with the distrust that was universally prevalent, occasioned so severe a drain upon the bank for gold, that to prevent the total exhaustion of its coffers, it was authorized, by a decree of the 16th March 1848, to suspend cash payments, its notes being at the same time made legal tender. But to prevent the abuse that might otherwise have taken place under the suspension, the maximum amount of its issues was fixed at 350 millions. The bank was then also authorized to reduce the value of its notes from 500 fr. to 200 and 100 fr.
Previously to 1848, joint-stock banks, on the model of that of Paris, and issuing notes, had been established in Lyons, Marseilles, Bordeaux, Rouen, and other large cities. And it was then determined that these banks should be incorporated with the Bank of France, and made branches of the latter. This was effected by decrees issued on the 27th April and 2d May 1848, by which the shareholders of the banks referred to (nine in number) were allowed, for every 1000 fr. nominal value of their shares, a share of 1000 fr. nominal value of the stock of the Bank of France. And, in consequence of this measure, 23,351 new shares, representing a capital of 23,351,000 fr., were added to the stock of the Bank of France, making the latter consist of 91,250,000 fr. divided into 91,250 shares. In 1851 the bank resumed specie payments.
The suppression of the local issues of the departmental banks was, no doubt, a judicious measure, and was indispensable, indeed, to secure the equal value of the paper circulating in different parts of the country. This, however, might have been effected by the mere stoppage of the issues of the departmental banks, without consoli dating them with the Bank of France. The latter measure is one of which the policy is very questionable ; and there are, as already seen, good grounds for thinking that the banking business of the departments would have been more likely to be well conducted by local associations, than by branches of the Bank of France. Constant additions have been made to the number of branches, which now exceeds seventy.
Owing to the war with Russia, and still more to the rage for speculation, and the drain for silver to the East that followed it, the Bank of France became exposed to considerable difficulties And in the view of strengthening its position, and also, it may be presumed, of providing a loan for Government, a law was passed (9th June 1857), by which the capital of the bank was increased from 91,250 shares of 1000 fr. each to 182,500 shares of 1000 fr. each. The new shares were assigned to the existing proprietors at the rate of 1100 fr. per share, producing a total sum of 100,375,000 fr., of which 100 millions were lent to Government at 3 per cent. Hence the measure, though it added to the credit and security of the bank, made no addition to the means directly at its disposal.
Down to the passing of this law, the bank could not raise the rate of interest on loans and discounts above 6 per cent. But this impolitic restriction was removed, and the bank authorized to charge any rate of interest which she reckoned expedient, except upon advances to Govern ment, the maximum interest on which was limited to 3 per cent. The bank was farther authorized to issue notes of the value of 50 fr., to make advances on railway shares, &c., and the charter was extended to 1897.
The management of the Bank of France was severely tried in the latter part of 18G4 by the occurrence of a financial crisis at Paris ; and in January 18G5 a commission of inquiry was appointed to examine into the principles and practice of banking. There was, however, nothing mysterious or exceptional in the experience of 18G4. Speculation had been much stimulated in France by the establishment of companies (Cre dit Foncier, Credit Mobilier, &c., ike.) for the undertaking of public works, and much capital was locked up and more pledged towards the com pletion of enterprises supposed at first to be highly profit able, but in reality offering a distant and doubtful promise of remuneration. The crisis of 1864 was the dissipation of these delusions, and the voluminous publications of evidence and opinion by the commission of inquiry produced no practical consequences.
influence on the operations of the bank. Successive Governments resorted to it for assistance, which was obtained by increasing the issue of its notes and by giving them a forced currency. The rate of interest, which had been 2 per cent, from May 1867, rapidly rose to 6 and 6|, at which it remained with scarcely any variation from 9th August 1870 till late in the year 1872. The rate would probably have risen much higher, but on the 13th August a law was approved suspending the liability of the acceptors of bills current to meet them at maturity, and this suspension was renewed until it was finally with drawn in July 1871. The amount of unpaid bills held by the bank reached a maximum of 368 millions of francs, but the ultimate loss was extremely small. On the 23d June 1870 the metallic reserve at the bank was 1318^- millions of francs, which was reduced to a minimum of 505 millions on the 24th December of the same year. The notes in circulation before the war had been about 1400 millions of francs; but before the end of the year 1870 their volume had increased to 1700 millions ; and this again rose to 2000 millions before July 1871, and to 2400 millions before the end of 1871. A law of the 29th December 1871 fixed the maximum at 2800 millions, which was finally raised on 15th July 1872 to a maximum of 3200 millions. The debt of the state to the bank increased concurrently with this increase of issues, which was, indeed, authorized for the purpose of enabling the bank to assist the treasury. On the 26th December 1870 the bank held treasury "bons." to the extent of 174,800,000 francs only, but on the 30th November 1871 it held 1,193,600,000 of these " bons," and in August 1872 the amount reached 1,363,100,000 francs. A law of the 21st June 1871, followed by an agreement between the bank and the Government, provided for the repayment of this debt in annual payments of 200 millions, but up to this time (August 1875) the income of the state has never been large enough to provide the whole of this sinking fund. The bank has, however, been able to increase its metallic reserve through the liquidation of securities and the ac
cumulation of deposits ; so that, after having been reduced.