Reminiscences of Prince Talleyrand, Volume 2 (of 2)

by active 19th century M. Colmache

“The nation, then, cannot, ought not, to become guarantee for the bank.

“Still less ought the nation to establish the bank on its own account; for, to all the inconveniences resulting from responsibility, there would be added many others. The nation would have only two methods to choose between, either to entrust the administration of the bank to salaried officials, or to personally interested managers. In the first case, there would be too much reason to fear that the management of the bank would not receive due attention; while, in the second case, there would be an equal risk of the directors seeking immoderate profits, under the pretence of serving the interests of the nation with which they would be associated. In either case, should any misfortune befal the bank, the representatives of the country would, with much less freedom, deliver their opinion on events in which the interest of the whole nation would be compromised, than if they had merely to judge the conduct of private directors. And, finally, in both cases the annual expenses of management would be increased, and the portion of profits which the nation might directly claim from the operations of the bank, would certainly not indemnify it for the incalculable loss resulting from the diminished interest of money in the kingdom.

“The nation, therefore, cannot become guarantee for the bank, nor can the bank be established on account of the nation.”

“It has been proposed to establish banks of discount (caisses d’escompte) in different towns of the kingdom, and this plan certainly looks somewhat plausible; for it would seem at first sight that if banks of discount are useful, they cannot be too much multiplied, and that if they are favourable to commerce, they ought, above all, to be established in commercial towns.

“But it is easy to perceive that a single bank of discount, or bank of aid (banque de secours), placed in the capital, in the centre of circulation, would not only animate the commerce of the place in which it is established, but would necessarily extend its influence throughout the whole of the kingdom.

“Now, a number of banks of discount, or banks of aid, would not produce the same advantages; for by mutually increasing their credit, they would infallibly injure each other.

“In the first place, the multiplicity of these banks would oblige every individual to examine all the different bank-notes presented to him, whilst at present a great portion of the confidence with which these notes are received, proceeds from the circumstance of their requiring no examination, being recognisable at first sight, almost as readily as pieces of coin.

“This observation is, perhaps, more important than it may appear. There can be no doubt that a degree of credit would be attached to the notes of a single bank applicable to the whole kingdom, which would never be accorded to the notes of a number of banks, dispersed among the provinces; for, as each of these several banks would enjoy a different degree of credit, the notes of each would require previous examination, before being taken in payment.

“But, independently of this consideration, another very grave inconvenience would arise. The embarrassments of any one of these banks would inevitably operate prejudicially on the credit of the rest, from the correspondence which would exist among them. To multiply the places where these embarrassments might ensue, would be to multiply their probability, and it is, doubtless, important not to augment the chances which may compromise the trade and the monetary circulation of the kingdom.

“A plan has been proposed for supplying the place of this multiplicity of banks, by admitting the existence of one general bank alone, having in most of the provincial towns branch establishments, where the notes of the bank would be paid on presentation. This idea is the most impracticable of all. With the inconveniences of the preceding plan, it combines a still greater inconvenience of its own; for it is evident that the bank, instead of merely holding in its principal treasury such portion of its capital as prudence might show to be necessary, would at the same time require to hold a similar portion in each of its branch establishments. But for this precaution, it would be in the power of evil-disposed persons to convey a considerable number of notes into any particular town in which there was a branch bank; even chance, or some circumstance impossible to foresee, might draw a great quantity of notes at one time into some particular branch bank, which might not be in a condition to honour them. If there were but fifty of these branch offices dispersed in different towns of the kingdom, the probability is, that there would be a failure of the bank in different places almost every day of the year, though the sums it held in cash, distributed among its different treasuries, might, in the aggregate, be very much beyond the whole demands made upon it.”