CREDIT (Lat. credere, to believe), in a general sense, belief or trust. The word is used also to express the repute which a person has, or the estimation in which he is held. In a commercial sense credit is the promise to pay at a future time for valuable consideration in the present: hence, a reputation of solvency and ability to make such payments is also termed credit. In bookkeeping credit is the side of the account on which payments are entered; hence, sometimes, the payments themselves.
The part which credit plays in the production and exchange of wealth is discussed in all economic text-books, but special reference may be made to K. Knies, Geld und Kredit (1873-1879), and H. D. Macleod, Theory of Credit (1889-1891). See also Hartley Withers, The Meaning of Money (1909).
CRÉDIT FONCIER, in France, an institution for advancing money on mortgage of real securities. Due to a great extent to the initiative of the economist L. Wolowski, it was created by virtue of a governmental decree of the 28th of February 1852. This decree empowered the issue of loans at a low rate of interest, secured by mortgage bonds, extending over a long period, and repayable by annuities, including instalments of capital. On its inception it had a capital of 25,000,000 francs and took the title of Banque Foncière de Paris. The parent institution in Paris was followed by similar institutions in Nevers and Marseilles. These two were afterwards amalgamated with the first under the title of Crédit Foncier de France. The capital was increased to 60,000,000 francs, the government giving a subvention of 10,000,000 francs, and exercising control over the bank by directly appointing the governor and two deputy-governors. The administration was vested in a council chosen by the shareholders, but its decisions have no validity without the approval of the governor. The Crédit Foncier has the right to issue bonds, repayable in fifty or sixty years, and bearing a fixed rate of interest. A certain number of the bonds carry prizes. The loans must not exceed half the estimated value of the property mortgaged, upon which the bank has the first mortgage. The bank also makes advances to local bodies, departmental and communal, for short or long periods, and with or without mortgage. Its capital amounts to £13,500,000. Its charter was renewed in 1881 for a period of ninety-nine years.
In 1860 the Crédit Foncier lent its support to the foundation of an organization for supplying capital and credit for agricultural and allied industries. This Crédit Agricole rendered but trifling services to agriculture, however, and soon threw itself into speculation. Between 1873 and 1876 it lent enormous sums to the Egyptian government, obtaining the money by opening credit with the Crédit Foncier and depositing with it the securities of the Egyptian government. On the failure of the Egyptian government to meet its payments the Crédit Agricole went into liquidation, and the Crédit Foncier suffered severely in consequence. The impracticability of the credit system to aid agriculture as worked by the Crédit Agricole was very marked, and, as a consequence, the financing of agricultural associations is now entirely in the hands of the Banque de France.
The Crédit Mobilier is an institution for advancing loans on personal or movable estate. It was constituted in 1871, on the liquidation of the Société Générale de Crédit Mobilier, founded in 1852, which it absorbed.
CRÉDIT MOBILIER OF AMERICA, a construction company whose operations in connexion with the building of the Union Pacific Railroad gave rise to the most serious political scandal in the history of the United States Congress. The company was originally chartered as the Pennsylvania Fiscal Agency in 1859. In March 1864 a controlling interest in the stock was secured by Thomas Durant, vice-president of the Union Pacific Railroad Company, and the Pennsylvania legislature authorized the adoption of the name Crédit Mobilier of America. Durant proposed to utilize it as a construction company, pay it an extravagant sum for the work, and thus secure for the stockholders of the Union Pacific, who now controlled the Crédit Mobilier, the bonds loaned by the United States government. The net proceeds from the government and the first mortgage bonds issued to the construction company were $50,863,172.05, slightly more than enough to pay the entire cost of construction. According to the report of the Wilson Congressional Committee, the Crédit Mobilier received in addition, in the form of stock, income bonds, and land grant bonds, $23,000,000—a profit of about 48%. The defenders of the company assert that several items of expense were not included in this report, and that the real net profit was considerably smaller, although they admit that it was still unusually large. The work extended over the years 1865-1867. During the winter of 1867-1868, when adverse legislation by Congress was feared, it is alleged that Oakes Ames (q.v.), a representative from Massachusetts and principal promoter of the Crédit Mobilier, distributed a number of shares among congressmen and senators to influence their attitude. Shares were sold at par when a few dividends repaid a purchaser at this price. Some in fact received dividends without any initial outlay at all. As the result of a lawsuit between Ames and H. S. McComb, some private letters were brought out in September 1872 which gave publicity to the entire proceedings. The House appointed two investigating committees, the Poland and the Wilson committees, and on the report of the former (1873) Ames and James Brooks of New York were formally censured by the House, the former for disposing of the stock and the latter for improperly using his official position to secure part of it. Charges were also made against Schuyler Colfax, then vice-president but Speaker of the House at the time of the transaction, James A. Garfield, William D. Kelley (1814-1880), John A. Logan, and several other members either of the House or of the Senate. The Senate later appointed a special committee to investigate the charges against its members. This committee, on the 27th of February 1873, recommended the expulsion from the Senate of James W. Patterson, of New Hampshire; but as his term expired within five days no action was taken. The evidence was exaggerated by the Democrats for partisan purposes, but the investigation showed clearly that many of those accused were at least indiscreet if not dishonest. The company itself was merely a type of the construction companies by which it was the custom to build railways between 1860 and about 1880.
See J. B. Crawford, The Crédit Mobilier of America (Boston, 1880), and R. Hazard, The Crédit Mobilier of America (Providence, 1881), both of which defend Ames; also the histories of the Union Pacific Railroad Company by J. P. Davis (Chicago, 1894) and H. K. White (Chicago, 1895); and for a succinct and impartial account, James Ford Rhodes, History of the United States, vol. vii. (New York, 1906). The Poland and Wilson reports are to be found in House of Representatives Reports, 42nd Congress, 3rd session, Nos. 77 and 78, and the report of the Senate Committee in Senate Reports, 42nd Congress, 3rd session, No. 519.