Crédit Mobilier was a French banking company, and one of the most important financial institutions 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 investors as capital for vast lending schemes. The Crédit Mobilier investments created vast debts for the countries which accepted these infrastructure loans and was thus indirectly involved in the European occupations of the countries whose governments defaulted on these loans during the worldwide economic depression of the 1870s.
History and objectives
Established 1852, the French Government sanctioned the statutes of the 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 Foncier, 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 vastly increased by accepting investments from the general public.
In 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%. In 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 in March 1856, the French government deemed it necessary to prohibit the proposed scheme.
The prohibition was a severe blow to the institution. In 1856, its dividends did not exceed 22%; in 1857 they were only 5%. Several attempts to resuscitate its credit failed, and finally, in November 1871, it was reorganized with a new board of management. In 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. In 1884 it was a second time reduced to 30,000,000 francs, but the company never regained its losses.
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