Millionaire - Janet Gleeson [39]
Against such a backdrop of horror Law’s scheme seemed suddenly to offer painless salvation. By spring the stage was set: his new proposal laid out plans for a private bank, funded by himself and other willing investors, which would issue notes backed by deposits of gold and silver coins and redeemable at all times in coins equivalent to the value of the coin at the time of the notes’ issue, “which could not be subject to any variation.” Thus, Law pledged, his notes would be more secure than metal money, a hedge against currency vacillations, and therefore a help to commerce. Moreover, paper notes would increase the amount of circulating money and trade would be boosted. In short, he vowed, his bank would offer hope and the promise of a better future.
The regent listened avidly. Harried with other concerns of state, exhausted by all-night excess, exasperated with interminable financial dilemmas and Noailles’s ineffectual, unpopular remedies, he wanted a speedy, effective answer. Law now had his unstinting support. Before the meeting at which the new proposal was due to be presented to the council, the regent spoke to each member individually to make his wishes clear. Conscious of the menacing Chamber of Justice, almost all fell into line. A solitary exception was the Duc de Saint-Simon, who dared to speak out against Law’s scheme. He knew little of finance but was sharp and honest enough to point out two main pitfalls: “First to govern the bank with enough foresight and wisdom not to make more bills than they ought ...; second, that what was excellent in a republic . . . became dangerous in an absolute monarchy like that of France, where the necessities of war ill-undertaken and ill-sustained, the rapacity of ministers, favourites, mistresses, the luxury, extravagant expenditure, and prodigality of a king might soon exhaust a bank, ruin the holders of bills, and overthrow the kingdom.” The objection, in other words, was the same as that voiced by Bernard in Louis XIV’s day: since the king was above the law, in difficult times there was no guarantee that the bank would not be abused.
Orléans fobbed him off with woolly reassurances, although neither he nor Law had any real answers to this flaw. The bank was to be unregulated and answerable only to Law and his shareholders. Anything could happen.
In May 1716, Law, having adopted French nationality as required, was finally granted a charter for his Banque Générale for a term of twenty years. But even with its seal of official approval it failed to generate much interest. Its stock consisted of 1,200 shares each valued at 5,000 livres ($400). Its capital should have been 6 million livres (or $480,000) sterling, but it was far less: only a quarter of the shares were taken up, and these transactions were not straightforward. Investors could pay three-quarters of the cost of shares in billets d’états, the unpopular government securities that were currently worth 60 percent less than their face value. In real terms the bank’s working capital was thus little more than 800,000 livres.
Public suspicion shone through the lackluster response. Law was still branded a dubious foreigner, a gambler, and, some said, a charlatan. Few trusted him, let alone his paper money. The establishment, who had been the chief investors in the painful disaster of the annuity bonds and billets, remembered the experience ruefully. To the wider French populace banks of issue were mysterious institutions, and the press compounded their entrenched misgivings, deriding the Banque Générale as “a vision . . . one can only laugh at it, no one believes it will last.” Undercapitalized, ridiculed, and distrusted, Law’s bank battled for its existence.
To save it Law resorted to both subtle and headline-grabbing tactics. His goal was first to ensure that the regent’s trust in him