Readings in Money and Banking Part 59

A. As long-term investments, we make loans to departments and munic.i.p.alities, sometimes to the State; we take government rentes, treasury securities, guaranteed railroad bonds, etc. As short-term investments, we take treasury bonds, bonds of the Monte de Piete of Paris (munic.i.p.al p.a.w.nshop), etc. Finally, we keep large sums in cash, either in our own vaults or to our credit in the treasury and the Bank of France, which, for that purpose, keep account currents on demand for us.

Q. You do not, as a rule, invest in mortgages?

A. No; owing to the difficulty in disposing of such investments.

Q. You purchase no bills and do no commercial business whatever?

A. No; that role is played by the Bank of France. Sometimes we make advances on securities, but only on treasury bonds.

Q. Your organisation is quite unique in the world, is it not?

A. There is nothing like it in England or America, but there are similar inst.i.tutions in Belgium and Italy, for instance. In France this inst.i.tution is highly appreciated by the lawmakers, who steadily increase its functions, and the number of laws and regulations governing the Caisse is ever growing.

Q. It is customary in France for savings banks to carry their reserve with this establishment?

A. The savings banks are bound to turn over to us all they receive from their depositors, except such sums as may be required to meet immediate demands.

Q. Then, as a matter of fact, this is a central bank for the savings banks of France?

A. Precisely.

CReDIT AGRICOLE

INTERVIEW WITH M. DECHARME, CHEF DU SERVICE DU CReDIT MUTUEL ET DE LA COOPeRATION AGRICOLE AT THE MINISTeRE DE L'AGRICULTURE[183]

Q. What is the nature of the business of the Credit Agricole and when was it inst.i.tuted?

A. The first law was in 1899. The first bank was opened in 1900. The Credit Agricole is based upon local organisations. France is divided into 86 departments, in each of which we are to have a regional bank (_caisse regionale_); and we hope eventually to have a local office (_caisse locale_) in each commune of each department. Among these 36,000 communes there are many which are cities, which naturally would not have agricultural banks. There are only 2 out of the 86 departments in France which have not already established a regional bank.

Q. Who furnishes the capital?

A. The basis of the system is the local office of the Credit Agricole in which each member--local farmers--has one or many shares of 20 francs, but on which he has to pay only 5 francs down. On payment of these 5 francs he becomes a stockholder. When a local office has been established it turns all of its capital over to the regional office.

Then comes the State which advances to the regional bank an amount four times the capital which has been subscribed by the local banks. The money given by the Government is not really given; it is lent without charge, without interest.

Q. For what purposes can this capital be used?

A. The regional office does not lend directly to the farmers; it lends to the local office, and the local office has a board of directors which examines the demands of the various members.

Q. Under what conditions do they make loans to farmers, and are their loans confined entirely to people engaged in agriculture?

A. The State loans to the regional office without interest; the regional office loans to the local office at 3 per cent.: the local office loans to the farmers at between 3-1/2 and 4 per cent.; in the northern region at 3-1/2 per cent.; in the southern at 4 per cent.

Q. Under what conditions?

A. The farmer who wants to borrow from the local office draws a bill upon himself, takes it to the local office, and the board of administration there considers it. If they approve it, the president signs it--and it has then two signatures--and then sends it to the regional office; if the regional office has plenty of money they will lend the money directly; if not, the president of the regional office signs it--it has then three signatures and is bankable paper--and it is taken to the Bank of France. During the crisis in the south of France last year in the wine-growing region at Montpellier, the centre, the regional office had one million capital; the Government then added 4; that made 5, but they lent at that office all together 16 millions, and the difference was obtained from the Bank of France in the way described by using paper with three signatures. Before the founding of these agricultural societies it would have been difficult for a farmer to obtain the three signatures necessary to borrow from the Bank of France, and what happened last year in the south of France could not have occurred before the organisation of the Credit Agricole. It should be added there has never been one cent lost by the Credit Agricole.

Q. Are all loans made to members?

A. Yes; exclusively to members.

Q. Who can become a member?

A. Farmers; agricultural workmen are excluded. We do not lend to people for nourishment to support themselves. We lend them money to increase the production of the land.

Q. Must a man have some share in the crops?

A. We lend money to buy a horse, a cow, or to buy fertilizer. We will lend to a man who rents a farm, but does not own it, to buy machinery, cattle, etc., but we will not lend to a man who wants to borrow the money for his own consumption; we do not lend money for a man to buy a coat, for instance. These local offices are in communities where everybody knows everybody else, and they always ask what the man wants to borrow for, and if he says he wants 400 francs to buy a cow, they watch him, and if four or five days afterwards he has no cow, they know it. As the liability is without limit, the other members of the locality would be responsible. At the beginning the farmers were afraid of unlimited liability, and on that account they had to make it limited, but now, in all of the new offices, the responsibility is unlimited.

Q. What are your co-operative societies?

A. They are societies for the production, preservation, sale, or transformation of agricultural products. There are co-operative agricultural societies in the wine-growing regions which have their own wine cellar; there are co-operative dairy societies for making b.u.t.ter and cheese; there are also co-operative societies which use waterfalls and electricity; co-operative mills to grind corn; co-operative railways to bring beet roots to the sugar refinery; co-operative distilleries and co-operative warehouses for corn. To these co-operative societies we make loans for twenty-five years. The Government loans without charge to the regional office and the regional office lends to these co-operative societies for twenty-five years at 2 per cent.

Q. What is the security?

A. The guarantee is the consolidated liability of all of the members of these co-operative societies and also a mortgage upon their real estate; their responsibility is absolutely without limit.

Q. Do you compete at all with the branches of the other banks or with the Bank of France?

A. No; we have an entirely different cla.s.s of customers.

Q. Is there any other inst.i.tution of this character in France, or do you practically cover the field?

A. The members of these local offices are people who up to the time these local offices were organised had never had any banking connection at all. The only persons with whom the local offices compete are individuals who used to loan to farmers at very high rates of interest.

FOOTNOTES:

[165] M. Robert Ma.s.son, Sous-Directeur du Credit Lyonnais, _The Bank of France_, an address delivered at the annual banquet of the bankers of the city of New York, January 19, 1914.

[166] Adapted from Maurice Patron, _The Bank of France in Its Relation to National and International Credit_. Publications of the National Monetary Commission, Senate Doc.u.ment No. 494, 61st Congress, _2d Session_.

[167] "Compte rendu de l'a.s.semblee generale des actionnaires de la Banque de France," 1891.

[168] Burdeau, "Discours sur le renouvellement du privilege de la Banque de France," June 29 and July 6, 1892, in the Officiel of June 30 and July 7.

[169] The Bank of France, during periods of quiet and prosperity, aims at a gradual effacement, at a more complete retreat toward a very high but very restricted sphere of economic activity. But as soon as the least trouble appears ... the Bank a.s.sumes again its place at the head of our great financial inst.i.tutions. (Brouilhet, "Le nouveau regime de la Banque de France." Revue d'Economie Politique, 1899.)

[170] The discounts and loans of the financial inst.i.tutions are growing in importance, and are steadily increasing in proportion to those of the Bank. This condition, revealed by statistics, is in itself not alarming, but it once more justifies that intervention, so many motives for which we have brought out.

[171] It seems that this protective mission especially applies to the department for stock market orders, originally reserved for the customers of the Bank, and later opened to everybody. Thus it prevents the financial inst.i.tutions from driving us toward excessive speculation.

This purpose explains, according to our notion, the growth and broadening of the business of stock market orders at the Bank of France.

[172] P. Coq, "Les circulations en Banque," Paris, Guillaumin, 1865, p.

38.

[173] The indirect expansion might be increased by wider use of the "crossed check." It will be long before we may expect good results from this practice, since we are as yet too far from the time when this check, almost unknown in France, will be currently used.

[174] Journal Officiel, 1845, p. 2471.