Yves Leclercq, La Banque
supérieure: La Banque de France de 1800
à 1914 Paris: Éditions Classique Garnier:
Bibliothèque de l’Économiste, 2010, pp.
349, index, bibliography.
The Bank of France,
contrary to its British, American or German counterparts, never
had its full-fledged well-researched academic history. This book
by Yves Leclercq, assistant professor at the University of Paris
VIII Saint Denis, aims at filing this gap for the 19th
century, a period during which the Bank played a major role in the
world's monetary history. The title, “the superior
bank”, brings back a sentence used by contemporaries in order to
suggest that despite being de jure mostly a bank of issue,
the Bank played from the very start the role of a central bank (a
term also used sometimes back then), even if with instruments that
were somewhat different from today. As this title exemplifies,
Leclercq doesn't start with a modern definition of a central bank,
its functions and tools, the progressive discovery of which would
give an easy organization of the book, although an anachronistic
one. He doesn't use a chronological exposition either, something
which may make the reading difficult for people unfamiliar with
the main events (a chronology would have helped). The organization is
thematic. The book has three parts and eleven chapters. The first
part presents the “institution”, the second one the issuing
monopoly and the third one focuses on the Bank's policies.
Actually, quite a lot of questions – such as the monopoly – are
discussed in various parts, because they are difficult to
disentangle from those central to these parts. The first part deals
mostly with the creation of the bank as an alliance between the
State and “commerce”, i.e. the most renowned Parisian merchants.
The context is important: the State needed some
reputation-enhancing mechanism after the assignats
hyperinflation and the two thirds default on the public debt of
1797. The merchants considered the competition between banks of
issue, which existed in the aftermath of the liberalizing
revolutionary abolition of privileges, as too risky and unable to
provide a stable instrument for large payments. As a result of their
context-specific and unexpected path, the Bank became an
institution differing both from a State administration and from a
bank, with a unique capacity for developing credit and dealing
with either political, economic of financial crises. It was
controlled by the most important bankers (and some industrialists)
of the time, some families staying on the board (the Conseil
général) for decades, but the stocks being
owned by an increasing number of rentiers who appreciated
its low but stable return. Actually, the Régents
(members of the board) soon accepted“public duties” and renounced maximizing profits in order
to benefit from that central position in the credit market. As
analyzed in chapter 8 (“face au pouvoir”), the government obtainedat each privilege
renewal (1806, 1840, 1857, 1897) not only some loans, but also a
development of services to the public, particularly the opening of
branches in more cities and the extension of the products proposed
by the Bank. Despite the immediate
dominance of the Bank (various times larger than its nearest
competitors until mid-century), its monopoly was long discussed
because laissez-faire dominated the public sphere. As
discussed in chapter 5, banks issuing notes were many in the
immediate aftermath of the Revolution, going from “banques de sol”
issuing small denomination notes guaranteed by copper coins to
relatively large Parisian banks, through banks bringing together
the main merchants and bankers in a city or region, like the Bank
in Paris. The very possibility of a monopoly was discussed since
issuing bills payable on demand and to the bearer was free, and
the difference between such bills and the Bank’s notes not clear.
The renouncement to more signatures (as when bills of exchange
were transferred by endorsement) in order to obtain the superior
quality of the Bank’s single signature was a matter of experience,
not law. The Bank then took advantage of circumstances in order to
eliminate competitors without bringing its competitors to court
for violation of its monopoly. The case of the “banques
départementales”, described in detail in chapter 6, is
telling: these banks had been created in various cities under the
demand of local merchant elites, first during the early
Restauration, second in the 1830s. They had a right to issue
banknotes by discounting local bills. The Bank was able to limit
their growth by obtaining restrictions on their ability to
discount bills on other cities and those payable in Paris, arguing
this was too dangerous an activity because of the personal
knowledge required for granting credit. They dangerously leveraged
their capital, maybe in order to counter these restrictions, which
led them to a crisis in 1846-48, during which the Bank absorbed
them. Contrary to later views
of metallic currency regimes, the metallic reserve was not central
to the Bank, which considered being strong thanks to its capital
stock (invested mostly in government debt) and, most importantly,
on its investments in three-signatures bills. Even if the
commercial nature of the bill was emphasized just like in the
Anglo-American real bills doctrine, the emphasis was on the
guarantee provided by the signatures of three well-known merchants
and bankers. Intimate shared knowledge of the situation of the
most important firms on the French trade and credit markets was
the true superiority of the Bank and its Régents. This
helped them to start developing a monetary policy in order to
soften fluctuations. This also allowed them to resolve some crises
in the best of their interest, as suggested but not discussed in
detail in the last part of the book. Contrary to former
accounts, Leclercq doesn't insist a lot on the debate between the
Bank's orthodoxy and its challengers, the saint-simoniens and the
Pereire brothers, who opposed the monopoly arguing that the Bank
should stimulate industrialization through low interest rates. He
is probably right. Another little developed discussion is the
comparison with foreign central banks. It is limited to the Bank
of England, which was probably the only discussed during the
period. Leclercq briefly but clearly shows that the Bank of France
acted quite differently, partly for doctrinal reasons, partly
because of a different context – the absence of a money market and
a much more hierarchical banking system, at least during the two
first thirds of the century. The strengths of the
book result from its focus on the first half of the 19th
century, a period of major choices that determined the future of
the institution. This explains why the discussion about the Second
Empire is more sketchy and dependent on secondary sources such as
Flandreau and Plessis. The same is true for the Third Republic:
the role of the Bank in the gold standard is not much discussed –
but the cooperative relations with the Bank of England are proven
to start much earlier than conventionally –and the evolving
relationship with the State is presented without reference to some
of the recent literature (e.g. Régine Vignat' dissertation
on the governorship of Pallain from 1898 to 1920). Leclercq
confirms that the French monetary system was not backward in 1900,
but one dominated by deposits, notes, and circulating commercial
bills, rather than coins; he describes the Bank's network in the
provinces, but doesn't analyze its role and how it articulates
with the development of other large banks, a new feature of that
period that challenges the dominance and very role of the Bank. The book's style is
unusual, because it is analytical but doesn't use any explicit
model, nor makes many references to the recent theoretical or
empirical literature on central banking or monetary policy. It is
excellent at presenting the public debates of the time and those
that took place within the Bank about its role and functions,
using a number of quotations, and writing even in the style and
vocabulary of the contemporaries. One advantage is to avoid
anachronism and to make the reader feel he participates the
understanding of the main bankers and economists of the time. For
example, the progressive transformation of banknotes from bills
into currency is better understood thanks to such an approach. The
inconvenient is that many issues won't appear so clearly to
today's economists as if exposed in standard modern phrasing.
Another element consistent with that one is the absence of any
modern statistical tool. Some eleven tables provide important
data, such as notes circulation, discounts, reserve ratio, etc
(mostly in the last chapters), but no explicit model is tested,
and no statistical appendix is available for other scholars. Some editing choices are
rather curious: the list of references includes only books, when
many articles are mentioned in the footnotes. The text is
literally full of quasi-quotations but precise references are
seldom given. No list of tables is given. Despite these few
shortcomings and a peculiar organization and style (or because of
these), this book is a must-read for anyone interested in the
origins of central banking. Pierre-Cyrille Hautcoeur Paris School of
Economics and EHESS