Chapter 179: The French Central Bank
In the interrogation room on the third floor of the Bastille.
Calonne contentedly arranged Necker's confession, glancing at Necker. "Mr. Necker," he said, "thank you for cooperating with my work. My task is now complete. The rest is between you and the royal representatives."
As he spoke, the door opened, and several Secret Police officers escorted a nobleman wearing silver-rimmed glasses and a splendid blue long coat into the room.
"Look, Count Herman is here."
Calonne rose and exchanged greetings with Herman, then yielded the lead interrogator's seat. However, Herman did not take the seat; instead, he received a document from his assistant and placed it before Necker.
"Mr. Necker, according to the information reported by the interrogation committee, the total amount you previously embezzled is 8,927,000 Livres."
He said, looking at Calonne, who immediately nodded to confirm the amount was accurate.
Count Herman continued, "Her Majesty the Queen, true to her previous promise, has decided to give you a lenient punishment, imposing a fine of only 2,000,000 Livres. So the total is..."
"11,927,000 Livres," Calonne answered with a smile.
Herman then turned to Necker. "So, you just need to return the illicit gains and pay the fine, and you can leave this place.
"Her Majesty the Queen has also graciously granted special clemency, allowing you to choose whether to go to Lorraine or Foix."
He tapped the document on the table. "You see, this is the pardon issued by His Majesty."
Given the circumstances of Necker's case, exile within France was undoubtedly a special pardon.
Necker had long since lost any thought of resistance. He took paper and pen, writing down an address and a string of numbers.
He handed the paper to Herman, saying dejectedly, "Go here. There's a safe with bank notes and withdrawal methods inside. This is the code.
"I'm not sure if it's enough to cover 12,000,000 Livres, but there should be over 10,000,000... This is truly all I have left."
The royal representative took the paper and nodded. "Thank you for your cooperation. You'll have to stay here for a while longer until these funds are fully redeemed. Also, I must inform you that the shortfall will likely have to be covered by your properties and estates."
"Do as you please..."
As Herman departed, Calonne pursed his lips in dissatisfaction. He hadn't expected Necker to merely be exiled; he had thought the man would spend at least a few years in prison.
What he didn't know, however, was that Joseph had no intention of letting Necker off so easily.
Necker's predecessor as French Minister of Finance was Jacques Turgot, a highly capable economist. During his tenure, through a series of financial reforms, he laid the foundation for France's capitalist economy, ushering in what was hailed as France's 18th-century economic "Golden Age."
However, upon Necker's succession, he quickly halted Turgot's reform policies and instead relied on extensive borrowing to maintain finances, ultimately plunging France into an abyss of debt.
How could Joseph simply allow such a parasite to get off with mere exile? France's tradition of leniency and light punishment for the upper echelons of society would not work with him!
Of course, everything had to wait until Necker had coughed up all the money, and they also couldn't allow the royal family to gain a reputation for going back on its word.
...
Palais-Royal.
The Duke of Orleans, grim-faced, stared at the newspaper in his hands—today, nearly every Parisian newspaper carried the public announcement for the French Industrial Development Fund.
Aside from some basic information about the fund, the announcement primarily declared the composition of its sole governing body—the Fund Committee.
The committee had a total of 10 seats: 6 were elected by the clients with the highest investment amounts, 1 was held or appointed by the Minister of Finance, 1 was appointed by the French Reserve Bank, and the final 2 were appointed by the royal family.
All matters related to the fund were to be decided by the committee; the royal family and government had no right to interfere. Of course, what he didn't know was that Joseph had left a 'back door' within it—the highest investor was the French government, followed by the Crown Prince himself, and then the royal family. This meant they could secure at least 4 of those 6 seats. Coupled with the two inherent royal seats and the one from the French Reserve Bank, this guaranteed his absolute control over the fund.
The Duke of Orleans irritably tossed the newspaper aside.
He had anticipated that the malicious bankruptcies of banks would trigger panic among the nobility, and that the French government would be unable to repay the nobles' investments. He had simply planned to wait for the nobles to unite and pressure the palace, forcing the royal family to yield and disrupting the Necker case.
Yet, he never imagined the government would manage to create an "Industrial Development Fund"! With just a concept, it had absorbed all the money the nobles had invested in the banking sector, thereby swiftly calming their panic.
When he first heard about the fund, he had planned to use the historical example of the Mississippi Company to guide the nobles into associating it with a "scam."
However, once he saw the details of the fund's disclosure, he immediately knew that approach wouldn't work.
The Industrial Development Fund's management and operational model was too transparent: it was committee-based, investors could audit accounts at any time, form independent oversight committees, and investments would be returned immediately upon any losses...
There were simply no exploitable weaknesses. This was inevitable; funds in later generations had developed for so many years, and obvious loopholes had largely been closed. Joseph only needed to copy them.
The Duke of Orleans knew very well that without the support of the nobles, the banks involved in the Necker case would be taken down one by one. And if he couldn't protect these major banks, his influence in the Banking Guild would plummet from now on.
Even more awkwardly, he himself had tens of millions of Livres invested and was still trapped in several of the troubled banks.
He couldn't help but sigh deeply. Was he, too, going to have to invest in that Industrial Development Fund?
The door opened, and his butler, Donatien, entered, bowing. "My lord, the guests have all arrived."
The Duke of Orleans nodded, rising wearily, and walked towards the hall on the second floor.
The towering doors were pushed open by guards, but the scene beyond sent a chill down his spine—aside from a dozen or so members of the Banking Guild, only seven or eight nobles were present, standing sparsely in the vast, empty hall.
Just a few days ago, when he had summoned the nobles to resist the Necker case by "not borrowing money from the government," this very hall had been swarming with people, with barely room to stand.
'Their resolve had crumbled...'
Seeing their linchpin arrive, those in the hall hurriedly gathered around him to pay their respects.
The Duke of Orleans was about to say something to boost their morale when Marquis de Ludo spoke with an anxious expression, "Your Grace, I heard from a friend that Necker's interrogation is over. He must have told them everything."
He glanced behind him. "What are we going to do now?"
The Duke of Orleans, of course, already knew this. If there had been a solution, he would have used it already; why would he have waited until now?
Seeing his silence, Marquis de Ludo cautiously asked, "Do you think we should try to negotiate with the royal family?"
The Duke of Orleans helplessly looked up at the crystal chandelier. Just then, someone entered and whispered something to the butler, who immediately reported to him, "My lord, we just received word that a large number of police officers are heading to the City Trade Bank."
Delachapode, the owner of the Trade Bank, instantly turned pale. Without even a word of farewell, he turned and ran out.
...
In the streets and alleys of Paris, people were all discussing the recent successive bank bankruptcies.
"Today, the City Trade Bank was also sealed off. I wonder if it will go bankrupt."
"It's as sure as the sun rises. The bank managers have all been arrested; at noon, I even saw the police shoving them into carriages."
"They say many more banks are involved. Who knows when it will end..."
"My God, my 60 Livres in the bank are just gone!"
"What? Don't you read the papers?"
"Read the papers?"
"The papers said that the bankrupt banks have all been acquired by the French Reserve Bank. You can withdraw your previous deposits from there."
"Really?! You're not joking, are you!"
"The newspaper stated that you only need to submit an application, and you can withdraw it in at most half a month. Or, you can convert it into a French Reserve Bank deposit."
"That's wonderful, thank you! I'm going to apply right away!"
...
Versailles.
Joseph was reviewing the latest acquisition status report.
Recently, the French Reserve Bank had successively completed the acquisition of four bankrupt banks and was currently auditing accounts and receiving various assets.
The French Reserve Bank's branches in Paris alone had suddenly increased to over a dozen, though more than half hadn't even had time to change their signs.
Joseph frowned as he read the report's mention of insufficient staff—primarily a severe shortage of management personnel.
The management teams of the banks involved in the Necker case had mostly been arrested, and the French Reserve Bank could not possibly provide so many managers at once.
This was even with him deliberately slowing the pace of bringing down the involved banks; if all thirteen banks were to collapse at once, more than half of France's financial market would plunge into chaos due to management issues.
'The foundation is still not solid enough,' Joseph thought, shaking his head inwardly. It seemed it would take at least half a year to fully digest these financial assets.
Time, however, was not an issue. For these bankrupt banks, no one was willing, nor dared, to compete with the French Reserve Bank.
Though the French Reserve Bank didn't have much actual cash, its shareholder lineup was enough to scare off any competitor—the King and Queen each held 5% of the shares, Prince de Condé 4%, and the Count of Artois 4%. The Minister of Finance, the Minister of the Interior, and the head of the Secret Police also held shares. Naturally, the largest shareholder was still the Crown Prince of France.
However, to establish the French Industrial Development Fund, the French Treasury had now also become a major shareholder in the French Reserve Bank.
After Joseph himself added a large investment, the shares of other shareholders were partially diluted. The current equity structure was: the French government held 40%, the Crown Prince 41%, the King and Queen each held 4%, Condé and Artois 3%, Monnot 2%, and Archbishop Brienne and Robert each 1.5%.
And after acquiring four major banks, the French Reserve Bank's nominal assets had reached an astounding 190,000,000 Livres!
However, the vast majority of this was loans made to the government. The banks' debts, through agreements with investing nobles, were transferred to the Industrial Development Fund. In other words, the French Reserve Bank now owed the Industrial Development Fund over a hundred million Livres.
Fortunately, the agreement stipulated that withdrawals could not be made within five years, otherwise the development fund would almost immediately collapse.
Going forward, the French Treasury would invest in various industrial sectors in the name of the development fund, and these funds would all be treated as repayment for the French Reserve Bank's loans.
The French Reserve Bank, in turn, would transfer these investments to the development fund. When the investments generated returns, the development fund would also have returns.
This way, French Treasury expenditures would no longer flow entirely into the pockets of banking capital but rather be used to aid industrial development. Profits from industrial sectors would then feed back into the treasury, truly forming a virtuous cycle.
Of course, this was merely Joseph's theoretical design; actual implementation would certainly encounter many problems, but these were the unavoidable costs of industrial development.
At the very least, after the French Reserve Bank took over the bankrupt banks' loans, it would renegotiate loan agreements with the French government, significantly reducing loan interest rates.
As for the exact reduction, Joseph planned to wait until all acquisition work was complete, then have Archbishop Brienne calculate the total amount of loans the French Reserve Bank had acquired, and then determine what interest rate would allow French finances to maintain a balanced budget.
The new agreement would then be signed based on that rate.
Regardless, it would certainly be far lower than the current interest rates on French government loans, which exceeded 15%.
After completing the acquisition of all thirteen involved banks, Joseph's next plan was to leverage the French Reserve Bank's immense size—though it had no actual cash, the book value of its loans was certainly astronomical—to gradually control the French financial industry, and progressively transform the French Reserve Bank into France's "central bank."
This process would undoubtedly encounter administrative issues and resistance from existing banking capital, but if successfully completed, the French royal family—or rather, the Crown Prince of France—would firmly grasp France's financial lifeline!
Joseph signed the operational plan submitted by the French Reserve Bank's manager. As he pondered the opportune moment to expose the next bank, Eman lightly knocked on the door and said, "Your Highness, Archbishop Brienne has arrived, and he's brought three bankers."
"Oh? Bankers?" Joseph asked, a little surprised, but he rose and added, "Please show them to the drawing-room."
A short while later, in the spacious drawing-room, Archbishop Brienne and the others each respectfully bowed to the Crown Prince. Then, Archbishop Brienne gestured behind him. "Your Highness, allow me to introduce you. This is Marquis de Ludo, this is Comte de Kaunitz, and this is Monsieur Boislandard."
Joseph narrowed his eyes. He had been frequently reviewing documents on the Necker case recently and was very familiar with the banks involved. These three men were precisely the owners of three of those banks. They also held another identity: leading figures in the French Banking Guild.
He invited them to sit, then asked with a smile, "May I ask what brings you gentlemen to me?"
Upon hearing this, Marquis de Ludo and the others were so agitated they were practically in tears.
The Duke of Orleans couldn't save them, so they decided to compromise with the government, or rather, to beg for mercy.
However, they couldn't even find anyone to beg for mercy from. First, they went to the Secret Police, only to be told they were merely assisting with arrests. Then they approached the Police Bureau, and from there found a mysterious department called the Police Intelligence Bureau, which informed them they only acted on orders.
Next, Marquis de Ludo and the others sought out the High Court and the Interior Ministry, but got nowhere. Finally, they found the Ministry of Finance, and only after paying a considerable sum in "kickbacks" did they learn that the true orchestrator of the Necker case was none other than His Royal Highness, the Crown Prince.
Afterward, they spent another sum of money, and finally, led by Archbishop Brienne, they were granted an audience with the Crown Prince.
Marquis de Ludo spoke with nervous deliberation, "Your Royal Highness, the things we did with Necker were extremely serious mistakes—oh no, they were grave crimes! We have deeply recognized our errors.
"We dare not beg for your forgiveness, Your Highness; we only wish to make amends for our past transgressions.
"Merciful Highness, from this moment forward, we are your most humble servants. Should you but nod your head, whatever you ask of us, we will agree without hesitation!"
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