YOU NEED MONEY TO MAKE MONEY^263was opposed to the use of the word banque for such intrinsically risky
ventures. This was also why the brothers Pereire later baptized their
bank the Société Générale du Crédit Mobilier and thereby gave birth
to a generic. If you can't call a bank a bank, you have to think of some
thing else that will smell as rich.
It was once thought that these new financial institutions came into
being over the opposition of the older private banks, which had their
own industrial interests. In fact, the private banks actively promoted the
crédits mobiliers, for the best of reasons. Long-term investments put
them at great risk, and the losses and bankruptcies of the business
crises of 1837-39 and 1848 convinced them that discretion was the
better part of valor. Shift the risk to shareholders of separate firms and
if possible get permission to incorporate with limited liability.
After the panic of 1848-49, the Crédit Mobilier of Emile and Isaac
Pereire seemed a new departure and quickly found imitators.^5 Its ap
proval by the regime signaled explicit encouragement for industrial
development; also for the arrival of new men. President Louis
Napoléon, nephew of the great Napoléon, soon to be Napoléon III,
alias ccle Petit, * wanted to make his place in history; also to create a
counterweight to the older network of top-drawer private banks—the
so-called haute banque—which had been thick with the late Orléanist
regime. In the same spirit, the regime relaxed the constraints that fa
vored old wealth. In 1867, in a belated response to general incorpo
ration in Great Britain in 1856, the French went over to routine
registration of public companies.^6
French investors could create and pay for development banks be
cause the country already held a lot of private capital. At that point, in
fact—and contrary to historical myth—the Crédit Mobilier and its im
itators in France were not much needed. The best of the railway lines
had already been conceded to syndicates of the older financial powers;
(2) limited partnerships (sociétés en commandite), where the general partners had un
limited liability and the limited partners liability only to the extent of their share in the
capital; (3) share limited partnerships (commandites par actions), where the limited
partners owned transferable shares; and (4) true corporations (sociétés anonymes),
where everyone enjoyed limited liability and all ownership parts took the form of
transferable shares. Until general limited liability was introduced in 1867, all such
companies required a charter from the legislature. This requirement rendered company
formation costly and difficult (political connections helped), but the general assump
tion was that limited liability was a violation of commercial morality and usage (cred
itors were deemed entitled to better protection), to be granted only in exceptional
circumstances.