A private bank
to restore confidence
On 18 January 1800, barely two months after the coup of Brumaire, the Banque de France was born. Its founders were bankers, not the state: after the collapse of the assignats, the First Consul knew that confidence in paper cannot be ordered.
A bankers' company under the First Consul's patronage
Coming out of the Revolution, paper money had wrecked public credit. The assignats, issued in profusion, collapsed before being abandoned in 1796, and nobody wanted notes issued by the state. Bonaparte therefore chose not to issue any himself. He backed the creation of a private institution, founded by a group of merchants and bankers, among them Perregaux and Lecouteulx de Canteleu.
The Banque de France was a joint-stock company. It issued notes payable on sight to the bearer, in exchange for discounting commercial bills, and almost at once absorbed the Caisse des comptes courants. The first notes, of 500 and 1,000 francs, appeared in June and July 1800; their high value kept them in the hands of merchants. Bonaparte himself appears on the shareholders' register, for 30 shares.
The mechanism comes down to a single operation, discounting. A merchant holds a bill of exchange payable in a few months: he sells it to the Bank, which immediately hands him notes, minus interest. The note thus rests on real trade, not on a government's signature.
In 1803 the Bank obtained the exclusive privilege of issuing notes in Paris. Its two hundred largest shareholders formed the general assembly, which chose fifteen regents. The crisis of 1805, however, exposed the fragility of this independence: the statutes were reformed, and the Bank came to be run by a governor and two deputy governors appointed by the head of state. In 1848 it received the issuing monopoly over the whole territory, and the departmental banks became its branches.
Paper worth only what its issuer is worth
The episode shows that a banknote has no value of its own: it is worth the confidence placed in whoever issues it. In 1800 the Bank did not win that confidence by decree. It borrowed it from known bankers, from selective discounting, and from paper at first reserved for those able to judge it.
The compromise nonetheless drew a tension that has never closed: too close to power, the issuer loses trust; too far from it, it escapes those who wanted it. Two centuries later, the debate on central bank independence takes up the same question: on whom must a currency depend for people to believe in it?
A note had to stop being merely the word of the state before people agreed to take it.