Page:The New International Encyclopædia 1st ed. v. 05.djvu/642

* CREDIT. 552 CREDIT MOBILIER OF AMERICA. the party who sends the letter shall reimburse him who makes the payment. Such letters of credit may be drawn on one or on several par- ties, being in the latter case sometimes called 'circular letters of credit.' They are much used by travelers, and the leading houses issuing them have correspondents in all parts of the world. Those who issue them are generally so well known to the banking fraternity that any banker, whether a correspondent or not, will, upon proper identification, make payment on the letter. When the letter is issued, the person to whom it is given either p.ays outright the amount named in the letter, or furnishes acceptable security that the maker shall be reimbursed for the drafts upon him. The alternative for (he letter of credit is the travelers' note. This differs from the letter in being issued in coupons, sometimes expressed on the face of the coupons for the currencies of other countries. Such travelers' notes were for- nierely issued extensively by the Cheque Bank of London, but the business in the United States has recently passed largely into the hands of the express companies. Such travelers' notes are sometimes designated circular notes. CRE'DIT FONCIER, kra'de' foN'sya' (Fr., landed credit). The French name for a method of borrowing money on the security of landed property whieli is widely practiced in France and other Continental countries. The borrower takes a loan, in return fur which he contracts to make certain annual payments, which are so ad- justed as to make provision for the interest and for the gradual extinction of the principal, which is fully paid when the term of the contract has been concluded. These contracts are generally made with companies organized for the purpose of loaning their capital in this fashion. Another variety of this form of credit is found in the Pfandhricf institute of the large landowners of Germany. Loans are nuide in the same way, but in retirn for the debt the borrower receives the securities of the association. He does not actu- ally contract a debt until he sells these securi- ties, which he may do in whole or in part. CREDIT MOBILIER, kra'de' mo'be'ya'. A well-known financial institution of France. On November 18, 18.52, the French Government sanc- tioned the statutes of a new bank under the name of the Socii'te Generate du Credit Moliilier, with a cajjital of fiO.000,000 francs. The name was intended as a contrast to the Societes du Credit Foncier. which are of the nature of land banks, and adance money on the security of real or iuunovable property, while the Credit ]Mobilier proposed to give similar aid to the owners of movable propei'ty. The declared object of the new bank was especially to promote industrial enterprises of all kinds, such as the construction of railways and the opening of mines, by placing loans and handling stock. Various privileges were conferred ujion it under its charter; among others it was allowed to acquire shares in public companies, and to pay calls made upon it in respect of such shares by its own notes or obliga- tions ; also to sell or give in security all shares thus acquired. The operations of the society were conducted upon a very extensive scale. In 1854 it subscribed largely to the Government war loan, raised durinc the Crimean campaign, to the Grand Central TJaihvay Company, to the General Omnibus Company of Paris, and to various other important undertakings. The divi- dend declared for 1854 was 12 per cent. In 1855 it loaned two sums to the Government — the one of 250,000,000 and the other of 375,000,000 francs. Its operations were vast during this year, and the net dividend declareil amounted to 40 jier cent. The directors then proposed to avail themselves of their [jrivilege of issuing their own obligations, and thought to issue two kinds of notes — the one at short dates, the other at long dates, and re- deemable by installments. The proposed issue was to amount to 240,000,000 francs ; but the public became alarmed at the prospect of so vast an issue of paper money, and in March. 1856, the French Government deemed it necessary to prohibit the carrj-ing out of the proposed scheme. This wjs .a severe blow to the institution. In 1856 its dividends did not exceed 22 per cent.: in 1857 they were only 5 per cent. Several attempts to resuscitate its credit failed, and finally, in November, 1871, it was reorganized and put under a new board of management. In 1877 its assets were 77,000.000 francs, but its shares, the par value of which was 500 francs, sold for 200 francs only. In 1878-79 the capital was first reduced to .32.000,000 francs, and then raised to 40.000,000. In 1884 it was a second time reduced to 30.000.000 francs, but the company never regained its lost ground. The Credit Jlobilier was undoulitedly useful in devel- oping the industrial power of France, but its operations were hazardous, and had the}" not been checked in time, they would in all proba- bility have ended in disaster. See Credit JIobi- LiER OF America. CREDIT MOBILIER OF AMERICA. A joint-stock company, whose alleged corrupt opera- tions in connection with the building of the L^nion Pacific Railroad gave rise, in 1872-73. to the greatest Congressional scandal in American his- tory. The company was chartered as the 'Penn- sylvania Fiscal Agency,' in 1859. was organized for a general loan and contract business in 1863, and was reorganized imder the above name in 1867, for the purpose of building the Union Pa- cific. This work, completed in 1809, w.as paid for largely in stock and bonds of the Union Pacific, so that the stockholders of the two companies soon came to be identical. The Mobilier stock, at first almost worthless, soon began to pay enormous dividends: suspicions were aroused; and in the Presidential campaign of 1872 the company was charged with gross dishonesty, and many prominent Republicans, including the Vice- President, the Speaker of the House, three Senators, and a number of well-known Repre- sentatives, were freely accused by the Democratic press of having been bribed in 1807-71 to use their influence and votes in favor of the Union Pacific, the alleged bribes having consisted of the sale of ^Mobilier stock to the accused at prices below its actual value. A prolonged investigation, con- ducted in 1872-73 by special committees in both the Senate and the House, resulted in a recom- mendation of the expulsion of one Senator, upon which, however, no action was taken, and the censure of two Representatives. Oakes Ames, of jMassachusetts, and .Tames Brooks, of New York, respectively for having sold Credit Jlobilier stock to members of Consress 'with intent to inflxience the votes of such members.' and for having, in- directly, received such stock. The scandfvl caused intense excitement throughout the countr}', and