Make France Great Again-Chapter 938 - 929: Isaac Pereire’s Response

The debt review of France’s large and medium-sized banks continued until late September when it finally concluded.

On the third day after Achille Fuld completed the review, a report appeared on Jerome Bonaparte’s desk.

The content of the report was Achille Fuld’s assessment over more than a month of the debt status of large and medium-sized banks within France exceeding tens of millions.

In the report, Achille Fuld arranged the debt situations of these dozens of banks from high to low, with the most severe belonging to Isaac Pereire’s Paris Industrial Bank.

Such a bank with a market value of over a billion had a debt burden that was 2.5 times the size of the entire bank.

Although the 2.5-fold debt is far from the nearly 10 times in history, it is still a considerable hole.

Once exposed by someone with intentions, Industrial Bank might not hold up until the next day.

Looking at the debt figures in the report, Jerome Bonaparte couldn’t help but furrow his brows and muttered softly, "Let me see where they spent the money."

Jerome Bonaparte continued reading, and in the report Achille Fuld handed over, it clearly stated that the vast majority of Industrial Bank’s debts were used for investment, and their investment targets were their own subsidiaries and foreign high-yield bonds/stocks.

Among them, the companies established by Industrial Bank included Paris Public Transport Company, Paris Water Company, Lyon Public Transport Company, Paris Real Estate Company..., they spanned across France and became an important part of France’s real industry.

"No wonder!" Jerome Bonaparte muttered again softly.

Judging from Isaac Pereire’s investment company types, most are ones that focus on long-term strategies.

Take Paris Water Company, for instance, even if Isaac Pereire was authorized by Jerome Bonaparte to monopolize the entire Paris water supply, would Isaac Pereire dare to raise prices?

They simply wouldn’t dare! If the tap water prices were excessively absurd, not only Parisians would be unwilling, but even Jerome Bonaparte would order Isaac Pereire to promptly adjust the water price to a suitable level.

Therefore, the earning speed of Paris Water Company is far inferior to financial speculation... don’t mention daily yields of 5%, 6%, even higher than the annual 4% yield of France’s national debt cannot be achieved.

Originally supposed to be a money-making tool, the real estate company also failed to reach expected levels because of Baron Haussmann’s continuous building plans.

Even worse, Paris Industrial Bank wasn’t established relying on traditional commercial models.

If it had the traditional commercial models of France, Isaac Pereire would never have been able to build a bank comparable to Rothschild Bank in just a few years.

The establishment of Rothschild Bank was through three generations of hard work by the Rothschild Clan, and it was at a good time, which made the bank possible.

While the establishment of Paris Industrial Bank depended on noble alliances and returns promised higher than France’s 4% national debt yields to absorb retail capital to grow strong.

Thus, the bank inherently had speculative attributes at its inception; therefore, when Industrial Bank couldn’t earn the promised returns domestically, they turned their attention abroad.

Industrial Bank not only holds railway bonds from the Kingdom of Prussia, Sardinian Kingdom, United States of America but also the national debts of the Austrian Empire and the Ottoman Empire... all these various debts are why Industrial Bank has such high debts.

This essentially means France lent money to Industrial Bank, which then lent money abroad.

Those investing in Industrial Bank got its bonds and stocks, while Industrial Bank gained debts and foreign bonds.

Over time, Industrial Bank’s debts kept increasing.

At the end of Industrial Bank’s section, Achille Fuld specifically wrote down Industrial Bank’s current situation and his evaluation of them.

As of now, Industrial Bank is still widely pursued in the securities exchange market.

Their value has not only not decreased but has kept increasing.

Industrial Bank exchanged the funds obtained from issuing stocks for other companies’ stocks, and Industrial Bank’s stocks were only guaranteed by its holding of other enterprises’ valuable securities, while various companies’ stocks were guaranteed by their intrinsic asset value.

Therefore, the same actual assets generated double virtual capital: one form as the stocks of that enterprise, another as Industrial Bank’s stocks allocated to the enterprise and buying its stocks.

However, Achille Fuld believes Industrial Bank’s actions are akin to walking a tightrope,

If overseas investments suffer losses, the whole company will instantly plunge into crisis,

Because the profit Industrial Bank gains from domestic investment is far from enough to pay their initial promises, sooner or later they will face crises due to financial chain issues.

After reading Achille Fuld’s entire report, Jerome Bonaparte realized that Alphonse Rothschild’s initial warning was not unfounded.

Had it not been for Achille Fuld’s report, Jerome Bonaparte would have merely regarded Alphonse Rothschild as being too cautious like his old father.

Then, Jerome Bonaparte summoned Bashirio again and instructed him to immediately send someone to invite Isaac Pereire.

"Yes!" Bashirio obeyed Jerome Bonaparte’s order and began to act.

About an hour later, Bashirio appeared once again before Jerome Bonaparte, with Isaac Pereire following behind him.

"Your Majesty!" Isaac Pereire, dressed in a black coat, respectfully addressed Jerome Bonaparte!

"Pereire, have a seat!" Jerome Bonaparte pointed to the sofa beside him and said to Isaac Pereire.

Isaac Pereire followed Jerome Bonaparte’s order and sat down. Then Jerome Bonaparte looked at Bashirio and said, "Bashirio, you may leave now! I’d like to have a private conversation with Mr. Isaac."

Bashirio bowed to Jerome Bonaparte and then closed the door.

The room was left with only Jerome Bonaparte and Isaac Pereire. After a brief silence, Jerome Bonaparte crossed his hands and spoke to Isaac Pereire in as cordial a tone as possible, "Isaac, you must be very clear about the reason I called you over, right?"

As soon as he said this, Jerome Bonaparte regretted it because he realized that the statement clearly had an interrogative tone rather than a consultative one.

"Your Majesty, I understand!" Isaac Pereire replied to Jerome Bonaparte in a calm tone.

Initially, when Isaac Pereire was under investigation by Achille Fuld regarding debts, he was already very aware that he might be summoned by Emperor Jerome Bonaparte after Achille Fuld reported the bank debts to the Emperor.

"I have reviewed the debt situation of the Industrial Bank, and while your situation is not too severe,

it is somewhat risky, with liabilities exceeding market value by 2.5 times. How do you plan to repay them?" Jerome Bonaparte inquired of Isaac Pereire.

"Your Majesty, the Industrial Bank has many investments overseas, and the current profitability of these investments is excellent!

We are fully confident in repaying these debts!" Isaac Pereire responded to Jerome Bonaparte with a firm tone.

At times like this, he had to demonstrate unwavering confidence.

"If an economic crisis occurs, what will you do?" Jerome Bonaparte continued his questioning.

"Your Majesty, we have some tangible assets on hand, fully capable of dealing with these risks!" Isaac Pereire told Jerome Bonaparte.

Jerome Bonaparte suddenly recalled that the Industrial Bank indeed accumulated some land.

Although the land’s appreciation wasn’t as high as historically noted, it was still higher than when Isaac Pereire had acquired it.

If Isaac Pereire could resell the land, the profit would only need to cover the dividends.

Then the Industrial Bank could continue to exist.

Ultimately, whether a bank can continue to operate largely depends on the market’s confidence in it.

By selling land to generate funds, Isaac Pereire signaled to the market that they had the situation under control.

As long as the market feedback wasn’t overwhelmingly negative, the Industrial Bank could survive.

An economic crisis is not perpetually present; if the Industrial Bank can withstand it, they can emerge victorious.

Like the Bank of France in 1848, they didn’t need more funds than other banks; they only needed to outlast them.

"That indeed is a solution!" Jerome Bonaparte nodded in agreement with Isaac Pereire’s method and then said to Isaac Pereire, "However, you should be aware that this strategy only works when your debt hasn’t far exceeded your assets!

If the Industrial Bank’s debt greatly exceeds your assets, selling your assets will only be seen as a final, desperate act!

At that point, the entire Industrial Bank would likely face a frenzy of withdrawals!

Leading to bankruptcy!"

"Your Majesty, I will certainly heed your advice!" Isaac Pereire replied to Jerome Bonaparte. 𝒻𝘳𝘦𝘦𝘸ℯ𝒷𝘯𝘰𝑣ℯ𝑙.𝘤𝑜𝘮

"By the way, you should also prepare in advance for the coming economic crisis! Some businesses need to be scaled down when possible. If you hesitate to do so now, it might be impossible later!" Jerome Bonaparte reminded Isaac Pereire once more.

Isaac Pereire informed Jerome Bonaparte that the Industrial Bank had already begun liquidating foreign bonds to cash out.