Lords of Finance: 1929, the Great Depression, and the Bankers Who Broke the World (10 page)

In 1896, Moreau followed in Caillaux’s footsteps and, after a brilliant performance in the ferociously competitive entrance exams for the upper civil service, had also become an
inspecteur des finances.
Although the examination system had made
⁷⁵
the inspectorate largely meritocratic,
candidates still had to have a parental guarantee of a private income of 2,000 francs per year until they were promoted.
^fn1
Moreau was now a member of the elite administrative class that exercised the true power in France during those years. The country was nominally governed by a clique of ministers who rotated in and out of office at the mercy of a vociferous and fractious national assembly. Governments had a typical life of less than seven months: there was a total of fifty different ministries in the forty-four years between the founding of the Third Republic in 1870 and 1914, some lasting a single day. But behind all the minor dramas of ministers resigning, governments falling, and the roundabout of the same old faces, France was run by this quiet, confident, extremely able, and well-trained college of mandarins.

Once inside the civil service, Moreau rose rapidly. In 1899, Caillaux became minister of finance, the first of his eventual seven terms in that position, and Moreau worked under him. In 1902, Moreau was handpicked by the new minister of finance, Maurice Rouvier, to be his
chef de cabinet.
The cabinet was the minister’s private secretariat, generally made up of his protégés and unusually promising junior civil servants who managed the full range of the minister’s activities, dealt with his correspondence, acted as a liaison with his constituency, and prepared his briefing papers. To be
chef de cabinet
⁷⁶
was to be the minister’s principal aide and chief of staff, a role as much political as administrative.

Rouvier, a moderate republican, by profession a banker, was one of the most competent ministers of finance that the Third Republic produced. He also had an unfortunate capacity for getting involved in scandals; indeed he had the distinction of being tainted by the two best-known
affaires
of that squalid era. In 1887, it was revealed that Daniel Wilson, son-in-law of President Jules Grévy, had been selling decorations, including nominations to the Légion d’Honneur, from his office in the Élysée Palace. Rouvier was prime minister at the time, and though not directly implicated in
the trafficking, was, along with the bewildered old president, forced to resign.

Rouvier’s exile was short-lived. Two years later he was back in government as minister of finance. In 1892, however, the Panama Canal Company went bankrupt and some 800,000 French investors lost $200 million. The investigation revealed a chain of corruption, slush funds, and influence peddling that wove through the high social and political circles of Paris. Rouvier was found to have had extensive dealings with two shadowy figures at the heart of the affair, the baron Jacques de Reinach, a German Jew with an Italian title, who then died in suspicious circumstances in what was implausibly declared to be suicide, and Cornelius Herz, a shady international adventurer and financier who promptly skipped the country. In the parliamentary inquiry that followed, Rouvier, accused along with 104 other deputies and countless journalists of accepting payoffs, defended himself by arguing that he had only accepted the money because he thought the project was in the national interest, and after all, his fortune had not “increased abnormally
⁷⁷
” in the process. Though insufficient evidence was produced to indict him, he was forced once more to resign and spent the next ten years in the political wilderness. He had only just been rehabilitated when Moreau first went to work for him in 1902.

Moreau never allowed Rouvier’s strange conception of public ethics to get in the way of his admiration for the man. Willing though he was to concede that his “beloved” mentor had suffered from a curious incapacity to distinguish between private interests and public responsibilities, he brushed it off as no worse than that of any other politician of the time—an aspect of that general “moral collapse
⁷⁸
[which was] very common in political circles” and continued to express his undying gratitude and loyalty to Rouvier for the enormous generosity he had received as a young man.

In 1905, Rouvier became prime minister for the second time, with Moreau as his principal aide and right-hand man. Within two months, the government was faced with a major international crisis. That March, the kaiser, who had an unfortunate habit of speaking out of turn, paid a visit
to Tangiers, and in a challenge to French ascendancy in North Africa proclaimed his support for Moroccan independence. Rouvier initially tried to negotiate with Germany, but the kaiser, sensing France’s weakness, kept increasing his demands. As the tensions mounted, Germany mobilized its reserves and France moved troops to the frontier. Over the next few months, Rouvier skillfully defused the crisis, not only retaining France’s special position in Morocco, but also engineering a graceful exit from a confrontation with Germany and setting in train the first conversations with the British that would lead to the Anglo-French entente. For Moreau, still only thirty-six, it was a heady experience to be at the center of a great international storm. But it was the fate of Third Republic ministries to last only a few months and the Rouvier government was soon voted out.

During his more than twenty years in and out of office, Rouvier had made many enemies, not least because of his own shady financial dealings. With Rouvier out of power, these enemies now targeted Moreau. On his presenting himself for reassignment, he was not sent back to the ministry of finance but seconded to the Banque d’Algérie, the central bank of Algeria and Tunisia, a minor financial institution compared to the Banque de France or the other great state banks. For a high-flying young official from the Ministry of Finance who had climbed his way to the center of things, it was a form of exile. It was not quite as onerous as it sounds, because Algeria had a special status among French possessions and the bank’s headquarters were in the heart of political Paris, within a stone’s throw of the National Assembly and the Ministry of Foreign Affairs at 207 Boulevard Saint Germain.

While privately owned, the Banque d’Algérie was one of the key organs of colonial policy. Over the next eight years
⁷⁹
, Moreau, who was promoted to director general in 1911, was instrumental in the development of the Algerian wine industry; was at the forefront of the fight against usury among the Tunisian Berbers; and worked closely with the military governor of Morocco, the future Maréchal Lyautey, to help finance public works during the military occupation and subsequent colonization of Morocco.
He was, and saw himself as, much more than just a banker; he was a servant of the state. In January 1914, he was made a Commandeur de la Légion d’Honneur, a distinction restricted to no more than 1,250 people.

But for all these achievements, the Banque d’Algérie was still a backwater for so ambitious and talented an official. His former contemporaries at the ministry were now running the finances not of a mere colony but of the whole country and its empire. When he thought back
⁸⁰
on what had happened to him, he could not help being bitter—he had been stuck in this dead-end job for the last eight years, apparently forgotten.

Perhaps Moreau had risen too far and too fast, arousing resentments among his peers. Perhaps it was that he was different from the others: a man of few words, blunt and almost rude, who had made no attempt to enter salon society and had none of the airs and graces of the Parisian higher civil servant. Very much a provincial, he proudly went out of his way to remain so. In 1908, he had been elected mayor of his home commune, Saint Léomer. It was a tiny place of only a few hundred residents, but he seized every opportunity he had to go back there. His property, La Frissonaire, had been in the family since 1600. It was there
⁸¹
that he felt most comfortable, among the friends with whom he had grown up, his fellow squires, the local
notaires,
and magistrates.

IN ANY OTHER
year
⁸²
, the last week of July would have found Moreau avidly awaiting the circular from the Minister of Agriculture, fixing the dates of the shooting season. He tried to make a point of being at La Frissonaire at the opening of hunting. As he liked to say, there were just enough quail, partridge, and rabbit on the estate “to keep it exciting
⁸³
, and not so much that one got bored.” But as July ran into August, it became apparent that this year, though the weather was perfect, he was going to have to leave his guns in their racks.

By Monday, July 27, several straws in the wind suggested that the Balkan crisis was beginning to assume alarming proportions. Madame
Caillaux began to be progressively edged off the front pages of even the Parisian papers. Every evening, a crowd generally gathered on the Boulevard Poissonière outside the offices of
Le Matin,
most popular of the French yellow papers, in whose windows were posted the latest bulletins. There were the inevitable fights. But no longer was it simply the opponents of Caillaux against his supporters. Brawls were now breaking
⁸⁴
out over national security, between those who opposed the extension of military service and the partisans of the Réveil National, the new patriotic movement.

Also gold coins began mysteriously to vanish from circulation. Having been burned by disastrous experiments with paper money twice before—once in the early eighteenth century during the ill-fated Mississippi Bubble, and then again by the assignats issued during the Revolution—the French had developed a healthy mistrust of banks and all but the hardest metallic currency. At the first sign
⁸⁵
of trouble, gold coins disappeared into those countless
bas de laine,
the proverbial long woolen stockings in which every French peasant was said to keep his little hoard of gold under the mattress or into those notaries’ strongboxes where the bourgeoisie kept their savings.

After eight days of court proceedings, at 9:30 p.m. on the night of July 28, the all-male jury voted 11 to 1 to acquit Mme. Caillaux. They concluded that she had been so uncontrollably distraught over the revelations in
Le Figaro
as to be driven to violence—the murder was therefore to be deemed
un crime passionel
. For all its drama, the verdict came as something of an anticlimax. Fighting did break out outside the Palais de Justice, and a large contingent of policemen had to be deployed to disperse the royalist ultras of Action Française who hated Caillaux. But most Parisians were now more concerned about how to pay for their groceries—gold or silver coins were hard to come by; the shops, even the cafés, had stopped accepting banknotes, and even the food markets at Les Halles had come to a grinding halt.

By 4:00 the next morning, several hundred people gathered around the Banque de France to convert notes into gold. That afternoon
⁸⁶
, the crowd
swelled to more than thirty thousand in a line that wove for over a mile along the side streets surrounding the Hotel du Toulouse, where the Banque was headquartered, along the Rue de Radziwill, past the Palais Royale, and up the Rue de Rivoli to the Jardin des Tuileries. Two hundred and fifty policemen kept order. The
Times
’s reporter was taken aback by the scene. “All classes of society
⁸⁷
mingled in the interminable queue and it was significant of the universal thriftiness in France that numbers of quite humble persons had evidently savings to withdraw from the guardianship of the National Bank.”

The Banque announced that it was prepared to continue paying out gold for as long as was necessary. After all, it had the largest single hoard of gold in the world. In 1897, its incoming governor, Georges Pallain, had gathered his staff to tell them that the Banque’s duty was to prepare for “every eventuality,” his code word for a war of revenge against Germany to reverse the disaster of 1870. Under Pallain, the Banque de France had steadily begun to accumulate gold. Every time the Reichsbank’s gold reserves increased, the Banque was a step ahead—a sort of arms race with gold as the object. By July 1914, it had over $800 million in bullion.

The French central bank had not, however, painstakingly built up this mountain of precious metal just to see it dissipated into the hands of its own nervous citizens. The treasure was there to support the state in a national endeavor. For more than a decade, every manager of the Banque’s more than 250 branches had kept locked in his safe, in a place that he was instructed should be “always easily accessible,” a secret envelope, to be opened only in the event of a general mobilization. Inside this envelope was Le Circulaire Bleu.

Written on grayish blue paper over Governor Pallain’s signature it contained each manager’s instructions in the event of war. With general mobilization, he would face “immense and perilous duties
⁸⁸
.” He was to meet this “formidable test” with “calmness, vigilance, initiative, and firmness.” The first and immediate task would be to cease paying out gold immediately. Should the branch’s town fall into enemy hands, he was to defend the assets in his care with “all [his] authority and . . . energy.” Thus, when
the order for general mobilization was issued at 4:00 p.m. on Saturday, August 1, French gold reserves were immediately immobilized.

An hour later
⁸⁹
, it was also impossible to get a taxi in Paris. All public transport—cars, wagons, and buses—was requisitioned to move troops. The only way to get about was on foot. Within twenty-four hours, public services came to a grinding halt as every able-bodied male headed for the railway stations, the Gare du Nord and the Gare de l’Est. Even the grandest hotels, such as the Ritz and the Crillon, lost their waiters; dinner was served by chambermaids.

Within days of the outbreak
⁹⁰
of war and for the next few weeks, an unnatural calm settled over the city as it basked gloriously in the August sunshine. The grand department stores for which Paris was famous were deserted; there was no traffic—the buses had disappeared to the front; and the
métro
ran only sporadically. Theaters and cinemas were closed; the cafés shut at 8:00 p.m., the restaurants at 9.30 p.m. Before the month was out, with all the foreigners gone, the big hotels lay empty.