Louis XIV. died on 1st September, 1715, and was succeeded by his great-grandson Louis XV., then a mere boy of five years old. The Duc d’Orleans was called to the Regency, and wielded the power of an absolute monarch. He brought to his office the singular gifts of a statesman, and man of affairs, modified by the vices and indifference of a debauchÉe. The Duc de Saint-Simon speaks of the “range of his mind, of the greatness of his genius, and of his views, of his singular penetration, of the sagacity and address of his policy, of the fertility of his expedients and of his resources, of the dexterity of his conduct under all changes of circumstances and events, of his clearness in considering objects and combining things; of his superiority over his ministers, and over those that various powers sent to him; of the exquisite discernment he displayed in investigating affairs; of his learned ability in immediately replying to everything when he wished.” No doubt this high estimate is the eulogium of a courtier, and requires to be discounted to some extent, but, on the whole, with little modification it may be considered a fair representation of the abilities of the man who was about to place Law in practical command of the government of France.

One of the first, as it also was one of the most important and pressing, matters to which the Regent’s attention was demanded, was the financial condition of the country. The adoption of drastic measures was imperative. The national debt amounted to 3500 millions of livres, and while the revenue produced 145 millions, the expenditure of the Government absorbed 142 millions, leaving 3 millions with which to liquidate interest upon the national debt, or 1-10th per cent. A deficit of 150 to 200 millions was thus accumulating each year, and every resource which ingenuity could conceive having long ago been exhausted, the situation was daily becoming more difficult. The Regent, shortly after his accession, called a meeting of the Council for the purpose of devising a means of relieving the intolerable strain. National bankruptcy was suggested by a few of its members, notably the Duc de Saint-Simon. The Regent would give no ear to such a course, and waved the suggestion aside as alike dishonourable and disastrous to all possibility of good government. No one, however, seemed capable of offering any plan of permanent value. The schemes proposed were merely expedients promising temporary relief, and no other policy but one of despair being apparent at the moment, the Regent was eager for their immediate execution.

A commission or visa was appointed to investigate the nature of the national debt, and, by classifying the claims, to bring order out of chaos. By methods, in many instances more rigorous than just, the national debt was reduced by 1500 millions, and interest was made uniform at the rate of four per cent. Of the 2000 millions at which the debt now stood, 1750 millions were funded, and the balance of 250 millions was converted into a general floating debt represented by billets d’État. A substantial reduction was thus made in the amount of interest payable by the Treasury; but, without an increase of permanent revenue, which, if it were to be accomplished by the imposition of fresh taxation, neither the Regent nor his Councillors would face, or without a reduction in expenditure to an extent which would have rendered the public service inefficient, the solution of the financial difficulty was as distant as ever. Recourse was accordingly had to two measures, which served the purpose of the moment. The first was the old expedient of debasing the coinage. With the ostensible object of having a new currency with the new king’s effigy, the old coinage was recalled. The fresh issue, however, was depreciated in the process to the extent of about 30 per cent., and the Government profited by the transaction sufficient to liquidate one year’s interest of the National Debt. The second device for replenishing the Exchequer was the establishment of a Chamber of Justice, a kind of inquisition for the investigation of the conduct of the tax-collectors. These men by their unscrupulous dealings, had come to be regarded as the evil genii of the French peasantry. Like vampires, they had for years been sucking the very life-blood of the nation. No redress was open to their victims, and resistance only had the effect of increasing the burdens laid upon their shoulders. The institution of the Chamber of Justice was accordingly received with unbounded joy. Every tax-farmer was arraigned before this tribunal. The most searching investigation was made, not only into his own dealings, but also into the dealings of the hordes of satellites whom he employed to bleed his unfortunate victims. Where information was withheld, or even where it was suspected that the information given was tainted with inaccuracy, encouragement was given to informers by holding out promises of 20 per cent. of any fines that might be levied. Such a system, of course, was bound to bring evils in its train as great as those it was intended to remove. A reign of terror set in amongst the farmers-general. No sympathy was extended to them by their judges. All confidence in their honesty had long ago been destroyed. They were already prejudged. No effort on their part could by any possibility ward off the weight of accusation against them. Prison accommodation was soon taxed beyond its capacity. Those who were fortunate enough to escape this Jeddart justice by bribery, by payment of enormous fines, or by quietly submitting to wholesale confiscation, left the country as a measure of personal safety. The records of the period teem with the decisions of the Chamber of Justice and their consequences. Most of the cases reflect a degree of moral obliquity on the part of the judges not less than on the part of the accused. We are told of one instance where a contractor had been taxed, in proportion to his wealth and guilt, at the sum of twelve millions livres. A courtier, possessing considerable influence with the Government, offered to procure a remission of the fine for a bribe of one hundred thousand crowns. “You are too late, my friend,” replied the contractor, “I have already made a bargain with your wife for fifty thousand.” In the course of a few weeks almost the whole of the fraternity had run the gauntlet of the Chamber of Justice. They had been stript of their power, their influence and their possessions. The country had been effectively cleared of their presence, but to comparatively small advantage. The total fines and confiscations amounted to one hundred and eighty million livres, of which the Government received only one half, and its parasites the other. As a consequence, its career was brought to a close, and with it the ingenious financial devices of the Council of Ministers.

Law was an amused spectator of the puerile efforts of the Regent and his advisers to restore financial stability to their country. He regarded them no less with scorn, and probably rejoiced in the futility of their efforts, in the hope that each successive step they took would bring the realisation of his own ambition within measurable distance. The position he occupied, however, was one of difficulty, and demanded a display of considerable tact and judgment. He had educated the Regent up to the point of implicit confidence in his scheme, but there still remained a dead weight of opposition in the Council, and without the support of both the ground was very uncertain.

No time was lost by Law in an attempt to bring his proposals to a head. He repeatedly interviewed the Regent within the first few weeks after the death of Louis XIV., and submitted definite schemes for relieving the situation. He urged that by the adoption of a system of paper credit, not necessarily for supplanting, but for supplementing, the coinage in currency, not only would the trade of the country increase in volume, but the national debt would be effectively dealt with. He based his argument upon the principle that the quantity of money in circulation in a country determines its industrial activity. Recognising that money, whether it be specie or paper, is not itself the wealth of a country, but only the measure of its wealth, and that in whatever form it exists it must represent either the whole or part of that actual wealth, he conceived the idea of issuing the notes against the landed property of France, and the ordinary State revenues. He pointed out, as examples in support of his proposals, the immense benefits which had flowed from the adoption of a similar system by England, Holland, Venice, and Genoa. The Regent, convinced before by Law’s arguments, was now determined to put them into operation. He convened the Council of Finances, and invited to its deliberations the principal bankers and merchants of Paris and of the provinces. The sederunt took place on 24th October, 1715, only eight weeks after the King’s death, but the Regent had personally interviewed beforehand several of the members to secure their support for Law. To this assembly Law unfolded the general outline of his proposals. “He was listened to as long as he liked to talk. Some, who saw that the Regent was almost decided, acquiesced; but the majority opposed.” The precise ground of opposition is nowhere recorded, but probably the fear, expressed at the former Council in July, had not been dissipated, that the system would lend itself to abuse at the hands of an absolute monarch, and might bring in its train greater evils than those it was intended to remedy. The letters patent of 2nd May, 1716, granting private banking privileges to Law, refers to the decision of this assembly, but being couched in the language of official ambiguity, gives no clue to the reasons which actuated the rejection of the scheme. “Mr. Law having some time since proposed a scheme for erecting a bank, which should consist of our own money, and be administered in our own name, and under our authority, the project was examined in our Council of Finances, when several bankers, merchants and deputies from our trading cities being convened and required to give their advice, they were unanimous in the opinion that nothing could be more advantageous to our kingdom, which, through its situation and fertility, added to the industry of its inhabitants, stood in need of nothing more than a solid credit for acquiring the most extensive and flourishing commerce. They thought, however, that this present conjunction was not favourable for the undertaking; and this reason, added to some particular clauses of the project, determined us to refuse it.”

Law was thus foiled again, but weakness of purpose was far from being a feature of his character. Irrefragable determination steeled him against all rebuffs. He saw more than ever that France was his last and only opportunity. He saw that the plastic minds of most of the ministers were susceptible to the pressure of the Regent’s influence if applied with sufficient strength. This was not difficult of operation. The Regent’s influence was at Law’s command, and he made unsparing use of it. With prudent calculation, however, of the future, should his plans fail in their object by some mishap, he modified his scheme to the extent of petitioning for permission to establish a private instead of a national bank. In order, too, that the members of the Council and those who would be called to the deliberations in connection with his proposal should have some more definite and complete knowledge of his theories than could be conveyed in conversation, or in course of an address at the Council table, Law translated his book on Money and Trade, published in Edinburgh in 1705, supplementing what he had written there by separate papers giving his maturer ideas.

Early in 1716 every preparation had been made, and all contingencies provided against. The Regent called again the Assembly of the previous October. The scheme was solemnly discussed. Opposition dwindled to a mere shadow. The scheme was passed, and remitted to the Regency Council for final ratification. This last stage in the process is well described by the Duc de Saint-Simon, whose opposition not even the Regent could overcome.

Letters patent were issued on 2nd and 28th May, 1716, incorporating the Bank, and three days after the latter date, these letters were registered in the Parliamentary journals. The Bank was formed under the name of the General Bank of Law & Company, the principal partners being Law himself and his brother William. The capital was fixed at six million livres, a sum approximately equal to £300,000, divided into 1200 shares of 5000 livres each. The price of the shares allotted to subscribers was payable in four equal instalments of which only one required to be in cash, the balance being in billets d’État. The management of the Bank and its general policy was placed in the hands of the shareholders themselves, the extent of their voting interest being determined by the number of their individual shares, each five shares conferring one vote. A bi-yearly audit was to be made of the Bank’s financial position, and shareholders were to be convened at least twice a year. The business of the Bank was similar in its nature to ordinary banking business of the present day, and wise provision was made against engaging in commercial undertakings. In short, the regulations were modelled upon the soundest principles of finance. The one great feature of the Bank, however, and a feature that displayed Law’s remarkable foresight, because its establishment was only the first step in the development of his vast designs whose ultimate accomplishment depended upon present success, consisted in the character of the note issue. All notes were drawn at sight to bearer, and were promises to pay in coin of the weight and standard of the day of issue. Here rested the foundation of the Bank’s phenomenal success. The coinage had in previous years been subject to sudden and arbitrary changes of relative value, and consequently its purchasing power was always of a speculative character. But, further, as the Government alone secured the profit upon depreciation of the coinage, each alteration brought with it dislocation of commercial transactions and indirectly affected the volume of trade of the country. Law’s notes in a very short time established themselves in the confidence of all classes. Their value was permanent and unaffected by any fluctuations in the coinage. Credit business was rendered possible where before it had been folly. Industry in general experienced the stimulus of financial stability, and underwent remarkable expansion. The notes, and not the current coinage, became the medium of exchange, and soon acquired a value in excess of the specie they nominally represented. To these advantages Law was careful to add ease of immediate conversion. Although the capital payable in cash only amounted to £75,000, yet the large deposits, and the extensive floating business of the Bank, together with the high estimate in which the notes were held, combined to make the risk of inability to convert the notes a very remote contingency.

In view of all these substantial advantages, the success of Law’s scheme came in a measure as a matter of course. Business of the most profitable nature flowed into the Bank. By enabling commercial men to trade upon their securities at a low rate of interest, not only did he usurp the functions of the usurer, functions which the bad policy of the Government had placed in his hands, but the ramifications of the Bank spread throughout the whole country, and made its beneficent influences felt in a striking degree. Law himself very shortly became the supreme protector of industrial prosperity. His statesmanlike instincts led him to revive many branches of trade which had degenerated, and to induce the establishment of others for which he saw the resources of France were eminently suited. In order to facilitate the business of the Bank he opened in the principal centres branch establishments which acted both as feeders and as outlets for the central institution. No one was more surprised than the Regent himself at the extraordinary measure of success which had attended Law’s scheme. Law accordingly occupied more than ever a high position in the Regent’s estimation. He was regarded as the financial saviour of France, a heaven-sent legislator before whom the hereditary advisers of the Crown were small and paltry. Law was sufficiently astute to press the advantage he had gained, and judging from the conduct of the Duc D’Orleans at this time, he evidently had the latter under his control. Saint-Simon tells us of the forced interviews he was compelled by the Regent to grant to Law in order that he might be tutored into approval, if not appreciation, of the new state of affairs. The wily courtier was impervious, however, to the blandishments of his tutor. He only deferred to the wish of the Regent, and merely gave a courteous acquiescence to the arguments and statements that were showered upon him. The object of these interviews obviously was to capture the confidence of Saint-Simon who had been sufficiently courageous on previous occasions to thwart Law’s designs in face of the Regent’s wishes, and who might prove an awkward element in accomplishing the development of his plans for the future. There was, however, a subsidiary purpose, and Saint-Simon was not slow to recognise it. “I soon knew,” says Saint-Simon, “that if Law had desired these regular visits at my house, it was not because he expected to make me a skilful financier, but because, like a man of sense—and he had a good deal—he wished to draw near a servitor of the Regent who had the best post in his confidence, and who long since had been in a position to speak to him of everything and of everybody with the greatest freedom and the most complete liberty, to try by this frequent intercourse to gain my friendship, inform himself by me of the intrinsic qualities of those of whom he only saw the outside, and by degrees to come to the Council; through me, to represent the annoyances he experienced, the people with whom he had to do, and, lastly to profit by my dislike to the Duc de Noailles, who, whilst embracing him every day, was dying of jealousy and vexation, and raised in his path, underhand, all the obstacles and embarrassments possible, and would have liked to stifle him. The Bank being in action and flourishing, I believed it my duty to sustain it. I lent myself, therefore, to the instructions Law proposed, and soon we spoke to each other with a confidence I never have had reason to repent.”

Notwithstanding the pressure of work upon Law’s shoulders at this period when the enormous amount of details consequent upon the establishment of the Bank required his unremitting attention, he yet found ample time for indulging in those trifling matters which bulk so largely in the estimation of a courtier, and, especially if they entail extravagant expenditure, often cloud his limited horizon to the exclusion of affairs of greater importance.

The Duc de Saint-Simon, with a fine eye and a keen judgment for the dainty trifles of this world, had set his mind upon the purchase for the King of a priceless diamond which had come into the market early in 1717. This gem, variously known as the “Pitt” or “Regent” diamond, possessed a rather questionable history. It had been discovered in 1701 in the Parteal mines of the Great Mogul by a slave, who immediately decamped with his precious find to the coast. Here he negotiated a sale with an English captain, who sold it to the Governor of Fort St. George, an office held at that time by Thomas Pitt, grandfather of the first Earl of Chatham. A model of it was made and shown to Law, who had been approached with a view to using his influence with the Regent for its purchase. The price, however, was a stumbling-block, and Law at once requested the assistance of the Duc de Saint-Simon. The Duc, who was always superior to any trifling financial difficulty, thought “that it was not consistent with the greatness of a King of France to be repelled from the purchase of an inestimable jewel, unique of its kind in the world, by the mere consideration of price, and the greater the number of potentates who had not dared to think of it, the greater ought to be his care not to let it escape him.” Saint-Simon’s record of his interview with the Regent is an excellent example of the arguments the extravagant spendthrift makes use of to salve his conscience when any whim is to be satisfied. The Regent “feared blame for making so considerable a purchase, while the most pressing necessities could only be provided for with much trouble, and so many people were of necessity kept in distress. I praised this sentiment, but I said that he ought not to regard the greatest King of Europe as he would a private gentleman, who would be very reprehensible if he threw away 100,000 livres upon a fine diamond, while he owed many debts which he could not pay; that he must consider the honour of the crown, and not lose the occasion of obtaining a priceless diamond which would efface the lustre of all others in Europe! that it was a glory for his Regency which would last for ever; that, whatever might be the state of the finances, the saving obtained by a refusal of this jewel would not much relieve them, for it would be scarcely perceptible; in fact, I did not quit M. le Duc d’OrlÉans until he had promised that the diamond should be bought. M. le Duc d’OrlÉans was agreeably deceived by the applause that the public gave to an acquisition so beautiful and so unique.... I much applauded myself for having induced the Regent to make so illustrious a purchase.” Through Law the price was fixed at two millions, or, approximately, £150,000. So reduced, however, was the exchequer that payment was impossible at the time, and thus an additional debt was added to an already over-burdened Treasury. The purchase of the gewgaw was a simple matter, and Saint-Simon was eminently capable for this portion of the negotiations. The payment was more difficult, and was postponed to be dealt with by Law himself.