Less than one year’s operations were sufficient to disclose the superior value of Law’s Bank as an institution of national importance. Its remarkable success was not attributable to factitious or ephemeral circumstances, but to the confidence inspired by the soundness of the methods upon which its business was conducted. Law’s powerful grasp of financial principles, and his striking capacity for their practical application, were evidenced in the masterly manner that characterised his management at this period. If anything was wanting to its complete success, it was recognition by the Government of the Bank as the official channel for the national revenues to reach the Treasury. This came before the first year expired. On 10th April, 1717, the Council decreed that the tax collectors should treat Law’s notes as legal tender at their full face value. The effect of this, of course, was to extend the demand for so stable a medium of currency to districts as yet outside the sphere of the Bank’s operations. Law’s position was now one of the first magnitude. So far-reaching was his influence that the industrial welfare of France was bound up to a large extent with his fortunes, and would have been seriously menaced by its withdrawal. The stimulus of his activity was felt throughout the whole country, and secured for him the greatest authority and respect.

Law now considered himself in a position to develop another stage at least of his great scheme for the commercial regeneration of France. Not only was the moment opportune, but the principles he had been advocating in theory had operated so well in practice that he entertained no doubt that certain success would follow his new enterprise. Credit, and especially that phase of credit represented in paper currency, was capable, in his opinion, of unlimited expansion so long, at least, as there was an apparent foundation of security. With an available cash capital of only £75,000 he had been able to float and to give stability of value to 60,000,000 livres, or approximately £4,500,000. Why, therefore, not centralise the whole wealth of France and establish upon it a huge currency of notes, by means of which industrial growth and prosperity would be fostered?

Dominated by this one purpose, he projected his famous Mississippi scheme during the summer of 1717, a scheme which was at once to raise him to the highest pinnacle of fame and to prove his undoing.

France at this time possessed the vast American territories which are watered by the Mississippi. In 1674, Jolliat, who had been sent by the Count de Fontenac to discover if possible a passage through the Bay of California into the South Sea, came upon the great river, but did not attempt to explore it. This was accomplished by La Salle, one of the greatest French explorers of the American continent. He went out two years after Jolliat, and after many adventures and hardships, succeeded in navigating the Mississippi to its mouth, where he set up the French flag on 9th April, 1682, claiming the whole of the vast territory he had traversed for his native country. On making known his success to Louis XIV., he was furnished by that monarch with three ships and a man-of-war for the purpose of establishing a French colony in the region he had annexed, in order to establish the right of France to the newly-acquired territory. Unfortunately, La Salle was unable to again locate the mouth of the Mississippi, and, after several months of vain wanderings in quest of his destination, he was murdered by some of his followers, who had been exasperated by his ineffectual efforts, and goaded into revolt by his harsh and domineering disposition. D’Iberville, a French Canadian, who took up the task of exploration in succession to La Salle, enjoyed, however, greater success, and erected a French fort at the mouth of the river in 1712.

As yet no actual development of resources had been seriously attempted, but the glowing account of the vast riches of Louisiana given by D’Iberville had the effect of inducing a wealthy merchant, by name Antoine Crozat, to acquire the monopoly of its trade and of exploiting its natural wealth. Louis XIV. granted him this privilege for a period of sixteen years from 1712. Whether by bad management, by bad fortune, by reason of the vastness of the undertaking, or by a combination of all three circumstances, Crozat, soon found he had entered upon a task, the magnitude of which was altogether beyond his capacity. In 1717, accordingly, he endeavoured to get rid of the burden he had so easily assumed, but could not so easily throw off. He naturally turned to Law, the man who loomed so large in the world of speculation, the one man who seemed able to evolve success from failure. Law regarded with favour the advances made by him, and created no little astonishment by announcing his decision to take over the monopoly and privileges which hung like a mill-stone round Crozat’s neck. He intimated his decision to the Regent, and explained the course he intended to pursue in the development of his new proposal. The Regent, who was of course controlled in all financial matters by Law, was readily willing to comply with his wishes and countenanced the vigorous prosecution of the scheme.

In August, 1717, by letters patent, a trading corporation under the name of the West India Company was established. To it was given a grant of the whole of Louisiana, and for a period of twenty-four years from 1st January, 1718, it was to possess the sole rights of trading with the colony, and the company was generally to regard the undertaking as a huge commercial enterprise, in the management of which they would not be trammelled by State interference. For these privileges no payment was made to the State, but no act was to be allowed which might prejudice the sovereignty of France in Louisiana, and the company was under an obligation to furnish at its own expense all necessary military and naval protection. The capital of the company was fixed at 100 million livres, divided into 200,000 shares of 500 livres each.

Although no price was payable to the State for the apparently valuable rights acquired by the company, the ingenuity of Law had devised an indirect consideration of great importance. We have already seen how the Bank had absorbed depreciated billets d’État at their face value to the extent of 4½ millions. But a bolder stroke was now conceived by Law. It was no less than to make the whole of the share capital of his new company payable in the State notes, which were then standing at a discount of 65 per cent. These billets d’État formed part of the converted stock of the previous year, and bore interest at the rate of 4 per cent. The company scrip which was given in exchange for the billets d’État was charged with a fixed permanent interest at the same rate, and in addition a contingent interest dependent upon the profits of each year. The effect of this financial juggle, was on the one hand, to transfer a twentieth part of the national debt from the State to a private company, and, on the other hand, to reduce the number of the nation’s creditors by several thousands. The advantage was primarily in favour of the State, and as will be seen later, was the first step towards the total extinction of the nation’s paper then in currency, by a method which in reality was repudiation of liability, though at this stage it could not have been foreseen as such either by Law or by the Regent.

The influential position to which Law had now attained was naturally productive of great heart-burning, not only amongst those whose power he had virtually usurped, but also amongst the army of tax-farmers whose opportunities he had seriously curtailed. D’Aguessau, the Chancellor of France, was particularly envious of Law, and had used all his influence with the Regent against the new regime. Law, however, was paramount in the Regent’s favour, and secured the summary dismissal of the undesirable Chancellor. In January, 1718, D’Argenson, Lieutenant of Police, a weak and pliable creature, was installed in his place, and a pretext was also discovered for requiring the resignation of the Duke of Noailles, chief of the Council of Finance, in order to combine the two offices in the person of D’Argenson. These appointments practically left the Government in the hands of the Regent, Law, and the AbbÉ du Bois, the Minister for Foreign Affairs. The elevation of D’Argenson was a move on the part of Law to secure the adoption of all his suggestions without encountering the opposition he would have met at the hands of a strong and independent Minister. His duties were to be merely clerical, and his services were to be at all times at the command of Law. D’Argenson, however, was of a suspicious disposition. Accustomed to being his own master in his former office, and active, though somewhat officious, in the administration of its functions, he fretted under the domination of his imperious master. He had been accustomed to the flattery of the great, and had become imbued with a sense of his own importance. To assume a position of inactivity, and to be deprived of all authority, were conditions much too humiliating to the self important Chancellor, and he endeavoured to surround his new office with an air of fictitious responsibility. While Lieutenant of Police he had been accustomed to give audiences at all times of the night and day, and this furnished him with an idea as to the possibility of impressing the people with the false notion that he was more than ever immersed in public business. He made appointments at the most inconvenient hours, mostly after midnight or in the early morning, and those who were favoured with admittance carried away an exaggerated idea of the tremendous load of responsibility upon the shoulders of the new Chancellor, from a pre-arranged theatrical display of work in which he might be seen dictating to innumerable secretaries in the midst of a veritable ocean of papers and documents requiring attention. So far, indeed, did he carry this ludicrous performance, that he is said to have driven through the streets in the evenings with a lighted carriage in order to maintain the appearance of requiring to employ every moment of the day for overtaking the stupendous volume of work.

Behind all this mummery, however, there was a determination in the mind of D’Argenson to counteract the influence of Law, if not to supersede him altogether. With this object in view he conceived a bold plan for outbidding Law in his financial proposals. This was no less than the extinction of the floating national debt, and the means for its accomplishment was depreciation of the coinage. Law had provided for the absorption of 100 million livres in his Western Company, so that D’Argenson had set himself the task of taking up the balance of the State notes, amounting to 150 millions. His proposal was not only of the crudest, but it displayed an utter disregard for the industrial interests of France, and even he could not fail to have been impressed with the highly injurious effects upon trade of arbitrarily tampering with the currency. He secured, however, the adoption of his proposal, and on 10th May, 1718, a decree was issued debasing the coinage to the extent of 50 per cent. upon the depreciation which took place in December, 1715. The silver marc was now raised from 40 to 60 livres, and the crown piece of 3 livres 10 sous, which weighed one ounce in 1715, now weighed less than half an ounce. In anticipation of his scheme, D’Argenson had purchased very cheaply a large quantity of silver for coinage purposes, and the Mint now issued 60 livres, weighing 8 ounces, in exchange for 48 livres of the old coinage and 12 livres in billets d’État. In order, therefore, to absorb all the floating paper, D’Argenson required to issue 750,000,000 livres, upon which the State realised a profit of 250,000,000, so that after the cancellation of the notes there would therefore have remained a balance of 100,000,000. This high-handed proceeding created a deep feeling of resentment throughout the community, and Parliament, deferring to the wishes of the traders and of those who were affected by the change, issued on 15th June a decree practically annulling the whole of the new coinage. The Regent, whose authority was thus threatened, was in despair. He endeavoured to stem the tide of opposition by ordering the destruction of all copies of the decree, and forbidding its publication. Not to be outdone, however, the Parliament employed the services of men who were willing to expose themselves to the risk of being shot down by the soldiery whilst engaged in placarding the decree all the city of Paris. From Paris the opposition spread throughout the whole of France, and became almost revolutionary in its intensity.

Law’s position had now unexpectedly become precarious. The outcry was directed towards him no less than the Regent, and D’Argenson, the real initiator of the fatal policy, was unconnected in the public mind with the agitation. Parliament, in the exuberance of its temporary success, resolved upon further measures. It instructed the collectors to refuse payment of taxes in bank notes; it prohibited all foreigners from any share in the management of the national finances; and it withdrew the privileges of the bank in so far as these related to the administration of the Treasury. The climax was reached when Law was charged with the instigation of all the disastrous effects of D’Argenson’s policy, and was under immediate danger of being arrested and forthwith hanged at the gates of the Palais de Justice.

It was now imperative that something should be done by the Regent. He felt that not only was he bound to save his favourite, but that, if Parliament were allowed without check to pursue its will, he also would lose his authority and mastery over the realm. Accordingly, a consultation was held on 19th August at the house of the Duc de Saint-Simon. “In this conference at my house the firmness of Law, hitherto so great, was shaken, so that tears escaped him. Arguments did not satisfy us at first, because the question could only be settled by force, and we could not rely upon that of the Regent. The safe-conduct with which Law was supplied would not have stopped the Parliament an instant. On every side we were embarrassed. Law, more dead than alive, knew not what to say; much less what to do. His safety appeared to us the most pressing matter to ensure. If he had been taken, it would have been all over with him before the ordinary machinery of negotiation (delayed, as it was likely to be, by the weakness of the Regent) could have been set in motion; certainly, before there would have been leisure to think of better, or to send a regiment of Guards to force open the Palais de Justice; a critical remedy at all times, and grievous to the last degree, even when it succeeds; frightful, if instead of Law, only his suspended corpse had been found!”

Law, knowing the intensity of feeling with which Parliament was moved, and the certainty of their threat being carried out should they succeed in arresting him, was greatly concerned for his personal safety. A secure and ready asylum was at hand. The Regent placed at his disposal a chamber in the Palais Royal, an astute move on the part of those who suggested it, not only because it removed the possibility of Law’s arrest, but because it would have the affect of strengthening the Regent’s determination to undermine the authority of that insubordinate assembly. The suggestion emanated from the Dukes de Saint-Simon, and De la Force, and Fagon, one of the counsellors of state, all three virulent opponents of Parliamentary institutions. The presence of Law in the royal palace and the inadvisability of surrendering him to the tender mercies of the irate House were both strong incentives to the Regent to act at once with decision so as to secure the freedom of the powerful financier. A Bed of Justice was agreed upon by the Regent and his advisers as the only possible means of annulling the decrees of 15th June. The difficulties, however, in the way of its being held were great and required the utmost tact and secrecy. The Duc de Maine, suspected as the prime instigator of the parliamentary resolutions, and the Marechal de Villeroy, a servile supporter of all the former’s proposals, were regarded as possible successful opponents of a session of a Bed of Justice. Both were guardians of the young king, and as his presence was necessary to setting the seal of authority to the results of the deliberations of this body, the Regent feared they would place obstacles in the way. But the Duc de Saint-Simon was equal to the emergency, and, in his own voluble and consequential way, has recorded with much detail the measures he adopted for carrying out the proposal. He assumed responsibility for all the arrangements, and with gossipy fulness tells how he prepared for holding the Bed of Justice at the Tuileries, keeping it a profound secret until the very morning it was to be convened, and how the summons to attend was only to be issued a few hours before. The precautions although somewhat elaborate were all required. The step was highly critical for the Regent. It involved not only the recognition of his authority as Regent, but, in the event of its being unsuccessful, his deprivation of the Regency itself. In short, it could only be justified by a successful conclusion, a result which was ultimately attained, although by means of a high-handed and arbitrary nature. Throughout the whole of the proceedings, the Regent displayed a firmness and resolution which can only be attributed to the desperation of his position. They were sufficient, however, to the end he had in view, although by no means features characteristic of his general conduct. The Parliament was over-awed; the decree was abrogated; and Law once more regained his freedom. Thus was Law the innocent instrument of the degradation of the French Parliament, and the establishment of a despotism oriental in its thoroughness and far-reaching in its effects.

Law’s escape from the violent intentions of the angry Parliament was however but a prelude to other difficulties and opposition. D’Argenson, smarting under the feelings of jealously engendered by the subordinate position he was compelled to play to a foreigner, and actuated by an exaggerated conceit of his abilities, conceived the notion of meeting Law on his own ground and damaging the importance of the latter by the adoption of a scheme which might supersede Law’s by its brilliance and attract to himself the admiration of the financial world. Depreciated securities issued by the various government departments were afloat to incredible amounts. Their value was purely speculative, and any tendency to fluctuation was usually downward, so that unfortunate holders were always uncertain of the extent to which they might be calculated as realisable assets. Here was the groundwork of a scheme for the display of financial genius which might eclipse the schemes of Law by converting them at face value into securities of a more substantial and liquid character. The idea of conversion was of course merely an adaptation of Law’s methods, but D’Argenson was bent on something less speculative, and so far as prospects were concerned, less remote, if not less illusory, than the Mississippi Scheme. He found ready instruments for his purpose in the four brothers Paris, great government contractors, men of considerable wealth, but most unscrupulous in the manner of their dealings. Not only were they envious of Law, but they feared a restriction of their own field of operations should his influence be left unchecked. With them therefore D’Argenson conspired in the initiation of a bold Anti-SystÈme.

Their scheme was the formation of a company to take over a large proportion of the national revenues, and in payment of the shares, of which there were 100,000, of 1000 francs each, to take the depreciated securities of the public service at their full value. This company was to guarantee a revenue of 48 millions per annum, derivable from the sources of taxation allotted to them, and the treasury were to hold in security of their carrying out their obligation the 100 millions of depreciated securities which the company would absorb. The company would of course proceed in the manner usual to all farmers of the public revenue, and exact from the public taxation exorbitantly in excess of what was payable to the treasury. D’Argenson and the brothers knowing that the holders of the depreciated securities were thoroughly acquainted with the profitable nature of the business in which the company was to engage would only be too ready to convert their securities into the company’s shares. The brothers Paris had a reputation for want of any quality of mercy in the levy of taxation, and the shareholders would require no assurances as to the probable returns upon their investments or as to the probable permanence of these returns. Alluring advertisements in praise of the company’s sources of income were quite unnecessary as in the case of the Mississippi scheme projected by Law. These unfortunately were patent to every one, but fortunately for those who would have been the victims of such a scheme, and fortunately also for the country at large, already suffering sufficiently from the insatiable rapacity of the tax-gatherers, the formation of the company did not commend itself to the Regent and his advisers, so once more Law was delivered from the jealousies of his rivals.