The efforts of Law and of the Regent having as yet proved insufficient to rectify the balance between the notes in issue and the amount of specie in the country, the adoption of some final drastic measure was rendered imperative. A step was taken which has given rise to much controversy as to its authorship. On 21st May an edict of Council was issued, the provisions of which were designed to adjust the finances of the realm by one sweeping process, irrespective of the interests of individuals, and of a character so radical and effective as to exclude the possibility of the whim of the speculator from defeating its object. It not only covered the relations which were to obtain between the value of notes and specie, but also fixed the price of shares so that they should not disturb by their fluctuations the arrangements of the Bank. It enacted that on the date of publication of the decree bank-notes of all denominations should suffer depreciation to the extent of 20 per cent. of their value, and that on the first of each month, from 1st July to 1st December, further depreciation should take place to the extent of 500 livres on notes of the nominal value of 10,000 livres, and proportionately on the smaller notes. Shares were to undergo a similar diminution in value, starting from 8000 livres as at 21st May. On 1st December therefore, all notes would have reached a discount of 50 per cent., and shares would possess a fixed value of 5000 livres each. These regulations were to apply to all financial and industrial negotiations; but one exception was granted in the case of payment of Royal revenues, and purchase of state securities such as annuities, where until 1st December all notes would be received at their full face value. As a possible steadying influence in so disturbing and so confusing a change, the repeal of the edict prohibiting the currency of specie was to be withdrawn, and the standard value of the specie was again to be increased to a more normal ratio, the silver marc to stand at the value of 30 livres.

In the confusion of authorities it is extremely difficult to apportion the blame for the publication of the edict. On the one hand, it is stated that the enemies of Law were the instigators of it, and among them in particular Dubois and D’Argenson. These two ministers, desiring nothing more than the downfall of their rival, had suggested two courses by either of which the great disproportion between the notes and specie might be immediately accomplished. They pointed out to the Council that as the notes in issue were double in value the amount of specie, equality could be obtained by halving the value of the former or by doubling the value of the latter. Their suggestion possessed the element of simplicity and appealed very strongly to the other members, who, after serious discussion, and in spite of the remonstrances of Law as to its fatal consequences, determined upon dealing with the notes and leaving the specie at its present standard.

On the other hand, it has been argued that the edict was really the work of Law and bears evident marks of his financial handiwork. Before the date of the decree, shares were at 10,000 livres in price, and the marc was valued at 85 livres. Consequently a share at that price represented almost 120 marcs. At the date of the last reduction, shares of 5000 livres would, with the increased ratio of value, return approximately 165 marcs to the holder, or a net gain of 45 marcs. The decree, therefore, which seemed to threaten the financial stability of the nation, would in reality have resulted not only in removing the difficulties due to the inflated issue of notes, but in benefiting materially all the shareholders of the company.

It is difficult to believe that Law on such a ground as this was the author of the decree. There is no contemporaneous evidence of its having been at any time advanced by himself or his friends in order to make the decree acceptable to the public, and it had the additional disadvantage of being unlikely to inspire any confidence. The immediate result of the decree, and not its probable result in the future, would be the determining factor in the attitude of the public towards it, and no one would understand this better than Law himself. It is more likely that Dubois and D’Argenson were accountable altogether for the decree, hoping thereby to secure his removal from office and to destroy the influence he had acquired in the government of the country. Law had made himself obnoxious to both. He had sought to undermine the authority of Dubois, and had deposed D’Argenson from the office of Comptroller General. Their personal jealousy of the great foreigner was therefore sufficiently deep to take advantage of such an opportunity as they now had to avenge themselves.

The publication of the edict created universal consternation. The community were paralysed. The last shred of confidence in Law was utterly destroyed, and national bankruptcy was feared to be imminent. The attitude of the people was one of intense hostility, and threatened to break out at any moment into active riot. Multitudes flocked to the Bank, and the protection of the troops was required to maintain order. Nor was the fury of the mob appeased by the knowledge that the Duke of Bourbon, the Prince of Conti, and Marshall Villeroi, were strenuously opposed to the edict and demanded its withdrawal. Posters were exhibited all over the city calling upon the citizens to resist, even to the extent of using force. Hand-bills were distributed in thousands, foreboding a step of revolution. “This is to give you notice,” they ran, “that a St. Bartholomew’s day will be enacted again on Saturday or Sunday, if affairs do not alter. You are desired not to stir, you nor your servants. God preserve you from the flames. Give notice to your neighbours.”

In the midst of this disorder the First President called Parliament together to consider the situation, and with prompt decision announced to the Regent their refusal to register the edict. The Regent, delighted to have this opportunity of reconciling himself with his Parliament, especially when the occasion allowed him to follow his own desires, received the parliamentary deputation with the greatest deference, and gave them assurance of his sympathy. He, accordingly, sent La VrilliÈre, one of the Secretaries of State, later on the same day to announce to the President his intention to withdraw the edict, and as far as possible restore the status quo which had been so ruthlessly disturbed. An edict was then published on 27th May, revoking that of 22nd May, by which shares and notes were allowed to remain at their previous value. Unfortunately, however, it was now impossible to restore public confidence. That was irretrievably lost. A blow had been struck at the system from which it never recovered. Its collapse may be dated from the ill-conceived edict of 22nd May, and its subsequent history is merely a record of measures of despair resorted to for the purpose of saving if possible some portion of the national credit.

Holders of bank-notes now thought to avail themselves of the possibility of securing some portion at least of their paper changed into silver, but Law had foreseen the danger of allowing unlimited demands being made on the Bank, and suspended payment in order as he declared to enable him to investigate the circumstances of numerous frauds of which the Bank’s officials had been guilty. This proceeding, while demanded by the exigencies of the moment, merely added fuel to the fire, and the frenzied multitude only awaited the word of command from a leader to break out into open revolt. The notes in circulation were practically valueless for purpose of currency, and the greatest distress accordingly prevailed. The situation could not continue for many days in its present condition, and Law, in order to relieve the distress which was now universal, caused several thousand livres in specie to be sent to each of the commissaries in the city for exchange, but only to be given to those who satisfied the distributing authority that they required the specie for immediate wants. Thus again for a few days at least the inevitable liquidation was postponed.

The Regent was naturally much alarmed at the situation which had been created. He felt that his own position was largely bound up with that of Law, and that the hostile attitude of the community might also be directed against himself. He was urged by Dubois and other influential advisers to sacrifice Law, and thus secure the good favour of the community. The Regent, however, was unwilling to sever in a summary manner his intimacy with Law, but Law himself communicated his readiness to be discharged from office if the Regent thought it prudent in the interests of himself and of the nation. On 29th May, accordingly, the Regent through Le Blanc announced to Law that he no longer held the position of Comptroller General of Finances, but that his services would still be retained as director of the Company and as a member of the Council. At the same time he informed Law that he intended to provide for his personal safety by giving him the protection of a detachment of Swiss Guards under the command of Benzualde. This precautionary measure was by no means superfluous. Law had been threatened by the mob and would have been stoned on one occasion while driving in his carriage had he not at the moment been near his own house and thus escaped. His family had also been subjected to similar treatment. The provision of a guard was therefore an act of kindly consideration for the deposed minister. On the day following his discharge, Law was taken to the Palais Royal by the Duke de la Force, but the Regent, in order to maintain the appearance of having disgraced him, refused to see him. The same evening, however, Law was sent for, and admitted by a secret door, and thus had the desired interview. Two days after these somewhat peculiar proceedings, Law and the Regent appeared together in public at the opera, the necessity for continuing the pretence of disgrace having evidently been regarded as needless.

Law, who acted at this critical period with great good sense, determined upon advising the Regent to reinstate D’Aguessau in the office of Chancellor from which he had been instrumental in removing him. With the assistance of Dubois, to whom Law had communicated his proposal and who strongly approved of its wisdom, as a prudent concession to public opinion, the appeal to the Regent was successful. Since his deposition, the ex-chancellor had lived in retirement on his estate at FrÊnes. Thence Law himself, and the Chevalier de Conflans, an officer of the Regent’s household, were despatched in order to convey the command of the King to resume his office. D’Aguessau at first refused to accept the honour, but after considerable pressure and on representations that the interests of the government lay with his acceptance, he agreed to receive the seals. D’Argenson was at the same time deprived of office, but retained all the honours and the position it had conferred upon him. Law’s own successor was Pelletier des Forts, and associated with him as colleagues were D’Ormesson and Gaumont. These three formed a commission of finance, and to them was entrusted the responsibility of adjusting the finances of the kingdom.

As with Law, the supreme object of the new commission of finance was the reduction of the volume of bank-notes in circulation and the establishment of the shares upon a more stable foundation in order to prevent the extravagant fluctuations to which they had hitherto been subjected. In their deliberations they were joined by five deputies of Parliament,—a suggestion of the Regent who wished to impress the public with the idea that all the measures which might be taken to deal with the crisis had the approval of that body. The result of their deliberations was the creation of twenty-five million livres of annuities secured upon the revenues of Paris. These annuities, which bore interest at the rate of 2½ per cent., were purchasable in notes, which were received at their nominal value, and the notes thus utilised were to be burnt publicly at the Town Hall. At the same time it was determined to effect a wholesale reduction of the capital of the Company. The King was proprietor to the extent of 100,000 shares, and the Company itself held 300,000 shares which had been bought in during February and March at the rate of 9000 livres per share. These were now to be cancelled, and 200,000 new shares were to be issued in place of the 200,000 shares to which the capital was now reduced. The new shares were to be given to holders of the latter, share for share, with a liability of 3000 livres payable in notes or at the rate of two new shares for three old shares, and were to carry a fixed dividend of 360 livres per share. To induce the commercial community to make use of the facilities which the Bank were willing to afford, it was also arranged to open credit accounts for their benefit upon which they could operate to the extent of any deposits they might make in notes. It was hoped that these accounts would absorb at least 600,000,000 livres in notes, but so little advantage was taken of them that only about 250,000,000 livres were deposited.

These schemes, however, were only directed to absorption of paper. They were valueless as means of relieving the distress of those who were in immediate need of money to satisfy the pressing wants of the moment. The price of food not only rapidly rose, but shop-keepers would only accept notes in payment at very high rates of discount, and in many cases refused to sell unless payment was made in specie. The distribution of silver by the commissaries had been of a very limited character, and merely served for the day upon which it was made. The probability of disturbances arising was strongly impressed upon the commission of finances unless provision was immediately made for extensive conversion of notes. It was accordingly arranged that the Bank should again be opened on 10th June for exchanging notes of 10 livres, and that on 11th June notes of 100 livres should also be exchanged for those of 10 livres. No more than one note of 10 livres was convertible into specie for each person, nor of 100 livres into small notes. These arrangements, designed with the best intentions, led unfortunately to a very alarming situation. The Bank was besieged by thousands of people during the few hours its doors were open, and a guard was stationed within the building to regulate the flow of the eager and excited multitude. Many were injured and crushed to death in the vast and unwieldy crowds, and the exasperating slowness of the process of exchange, by which only an insignificant portion of the crowd was satisfied each day, culminated not infrequently in attacks upon the soldiery who were thus under the necessity of charging them in order to prevent the possibility of the Bank being wrecked.

To relieve the Bank, recourse was had again to the employment of the district commissaries, whose offices were open on Wednesdays and Saturdays, but the same scenes were enacted there as at the bank itself. “The doors,” says Buvat, “were only half open, so that the money seekers should only enter one by one, and none got in but the strongest. Most of them brought away nothing but sweat and fatigue instead of money, because the preferences that the commissaries gave to their friends had exhausted the funds, and they reserved a portion for themselves.” This system of decentralising the distribution of specie was, however, of short duration, the Regent and his advisers fearing that the creation of numerous centres of disturbance might at any moment lead to widespread revolt.

Although the distribution of coin continued for several weeks, the needs of the community were still far from satisfied, and the crowds, instead of diminishing, grew larger each day. On the morning of 17th July, the crowd, who had commenced to gather at three o’clock, found their approach to the Bank protected by barricades so as to render the task of the guard less difficult in arranging the people in file. This measure of safety, however, only incited the people to violence, and determined them to destroy it. In the rush, by which it was hoped to carry away the barricades, a large number were seriously injured, and twelve were killed. Three of the bodies were forthwith carried to the Palais Royal, followed by a concourse of three or four thousand people thirsting for vengeance, and demanding the lives of Law and the Regent, both of whom were conceived to be the cause of the prevailing distress. The scene was impressive, and Paris seemed ready to rise in arms, but Le Blanc was equal to the situation and acted with promptness and tact. He ordered the guard at the Tuilleries to proceed at once to the Palais Royal. He himself reached the palace after the utmost difficulty, and with the greatest coolness informed the people who he was and that he had come to plead their case before the Regent. Addressing himself to those who had carried the bodies, he said, “My children, take these bodies, carry them to a church, and return to me immediately for payment.” Surprised by the calmness of the Minister, they obeyed in spite of themselves, and a considerable portion of the crowd followed them, partly from curiosity and partly in hope of also participating in the reward. During their absence the guard arrived and dispersed the crowd without difficulty, the force of their demonstration having been destroyed by the removal of the bodies.

At ten o’clock on the same day Law drove to the Palais Royal to speak with the Regent. On the way he was recognised by the widow of one of those who had lost their lives earlier in the morning. At once the people surrounded his carriage and threatened to kill him. By preserving his usual coolness, however, he succeeded in reaching his destination without injury. The Regent, after the interview, would not allow Law to return home, and his carriage on making its appearance on the streets was again attacked and broken to pieces, the coachman barely escaping with his life. The news immediately spread through the city, and the First President who had left the chamber where Parliament was deliberating, hearing it rushed back to inform the members of what had happened. They rose to their feet and in excitement asked if Law too had been torn to pieces, but on the President replying that he was ignorant of all that had occurred, they adjourned the sitting in order that they might carry the news to their friends.

Since the Rue Quincampoix had been closed to the stock-jobbers no place had been allotted to them for carrying on their business. Transactions, however, were not less numerous now than they were before, and the events of the past few months did not destroy speculation in the shares of the company. The extreme inconvenience of having no recognised place for meeting induced the Regent to consider the appeals made to him, and accordingly on 2nd June they were allowed to establish themselves in the Place VendÔme. In the beautiful open square, of which the Place VendÔme consisted, assembled daily the fashionable Parisians of the day. Tents were erected for the accommodation of stock-jobbers, and the host of gamesters, saloon-keepers and others who catered for the pleasures of the crowd. The noise however of the great multitude of people proved a source of much annoyance to the Chancellor whose court was held in the vicinity, and on his complaint being made to the Regent it was necessary to arrange for the removal again of the place of exchange. Thereupon the Prince de Carignan sold to Law his Hotel de Soissons at the price of 1,400,000 livres, reserving the gardens which extended to several acres. In these the Prince erected a large number of tents for the jobbers which he let at 500 livres per month, the revenue from all producing about 500,000 livres per annum. In order to secure that the tents should be utilised, the Prince succeeded in obtaining an edict prohibiting the conclusion of any transaction except in one of them, and this was done under pretext of providing against the loss and theft of pocket-books containing money. For three months the stock-exchange of Paris was held in the gardens of the Hotel de Soissons, and on 29th October, stock-jobbing was entirely prohibited, a penalty of 3000 livres being imposed upon any one found dealing in shares or notes.

A few days before the outbreak at the Palais Royal, the Regent on the advice of Law had drawn up an edict, conferring in perpetuity upon the Company the whole commercial rights and privileges of the kingdom on condition that it liquidated within a year 600,000,000 livres of bank notes by monthly instalments of 50,000,000 livres each. The operation of this edict would have had the effect of re-establishing the Company as a sound commercial undertaking and of removing from circulation the unsecured paper issue afloat, but this would only have been possible at the cost of ruining the whole community of private traders or at least of placing them at the mercy of the Company which might exercise their proposed privileges in an arbitrary and despotic manner. On the 16th of July the draft-edict was submitted for approval to the Council of the Regency, and this body agreed to send it for registration to the Parliament. The following day accordingly it was deliberated upon by that assembly, who refused to give it effect, 148 members going so far as to support a proposal that it should be returned to the Regent without acknowledgment or reply.

This unexpected check to the plans of the Regent and of Law produced the greatest consternation at court. They feared that the people would by the refusal infer the sympathy of Parliament with their position and might be encouraged to break out into revolt, although the refusal had not proceeded from motives so high and disinterested, but from feelings of opposition to Law and to every proposal he might suggest that would tend to rehabilitate confidence in the Company. The Regent, with Law, Dubois, and Le Blanc, then resolved in secret council upon the banishment of Parliament to Blois. The musketeers with four thousand soldiers were immediately put in readiness to accompany the refractory assembly on its journey on the following day. The musketeers were to surround the resident of the First President, and the soldiers were to take possession of the Grand Chamber early in the morning, and orders were to be conveyed to all the members that they were to betake themselves to their place of exile within 48 hours. At the last minute, however, D’Aguessau prevailed upon the Regent to send the members to Pontoise, a place within easy reach of Paris, instead of to Blois where it was hoped they would have sooner submitted to his wishes by reason of the many discomforts and inconveniences they would undergo owing to its greater distance from the capital. The members, accordingly, proceeded on 21st July to Pontoise in a body without demur, determined to maintain their authority and equally determined to enjoy the term of their exile. The change of place of exile and all the circumstances connected with it converted what was intended as a punishment into proceedings of a highly ridiculous character. In order to assist those who might require money for their journey, the Regent sent to the Attorney General 100,000 livres in silver and a similar amount in notes. The First President was allowed a considerable sum in addition for his own expenses and drew from the Regent no less than 500,000 livres in all. “He kept open table for the Parliament; all were every day at liberty to use it if they liked, so that there were always several tables all equally, delicately, and splendidly served. He sent, too, to those who asked for them, liquors, &c., as they could desire. Cooling drinks and fruits of all kinds were abundantly served every afternoon, and there were a number of little one and two horse vehicles always ready for the ladies and old men who liked a drive, besides play-tables in the apartments until supper time. A large number of the members of the Parliament did not go to Pontoise at all, but took advantage of the occasion to recreate themselves in the country. Only a few of the younger members mounted guard in the assembly, where nothing but the most trivial and make-believe business was conducted. Everything important was deliberately neglected. The Parliament, in a word, did nothing but divert itself, leave all business untouched, and laugh at the Regent and the government.” The Parliament adhered to their resolution to refuse to register the edict, and remained in exile till 17th December.

Thus the final grand expedient of Law to restore the Company’s fortunes was destroyed.

On the 17th of July an edict was published which prohibited the people from assembling in crowds, under pain of heavy penalties, and it was also declared to be necessary in the interests of public peace and safety to close the Bank for an indefinite period, and that no further notes could be received there for conversion into coin.