Second Memoir on Pauperism, Post 12

The ideas that I explain are supported not only by reason, but by experience.  Why does the government, which, lately, has shown real solicitude for the material interests of the indigent classes not benefit from this useful experiment?  What is the reason, far from promoting the union of the savings banks and pawnshops, behind the government's resistance to efforts made towards that end?  I only understand it with difficulty.  If one ever comes to really attract all the savings of the poor into the hands of the state, the ruin of the poor and of the state itself cannot fail to occur.  Would the government believe its interests lay in the close connection between itself and the existence of the working classes such that one cannot destroy the government without ruining the working classes as well?  I cannot believe in so dangerous an enterprise.  In my opinion, I see in the combination I have described, the most powerful way that can be used to retain the advantages of the savings banks while avoiding some of the dangers.  I say some, because it is evident that the remedy proposed could, in a given time, become insufficient.

If the administrators of the savings banks can only use the savings of the poor to lend on security, this use of the money is limited and the money not being limited, a day will come when one would be obligated to refuse some new depositors, which would be a great misfortune, because a continual doubt would enter the minds of the poor about the placement of their savings and, consequently, a great temptation not to save.

I would therefore not want the state to definitively close its savings banks to the poor.  I would allow the laws to remain as they are at present; I would only allow the savings banks to pour their money into the Treasury when the pawnshops are not offering a better option.  In this way, one would have all the advantages of the institution while escaping most of the disadvantages.

But this is not yet enough.  Inasmuch as the poor will deposit their money only on the condition of being able to withdraw it at will and inasmuch as easy and sure alternatives will not have been offered, one will not come to results that are at the same time great and certain.

-------------------------------------------

End of the second memoir

Second Memoir on Pauperism, Post 11

What could be at the same time more simple, practical, and moral than such a system: the savings of the poor placed in this way would pose neither a risk to the state, nor to the poor themselves, because there is nothing more certain in the world than the lending of money with security.

The interest of the borrowed money not being used for anything but to serve as interest on the savings deposited by the poor, one can obtain at the same time these two very useful results; one would no longer need to demand usurious rates from the poor who borrow on security and one could give a higher interest to the poor depositor.   The borrowing rate could be easily reduced to 7% and the interest paid raised to 5%, which would be a double benefit.

One could, it is true, encounter instances of public misery where the savings bank depositors would come to ask for their money, while the number of borrowers at the pawnshop increases beyond measure.  The administration would then receive fewer of the former and obligated to lend more to the latter.

It is easy to see that the peril that one indicates here is only apparent, not real.

There is no establishment that enjoys more credit than a house that lends on security.  Those that lend it money run no risk because they have the collateral itself as a guarantee on the loans.  It is for this reason that pawnshops have always been able to borrow at a low rate even when the state or individual borrowers had no credit.  If the administration I have mentioned finds itself temporarily deprived of the savings of certain poor people, it could borrow to furnish on its own the money to lend on security that other poor people demand, and it would find itself still profitable, since it could borrow at 5% and lend at 7%.

I do not pretend to be the inventor of the system I have described here.  The unification of the pawnshop and savings bank has been taking place for [?] years in one of our most important and advanced cities under the auspices of philanthropic and popular institutions, in Metz.  In the middle of this unification, the administrators of the savings bank have been able to pay 5% interest instead of the 4% to its customers that have deposited less than [?] francs and the pawnshop administrators (the same people) have been able to reduce the interest of the loans to 7%, while in Paris, one still demands 12%.  In addition, the cost of administration of the two establishments have decreased by half since the two establishments have been combined into one.  Finally, to complete the picture, one must add that the Metz savings bank and pawnshop underwent the 1830 revolution and the financial crisis that followed without experiencing any notable embarrassment.