GOVERNMENT PAWNSHOPS IN FRANCE. Historical—We must go back to the Middle Ages to find the first French banks loaning money on pledges. The Jews, who controlled these establishments, carried on this form of business on lines in which usury played a prominent part. They demanded the deposit of pledges representing double the amount of the loan, and exacted interest at a rate as high as 10 per cent per month.
From a very early period, the royal author ities became acquainted with these abuses and took steps to repress such illegal practises. The first royal decree dealing with the matter was drawn up by Phillippe Auguste in 121& This decree authorized the Jewish bankers to lend money on pledges, and merely limited the interest to be charged to two deniers per livre (*) per week— that is to say that it was still more than two-fifths of the principal —on sums of money which could not be loaned for more than a period of one year. As the bankers of those days did not respect the terms of the royal decree they were expelled in the year 1226 and replaced by Italian bankers, hailing from Piedmont. These money-lenders profited by the aforesaid decree of 1218 in re turn for the payment of a certain sum as a license.
The first so-called pawnshop instituted in a French town really having the character of a pledging establishment was founded in 1557 at Avignon, capital of the Comat-Venaissin, at that time under papal domination. Three towns followed the example of Avignon:— Aix, Montpellier and Marseilles, in 1635, 1684 and 1694, respectively. The establishments profited by the decree issued by Marie de Medicis, after the States General had sanctioned in 1694 the creation of pawnshops in every town of the kingdom where such institutions seemed likely to be of public utility. The schemes for the establishment of pawnshops were much delayed owing to lack of capital on the one hand and to illegal activities of power ful adversaries on the other, the latter being fully aware that any new organization would at once put an end to their usurious practices.
On 9 Dec. 1777, Necker drew up the first letters patent for the establishment of the Paris pawnshop. In this document it is stated, inter alio, pawnshop, or general office whose busi ness it is to loan money on pledges, would ap pear to be the best means of suppressing that kind of usury which was only too frequently the cause of the ruin of many families. Ac
cording to the aforesaid document, all profits resulting from such business were to be ap plied to the relief of the poor. All cash in hand, with the exception of the sums to be paid to the *Regie* (state administration) and those necessary for the administration of the pawnshop, were to be handed over to the Gen eral Hospital. It will be shown during the course of this article that the lien existing be tween the pawnshop and charitable institutions still exists in modern pawnshops, resulting in partially paralyzing their natural evolution. The success of the Paris pawnshop was so great, that although created without capital, it obtained all the funds required to carry on its business and was able to make loans on pledges to the public during the period 1778 up to the outbreak of the Revolution in 1789, amounting to nearly 200,000,000 livres, or a yearly average of more than 15,000,000 livres. The Revolu tion, however, put a stop to the development of this promising start, and in 1793 the Paris pawnshop was compelled to suspend its opera tions. The perfect freedom of financial trans actions which had been decreed by the con vention of 11 April 1793 provided an oppor tunity for the usurious bankers, who had not entirely ceased their operations, to recommence their corrupt practices on a larger scale and to charge interest, which had previously been lim ited to 18 per cent per annum when pawnshops were established, to a rate which soon reached 20 per cent per month. During the Directoire period, the Paris pawnshops endeavored to re commence their operations, but the results were far from satisfactory, due in no small measure to the competition of independent firms. It was during the Consulate that the idea of making pawnshops a state monopoly originated. In a report drawn up by Regnault de St. Jean d'Augley it was stated in general, all social transactions ought to be free, there are, however, some which should be governed by special rules in the common interest, so that the public may be protected and not become victims of avarice.* These ideas took shape and a law was passed on the 16 Pluviose Year X•I (6 Feb. 14). In the following pages we will outline the main points of this law, which con stitutes to the present day the legal basis for the operation of government pawnshops in France.