Kurhessische lending and Commerzbank
The Kurhessische Leih- und Commerzbank (actually Leih- und Commerzbank zu Kassel ) was a commercial bank based in Kassel , which in practice acted as a private central bank . In 1859 the bank went bankrupt .
history
On April 19, 1721, the Leyh- und Commercien-Compagnie received a license from Landgrave Karl von Hessen-Kassel to set up a stock corporation to operate commercial transactions and issue loans. The main business was initially the trade in wine and tea. As a lender, the bank financed the state and the estates of the Landgraviate of Hesse during the Seven Years' War . After the end of the Electorate of Hesse, communities, corporations and noble families were also borrowers from 1807. The bank gained a reputation as a secure and solid credit institution. The refinancing was carried out in the first half of the 19th century through to 3%, later to 3½% interest bearer bonds . From 1823 the bank operated under the name Leih- und Commerz-Bank zu Cassel.
Speculative business
From the 1820s onwards, the bank became increasingly involved in speculative transactions with risky securities and bills of exchange. This was initially successful and the bank was able to distribute high dividends. Any losses incurred were covered by additional deposits.
The Kurhessische Estates assembly called on the government to set up a control over the bank. The Ministry of the Interior followed suit and on September 12, 1835 appointed the police director of Kassel as government commissioner, who was to exercise state supervision over the institute. However, a lawsuit by the bank against this banking supervisory authority before the Kassel Supreme Court was successful. The court ruled on October 30, 1840 that the landgrave's privilege of 1721 did not provide for bank supervision.
In 1842 the bank was nearing its end. A member of the bank management gave himself a loan of 70,000 thalers. When the loan failed, the bank could only be kept alive through additional contributions from the group of shareholders and directors (including Siegmund von Meyer ).
The issuance of receipts
In 1850 the bank faced financial problems again. This time the problem was that the state had issued new government bonds with an interest rate of 4½%. Accordingly, many customers withdrew their lower-interest deposits from the Leih- und Commerzbank, and the latter had to refinance at the significantly higher interest rates after the March Revolution .
As a solution, the board of directors of the bank had considered the issue of banknotes in the form of cash orders. Therefore, on March 25, 1850, the bank notified the Ministry of the Interior to issue banknotes in the range of 150,000 to 200,000 thalers. Since these would only differ from the previous bonds in terms of the interest-free nature, the procedure was covered by the privilege of 1712. One third of the issue was covered by cash and two thirds by deposited securities. Interior Minister Ludwig Hassenpflug informed the bank on March 28, 1850 that the government did not intend to intervene in the supervisory channels. This was very unusual: private central banks usually needed a formal license to issue banknotes.
On behalf of the bank, the Theodor Fischer printer in Kassel produced 400,000 copies of banknotes of one thaler . 200,000 of these had been put into circulation by 1851. They showed Kurhessische Leih- und Commerzbank as the name of the issuer and thus gave the impression that an official authority of Kurhessen was behind the banknotes. The banknotes were circulated abroad, especially at the large exhibition centers, and were initially well received. In 1853 the bank again suffered large speculative losses. To compensate for this, the other 200,000 banknotes were now also put into circulation, but the balance sheet continued to show that only 200,000 thalers were in circulation.
By law of May 14, 1855, Prussia had banned foreign banknotes with a face value of less than 10 thalers. Other states followed suit. Accordingly, the banknotes were presented for redemption. In order to be able to redeem this, the bank had Theodor Fischer print new receipts with a nominal value of 10 thalers. The circulation volume did not change as a result.
While the Interior Ministry was in charge of the bank, the Treasury Department feared that the bank's receipts could be confused with those of the country. Government agencies in Kurhessen did not accept the bank's receipts. The Ministry of Finance also called for the banknote issue to be transparent, as is usual for central banks, but could not enforce it.
Cash receipt Kurhessische Leih- und Commerzbank, 1850, 1 thaler, obverse
Cash receipt Kurhessische Leih- und Commerzbank, 1850, 1 thaler, reverse
Cash register receipt Kurhessische Leih- und Commerzbank, 1855, 10 Taler, obverse
Cash register ticket Kurhessische Leih- und Commerzbank, 1855, 10 Taler, reverse
The end
The Sardinian War in 1859 led to considerable economic uncertainty and a fall in the price of all government bonds. Accordingly, there was also a rush of customers at the Leih- und Commerzbank in Kassel , who wanted to redeem the bank's bonds and receipts for cash. To meet these demands, the bank sold government bonds at a great loss. This was not enough, on May 9, 1859, the loan and Commerzbank had to stop their payments.
The spectacular bank collapse led to an increased redemption of the cash register bills of the Hessian government and to a loss of confidence in the banknotes of the small German states. Compensation for the creditors became a political issue: both chambers of the estates spoke out in favor of compensation for domestic creditors. The first report of the bankruptcy trustee Carl Oetker on November 14, 1859 stated that of the assets, which amounted to 919,317 thalers, only 329,674 thalers were assessed as realizable. For the bulk debtors, the bankruptcy rate was around 35%. This led to increased allegations from the state parliament regarding a lack of banking supervision .
The liquidation of the bank dragged on for almost 5 years. The state parliament unanimously passed the bill to resolve the debt obligations of the loan and Commerzbank on July 8, 1863. The law entered into force on August 5, 1863, when it was signed by Elector Friedrich Wilhelm I. On February 3, 1864, the City Court of Kassel declared the unregistered claims to have expired. The foreign mass creditors received a quota of 57% (many assets had still been realized), the quota for domestic creditors was topped up by state funds and amounted to 80%.
people
In the 19th century, high officials of the ministerial bureaucracy were often directors of the bank. These included:
- Friedrich Meisterlin (1845–1847 Director) (Minister of Finance 1834)
- Siegmund von Meyer (1833-1835 and 1842-1859 director) (Foreign Minister 1856-1856)
literature
- Andreas Kaiser: The paper money of the Electorate of Hesse, Diss. 2003, p. 239 ff., Digitized
- Albert Pick: Paper money. 1967, pp. 191-193
