An earthquake in the banking industry

"Haha, this is really a funny joke.🔥🍮 💥💚" Charles laughed even louder.

He has been traveling this Mediterranean Sea route for over ten years and has some understanding of the situation in North Africa countries. The Tunisia Pasha imprisoned in this jail Younis, but he is not actually a real Pasha.

"Pasha" was the Governor of Tunisia appointed by the Ottoman, and the de facto King of Tunisia. Younis, as a prince, led an army in rebellion and proclaimed himself Pasha, but was suppressed by his father. He then fled to Algiers and was imprisoned.

How could someone so important escape so easily?

Ali took a sip of soup and began his story for the day. This was a daily routine for him and Charles: sharing their experiences to pass the time—the guards would appear frequently after noon, making it impossible to dig a tunnel.

"Actually, this shouldn't be mentioned to others, but since you're United States, it's okay to say it."

Ali finished all the food, wiped his mouth, and said, "Don't think Lord Younis is just a prisoner. He used to have many followers in Tunisia, including several generals. And he brought a large fortune with him when he came to Algiers."

"He was imprisoned here by the Guards, but someone helped him escape in less than a year."

"He now lives on the West Coast, he's rich and powerful, and even owns a beautiful castle. Many people there depend on him for their livelihood."

Charles curled his lip. "These legends always like to be exaggerated to the extreme, like the ghost pirates of the Caribbean Sea."

Ali immediately replied, "This isn't just a legend, my friend. You know what I do; my boss has met Lord Younis and even dined with him."

Charles knew that Ali was a smuggler with a large business; his boss owned one-seventh of the goods smuggled from the United Kingdom to Algiers each year. This was also why he wasn't hanged immediately after being arrested—his boss might be willing to pay a Ransom for him.

Ali then brought up the matter of Younis, saying that the smuggling business on the west coast of Algiers simply couldn't continue without Younis's approval.

He would even sometimes get involved in the Algiers Navy's business dealings.

Charles spat on the ground in annoyance—he was the one who had been captured and brought here by the Algiers "navy".

As darkness fell, Ali resumed his digging, finally bringing their "story salon" to a close.

Two days later, when the guards brought food, they discovered that Ali had escaped.

Charles was shocked and filled with remorse as he watched the Algiers soldiers cursing and shouting at the tunnel leading to the opposite cell. If he had trusted Ali and dug a tunnel to the next cell, he could have escaped with him!

He sighed heavily, staring at the Smallpox, recalling what Ali had said many times before, "My friend, when we leave here, I'll treat you to the finest fermented grape juice and the most beautiful girls. Oh, and remember my address..."

That afternoon, news began to circulate among the Nobility of the Versailles Palace — Her Majesty the Queen had decided to establish the "France Industrial Development Fund."

No one could clearly explain what the "fund" was; they only vaguely understood that the government would pool a large sum of money to invest in France industry. At the same time, anyone could invest money in the fund and receive a share of the profits after the investment was profitable.

It sounds a bit like investing in a company, but the risk seems much lower. However, because the total amount of the fund is rumored to be as high as hundreds of millions of Livre, it immediately became a topic of interest.

The following morning, the "Necker Case Alliance" gathered in front of the main gate of the Versailles Palace and began to protest loudly.

Their numbers have increased since yesterday, reaching over four hundred.

In reality, thousands of Nobility had investments in the banks involved in the Necker Case, but many of them were simply too afraid to cause trouble.

However, once the initial few hundred people establish a foothold, others will inevitably follow suit.

Viscount Prudhomme stood on the steps before the gate, shouted a series of slogans, and then raised his arm. "Everyone, follow me to plead with Her Majesty the Queen!"

While claiming to be pleading for leniency, they were actually using the threat of "not borrowing money from the government" to pressure him into resigning.

Just as the crowd was about to turn towards the Petit Trianon, two squads of Court Guard in red uniforms suddenly came running and stood at attention around the palace at the officer's command.

The Nobility were slightly taken aback, thinking that the Royal House was going to use the Guard to disperse them, but having lived in the Versailles Palace for a long time, they were used to such scenes and showed no fear. Instead, they prepared to confront the soldiers with even more intense protests.

Just then, Brienne walked out of the main gate of the Versailles Palace, accompanied by the Crown Prince and a group of officials from the Finance system.

The Nobility of the "Necker Case Alliance" paused for a moment, then immediately turned their anger towards the Minister of Finance: "Archbishop Brienne, please advise Her Majesty the Queen to halt the trial of Necker!"

"Using Necker to accuse those banks must be a Cabinet conspiracy!"

"Archbishop Brienne, please seriously consider the Finance issues and bring the Necker Case to a close."

"Yes, otherwise we'll have no choice but to stop buying any more government bonds!"

Brienne smiled, raised his hand to signal everyone to be quiet, and then said loudly, "Necker was seriously corrupt during his tenure, and his interrogation must not be interrupted."

"And the banks involved will certainly face severe penalties," Joseph added from the side. He was there as Assistant Minister of Finance, mainly responsible for providing support.

The Nobility below immediately became agitated. "You can't do this!"

What will happen if all those banks go bankrupt?

"Let's go and petition Her Majesty the Queen!"

"I have good news to share," Brienne's voice silenced the crowd. "The France Reserve Bank will acquire Beranger Bank and assume its previous debts."

The bulk of bank debt comes from investments by Nobility.

The Nobility of the "Necker Case Alliance" immediately cheered. "An acquisition? That's wonderful!"

Long live His King! Long live the France Reserve Bank!

"Now we're saved!"

However, some astute Nobility immediately spotted the problem and asked loudly, "Archbishop Brienne, does the French Reserve Bank have that much capital?"

"Yes! There might be many more Guild into problems later. Is the French Reserve Bank going to acquire it too?"

Brienne nodded and said, "Yes. The government will acquire a stake in the French Reserve Bank. Combined with the bank's existing assets, there should be tens of millions in funds."

Before the Nobility could raise any objections, Joseph stepped forward and said, "That's right, this money is far from enough to cover your investments in the bank, but illegal banks must be punished!"

"Therefore, Her Majesty the Her Majesty the Queen, in order to protect everyone's money from loss, decided to establish the France Industrial Development Fund."

He then explained the meaning of the fund, concluding:

"Investment certificates from all banks acquired by the French Reserve Bank can be used to invest in Industrial Development Fund."

His words immediately brought back painful memories for everyone of the "Mississippi Company scam"—back then, John Law had people exchange Government Bonds for Mississippi Company shares, only to lose everything in the end.

The Nobility erupted in a fierce protest. Joseph waited until they quieted down before taking out a document and waving it around. "The Industrial Development Fund is guaranteed by the French Reserve Bank and the France Finance."

"First of all, the fund's accounts are completely transparent, and all clients who have purchased more than Livre livres can check their accounts at any time."

"The fund publishes its budget at the beginning of each year and its financial statements every six months, explaining its revenue situation."

"Secondly, we will require all companies that receive investment to disclose their operating conditions and accept the fund's financial audit."

Finally, all matters concerning the fund are decided by the Fund Committee, and the government must not interfere.

Openness and transparency—these financial policies, which seem quite ordinary to later generations, were remarkably advanced in the 18th century. Even the most transparent companies today, such as the United Kingdom East India Company, are far from achieving this level of transparency.

The Nobility below began to whisper among themselves upon hearing this, and the dozen or so "shills" that Joseph had arranged beforehand all started working at the same time:

"If we can check the accounts at any time, that would be much more secure."

"The main thing is that it's guaranteed by the French Reserve Bank and the Finance, so I don't think there's any problem."

"Moreover, this is an investment in domestic industries, unlike the distant United States 'gold mines' of the past, where the operational status can be monitored at any time."

They inspired even more people, and soon the Nobility began to nod in agreement.

Seeing the situation turning sour, Viscount Prudhomme and the others hurriedly shouted, "What foundation? Who knows how well it will be managed in the future? It's safest to suspend the interrogation of Necker!"

Joseph sneered, "Archbishop Brienne just said that the case must be investigated thoroughly!"

"Then we'll have to consider stopping lending money to the government..."

No sooner had Viscount Prudhomme finished speaking than Joseph's cronies began whispering among themselves, "I don't think it's possible for everyone to refuse to lend money to the government."

"Why? Didn't you succeed the time you refused to pay taxes before?"

"Hehe, that requires paying money out. If you say you won't pay, everyone will definitely be happy to cooperate. But this is lending money to the government, which can earn interest."

"I reckon in the end, everyone will just say they won't lend it, but they'll still act the same way as before."

"Yes, they tricked us into not lending money to the government. They planned to secretly invest when government bond interest rates rose."

"The safest option right now is to lend to the government. Look at what happened when we invested in banks; it caused such a huge problem."

Within just over ten minutes, the Nobility were no longer willing to mention the "refusal to lend money to the government"—they had previously used this as leverage against the Royal House, but now that the Industrial Development Fund offered a solution, who would want to go against the interest rates?

Just then, a messenger reined in his horse a short distance away, then ran over quickly and handed a letter to Brienne.

The latter quickly glanced at the letter and announced loudly, "Just now, three illegal transactions between Necker and Clasney Bank were confirmed. Eleven bank managers have been arrested, and the bank's accounts are under thorough investigation."

The Nobility present immediately panicked, especially those who had investments in the Clasney Bank, who were sweating profusely with anxiety.

Based on the previous case of Beranger Bank, the banks under investigation will soon go bankrupt. Their money will be completely lost!

In reality, if these banks operate according to standard procedures, even if illegal issues are exposed, they can easily raise funds to pay the fines and recover in a few years.

However, the Duke of Orléans' attempt to force the France Finance to collapse led to the rapid bankruptcy of the Beranger Bank, which terrified the Nobility who had invested there. This caused other Nobility to withdraw their money from other banks, resulting in a significant tightening of bank lending.

At this point, with Necker's case also looming, the bank was simply unable to manage its finances, leaving it with only bankruptcy as its only option.

Of course, the timing of announcing the collapse of Clasney Bank was also pre-arranged by Joseph.

The Nobility present couldn't hold back any longer, especially those who had invested in the Clasney Bank, who shouted, "I'm willing to transfer my money from the bank to the Industrial Development Fund!"

"I'm also investing. Please give me a copy of the agreement!"

I want one too!

"And me..."

Joseph stepped forward at the opportune moment, signaling everyone to quiet down. "One thing needs to be made clear beforehand: if you are using bank investments to reinvest in the Industrial Development Fund, you can only withdraw the entire principal after five years."

This is the core of "debt-to-equity swap funds"—to buffer against panic and prevent a run on the Nobility by investment banks. In fact, if the fund performs well, they won't withdraw their capital after five years. Who wouldn't want to make money?

Hearing that "it can only be removed in five years," people hesitated again.

Brienne, following the script, delivered the final blow. "To ensure the safety of everyone's investment, the Industrial Industry Fund guarantees that if there are losses for six consecutive months, the investment will be fully refunded immediately. If the fund's funds are insufficient, the France Finance will step in to cover the shortfall!"

The eyes of the Nobility present immediately lit up again.

If the fund is making money, you can simply sit back and enjoy the returns. If it loses money, the government guarantees that you can get your investment back.

What is there to worry about?

Even if there are risks, we can't worry about that right now. Transferring the money to the Industrial Development Fund is much better than losing it all with the bank's bankruptcy.

The official next to Brienne immediately gestured to everyone that they could go to the Office of the Minister of Finance to collect the agreement documents for the "debt-to-equity swap fund".

Almost instantly, the crowd in front of the Versailles Palace vanished without a trace. Viscount Prudhomme, seeing he couldn't stop them, frowned and hesitated for a few seconds before quietly heading upstairs himself.

At noon, the King and Queen personally convened a ceremony to establish the "France Industrial Development Fund," marking another instance of the Royal House family endorsing the fund.

When the news spread, all the Nobility involved in banking investments flocked to the Office of the Minister of Finance, quickly crowding the doors.

A day later, under intense pressure from Calonne, Necker finally broke down—his dealings with the bank had been accurately uncovered, leading to the collapse of two banks.

After receiving a promise of leniency for confessing, Necker spilled the beans, revealing all the illegal transactions he had with the bank.

Meanwhile, Calonne breathed a sigh of relief.

He prioritized cases with more leads and those he was confident about, which allowed him to conduct the trials so quickly.

If Necker keeps pressing on and won't budge, his pace will slow down more and more, and he won't even be able to uncover nearly half of the deals.

However, Necker surrendered. A major earthquake was about to hit the entire Bank of France!