Morning journal and courier., 1882-01-31
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Paris Correspondence of the London Economist]
 The close of the year 1881 has been the turning point in the wild speculation in new companies and in some favored old stock which has ragged on the Paris Bourse during the last two years. The origin of this fever
 of speculation may be traced in the first in-
 stance to the abundance of unemployed capi- tai lying idle with the great joint stock banks,
 and the scarcity of sound investments ln
 which the public could place money with
 confidence after the default and embarrass- ments of the many foreign States. The bank finding money forced on them, for which they were only required to pay small inter ests, generally only one per cent, and not finding a use for it in their regular discount and loan business, were led to invest it in rente and other good dividend paying securi- ties The next step was the formation of syndicates or groups of banks and capitalists for taking in hand particular stocks in which large profits were to be made at the expense of unwary sellers. The public at first hesi- tated to join in that speculation, and even abstained from investing, believing that the higher prices reached were only temporary {; they continued to lodge their deposits with the banks, which used them as before to
 make the stocks and shares still dearer. In A certain measure the increase in the price of the best securities was justified, for the ten dency had been to a capitalization at lower rate of interest. The first speculation was chiefly on the five per cent. rente, the price of which was low relatively to the three per
 cents, apart from the fear of a refunding at
 lower rate of interest. It had been sup posed that at no the conversion was certain,
 but when that prioe had been reached and passed and the government took no steps,
 NJ. Grevy being known to be opposed to q reduction of interest, the speculation con tinued, the public joining the banks on sec
 .7,1f
 ton of one half was made to the capital of holders, besides the interest. The profits made by the banks naturally caused the cres- ton of new banks, and as the speculation in rente had been used up, the banks directed their attention to speculations in railway and other stocks and the formation of new com panies The movement was favorable for new undertakings, for the former channel for the investment of surplus capital had been dried up by the discredit into which foreign loans had fallen. It was suddenly dis covered that there was a scarcity of insur- ance companies in France. Most of the old companies, which almost monopolized the business, were paying large dividends, and the promoters of the new companies intro duced the practice of issuing their shares at premium. 4 500- 0-franc share was generally of- fered at premium of 250 francs, and as only one-fourth was called, the public were asked to pay 375 francs for capital of 125 francs.
 To save appearances a part of the premium
 was applied to form first reserve, but the greater part went into the pockets of the founders The shares had been previously allotted among the founders and their friends,
 and the press was quieted by a share in the distribution The banks by which the new
 companies. were fosted were of course inter- ested in maintaining the prices, and when the public failed to come forward and pay the premium for the shares, they had to be kept up by buying in the shares of the holders who were impatient to realize. The capital of the banks thus got locked up in these new ventures, the shares of which were floating on the market. After insurance companies, l others for investments in house property or | for mortgages on houses came into favor, and, as before, the shares were issued at a I premium, and frequently with the same re- suit of increasing the floating paper on the market. For time all went on well, for | money for carrying over purchases wss 1 cheap, and holders could afford to wait hop | ing that the shares would be taken of theil 1 hands by investors, the few companies which really succeeded encouraging the others
 The voting of the Shipping Counties bill las | year, and the law on maritime hypothec brought into existence another class of com