Thursday, January 26, 2012

Jubilee! A 375 Year Old French Bank ("Ethical Pawnshop") Forgives Debts of Paris' Poorest

375 years with neither Dodd nor Frank!
From Good Business:

Just as France was being chastised for excessive national borrowing with a sovereign debt downgrade, thousands of lucky French people had their financial obligations forgiven after the country's oldest bank decided to simply wipe their slate clean.

Granted, it's a small slate. The 3,500 clients who benefitted from the bank’s largesse had debts of 150 euros or less (about $190) with the Crédit Municipal de Paris, also known as the "Mont-de-piété," the bank of the poor, which has for centuries allowed the needy to get loans against their valuables—a kind of ethical pawnshop, or the original microlender. The small kindness was welcome for many.

"I'm very happy, it's the first time I get something for nothing," said Geneviève, an elegant woman in her fifties who was at the bank to get back a gold coin and a small wedding band she had pawned three years ago. "There came a point when I needed money. They're not worth much but they're important to me."
The unexpected gift is a way for the bank to celebrate its 375th anniversary. The Crédit Municipal de Paris was created in 1637 by Théophraste Renaudot, a doctor, journalist and philanthropist who wanted to combat poverty by giving the needy access to fair banking.

"The goal was to combat usury," explains Thierry Halay, who authored a history of the Mont-de-piété. "Interest rates at the time could go up to 130 percent," which quickly turned small loans into unmanageable debt.

The good doctor's idea was to give the poor people of Paris loans they could reasonably hope to repay, at decent rates for the time (about 10 percent annually) against whatever collateral they could produce: pots and pans, linens, silverware, artisans' tools. Halay found evidence of a 19th-century woman so destitute her only possession was her mattress. Every morning, she would carry it to the bank and pawn it. With that money, she'd buy potatoes, sell them for a profit during the day and buy back her mattress at night....MORE
HT: naked capitalism