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 PAL GRAV E STUDI E S I N
TH E H I STORY OF FI N AN C E

DECISION TAKING,
CONFIDENCE AND RISK
MANAGEMENT IN BANKS
FROM EARLY MODERNITY
TO THE 20TH CENTURY
E DI TE D B Y
KOR I NNA S C HÖ NHÄR L
Palgrave Studies in the History of Finance

Series Editors

Martin Allen
Fitzwilliam Museum of the University
of Cambridge, UK

D’Maris Coffman
University College London
Bartlett School of Construction and Project
Management, UK

Tony K. Moore
University of Reading, UK

Sophus Reinert
Harvard Business School, USA
The study of the history of financial institutions, markets, instruments
and concepts is vital if we are to understand the role played by finance
today. At the same time, the methodologies developed by finance academ-
ics can provide a new perspective for historical studies. Palgrave Studies
in the History of Finance is a multi-disciplinary effort to emphasise the
role played by finance in the past, and what lessons historical experiences
have for us. It presents original research, in both authored monographs
and edited collections, from historians, finance academics and econo-
mists, as well as financial practitioners.

More information about this series at

http://www.springer.com/series/14583
 Korinna Schönhärl
Editor

Decision Taking,
Confidence and Risk
Management in
Banks from Early
Modernity to the
20th Century
Editor
Korinna Schönhärl
University of Duisburg-Essen
Duisburg, Germany

Palgrave Studies in the History of Finance

ISBN 978-3-319-42075-2    ISBN 978-3-319-42076-9 (eBook)
DOI 10.1007/978-3-319-42076-9

Library of Congress Control Number: 2016958112

© The Editor(s) (if applicable) and The Author(s) 2017

This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of
illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and trans-
mission or information storage and retrieval, electronic adaptation, computer software, or by similar or
dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication
does not imply, even in the absence of a specific statement, that such names are exempt from the relevant
protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this book
are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or
the editors give a warranty, express or implied, with respect to the material contained herein or for any
errors or omissions that may have been made.

Cover image © Gerhard Haderer

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature

The registered company is Springer International Publishing AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
This volume provides a wealth of historical case studies of different
­techniques used over time by bankers to assess and mitigate their e­ xposure
to different sources of risk. By combining institutional, sociological and
behavioral perspectives, it emphasizes the relevance of culture, social net-
works and institutional rules for bankers’ perceptions of risk, lending
decisions and investment strategies. An entertaining and instructive read-
ing both for financial historians and banking practitioners
—Stefano Battilossi, Associate Professor, Universidad Carlos III Madrid,
Spain, and Editor, Financial History Review

v
 Acknowledgments

This book draws on papers presented during the workshop ‘Decision

Taking, Confidence and Risk Management in Banks: 19th and
20th Century’ in February 2015. It took place at the KWI Essen
(Kulturwissenschaftliches Institut, Institute for Advanced Study in
the Humanities). The plan was to bring together an interdisciplinary
and international group of researchers to discuss new methodological
approaches to banking history, which sometimes seems to need fresh
input. My interest in this topic emerged during my project ‘Financers
Desired Spaces. European Bankers and Greece in the 19th Century’,
which researches the motives of British, French, German and Swiss bank-
ers to invest their money in that high-risk emerging market. All con-
tributors to the workshop were invited to present one methodological
approach or idea and to illustrate its use and function in an empirical
case study taken from their current research. The workshop’s discussions
indeed offered plenty of helpful ideas and stimulation about how histori-
ans can deal with bankers’ investment motives. Our chairs and commen-
tators Dirk Baecker (Friedrichshafen), Johannes Bähr (Frankfurt a. M.),
Boris Barth (Konstanz), Youssef Cassis (Florence), Christopher Kopper
(Bielefeld) and Dieter Ziegler (Bochum) made major contributions to
our results.
I extend my sincere thanks to Ute Schneider who, as Professor for Social,
Cultural and Economic History at Duisburg-Essen University, provided
vii
viii Acknowledgments

me with the time and space to develop and execute this workshop inde-
pendently. I also thank the KWI, where the workshop was held in a pleas-
ant atmosphere. Furthermore I am very grateful to our partners for their
generous funding of the workshop as well as the publication of the volume:
Akku (Arbeitskreis für kritische Unternehmensgeschichte, Association
for Critical Business History), DFG (Deutsche Forschungsgemeinschaft,
German Research Foundation), Eugen-Gutmann-Gesellschaft e.V.,
EABH (European Association for Banking History), GUG (Gesellschaft
für Unternehmensgeschichte, German Business History Association),
Historische Gesellschaft der Deutsche Bank (Historical Association of
Deutsche Bank), IfB (Institut für Bankengeschichte, Institute for Banking
Historical Research), Sal. Oppenheim and Targo-Bank Foundation.
Finally yet importantly, I thank Katharine Thomas for language cor-
rection and Svenja Kiel for her essential help in organising the workshop
and editing this volume.
This book is dedicated to my daughters Pauline and Ricarda, the source
of my energy and happiness.

Korinna Schönhärl
Essen, in May 2016
 Contents

Introduction1
Korinna Schönhärl

Part I First Part Recruitment of Personnel and Partners 13

The House of Morgan: Private Family Bank in Transition15

Susie J. Pak

Top Careers as a Means of Risk Management in

Organisations57
Daniel Wylegala

Cooperative Governance in Banking: Consequences

for Decision-­Making Processes81
Friederike Sattler

ix
x Contents

Part II Second Part Risk Management Techniques 103

Minimising Risk: Financial Intermediaries

and Bond Issuing in London Before the Great War105
Anders L. Mikkelsen

Financial Centres as Fields: Reflections on Habitus

and Risk in the Nineteenth and Twentieth Centuries125
Andrew Dilley

The “Reputation Approach” and the Justificatory Function

of Economic Calculation. Some Critical Reflections on Monika
Pohle Fraser’s Analysis of Risk Management Techniques in
the Nineteenth Century147
Sebastian Knake

Investigating Attitudes to Risk in British Banking: A Case

Study of Barclays’ Branch Banking System, c. 1900–80173
Matthew Hollow

Between Novelty and Fashion: Risk Management

and the Adoption of Computers in Retail Banking189
Bernardo Bátiz-Lazo

Part III Third Part Methodological Tools for Historians:

Network-Theory, Principal-Agent-Relationship,
Behavioural Finance and Social Capital 209

Social Capital Versus Commercial Profits: The Impact

of Networks on Decision-Making in Early Modern Banks211
Nadia Matringe
 Contents
   xi

Risk Management, Credit and the Working of Merchants’

Networks in Early Modern Banking235
Daniel Velinov

The Role of Group Psychology in Behavioural Finance:

A Research Starting Point for Banking, Economic,
and Financial Historians269
Victor Ricciardi

Behavioural Finance as a Methodological Approach for

Historians? A Field Report Concerning the Construction
of the Canal of Corinth in Nineteenth-Century Greece293
Korinna Schönhärl

Considerations of Social Capital and Future Research

in Banking History315
Morten Reitmayer

Index333
 Notes on Contributors

Bernardo Batiz-Lazo read economics (at ITAM, Mexico and Autónoma de

Barcelona, Spain) and history (at Oxford) and received a doctorate in business
administration from Manchester Business School. He has been studying finan-
cial markets and institutions since 1988. He joined Bangor as professor of busi-
ness history and bank management after appointments at Leicester, the Open
University and Queen’s University of Belfast. He has combined full-time
appointments with consulting and executive training in Europe, the Gulf States,
Latin America and Asia. Bernardo has published over 40 refereed articles, three
books and eight distance-learning books. He is a Fellow of the Royal Historical
Society, research associate of Fundación Estudios Financieros (Fundef – ITAM),
and edits a weekly report on new working papers in Payments and Financial
Technology (see http://lists.repec.org/mailman/listinfo/nep-pay) and on
Economic and Business History (http://lists.repec.org/mailman/listinfo/nep-­
his/). He is also the Executive Editor of www.nephis.org. Twitter: @BatizLazo
Andrew Dilley completed his Dr. Phil. at the University of Oxford in 2006. He
is a Senior Lecturer in Imperial and Global History in the Department of History
at the University of Aberdeen. His early publications, including his book Finance,
Politics, and Imperialism: The City of London, Australia, and Canada 1896–1914
(Palgrave, 2012), focused on the political impacts of London finance in the British
dominions. He currently holds an AHRC Early Career Fellowship on Commerce
and the Commonwealth: Business Associations, Political Culture, and Governance,
1886–1975, which aims to re-examine the economic and political history of the
Commonwealth through the lens provided by business associations.

xiii
xiv Notes on Contributors

Matthew Hollow is an Associate Lecturer at the York Management School

(UK). He holds a PhD (DPhil) in Modern History from Oxford University and
has previously worked as a Research Associate on the Leverhulme Trust-funded
‘Tipping Points’ project at Durham University. Research-wise, his main interests
include: the history of commercial crime, risk and risk management, business
ethics, and shadow banking. His most recent book is entitled Rogue Banking: A
History of Financial Fraud in Interwar Britain (2014).
Sebastian Knake studied history and social science at Universität Bielefeld and
at Johns Hopkins University in Baltimore. In 2010 he wrote his master’s thesis
on the bicycle production cluster in the city of Bielefeld from 1880 to 1970. For
this study he was granted the Gustav-Engel-Award of the ‘Historischer Verein
für die Grafschaft Ravensberg’ in 2012. Since 2012 he has been working on his
doctoral thesis on the expansion of business financing by the ‘Braunschweigische
Staatsbank’ from 1919 to 1969 (funded by the ‘Niedersächsisches
Wirtschaftsarchiv’ in Wolfenbüttel). Some parts of this research will be pub-
lished as part of a study about the history of public banking in the former state
of Brunswick in March 2016. In 2015 Sebastian took a position as research
assistant in the project: ‘Ersparte Krisen?’ at Bayreuth University (funded by the
Federal Ministry of Education and Research). The aim of the research is to
examine changes and continuities in the saving behaviour of the (West-) German
population between 1960 and 1980 on the basis of normative judgements con-
cerning different forms of saving.
Nadia Matringe is an economic historian specialised in utilising business firm
archives to analyse economic mechanisms at a macro level, such as market inte-
gration, network dynamics, and the evolution of banking systems. She com-
pleted her PhD at the European University Institute of Florence, for which she
received the EBHA dissertation prize 2014. Currently an LSE Fellow in
Accounting, and a researcher affiliated to IHMC (CNRS, Paris), she is focusing
on the technical spread of financial techniques and expertise from the
Mediterranean to North Western Europe in the Early Modern Age. The com-
parative history of accounting systems is at the core of this research project.
Anders L. Mikkelsen completed a PhD in financial history at King’s College
London in 2014 on the market practices and techniques of London issuing
houses and their role in facilitating access of sovereign borrowers to the London
capital market between 1870 and 1914. He currently works as a researcher at
BH-DG Systematic Trading LLP and holds a Visiting Research Fellowship at
the ICBH, King’s College London.
 Notes on Contributors
   xv

Susie J. Pak is an Associate Professor in the Department of History at St. John’s

University (New York). A graduate of Dartmouth College and Cornell University,
she serves on the editorial board of Connections, the journal of the International
Network for Social Network Analysis (INSNA), and as co-chair of the Economic
History Seminar at Columbia University. Her book, Gentlemen Bankers: The
World of J.P. Morgan, was published by Harvard University Press in 2013.
Morten Reitmayer is Deputy Chair for Modern History at the University of
Trier. He studied history, sociology and German literature at the University of
Hannover. His dissertation thesis is: Bankiers im Kaiserreich. Sozialprofil und
Habitus der deutschen Hochfinanz (1999); his habilitation thesis is: Elite.
Sozialgeschichte einer politisch-gesellschaftlichen Idee in der frühen Bundesrepublik
(2009). His fields of research comprise business history, intellectual history and
the social history of modern European societies.
Victor Ricciardi is an Assistant Professor of Financial Management at Goucher
College in Baltimore, Maryland, USA. He teaches courses in financial planning,
investments, corporate finance, behavioural finance, and the psychology of
money, and is a leading expert on academic literature and emerging research
issues in behavioural finance. With Kent Baker, he co-edited the book Investor
Behavior: The Psychology of Financial Planning and Investing (2014, as part of the
Wiley Finance Series). This research endeavour is a contributor series book that
incorporates 30 chapters written by 45 leading experts (academics and practitio-
ners) on emerging research on investor psychology in personal finance, financial
planning, and investment management. He received a BBA in accounting and
management from Hofstra University, and an MBA in finance and Advanced
Professional Certificate (APC) at graduate level in economics from St. John’s
University. He also holds a Graduate Certificate in personal family financial plan-
ning from Kansas State University. He can be found on Twitter @victorricciardi.
Friederike Sattler studied economic and social history, modern history and
economics. She took her PhD from the Freie Universität Berlin in 2001. She has
worked as a research fellow and lecturer in economic and social history at vari-
ous institutions, among them the University Halle-Wittenberg, the Center for
the Study of Contemporary History Potsdam and the Historical Commission at
the Bavarian Academy of Sciences and Humanities in Munich. Today she is a
lecturer in economic and social history at the Goethe-University Frankfurt. Her
main fields of research include the economic and social history of the twentieth
century, business history with a focus on banks and finance, European economic
elites and the history of modern capitalism.
xvi Notes on Contributors

Korinna Schönhärl is assistant professor in the Department for Social and

Economic History at the University Duisburg-Essen and fellow of the Historical
College (Munich). Her thesis from Goethe-University Frankfurt is entitled
Knowledge and Visions. Theory and Politics of the Economists in the Stefan George
Circle (2009). Her research interest is the combination of cultural and economic
history on an international level. Her second book project (just finished) is enti-
tled Financers desired spaces—European Banks and Greece in the 19th Century. It
examines the international relationships of French, British, Swiss and German
banks with Greece from the time of her independence until World War
I. Additional research foci are the history of migration (Ruhr Area and Istanbul.
The Economies of Urban Diversity, 2013) and the history of tax morale.
Morten Reitmayer is Deputy Chair for Modern History at the University of
Trier. He studied history, sociology and German literature at the University of
Hannover. His dissertation thesis is: Bankiers im Kaiserreich. Sozialprofil und
Habitus der deutschen Hochfinanz (1999); his habilitation thesis is: Elite.
Sozialgeschichte einer politisch-gesellschaftlichen Idee in der frühen Bundesrepublik
(2009). His fields of research comprise business history, intellectual history and
the social history of modern European societies.
Daniel Velinov is a researcher at the Centre National de la Recherche Scientifique
(CNRS) and is affiliated to the Laboratoire de Recherche Historique Rhône-Alpes
(LARHRA) in Lyon. He holds a PhD from the Freie Universität Berlin and from
the Université de Paris 1. In his thesis, he studied the working of exchange mar-
kets and of the international payment system based on the archive of the
Antwerp banker de la Bistrate (1654–1674). He continues to work on early
modern banking and exchange.
Daniel Wylegala is an economic and social historian specialised in utilising
sociological theory in the field of German business history. Currently, he is fin-
ishing his doctoral thesis about the career of the former Deutsche Bank’s co-­
CEO and President of the Bundesbank Karl Klasen at the Philipp University of
Marburg and working as a scientific researcher at the Heinrich Heine University
Düsseldorf, where he is examining the role of experiences and expectations for
decision making in business using the example of innovations in the German
iron and steel industry after 1945.
 List of Figures

Fig. 1 Meeting of the founders of the EBIC-Group in 1963. 93

Fig. 2 Drawer, drawee, payer, payee cycle: Antwerp and Lille 238
Fig. 3 Drawer, drawee, payer, payee cycle: Venice and London 240
Fig. 4 Plan Général et croquis explicative de la méthode
de percement de l´Isthme de Corinthe 298
Fig. 5 Acro-Corinthe et Ancienne Ville de Corinthe 303
Fig. 6 Société Internationale du Canal Maritime de Corinthe,
Obligation au Porteur à cinq cents francs 304

xvii
 List of Tables

Table 1 Partners who did not have family ties to another partner
before joining the firm, J.P. Morgan & Co. and
Drexel & Co., 1895–1920 21
Table 2 
Partners who did not have family ties to another partner
before joining the firm, J.P. Morgan & Co. and
Drexel & Co., 1921–1940 24
Table 3 Partners who had family ties to another partner before
joining the firm, J.S. Morgan & Co./Morgan,
Grenfell & Co., 1895–1940 28
Table 4 Partners who did not have family ties to another partner
before joining the firm, J.S. Morgan &
Co./Morgan, Grenfell & Co., 1895–1940 30
Table 5 Partners who had family ties to another partner before
joining the firm, Morgan, Harjes & Co./Morgan et Cie,
1895–194032
Table 6 Partners who did not have family ties to another partner
before joining the firm, Morgan, Harjes &
Co./Morgan et Cie, 1895–1940 33
Table 7 Partners who had family ties to another partner before
joining the firm, J.P. Morgan & Co. and Drexel &
Co., 1895–1940 39
Table 8 Market shares of credit institutions in Germany
(without foreign branches), in percent 88
Table 9 Selected use of technology in the retail banking organisation 196

xix
 Introduction
Korinna Schönhärl

1  ankers’ Investment Decisions and Risk

B
Management
During the recent years of crisis, public opinion has drawn a very negative
picture of bankers and their investment decisions, which are considered to
be predominantly motivated by profit maximisation, lacking all kinds of
social responsibility (N.N. 2013). Certainly, profit has always been a driv-
ing force for bankers, as it necessarily is for all entrepreneurs who want to
succeed. But when researching the worldwide history of investment, one
soon realises that rational choice theory does not provide sufficient meth-
odological approaches to understanding all variants of bankers’ invest-
ment behaviour (Green and Pohle Fraser 2008). Sometimes banks have
invested despite rather poor expectations of profits and insufficient risk

K. Schönhärl (*)
Historical Institute, University Duisburg-Essen, Essen, Germany
e-mail: korinna.schoenhaerl@uni-due.de

© The Author(s) 2017 1

K. Schönhärl (ed.), Decision Taking, Confidence and Risk
Management in Banks from Early Modernity to the 20th Century,
DOI 10.1007/978-3-319-42076-9_1
2 K. Schönhärl

premiums. Sometimes they let apparently good investment ­opportunities

go to their competitors, although the risk seemed to be low. How can
banking historians understand and explain their decision-making?
Primarily it should be acknowledged that bankers are humans of flesh and
blood with emotions and experiences and ethical norms, who cannot be
squeezed into a narrow model of homo economicus (Berghoff 1999, 174).
Bankers’ investment decisions and the motives behind them should be
looked at more closely. Why did bankers take their decisions in the way
they did? What mechanisms of decision-taking were established in bank-
ing from early modern times until the twentieth century, and how did
they change over time? What kinds of risk management techniques were
used and to what extent did they succeed? How did bankers perceive risks
and how did they try to limit them? Which factors contributed to the
constitution of confidence and which factors damaged it? These questions
can certainly only be answered with the help of elaborate methodologi-
cal concepts. Thus this volume presents methodological approaches for
banking historians to analyse questions pertaining to bankers’ decision-­
making. The methodological tools are not only introduced in theory, but
their practical application to empirical research based on archive material
is also demonstrated in selected case studies.

2  isk, Confidence and Decision-making:

R
Some Definitions
In order to research risk management, it is necessary to define the term
‘risk’: the possibility that an action causes losses for or damage to the
actor (Baecker 2008, III). Decisive for choices related to risk manage-
ment is the interpretation of the situation by the actor as dangerous (i.e.
influenced by external, non-controllable dangers) or as risky (dependent
on one’s own decisions and actions) (Hahn 1998, 49; Akerlof and Shiller
2009, 205). Risk, according to this definition, is always connected to one's
own actions and one's own decisions. Different options for action have
to exist, providing the actor with a choice. He or she could easily avoid
the risk by taking an alternative course of action (e.g. not to invest), but
in this case he or she would also lose the chance of winning something.
 Introduction 3

While uncontrollable dangers have to be avoided, consciously ­getting

involved in risks can be profitable and desirable, as entrepreneurs can
profit from the contingency of future developments by being repaid for
the taking on of risks (risk premium). This is especially the case for bank-
ers, who are responsible for the compensation of time differences in the
economy. They deal with payment promises in a contingent future and
have to secure the safety of payments through continued rescheduling
and thus deal with various kinds of risk: risk of fraud, risk of insolvency,
risk of illiquidity or risk of loan loss (Baecker 2008, VIf., 108–112).
So banks continuously have to take on risks and consequently develop
risk strategies (Kahneman 2011, 340). Their business is unimaginable
without risks. The most important aim for bankers was (and is) not to be
taken in by an illusion of security because this would damage the chances
of identifying and allocating risks. This is even more important because
bankers often have to represent themselves to politics and the public as
being risk averse (Pohle Fraser 1999, 2, 48). However, they have to clearly
identify risks and use risk management to put themselves in a position
that is as advantageous as possible in terms of risk-taking. In this pro-
cess, banks must reduce the complexity of ‘noise’ in their environment
(Pohle Fraser 1995, 28) and thereby differentiate between important and
insignificant information in order to make investment decisions possible.
Risk management works on three levels: firstly, the observation of markets
to identify profitable business opportunities; secondly, risk management
within the organisation to organise the conditions of risk-taking; and
thirdly, the design of financial instruments to split risks (Baecker 2008,
126). The allocation of partial risks between reliable partners was (and is)
one of the most important techniques of risk management. All three levels
of risk management can be reconstructed using banks’ archive materials.
However, even with elaborate risk management complete knowledge
of one's counterpart, including the prognosis of his/her actions is not
possible in business relationships, as indeed is the case in any other social
interaction. The actions of the counterpart are always contingent (Simmel
2013, 268, 274). Increasing control over a business partner always
involves rising transaction costs due to the provision of ­information.
A reduction of these transaction costs is only possible by confidence
(Berghoff 2004, 59). Confidence can be defined as a mechanism to stabi-
4 K. Schönhärl

lise insecure expectations and to reduce the complexity of human action

(Ripperger 2005, 9). It reflects contingence, whereas hope eliminates
it (Luhmann 2009, 29). Political science, sociology, anthropology and
economics have developed various approaches to the term ‘confidence’
(or trust) in recent decades, without arriving at a consensus (Fukuyama
2001). The operationalisation of the term also remains difficult in his-
torical research (Frevert 2013). Perhaps the most usable approach is that
of new institutional economics, elaborated on by Tanja Ripperger. She
defines confidence not as an end in itself or a moral aim, but as a com-
petitive factor in business life due to the possibility of saving transaction
costs (Ripperger 2005, 262). Francis Fukuyama similarly argues that it
is the level of confidence inherent in a society which makes it successful
in economic terms (1995, 150). Especially within the principal-agent
relationship, confidence is a sine qua non of economic interaction. The
principal has to intentionally bypass his/her lack of information concern-
ing the intentions of the agent, for example by generalising his/her expe-
riences with other members of the same group. But in the end confidence
is always a voluntary act. All the reasons that may be mentioned as under-
lying it are only ways of legitimising a decision which cannot be based
on pure rationality (ibid.). The decision to bestow confidence, after all,
seems to possess many of the characteristics of a black box in historical
research, as is the case for many other banking decisions.
In this unsatisfactory situation, behavioural psychology can provide
new options for historians interested in the motives of decision-making.
Choice theory intensively researches factors relevant to decision-taking
and ‘has uncovered substantial and systematic regularities in how people
make decisions’ (LeBoeuf and Shafir 2012, 243; Allingham, 2002). The
rational choice model has been shown to be insufficient because it cannot
explain many aspects of human decision-making. The assumption that
individuals always choose the most profitable alternative has lost ground
vis-à-vis more differentiated models. Behavioural finance transfers these
approaches to the field of financial markets with the aim of explaining
the decisions taken by individuals. It is especially concerned with ques-
tions of risk perception, the process ‘by which an individual is in search
of preeminent clarification of sensory information so that he or she can
make a final judgement based on their level of expertise and past experi-
 Introduction 5

ence’ (Ricciardi, 2008, 86). The main finding of behavioural finance is

that risks are perceived very differently by different individuals and that
‘objective’ mathematical quantification is unhelpful in making sense of
the decision taken in a certain situation by a certain actor on a certain
financial market (ibid.). These results are gained mostly by empirical test
series carried out in laboratories with selected probands. Here is the point
where historians can enter with their qualitative methods and enrich the
discussion with the results of their historical source-based research. How
did bankers in the past perceive risk and how did they try to manage it?
The analysis of archive material can produce valuable case studies and
can therefore augment the behavioural finance perspective on investment
behaviour. It is important to carefully investigate the question of whether
the decision-making processes of actors today are comparable to those of
actors in the past and the nature and significance of possible differences.
Even if the differences indeed prove to be predominant, a new perspective
on archive material can be gained. The explicit aim is to overcome a per-
spective in which the bankers are described either as responsible investors
or as foolhardy speculators, depending on the outcome of their business
decisions (Priemel, 2013). Instead, analysis of their state of knowledge
and information at the moment of the decision is required.
The framework of this volume is defined by the three terms ‘decision-­
making’, ‘risk management’ and ‘confidence’. The aim is to present care-
fully designed case studies that use different methodological tools to
illuminate the black box of bankers’ decision-making.

3 F irst Part: Recruitment of Personnel

and Partners
Maybe the most delicate decisions that have to be taken in banks concern
the recruitment of the next generation or adequate business partners.
They are dealt with in the first part of this volume. Decisions made in
this field involve high risks for the entire enterprise. This is true whatever
the governance structure of the bank in question, be it a family bank or
a joint-stock company. Susie J. Pak analyses the risks associated with
the recruitment of non-family members to the House of Morgan from
6 K. Schönhärl

1895 to 1940, when the family was no longer able to fill all the positions
itself. She discusses how and according to which characteristics possible
candidates were recruited, how they were judged, and how they were
incorporated into in-house and broader social networks to make them
more reliable. The resulting structures were still comparable with the pre-
ceding ones when belonging to the family was the essential characteristic.
Pak includes all the non-family members of the House of Morgan in that
period in her research, based on detailed tabular material which offers an
analytic overview.
Daniel Wylegala also deals with the question of how an organisation’s
higher hierarchical levels can be filled and how the associated risks can
be managed. Using Niklas Luhmann’s system theory he views top careers
as a process of selection and socialisation, in which a candidate has to
prove his eligibility and ability to manage risks time and again. In a case
study on Karl Klasen, President of the German Bundesbank, Wylegala
demonstrates how a system theoretical perspective can be used to develop
a consistent narrative of a top manager’s biography.
Not only is the recruitment of in-house personnel a risky business for
banks. The selection of cooperation partners also takes place under condi-
tions of uncertainty and is connected with high risks. Friederike Sattler,
after careful consideration of the methodological challenges, designs a
model of experience-based expectation formation to explain the post-­
1960 decisions of German universal banks to enter the US-American
market via club banking rather than alone. Sattler demonstrates a special
interest in the banks' perceptions of the chances and risks of this kind of
multilateral cooperative governance.

4  econd Part: Risk Management

S
Techniques
Of course the recruitment of staff and partners is only one field of bank-
ers’ decisions. Another one concerns the question of investments. Close
cooperation here can help to manage risk too, for example when issuing
state loans. Anders L. Mikkelsen opens the second part of the volume by
analysing the way in which British issuing houses dealt with underwrit-
 Introduction 7

ing and reputational risk from the 1880s onward when the gatekeeper
positions of the banks weakened for certain countries. Their reaction was
to cooperate by issuing syndicates and forming underwriting groups in
which the underwriting risk could be spread over several strong shoulders
and the position towards the creditor strengthened.
Such risk management always took place in a certain cultural and eco-
nomic setting, in this case the British one. Is the national environment of
any importance? Andrew Dilley instead proposes the financial centre as
a unit of analysis. He understands it as a field in the sense of Bourdieu’s
praxeology, his ‘theory of practice’, causing a certain ‘habitus’ of risk per-
ception. Habitus is understood here to refer to the structure of mind
and emotions of the individual, socialised through education and social
environment. Using, in addition, the new institutional economics per-
spective, Dilley argues that this habitus was influenced by economic and
business structures, the role of states, social networks and cultural factors.
He thus opens up a wide field for international banking historians to
look beyond their own noses and examine cultural differences in banking
more closely.
This was well demonstrated in Monika Pohle Fraser’s analysis of the
risk management techniques of German and French banks in the nine-
teenth century. Her focus was on the question of how bankers’ justifica-
tions of investment decisions in these two different countries developed in
this period. Sebastian Knake summarises the results of her unpublished
dissertation and compares it with Thévenot and Boltanski’s convention
theory. He puts his results to the test in a case study on the risk manage-
ment of the Braunschweigische Staatsbank in the 1950s and shows that it
is very likely that some elements of risk management survived in banking
practice until the first half of the twentieth century.
Matthew Hollow also deals with twentieth-century risk management.
He researches how Barclays Bank dealt with the risks inherent in lend-
ing to small and local businesses. His results are in many points compa-
rable with those of Knake and of Pohle Fraser of the nineteenth century:
despite all the technical innovations, interpersonal relationships and net-
works remained very meaningful for the lending decisions.
Does this situation change with the emergence of computer technology
in financial institutions? Bernardo Batiz-Lazo asks about the expectations
8 K. Schönhärl

of decision makers and shareholders in applying these new methods to retail

deposit-accepting financial institutions and their outcome for the decision-
making process. He is also interested in the impacts of these changes on the
social composition of the bank’s staff and the education of bankers.

5  hird Part: Methodological Tools

T
for Historians: Network Theory,
Principal-Agent Relationships,
Behavioural Finance and Social Capital
In addition to the approaches already mentioned, the third part of the
volume deals with further methodological tools with which historians
can research risk perception and decision-making processes in banks.
Nadia Matringe emphasises the role of networks in the decision-taking
of early modern bankers. Networking was so important to the bankers
(her case study is the banking house Salviati) that profit maximisation
could actually be of subordinated importance. The integration into social
networks could prevent the bankers from acting opportunistically.
Opportunistic behaviour of business correspondents is but one of the
multiple risks early modern bankers had to deal with. Based on the archive
of the Antwerp banker de la Bistrate, Daniel Velinov examines risk miti-
gation in the context of payments via bills of exchange in 17th century
Europe. The close analysis of exchange transactions shows that it is the
complex relationship between principals and agents that is the source of the
important variety of risks that both principals and agents faced. Therefore,
risk mitigation relies on procedures that regulate the principal-agent rela-
tionship or – to put it differently – that are inherent to the system of com-
mission trading. Also the notions of credit and reputation relate intrinsically
to the principal-agent relationship. This finding challenges the commonly
attributed importance of familial, city-based, regional, national, ethnic or
religious affiliations to generating trust, credit and risk mitigation.
The variety of motives that can contribute to investment decisions is
the subject of the following chapter by Victor Ricciardi. As a researcher
in financial management, he presents the basics of behavioural finance
 Introduction 9

for banking historians, covering overconfidence, representativeness,

anchoring, worry, herd behaviour, group polarisation and groupthink.
In an interdisciplinary approach, Ricciardi considers the chances and
challenges of behavioural finance for the research of bankers’ investment
decisions in the past, discussing the new and interesting perspectives that
it opens up for work with archive material, despite the methodological
snares that have to be negotiated.
This idea is put to the test by Korinna Schönhärl in the following
chapter. She uses the behavioural finance approach to analyse the deci-
sion by the French bank Comptoir d’escompte to get involved in the
construction of a maritime canal at Corinth in Greece (1882–1893).
She shows that it is probable that ‘belief in experts’ and ‘overconfidence’,
caused by imperial overestimation of French technical and financial capa-
bilities, were meaningful for this investment decision. The behavioural
finance approach opens up a new perspective on the archive material and
helps to construct a narrative from the research.
But can attempts like this make banking history more attractive for
‘general’ historians? Morten Reitmayer is sceptical. Even if he judges the
concept of social capital, which he explains in detail, to be a promising
methodological approach, he does not believe it will bring banking his-
tory very much closer to the historical mainstream. Reitmayer instead
proposes a range of subjects and themes where the expertise of banking
and more general business historians are required where they could fruit-
fully contribute to historical and social discussion in general. He thus
opens up the field for consideration of the future of banking history and
the challenges with which it will be confronted.

6 Main Results of the Book

Addressing the questions of how bankers took their decisions and what
their risk management looked like, the volume provides a couple of inter-
esting results. On the one hand, it becomes clear that from the seven-
teenth to the twentieth-century new risk management techniques were
continuously developed, employed and advanced. For early modern
times the procedures of commission trading or the construction and care
10 K. Schönhärl

of networks of personal confidence are worthy of mention. In comparison

to the observance of the rules of the game of commission trading or to
the elaborate maintenance of networks, profit maximisation was often
less important for early modern bankers. Later on, with the evolution
of the banking business, risk management techniques also became more
sophisticated. In the nineteenth century, the era of ‘the banking revolu-
tion’ (Cassis, 2009, 43; Chapman, 1984; Kynaston, 1994), banks made
accessible new sources of capital by becoming joint-stock enterprises.
With their new, completely revised governance structures they started the
financialisation of a globalising industry. The challenges connected with
this forced not only joint-stock but also more traditional family banks
to adopt new methods of risk calculation and management. At this time
several new mechanisms were proven as responses to new challenges: the
construction of issuing groups as a method of risk sharing, the devel-
opment of scientific expert systems, and, in the twentieth century, the
employment of computer technology. But alongside these innovations
other key elements of risk management like personal reputation, con-
necting elements like memberships in certain universities or clubs, shared
contacts and confidence continued to be of importance throughout the
centuries. Even if the bankers claimed to practise modern and techni-
cally up-to-date risk management, they de facto still relied on the sec-
ond-order observation of colleagues, business partners and even scientific
experts, checking their reputations and middle-class virtues as the basis
of confidence. Even in-house careers in banks can be interpreted as the
­long-­lasting probation of candidates, their gradual involvement in deci-
sion situations and the establishment of their reliability. The risk manage-
ment techniques used by bankers alongside these traditional approaches
often served more to legitimise decisions afterwards, as far as it is possible
to distinguish between these two purposes at all.
It becomes clear that risk perception is a deeply culturally conditioned
process, one that can be analysed only when embedded in the context of its
social, political and cultural background, something that is indeed a chal-
lenge for banking historians. Culture, language and local habits do mat-
ter when considering bankers’ investment decisions. Alongside this group
level, some of the chapters of this book also prove the importance of the
individual level, because they show that the decision-making of bankers is
 Introduction 11

a highly individual process that can be understood only by ­considering the

value background, the expectations and the past experiences of the actors
involved. Another person might have made a different decision in an iden-
tical situation—an observation that has to be taken seriously.
So the research of bankers’ risk management and investment decisions
is not possible without an elaborate methodological approach that focuses
on the evaluation of sources in the decision-making process. This volume
offers a variety of proposals about how this focusing can be put into effect,
taking one’s own blind spots as a historical researcher seriously and trying
to shed light on them. The broad field of methodological approaches from
modern cultural history (Arcangeli, 2012; Burke, 2004; Daniel, 2001)
thus becomes indispensable for writing the history of banks.

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 "Yes, already!" said Robespierre.

And he told them all about their walk through the strange crowd, so
lively and so full of enthusiasm, turning now and then to Cornélie for
corroboration. But Cornélie wore an absent air, replying only in
monosyllables, for she had just learnt that her dress had not yet arrived;
though she took some comfort on hearing that her sisters were in no better
plight.

Mother Duplay, with arms akimbo, lingered to listen with enraptured

interest to Robespierre's narrative.

"I said as much to Duplay! It will be a triumph."

Duplay here interrupted her.

"Well, are we to have supper to-night?"

"You may well ask, but when Maximilien talks I forget everything."

Then taking up her basket of salad, she called Victoire to help her. They
used to dine out of doors when the weather was fine; the table was already
there, and had only to be laid. Ah! that fête—how it turned everybody's
head! Mother Duplay was certainly late, to her great discomfiture. Yes, she
was late—she, the pink of punctuality.

"And the chicken will be burnt to a cinder!"

She ran to the kitchen, on the ground floor, next to the dining room, and
found her youngest daughter, Madame Lebas, already there.

"I thought of it, mamma!" she said.

The chicken, nicely cooked to a golden brown, swimming in gravy, was

ready to be served.

"Now then! Let us make haste!" said Madame Duplay, highly amused at
being caught by her daughter. "Strain the soup while I prepare the salad.
Oh, Victoire, we haven't laid the cloth yet!"
 With the Duplays, it was a long-established custom that everything
connected with the kitchen or the table should be entrusted only to the
family; the maid washed up when the meal was over. Perhaps this was an
excess of prudence, or a fear of poison. Whatever the motive was,
Robespierre highly approved the practice.

"It is well to know what one is eating," he would often say.

The two girls and Madame Lebas took it in turns to wait at table, and so
they could all speak freely, without being restrained by the presence of the
servant.

The soup was now served up, steaming hot, and Madame Lebas was
ladling it out in equal portions, reserving the last, as the hottest, for
Robespierre.

"To table! To table!" she cried, placing chairs for every one.

But Robespierre and Duplay did not move. They were deeply interested
in something Lebas was telling them. Duplay's son-in-law had just returned
from the Tuileries, where he had gone "to feel the pulse of the Convention,"
as he expressed it. The National Assembly, although undermined by some
evil-minded members, would be excellently represented at the fête on the
morrow. The abominable rogues who had charged Robespierre with
intending to turn this popular manifestation to his own profit had been
disappointed—an appropriate reward for their drivelling calumny! No one
attached the slightest importance to their scandalous reports. The
Convention, as well as the people, were with Robespierre. Only the
Committee of Public Safety...

"But, I say, children, the soup will be cold," Madame Duplay called out
in desperation.

Simon the wooden-legged came down from his room, declaring that he
was famished.

"Here we are! Here we are!" the three men exclaimed, taking their seats.
 Robespierre had made a sign to Lebas to change the conversation on
account of the women. Then significantly shrugging his shoulders, he
whispered to him—

"The Committee of Public Safety? Well, I shall be ready for them!"

At table Robespierre, who was seated between Monsieur and Madame

Duplay, hardly tasted his soup.

"The soup doesn't please you, friend?"

"Oh yes! Very good! Excellent!"

Victoire cleared away the soup plates as slowly as possible, waiting for
Robespierre. When he had finished, she said—

"That is right, bon ami. You know you have to keep up your strength for
to-morrow."

Madame Lebas now returned from the kitchen with the capon, and was
greeted by a general murmur of admiration.

"Splendid!" cried Simon Duplay, who was a bit of a gourmand.

"To-morrow, children, you shall have duck, duck and turnips!" said
Madame Duplay, much gratified, as she set to work to carve the fowl,
giving Robespierre the white meat, which he took mechanically, deep in
thought. Lebas told them that he had seen Fouquier-Tinville, the Public
Prosecutor, who was returning from the Bastille, where he had been to
inspect the new installation.

"Ah, yes! the guillotine!" interposed mother Duplay, continuing to

carve. "But it didn't work to-day, did it?"

"It will not work to-morrow either," said Robespierre, "but the day after
to-morrow ..."

"Will you allude to it in your discourse, bon ami?"

 "Yes, towards the end; for it is well that the aristocrats should know that
we are not disarming."

"Decidedly," chimed in Duplay, "that would be too stupid."

Robespierre, warmed by the tone of the conversation, recovered his

appetite.

"At all events," he said, "the fête to-morrow will be a warning for every
one; for the aristocrats, as well as for many a Judas of the party."

He stopped to express his appreciation of the fowl, sending up his plate

for more.

"A leg, or a wing?" asked mother Duplay, delighted.

Robespierre suddenly turned round. He had heard a noise.

"I am sure the front door has just been opened," he said.

Simon Duplay took out a match to light a lamp, and young Maurice
rose, looking out into the dark.

"It's true," he said; "it's a woman with a large parcel."

"Our dresses, surely!" exclaimed Cornélie, who had been somewhat

morose and silent until then.

"Yes, our dresses," cried Madame Lebas and Victoire expectantly.

It was, after all, only the dresses, which the dressmaker had at last
brought. The enormous box was handled by them eagerly; they wished to
open it there and then. However, Victoire, prudently fearing to soil the
contents, carried it into the dining-room, followed by her sisters.

The conversation was resumed with lively interest by the light of the
lamp just lit, and opinions were freely expressed that as Royalty had her
fêtes, the world would now see what a Republican fête could be like. It
would be truly national, imposing, and symbolical.
 The young women had not yet returned.

"Hullo! you children! what are you doing there?" called out old Duplay.

"Here we are! Here we are!" answered Victoire, appearing that moment

on the threshold of the dining-room in a pretty white dress, coquettishly
pushing back her hair, disordered by her hasty toilet.

"Doesn't it suit me?" she said. "Oh! don't look at my hair; it isn't
arranged," and she ran down the steps followed by Madame Lebas and
Cornélie, also arrayed in their new finery.

Mother Duplay scolded her daughters.

"What! You dressed yourselves in the dining-room? Why, it is positively

improper! Isn't it, Maximilien?"

Robespierre smiled.

"Let them alone, bonne mère. It's not fête every day!"

And he looked at the dresses, pronouncing them charming, and in

perfect taste.

Madame Lebas was in blue, Victoire in white, and Cornélie in red.

"The three colours!" observed the boy Maurice.

"We wanted to give you a surprise," said Cornélie, advancing towards

Robespierre.

"Nothing could have given me more pleasure," he replied. "That is what

I call true patriotism."

The noise of hurrying feet, the sound of voices and music, the hum of
Paris in the distance preparing for the coming fête centered through the
open window. Fireworks burst in mid-air, then suddenly seemed to radiate
in a blaze of glory.
 "Oh, look!" exclaimed the boy Maurice, as showers of golden fire fell in
a cascade of light. Robespierre musingly watched their slow descent, which
to his overstrained imagination took the form of one huge halo of glory.

Robespierre was early up and dressed next morning, and he was

received by the Duplays in the courtyard with cries of surprise, for it was
scarcely nine o'clock. "What! dressed already! And we haven't
commenced!"

Robespierre told them he had hastened in order to be at the Tuileries in

time to superintend things a bit, and to arrange matters with his friends, that
there might be no hitch. People would talk so! The slightest thing might mar
the splendour of the manifestation, which would be a pity on such a
splendid day!

"The sky is naturally propitious for the fête of the Supreme Being," said
Victoire; "but you will have some breakfast, I suppose?"

"No, I shall breakfast over there."

They now surrounded him, retaining him to arrange the folds of his
cravat, or brush grains of powder from the revers of his coat, which they all
declared suited him to perfection. He received the compliment with visible
pleasure, as he had given himself no little trouble over his toilet for the
great occasion.

He wore a light blue coat, nankeen breeches buttoned above the knees,
where a stream of tri-colour ribbons was attached. White silk stockings and
buckled shoes completed the array of this real Republican dandy. He was
powdered of course, as usual, and had even indulged in an extra puff or so,
but his most extravagant conceit was displayed in the lace waistcoat which
spread like a filmy foam across his breast. The women went into ecstasies
over this, and declared his taste exquisite. As he was taking leave, Cornélie
appeared with an enormous bouquet of wild flowers and ears of corn in her
hand.

"And the bouquet?" she asked, giving it to him at the same time.
 "Ah! yes! I had forgotten it. How kind you are! Au revoir. I shall see
you by and by, looking your best, I am sure!"

And Robespierre, spick and span in his new clothes, all curled and
perfumed, picked his way daintily across the courtyard.

At the door he found Lebas, Simon the wooden-legged, and the boy
Maurice Duplay awaiting him. They wished to escort him to the Tuileries.
Didier, the agent, now came up, accompanied by two of his men, and they
all started in the direction of the Rue Saint-Honoré, keeping to the right.
The Incorruptible conversed with Lebas.

A breeze stirred the flowers that decorated the front of the houses,
wafting abroad their perfume. People were filling the streets from all
directions, all in festive attire, with palms and ears of corn in their hands.
On recognising the Incorruptible, they bowed to him; delighted, he
discreetly returned their salutations.

Robespierre had turned into the Passage des Feuillantes, and found
himself on the terrace. Here a surprise awaited him. The garden was
already, at that early hour, three-quarters full, looking like an immense sea
with wave upon wave of tricolour ribbons, plumes, and cockades. He
continued his way along the Terrace des Feuillantes, a smile on his lips,
returning the greetings as he went, and then joined the stream of people
moving towards the Tuileries, happy to lose himself in that crowd flocking
to his own apotheosis.

Flowers festooned the front of the Palace from end to end, lending to it
the freshness of spring-tide.

When Robespierre arrived he cast a hasty glance at the vast

amphitheatre which awaited the National Convention. It was still empty.
The amphitheatre extended from the gardens to the balcony of the Horloge,
from which projected a tribune, erected above the seats of the deputies—the
tribune of the President, his tribune. It was from there that he would speak
to the people, assembled to hear and to applaud him.
 Robespierre entered the Palace alone, Lebas and the two Duplays
having gone back to the Rue Saint-Honoré to fetch the family. Beaming
with expectation, the Incorruptible looked about in search of some familiar
faces, but he found none. He crossed the Convention Chamber to the offices
of the Committee of Public Safety, and questioned the men in charge, who
told him that only the members Barère, Collot d'Herbois, Prieur, and Carnot
had put in an appearance for a moment, and then had gone to breakfast at a
restaurant. As he crossed the Hall of Liberty he met Vilate, a fellow-
juryman of Duplay's on the Revolutionary Tribunal. Vilate was under an
obligation to Robespierre, who, in conjunction with Barère, had procured
for him a residence in the Palace at the Flora Pavilion. It was the surest way
of having a spy ready at hand, a reliable and silent witness of every act and
move of the Committee of Public Safety. Vilate, at once insinuating and
deferential, invited him to breakfast.

"It would be so convenient," he suggested, for he could breakfast, and

yet not lose the splendid spectacle of the crowd as seen from the first story.
Robespierre accepted the invitation, and remained for two hours there. Even
after Vilate had left him he stayed on, looking down on all the preparations,
lost in a day-dream of anticipated joy. He was nearing the supreme moment,
the popular moment, which would raise him so high above his colleagues
that henceforth any steps taken against him would be considered as directed
against the nation itself. He smiled. His dictatorship? Was it not imposed on
him by the French people? Was it not the outcome of the public will? It
would be presently called for by a hundred thousand voices in these very
gardens, in presence of all France, represented by the three hundred
deputies of the Convention. He remained in meditation, smiling still, his
forehead pressed against a pane of the window, his looks plunged in that
living sea swaying at his feet. If ever Robespierre was happy, it was at this
supreme moment.

Some one knocked.

"Come in!" he said, as if awakened from a dream.

It was Lebas, who, all out of breath, came to tell him that the
Convention was assembled, and only awaited his arrival.
 "Vilate sent me here. I was wondering where to find you."

Robespierre looked up in astonishment.

"It can't be very late," he said.

"Why, it is half-past twelve!"

"Half-past twelve?"

The fête had been fixed for noon. He was then half an hour behind time!
And the ironical smiles of some of his colleagues when he appeared in the
tribune were not the least bitter consequences of his unpunctuality.

A voice was heard saying—

"He has at last decided to put in an appearance!"

And then another—

"He hasn't even the courtesy of kings, yet he has enough of their
insolence!"

Robespierre recognised the voice.

It was Barère's. Drops of gall were already falling into his cup of joy.
But as the people began to applaud at the lower end of the gardens,
Robespierre advanced to the edge of the tribune, and bowed. The expectant
crowd swayed as one man towards him, unwilling to lose a single gesture or
a single word. So stood the Incorruptible, enwrapped and penetrated by the
inebriating vapours of adulation and the perfume of all the palms and
bouquets that rose as incense at his feet.

But again a discordant note was touched, and another voice was heard
—

"See how like a throne the tribune stands!"

 And in fact, set high above the steps, it did seem raised on a pedestal.
Robespierre felt this as in some embarrassment he unfolded his manuscript,
and commenced. His voice was almost inaudible, except to the members of
the Convention seated near him. Passages on which he counted most passed
unheeded, and he felt the encouragement of his friends to be indiscriminate
and misplaced, like that of some theatre claque.

When he had finished he was greeted with considerable applause, that

was more formal than genuine; it mounted from the gardens and reached
him, mingled with the strains of Gossec's hymn, just started by the Opera
choir. Robespierre left the tribune dissatisfied with himself, but convinced
that his address to the people on the Place de la Révolution, from the altar
of flowers erected at the foot of the statue of Liberty, would retrieve this
first failure. There he would be in direct contact with people, and then they
would see! For he felt the people were with him; their acclamation coming
up to him from the gardens was proof enough.

He descended the steps, followed by the Convention, and went towards

the first fountain on the lawn, from which rose an allegorical group,
representing Atheism surrounded by the Vices, led by Folly, while Wisdom,
standing apart, pointed a warning finger at the group. He was to set a match
to this ingenious specimen of artistic pyrotechny, when Atheism was
supposed to disappear, dragged down by Folly and the Vices, leaving
Wisdom alone, radiantly triumphant. But it was the very opposite that
happened. Wisdom caught fire and upset the whole arrangement, provoking
disrespectful laughter among the deputies.

Robespierre turned pale. The fête had certainly not opened auspiciously.
Then, in spite of himself, an instinctive and uncontrollable desire to lean on
some one, which always took possession of him in hours of suffering,
mastered him. As he looked round in search of a sympathising glance, his
eyes fell on a fair, rosy child, in its young mother's arms, trying to play with
bouquets of corn and wild flowers which its mother kept from him.
Robespierre recognised the bouquet which in his excitement he had left on
the tribune, and which the young woman now held out to him. This delicate
attention fell on his parched soul like refreshing dew, and he gratefully
accepted the simple homage offered with such charming frankness.
 Robespierre now headed the procession, preceded by trumpets and
drums, followed by the Convention through the line of National Guards,
who kept back the curious crowd on either side of the garden, as the line
wound its way towards the swing-bridge which opened on to the Place de la
Révolution.

The deputies were all there, dressed in official garb: dark blue coat, red
collar and cuffs, tight-fitting knee breeches of doeskin, high boots, broad
tricolour sashes across the breast, fastened on the left shoulder, and tricolour
plumes in their hats. Each member carried in his hand a bouquet of flowers
and ears of corn.

Robespierre was conspicuous by the difference in his attire, which was

of a lighter blue. He walked well ahead of his colleagues, as if to accentuate
the distance between himself and them in the eyes of the crowd, who, with
keen curiosity, were climbing on stools, on ladders, on the bases of statues,
on gates, and even on the trees, to get a better view of him. Thus
Robespierre, whose serenity had now returned, advanced towards the Place
de la Révolution, where he knew that the greater mass of the people were
assembled to receive him with thunders of applause.

The sound of "Vivat! Vivat!" was heard in the distance, accompanied by

the roll of the Champ-de-Mars cannon, which fired a resounding salute at
regular intervals. Those vivas were welcoming on the Place de la
Révolution the cortège which had preceded Robespierre and the members
of the Convention; the delegates from the different sections of Paris, who
entered amidst the beat of drums and blare of brass instruments, headed by
a standard-bearer. The procession had no sooner reached the square than
they parted into two lines; on one side women and young girls, dressed in
white and crowned with roses; on the other, old men and youths, carrying
branches of oak and laurel. The crowd, kept back by a rope of tricolour
ribbons, received the procession with enthusiastic shouts, chanting with the
choirs the choruses of the Chant du Départ. To the passionate strains of
Mehul's national anthem succeeded soon after a hymn appropriate to the
occasion, Gossec's composition calling down the benediction of the
Supreme Being on France and on humanity.
 The people applauded, but stopped directly to welcome another group
of the Paris section, a company of young Republican warriors dressed in
blue and rose-colour, holding aloft lances decked with tricolour ribbons.
The greatest triumph of all, however, was the group symbolising the Four
Ages—Childhood, Youth, Manhood, and Old Age—represented by a
multitude of children, youths, maidens, men and women, both middle-aged
and old, some crowned with violets, others with myrtle, oak-leaves, olive-
branches, and vine-leaves. One unanimous cry of admiration rose from the
crowd and resounded through the immense square, where the sun fell in
burning rays on the silks, velvets, and brocades, playing in the gold fringe
of flags and banners, and on the many tricolour ribbons and streamers, in a
flood of dazzling light.

The excitement of the populace was now at its height, and, as the
members of the Convention appeared in sight, a cry rose suddenly—

"He is here!"

"Who?"

"Robespierre."

A tremor of curiosity ran through the crowd who, mad with excitement,
poured forth their welcome in a storm of enthusiastic cheers and plaudits,
even before their hero came in sight. A sheriff, then a delegate, then a
master of ceremonies, were by turns loudly cheered by the eager multitude,
who in their impatience had taken them for the Incorruptible. At last he
passed, smiling affably, hat in his hand, and the cry ran from mouth to
mouth—

"It is he! It is he!"

This time it was really Robespierre; there was no mistake. Hats, caps,
handkerchiefs, waved on all sides; women raised sprays of loses in the air
and men branches of palm.

This outburst threatened to break up the cortège of the Four Ages,

which, like the preceding one, had ranged itself round the statute of Liberty,
where Robespierre was to deliver his discourse. Children begged their
mothers to lift them up, that they might see also. At the same moment the
solemn chords of a harp floated on the air.

Robespierre advanced slowly, slackening his pace, for he had become

suddenly aware of the great distance which separated him from the
deputies, who filed into the square six abreast, grave and slow, like judges.
The different groups of the procession, who had arranged themselves in
regular lines, now unveiled the statute of Liberty, where an altar of flowers
and foliage had been erected. It was at this altar that Robespierre was to
officiate, and consecrate amidst the burning of incense the worship of the
Supreme Being.

The Incorruptible was now passing the very spot where on the previous
day the scaffold still stood. A woman in the crowd called attention to this in
all simplicity. But her voice was quickly drowned by a hundred harps,
whose dulcet music filled the air. All members of the Convention had
reached the Place de la Révolution, when a new cortège came in sight, the
chariot of Agriculture, draped in blue, covered with garlands of roses, and
drawn by a yoke of oxen with gilded horns. The goddess of Agriculture was
impersonated by a beautiful girl from the Opera, who smiled on the crowd
with her light blue eyes, looking the very incarnation of luxuriant youth, her
blonde beauty framed in ripe golden corn and fruits of the rich harvest.

Robespierre, now standing before the altar, was burning incense in a

golden tripod, amidst the mute reverence of the crowd, who behaved as if
assisting at some religious ceremony. Presently, descending the steps of the
altar, he turned to address the multitude.

All music had ceased, each voice was silenced, every whisper hushed;
even the cries of pedlars and street-hawkers were unheard. A hundred
thousand eyes were fixed on Robespierre, who, set up on high and wrapped
in clouds of incense, appeared to tower in stature, to dominate that mass of
human beings with all the force of a prevailing pride.

A sudden inspiration seized him: he would repeat the more notable

phrases of his former discourse, here, to that crowd whose mighty heart he
felt beating with his own; he would have his revenge, and hear his burning
words applauded by the nation itself! Ah! had the deputies been indifferent,
cold, hesitating in their applause? Well, they should receive a lesson that
would be at once a warning and a mandate! The delegates of the nation
should be censured publicly by the very nation they represented!

Robespierre had delivered the opening sentences of his speech. Carried

away by the enthusiastic ovation of the crowd, now entirely master of
himself and of his discourse, his words flowed freely and abundantly, and
he declaimed without once referring to his notes, in a clear, penetrating
voice. Every point was greeted with a thunder of applause as he spoke on,
stimulated by a glow of satisfaction which touched the most secret fibres of
his being. He felt himself to be for ever and in very deed master of France,
acclaimed Dictator, solely by the people's will. Through the fumes of this
mad delirium he saw the Convention vanquished, paralysed with fear and
amazement.

He was thanking the French nation, who had laid aside their work to lift
their thoughts and aspirations towards the Great, the Supreme Being.

"Never," exclaimed the Incorruptible, "never has this world which He

created offered Him a sight more worthy of His regard. He has seen the
reign of tyranny, crime, and imposture on the earth——"

But a stir was noticeable in the crowd, not far from Robespierre. A man
had just made an observation in an audible whisper, attracting the attention
of the bystanders. They looked at him in surprise, trying to divine his
meaning, but Robespierre, who was too far off to have heard, continued—

"Frenchmen! if you would triumph over your enemies, be just, give to

the Divine Being the only offerings worthy of Him—virtue, compassion,
forbearance——"

"With the guillotine!" called the voice in the crowd, with a bitter laugh.

A murmur rose round the man, every one whispering out of respect for
Robespierre, who continued his harangue. They questioned the man,
threatened him. Voices grew louder. "Silence!" called the officials, but the
disturbance went on. "He ought to be arrested!" and the words drunkard,
aristocrat, chouan, were thrown at him. "What did he want? What did he
say?"

"Yes, what did you say?" asked a patriot coming close to him.

"I say only what you ought all to cry out to that charlatan—'Instead of
burning incense to your idol, Tyrant, burn the guillotine!'"

This daring critic, as the reader will guess at once, was Olivier.

His voice was drowned in a burst of applause which greeted the words
of Robespierre encouraging him to go on with his speech.

In presence of such irony Olivier lost all self-control.

"And they can applaud him, the fools! They can applaud him!"

The fury of the multitude, now unchained, knew no bounds. Cries of

"To death with him! To death!" were heard amidst the awful tumult, which
completely drowned the voice of Robespierre, whose anxiety was now also
aroused. Olivier, down-trodden, his clothes torn to tatters, fought and
struggled in the grasp of twenty or more of the infuriated populace. "He
must be killed! He is an aristocrat! A chouan! To death with him!" One of
the patriots lifted a be-ribboned spike in the air, threatening to pierce his
eyes. But a man armed to the teeth, dagger and pistols in his belt, pushed
aside the crowd and seized the offender by the throat. He then turned and
bade them make way for the officers of the peace who followed him.

"Stand back there!" he cried. "This man is to be dealt with by justice

only!"

It was Héron, chief police-agent of the Committee of Public Safety.

With the assistance of his men Héron dragged the offender to the feet of
Robespierre, who, being informed of the affair, had asked to see the
interrupter.

But a vociferating crowd obstructed the passage. Robespierre

impatiently descended the steps of the altar. The whole Convention and the
cortège had moved also, wishing to see. The police forced a way in the
crowd for Robespierre. At the name of the Incorruptible the multitude gave
way, and Olivier appeared before him, struggling in the powerful grasp of
Héron.
 "Against whom does this madman, who disturbs our fête, bear a
grudge?" asked Robespierre.

"Against you! hypocrite and scoundrel!" Olivier cried; "against you,

who dare speak of justice and humanity on this spot soaked with the blood
you have spilled!"

A horrified scream rose from the crowd, but was as soon hushed at a
sign from Robespierre. Olivier tried to throw himself on him, but was held
back by the police.

"Look at the soles of your shoes, you butcher!" he cried desperately.

"They are red with blood!"

He was not allowed to continue.

The Incorruptible motioned the agents to remove him out of reach of the
furious and exasperated crowd, who continued to cry out—

"To death with him! To death!"

Olivier turned in the grasp of his gaolers and cried—

"You can kill me, murder me, ruffians! but I have cried out, as others
will cry out after me, 'Down with the scaffold!'"

His words were lost in the tumult. Robespierre reascended the steps of
the statue, and tried to calm the people.

"Citizens!" he said, "let us give ourselves up to the joys of this fête,

which the insults and outrages of a rebel shall not disturb! To-morrow the
sword of Justice will strike with renewed ardour the enemies of our
country!"

Loud plaudits followed, and cries of "Long live the Republic! Long live
Robespierre! Long live the Incorruptible!"

"Down with the scaffold!" cried a faint voice in the distance.

 It was Olivier, whom the police, aided by the National Guards, were
carrying away in chains.

CHAPTER VIII

AN EVENING AT THE DUPLAYS'

Robespierre slowly descended the altar steps with a preoccupied air, for
that last desperate cry of Olivier had struck its mark. However self-
possessed he might be, he had felt the blow acutely. That voice, full of
hatred and revenge, had risen from the crowd he thought entirely at one
with him! In their very applause at that moment the people were protesting
against an insult coming from their ranks! They were driven to defend him,
when he had dreamt that the populace would receive him with instant and
unanimous enthusiasm, insuring to him for ever the esteem of France!

Pale and anxious, he followed the procession to the Champ de Mars,

where the fête was to close with one crowning patriotic demonstration. He
felt that his supremacy was tottering, and wondered how many more
discordant notes would disturb the prevailing harmony. Alas! there were
already signs of jarring discord. Certain members of the Convention talked
aloud in a free, sarcastic strain, on the road, openly exchanging opinions,
emboldened by Olivier's public insult. Words of dark and ominous import
reached the ears of Robespierre—words of hatred and scorn, of tragic
foreboding, and portentous prophecy. "I despise and hate him!" said one.
"There is but one step from the Tarpeian Rock to the Capitol!" said another.
And a third added: "A Brutus may yet arise!" To close the mouths of these
backbiters, he mentally reflected, and to save all, nothing was wanted but
the vox populi, the supreme and national mandate, uprising from the
assembled multitude and re-echoed through the whole of France:
"Robespierre Dictator! Dictator for life!" But the Incorruptible awaited any
such acclaim in vain.
 The fête of the Champ de Mars which followed was wanting in the
brilliancy and magnificence of the preceding festival. Every one was hot
and unstrung. Robespierre again addressed the people, who, tired from
having stood so long under a burning sun, were listless and absent-minded.
The demonstration was drawing to its close amidst a general feeling of
depression.

Nothing but confusion reigned on the march homeward. Robespierre

was to return to the Tuileries to meet several of his colleagues, but instead,
he hurried away, fully resolved to shut himself up in his room and open his
door to no one, not even to the Duplays, who had dogged his steps the
whole way back, trying to catch him up, and only succeeding at the
threshold of their house, where Robespierre begged them to have their little
festive party without him.

"I want rest," he said.

"The fête went very well, didn't it?" asked mother Duplay.

"Yes, very well!" replied Robespierre.

"Then you are satisfied?"

"Perfectly!"

As Cornélie began to tell him of some details which she thought had
escaped him, he put her off gently, saying—

"Was it so? Indeed! Well, you will tell me that to-morrow."

"What! You will not dine with us?"

"No; I must ask to be excused."

And as she pressed him to join them, he repeated—

"No, no; I must beg you to excuse me! Au revoir till to-morrow! Au
revoir!"
 With these words he went up to his room and locked himself in.

Every one was in low spirits at the Duplays' that evening. They scarcely
tasted their supper. No one was deceived by Robespierre's feigned
indisposition; they were well aware that the fête had been a great
disappointment to him, and they shared his chagrin, though they determined
that this should be in no way apparent.

"We must not disturb his meditations," observed mother Duplay.

"But are we not going to see the fireworks?" asked the boy Maurice
anxiously.

"We are not," declared mother Duplay. "How could we enjoy ourselves
without him?"

And they went early to bed.

The house, which had awakened to joy, now slumbered silently whilst
Paris was being lit up to prepare for the populace, again in holiday mood,
the promised display of fireworks.

Robespierre rejoined the Duplays next day at supper. He had spent the
morning and afternoon locked in his room, under pretext of working. And
work he did. Alone, in sullen silence, he prepared that atrocious Prairial
law, which he intended to lay before Convention forthwith—a law which
aimed at nothing less than the entire suppression of the right of defence
before the Revolutionary Tribunal. Moral evidence was to suffice; cross-
examinations, depositions, and the testimony of witnesses were to be done
away with. To be a "suspect" would itself be a proof of guilt.

Ah! he had been insulted! Well, this was his reply to the insult. He had
wished to establish his dictatorship under conditions of peace, but the great
pacific demonstration had not availed him. Were these cowards only to be
subjugated by terror? They should have it then, with renewed vigour, in a
whirlwind of tempestuous violence carrying everything before it. It should
be a fearful and memorable lesson! Every trace of those stubborn,