In his short time at the State Bank, Stieglitz brokered several foreign loans. In 1862 he helped to secure a loan of £15 million at 5 per cent interest for monetary reforms from the London- and Paris-based Rothschilds. In May 1862 it was announced that henceforth the State Bank would exchange gold and silver coins and bullion for paper money. However, the State Bank was forced to cease this practice by November 1863. The reform failed because of the Polish rebellion of January 1863. The rebellion led to a sharp budget deficit and panic on the Petersburg stock exchange. The free exchange of paper money into silver and gold had to be halted. A long period of paper money circulation began. Resources were needed to support the budget, and in i864 and i866 Stieglitz concluded two large loans at 5 per cent interest rates with the English and Dutch. Thesebailouts, brokered by Hope and Co. (Amsterdam) and Baring Brothers (London) were intended to stabilise Russia's financial situation. Other measures were taken as well, but this was not enough to overcome the fall of the exchange rate for the paper rouble. The State Bank raised its discount rate to 8.5 per cent, and Stieglitz was forced to resign. After his resignation, the Foreign Department of the Special Credit Chancellery of the Finance Ministry took control over concluding foreign loans.[360]
In the i860-80s, a system ofjoint-stockbanks of commercial credit emerged in Russia, as did mutual credit societies. St Petersburg and Moscow became large banking centres.
In i864 in St Petersburg, the first joint-stock bank was founded, the Petersburg Private Bank. Soon after, several more banks opened in the capitaclass="underline" the Petersburg International Commercial Bank in 1869; the Volga-Kama Commercial Bank in 1870; and the Russian Bank for Foreign Trade in 1871. In 1899 the Siberian Bank transferred its board of directors from Ekaterinburg to St Petersburg and at the beginning ofthe twentieth century the Azov-Don Bank moved its headquarters from Taganrog to the Russian capital. This group of Petersburg banks began to play the leading role in the financial life of the empire.[361]
In contrast to the Petersburg banks, private banks in Moscow were connected to the government, foreign capital and European banking to a lesser degree. In Moscow capital was controlled largely by Old Believers, who were to a certain extent even anti-government. In i866 the Merchant Bank was founded in Moscow; in 1869 the Moscow Merchant Society of Mutual Credit; and in 1870 the Moscow Discount (Uchotnyi) Bank and Moscow Commercial Bank. A number of other banks were founded in the 1870s but many of them quickly collapsed. Around the beginning of the twentieth century new influential banks appeared in Moscow, linked to L. S. Poliakov's banking house. Poliakov moved the headquarters of the Moscow-Riazan Bank from Riazan to Moscow, and later the bank became known as the Moscow International Commercial Bank. He also transferred the South-Russian Industrial Bank's main offices from Kiev to Moscow.
In the beginning of the 1860s a new system of mortgage credit was formed in Russia. In addition, societies of mutual land credit and several joint-stock land banks opened. Also, two state banks for mortgage credit were founded in the capitaclass="underline" the State Peasant Land Bank in 1883, and the State Noble Land Bank in 1885. The creation of state banks for mortgage credit further strengthened the Ministry of Finance's control over banking.
Banks in the capital and banking houses were closely connected to the government and many ofthem acted as conduits of state policy abroad. Among such banks at the end ofthe nineteenth and the very beginning of the twentieth century was the Saint Petersburg International Commercial Bank. In i894 it actedjointlywithagroupofFrenchbankstofoundtheRusso-Chinese Bank. By the beginning of the Russo-Japanese War this bank became the main channel for moving capital from Russia to the Far East. The Discount-Loan Bank of Persia was created in Persia to benefit Russian investment and trade. In contrast to the Russo-Chinese Bank, the Discount-Loan Bank of Persia was not linked to foreign capital but instead issued credit at the expense of the State Bank and State Treasury. Hoping to break into markets in the Far East and Central Asia, the Finance Ministry also helped to create the short-lived Russo-Korean Bank.[362]The Great Reforms of the late 1850s to early 1860s, especially the banking reform and emancipation of serfs, allowed the government to set a course for faster development of Russian industry. Beginning in the 1860s, the commercial-industrial policy of the tsarist government acquired a systematic character. The Russian government in the second half of the nineteenth century was often an imperfect machine. However the Ministry of Finance was a noteworthy exception. It was headed by distinguished statesmen: M. Kh. Reutern, N. Kh. Bunge, I. A. Vyshnegradskii and finally S. Iu. Witte were ministers of finance for long periods and key figures in government. Bunge and Vyshnegradsky were also scholars recognised worldwide.[363]
In his first years as finance minister, between 1866 and 1870, Reutern advocated encouraging private enterprise. With European countries increasingly allowing private enterprises to form without explicit government permission, Russian leaders understood that new legislation was needed to give more room for private initiative in the founding of joint-stock companies.[364] However, this idea remained unrealised. Possibly influenced by the 1873 stock-market crisis, Reutern ordered that work cease on the proposed legislation in 1874 and began to support restricting the foundation of joint-stockpublic enterprises.[365] In 1877 Reutern argued that the government should use its resources to combat speculation on the stock market, regulate the exchange rate of the rouble and bonds, and discourage free competition. It was this logic that started the practice ofthe government supporting, accordingto its ownjudgement, individual enterprises and banks by providing them special loans from the State Bank.[366]As a result, in the 1870s the state developed several methods to influence the country's economy.
In the 1870s the Russian government floated a series of railway bonds on European markets. From 1870 to 1884 the tsarist government produced seven issues of consolidated railroad bonds to replenish the special government fund for supporting railway companies. The first four bond issues, as well as the seventh, carried an interest rate of 5 per cent; the fifth issue offered 4.5 per cent, and the sixth issue - 4 per cent. The first five issues (two at £12 million, and the rest at £15 millions each) were sold through the Paris and London Rothschilds. The total sum of £15 million ofthe fourth bond issue was partly floated through the Rothschilds, the State Bank, and also through Hope and Co. as well as the Paris banking house Vernier. The active participation of German banks in Berlin, Hamburg and Frankfurt was significant in the sixth and seventh bond issues.
In the second half of the 1870s, because of the deterioration in Anglo-Russian relations due to competition in Central Asia, Russia's main creditor became Germany rather than England. By the beginning of the 1880s major German banks (Diskonto-Gesellschaft, Bleichroder, M. A. Rothschild, Mendelssohn, Warschauer, Berliner Handelsgesellschaft) formed the so-called Russian Syndicate for floating Russian loans. The Amsterdam banking house Lippmann and Rosenthal also closely worked with this syndicate.
360
For more on Stieglitz, see B. V Anan'ich, 'Stiglitzty - Poslednie pridvornie bankiry v Rossii', in
361
Anan'ich et al. (eds.),
362
SeeB. V Anan'ich,
363
P. A. Zaionchkovskii,
364
I. F. Gindin,