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Fergusson-Tepper’s Falenty The episode of free banking in Poland in the 18 th century. Wojciech Rogowski 1 Here, far from worries, By which the court affairs oppress the spirit, You are being called by the place of repose, a friend of weary heart. Here you may breathe, you may wander anywhere, Here you may have a deep breath of air (...) A.D. 1717 With those words, praising the beauty of the surrounding area, by that Latin inscription, Franciszek Jan Załuski, the then owner of the estate, wojewoda of Czernichw, honoured restoration of the palace in Falenty. The charm of that area has been maintained up to now and similarly as it was in remote centuries, illustrious persons still come to visit Falenty. The conference on the central bank monetary policy organised every year by the National Bank of Poland, this time taking place in Falenty Center, induces us to remind not well known episodes of Polands history and the history of Polish and European banking connected with that place. 1 National Bank of Poland, [email protected]

Fergusson-Tepper’s Falenty · in-law Œ received the right of nobility, conferred on them by the 4 Years™ Sejm (Sejm - the Polish Parliament). Scottish and knighthood roots and

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Page 1: Fergusson-Tepper’s Falenty · in-law Œ received the right of nobility, conferred on them by the 4 Years™ Sejm (Sejm - the Polish Parliament). Scottish and knighthood roots and

Fergusson-Tepper’s Falenty The episode of free banking in Poland in the 18th century.

Wojciech Rogowski 1

Here, far from worrie s ,

By whi ch the court a f fa i r s oppress the sp ir i t ,

You are being cal l ed by the pla ce of repose, a fr i end of weary heart .

Here you may breathe , you may wander anywhere ,

Here you may have a deep brea th of ai r ( . . . )

A.D. 1717

With those words, praising the beauty of the surrounding area, by that Latin

inscription, Franciszek Jan Załuski, the then owner of the estate, wojewoda of

Czernichów, honoured restoration of the palace in Falenty. The charm of that area

has been maintained up to now and similarly as it was in remote centuries, illustrious

persons still come to visit Falenty. The conference on the central bank monetary

policy organised every year by the National Bank of Poland, this time taking place in

Falenty Center, induces us to remind not well known episodes of Poland�s history

and the history of Polish and European banking connected with that place.

1 National Bank of Poland, [email protected]

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The residents of that area have been since a long time connected by economic ties

with distant European regions. The oldest trances of settlement (bell-shaped tombs,

ceramics) at the area of Falenty estate is dated on 1200-600 B.C. In the first ages of

our era that marshy area were intensively exploited, morass ore was acquired and iron

was made in primitive smelting furnaces localised in the Falenty estate. Of the crude

iron produced there arrowheads, spears and swords were forged, later in great

quantities used by Huns and Vandals tribes conquering Rome.

The settlement in that area was strengthened as early as in early Middle Ages,

however the importance of the settlement increased not earlier than at the time when

the Capital City of Poland was transferred by Zygmunt III Waza (Vasa) to Warsaw.

The beautiful scenery of the locality being just 2 miles off the city, at the road to

Kraków, was appreciated by the royal dignitary, wojewoda of Dorpat (Tartu) Zygmunt

Opacki, who at the beginning of the 17th century have a magnificent, built of bricks,

palace constructed there. Thanks to splendid scenery, ample game and hospitable

hosts Falenty were visited by Polish princes and kings of Vasa House. There the king

Jan III Sobieski

stayed with his court

and also envoys

travelling to the

Capital City.

In 1782 the

Falenty estate was

acquired by the

Tepper family � the

Warsaw bankers,

entwining its history

with the history of

Polish financiers for

two decades.

The buyer of the

estate � Piotr Tepper was a son of a Poznań furrier and a fur trader Piotr Tepper,

whose ancestors, as the name seems to indicate, arrived in Wielkopolska from

Brandenburg. Piotr junior was born in Poznań in 1702. He practised the trade at the

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side of his father. However soon he moved to Warsaw, where he became an

employee, an accountant and a shareholder of commercial companies. The ledgers

written by Tepper�s hand from 1723 have been preserved till the present times.

The Saxon Era in Poland was the time of peace, weak state and low taxes. Tax

liabilities in Poland were six times lower than in neighbouring Prussia and Russia, 12

times lower than in Austria and as much as 30

times lower than in England or Holland .That

situation favoured the magnates and a part of

nobility going rich, and therefore it favoured

opening domestic market and flourish of the trade.

Mainly foreign traders were taking advantage of

that time of economic prosperity, although certain

Polish traders� businesses thrived perfectly on that

surge of demand, particularly when they were

backed by such a talent as that of Piotr Tepper.

Contacts with western cities kept, among others,

thanks to his and his wife�s vast families; his wife

came from Wrocław merchant Sauter family. Piotr Tepper knew very well how to

competently use the prosperity to attain to his own position and fortune. His

companies supplied the Polish aristocracy and richer nobility with various articles of

luxury manufactured in England, France, Holland and Germany. Those goods were

in great demand among Polish nobility. P. Tepper was one of the first founders of

modern department stores in Warsaw. In his vast, as in those times, department store

well situated at Miodowa street, it was possible to buy almost everything � from

English coaches, articles to furnish house to writing paper, pins or luxury food

articles, for example English beer.

Competent joining the Warsaw establishment, in which he was helped by his

activities in evangelic community in Warsaw was not of less importance. He was

founder of churches, animator of religious and social life. Numerous contacts with

royal courts, not only the Polish one, were also helpful. In his palace the Russian

legation hired a floor, his quarters were also used by the Austrian Embassy in

Warsaw.

With time financial interests started to play more and more important role. Their

full prosperity falls on the time when Stanisław August Poniatowski was the King,

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when the Bill of Exchange Act of 1775 created the basis for capitalism and free

banking development. Adoption of his nephew Piotr Fergusson-Tepper, from that

time called Tepper-Junior, who with time overtook management of the family

business, also contributed to success. In the following years that bankers family

developed their business into a form of a true financial cartel. Piotr Fergusson-

Tepper married his two elder daughters � Henryka Katarzyna and Elżbieta Dorota

off to well prospering young financiers: Karol Szulc (in 1780) and August Wilhelm

Arendt (in 1783). Most probably the dowries acquired with the hands of his

daughters constituted �silent shares� in the bankers houses managed by his sons-in-

law. Anyhow, Tepper�s position was much better when Szulc�s and Arendt�s

companies started to operate as subsidiary banks in relation to mother company.

At the beginning the financial activity was based on crediting trade, money

exchange, cashing domestic and foreign checks, and performing services relating to

concluding transactions, as for

example importing jewellery

for the Empress Catherine II.

After some time the Tepper�s

�Banking House� became

independent, competing with

other, then arising, banks,

those of Szmul Zbytkower,

Piotr Blank, Prot Potocki or

Jędrzej Kapostas. Those

bankers were dealing not only with their own funds, but also with entrusted funds, as

they were accepting money deposits, paying from 6 to 10% annually. They were

making cash settlements and mutual transactions in primary interbank market, they

were servicing the traders financial needs at exchange markets operating at that time.

Tepper�s Banking House and Banking Houses run by Prot Potocki, the first

nobleman dealing with banking � having their branches in many cities in Poland �

were particularly active. Tepper�s presence in financial markets in Amsterdam and

Berlin, and also in Kherson on the Black Sea coast, attest the more than local nature

of his business. He was keeping vivacious contacts with foreign bankers, was making

payments ordered by Petersburg, Vienna and other banks, he was also keeping his

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deposits there. In his bank there were also foreign banks and foreign courts

(Austrian, Prussian) deposits.

Tepper�s Banking House also performed banking services, now called investment

services and private banking. He accepted other people�s funds to manage them in

compliance with orders received from the owners, often those were foreign funds.

Tepper�s Bank financed mainly industrial undertakings, particularly those made on

the King�s initiative and supported by the government. His Bank became, among

others, a co-founder of Fabryka Krajowa Płócienna (Cotton Cloth National Factory)

in Łowicz, Kompania Manufaktur Wełnianych (Wool Manufacture Company),

Kompania Beusta (Beust Company),

appointed �to search for and evaporate salt

in royal property�. Those undertakings had

a modern form of a joint stock company

with the defined corporate governance

principles, public shareholding and multi-plants structure.

Participation in implementing the economic policy the enlightened country gave

numerous contracts with the King and magnates, as well as with the State

institutions, for example Komisja Skarbowa Koronna (The Crown Treasury Commission)

(the ministry of finance), or Rada Nieustająca (Permanent Council) (the government). P.

Tepper together with Jan Blank, his greatest competitor, formed a company which in

1775 won a tender organised by the Treasury Commission for usufructs lease of the

National Lottery, which yielded an annual income to the Crown Treasury of 300.000

zlotys. Income of the Company was not smaller, the Company was operating till

1795.

The Teppers were keeping, as it was then said, �permanent relationships with the

King�s casket�. For many years the King was their main client. The Tepper�s Bank

was granting numerous and substantial loans both to the Crown Treasury, and to the

King. It also operated in taking credits in Holland or in Italy, charging for its services

substantial fees. The Tepper�s Bank was also granting services to Russian Army then

operating in the territory of the Republic, as well as other countries� envoys. The fact

that the King Stanisław August was privately indebted at Tepper Bank for 11.5

million Polishi zlotys. The representatives of Radziwiłł, Potocki, Ogiński and other

magnates families, not even mentioning petty nobility by name, were also Tepper�s

debtors.

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The King - Stanisław August Poniatowski favoured his banker. Even before

Tepper was raised to the rank of nobility, in July 1787, coming back from a

significant meeting with Catherine II in Kaniów in Ukraine, the King visited Falenty.

In that time the Tepper cartel financed most initiatives and construction works

undertaken by the King Stanisław August and his associates. Alas, because of

imperfection of systemic solutions relating to finances of �the King�s and the

Treasury�s funds�, the King�s debt was dangerously aggrandizing each year. In 1793

its total amount reached 33 million Polish zlotys, while the King�s annual income

amounted to about 7 million Polish zlotysii. At that such dependence of the King�s

court from financial circles had a significant influence on the eminent burghers

acquiring the rank of nobility. In November 1790 the Teppers � Piotr and his sons-

in-law � received the right of nobility, conferred on them by the 4 Years� Sejm (Sejm -

the Polish Parliament). Scottish and knighthood roots and coats of arms of the

Fergusson family appeared to be helpful. �The Constitutional Sejm of 1790, puts the

bankers Piotr Blank, Fryderyk Kabryt and his son-in-law Jan Meysner, in one line

with the Tepper family � as �the first bankers of the Republic�, stating that �by

opening their banks make the trade easier, therefore they become useful for the

country�. A specific ranking of banks based on

their founders reputation and financial power

appeared in that document for the first time.

Jan Klug, F. Segebarthiii, Frybes brothers,

Jędrzej Kapostas, F. Morino, J. Fenger and W.

Laśkiewicz were ranked as �secondary bankers�. The owner of one of the largest

financial institutions � Antoni Protazy �Prot� Potocki, as a magnate, did not need to

acquire the rank of nobility. Acquiring the rank of nobility was absolutely beyond the

reach of the largest Jewish entrepreneur and banker in that time Berk Szmul

Jakubowicz Zbytkower.

But let us come back to that summer 1787 ....

The reconstruction of the Falenty palace had been finished before the king

arrived. The palace, bought by Piotr Tepper in 1782, 65 years after it had been

reconstructed by Franciszek J. Załuski, was in a state wanting repairs. The

architectural and town planning design was prepared by Szymon Bogumił Zug, a

renown Warsaw architect, who was a good acquaintance of Piotr Tepper Senior, for

whom he had already had buildings constructed (among others the palace �Pod

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Czterema Wiatrami� (�Under Four Winds�). He became his friend during construction

of the monumental St. Trinity Churchiv for evangelic-augsburg community, whose

council was chaired by P. Tepper. Szymon B.Zug had already been famous because

of palaces and gardens designed by him in Warsaw and its surrounding (among

others Arkadia). The marshy area surrounding the Falenty palace made a good

occasion to make an extensive park �according to the English fashion� and to use

the charm of ponds and streams. Later reconstructions in the 19th century blurred the

original arrangement of Falenty gardens. Taking into account relations of the people

living at that time, the representative character of the estate located near Warsaw and

opulence of its owners, we may be sure of its beauty and splendour. At the beginning

of 1790s the fortune of Piotr Tepper was estimated at 60-65 million Polish zlotys.

Not without reason his contemporaries defined him as �the greatest banker in the

North�, while travellers visiting Warsaw inserted in their accounts extensive

comments on paying a visit in his house. The high living level of his family may be

attested by the preserved scraps of memories � on special post by which underwear

and Brabant laces were regularly sent to laundry in Paris, on tea brewed with the use

of solely English coal, on paintings collection of which �even the King was not able

to boast of�, on revelry balls, parties, equipages and other luxuries, of which � as

people of that time mention � �only few estates could equal�. Very probably that

reproved sumptuous life, luxury of the residence, snobbery � was an intended

manifestation and served supporting of the banker�s prestige in financial market, in

compliance with the principle that �the financial magnate� should prove with his

every move that he is richer than any other landowner, his potential customer. If he

is able to afford such luxury, certainly he makes a good business. The same might

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have been proved by the King�s visits. Stanisław August Poniatowski was entertained

in Falenty really in a kingly manner. His visit was a true ennoblement for the whole

Tepper family gathering in their summer palace. Piotr Tepper senior was then living

in good health, Piotr Fergusson-Tepper probably welcomed the King, together with

his wife Maria Filipina and their ten children, including the two eldest daughters with

their husbands and a group of their children. Perhaps there were also the family�s

friends, like Szymon B. Zug, the architect, �the court saddler� and the renown

manufacturer of coaches - Tomasz Dangel with his wife Zofia, or even the

competitor � financier Prot Potocki. In great number there was Warsaw �company�,

members of the King�s family, senators and �numerous gentlemen�. The King�s

brothers � Michał, the primate of Poland, and the duke Kazimierz - were going to

meet the King�s cortege when after a three month travel he was coming back from

Dnieper Sich. A meeting in Falenty was for many people an occasion to hear an

account of the King�s meeting with the Empress Catherine II. In the ball room the

visitors were sitting at the

table adorned with a huge

cream cake in the form of

Łazienki Palace. The

discussion must have been

elevated, as people hoped

that Poland in her

international situation

might pose conditions on

Russia. After the dinner further visitors were coming from the Capital City, while the

King was strolling in the garden and talking with them till late evening. A show of

fireworks illuminating the whole garden and boats floating on the pond, as well as

�supper at beautifully adorned tables� made the culmination of the evening. Maybe a

Jewish band from a nearby inn in Raszyn played to dances, maybe among the guests

there also was a parson from the local parish dedicated to Saint Szczepan. The King

left Falenty the following day, on Sunday July 22nd, 1787 �about 9 o�clock, �showing

his contentedness and gratitude to the Honourable Gentlemen P. P. Teppers for

comfortably and kindly entertaining him with due decorum�v.

The Teppers gained friendliness of the local community, what has been proved by

a table built in the presbytery the church, extolling contributions of that protestant to

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the Catholic parish. In March 1783 the King Stanisław August granted a market

privilege for the village Raszyn to the enterprising Tepper Junior. Because of Jewish

expulsions in 1784, Tepper sheltered the expelled from Warsaw Jews in his estate

encircling Warsaw. According to the spirit of the epoch he planned to develop

Raszyn, then having 31 houses, to the role of a town centre (jurydyka). He noticed

that settlement�s beneficial location at the route leading to the south of the country

and he decided to profit it commercially. Taking advantage of the outstanding

architect, Szymon B. Zug�s

presence in Falenty, he charged him

with reconstruction and renovation

of the St. Szczepan Church and

with modern layout of the

settlement centre. He used his own

funds to finance the construction

of the whole complex of buildings

built of bricks around the old

market, most of which have been preserved up to now. A representative, neo-

classical storeyed building of the Town Hall, a post office building with a stable for

20 horses and a lodging part, a coach-house, an inn building (austeria), further a mill,

and on the east side a classical mansion � a presbytery, blacksmith�s shop and

numerous stalls.

Uneasy times were coming. The geopolitical situation of Poland was becoming

more and more complicated Poland was loosing sovereignty and parts of her

territory. However the activities striving to restore and to strengthen Poland

fructified with the modern Constitution of the Third of May � �which is worth more

then the English one� � such was the opinion of von Hertzberg - the Prussian

minister of foreign affairs � and with the ideas and projects of modern public

institutions, including the national bank, or of the banknotes issue. The 90s of the

18th century were not peaceful times. The politics cast larger and larger shadow on

financial, commercial and industrial interests. As a result of the first in Poland�s

history banking crisis the impressing progress of free banking slumped. The domino

effect started from the largest bank - Piotr Fergusson-Tepper�s Banking House.

The problems started to occur in winter 1793 at the then largest Polish financial

market in the market town Dubno. The market responded to the information on

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partition convention signed on January 23, 1793, by Russia and Prussia, on the

Prussian army invading Poland, on political agitation elicited by those events, but

above all, war being in the air � by drop in prices and huge demand for cash. In that

time there were no banknotes, bills of exchange were used instead, their circulation

was regulated by the Bill of Exchange Act of 1775, considered to be the corner stone

of Polish capitalism, and first of all, the Polish banking development. As a result of

good economic prosperity persisting in previous years, all the liabilities of Tepper�s

Bank were invested in numerous credits granted and own investments. In case of a

sudden, extraordinary need for cash, the bank usually took a refinancing credit

abroad. Tepper�s partner,

a Berlin Levy�s Bank,

refused � probably as a

result of political

demands of the Prussian

government - to cash a

check for rather little, as

compared with Tepper�s

assets, amount of cash.

The information on that

refusal spread in a flash, causing other Tepper�s creditors to withdraw their deposits

and presented the bills of exchange for payment. Because there was no liquidity, after

failed attempts to get help from Warsaw municipal authorities, and because in the

financial system there was no last instance creditor, the bank was forced to limit its

operations and payments. Perhaps regaining confidence would have been possible if

fatal political circumstances had not occurred. Tepper enjoyed his creditors

confidence, the more so, as a bank bankruptcy never happened before in Poland and

the nobility never even imagined that it was possible.

As the historians seem to believe, the events taking place in the Castle in

Warsaw on February 9th 1793 was a proverbial �straw that broke the camel�s

back�, causing a �flood of insolvency�. Sievers, the tsar�s ambassador, tried to

force the King Stanisław August to go to the Sejm in Grodno to confirm

Targowica. The King �evaded� saying thet he had no money necessary for that

purpose (about 1 million Polish zlotys). P. Tepper, �the King�s cashier� called for,

refused to grant any further credit, as his bank is short of money. By that he made

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a fatal mistake, not forcing inflow of cash, at least from the friendly Prot Potocki,

by that decision he causes a financial earthquake. The information on Tepper�s

insolvency � �the first banker in the Republic� � spreads around the city

immediately, causing an outburst of frantic, hysteric chase for money. During a

few days � not even a week � payment of 18 million Polish zlotys was

demanded!!! That was not to be borne by any bank independently. February 25th

was the day when Piotr Fergusson-Tepper officially bankrupted, and that was the

beginning of the end of Polish financiers. On following days the offices of all the

other banks of the financial group and of their strongest competitors were sealed.

The claims towards the 6 bankrupted banks were estimated at 250 million Polish

zlotys. After the Sequestration Commission was appointed and, as it seemed,

securing their interests, the creditors, because the banks were insolvent, applied to

the Sejm (Confederation of Targowica) at that time in session in Grodno,

demanding termination of banks liquidation proceeding. The fact how soon the

Sejm, at that time absorbed with loaded with consequences of Partition Treaty,

adopted a statute �on appointment of the commission to judge the matter of

bankrupted banks�, what required adoption of a modern bankruptcy law, may

indicate real perception of the financial crisis meaning for the State, as well as of

the public feeling. That was done as soon as on March 1st 1793. At the same time

the King passed a �note� ordering protection of bank books, in order to secure

bank secrecy, particularly the transactions (payment of salaries) performed by the

Russian legation. From that time till 1803 Teppers� property and estate was

administered by the said State commission, while after the last partition � by a

Liquidation Tripartite Commission of the Partitioners. In consequence of the 10

years Banking Commission activities the creditors of P. Tepper�s Banking House

regained about 43% of their dues. The Falenty estate was put to auction three

times, finally � in 1801 - it was bought by Tomasz Dangel, a friend of P.

Fergusson Tepper. T.Dangel achieved huge property manufacturing in Warsaw

coaches famous in the whole Europe. Piotr Fergusson Tepper who was widowed

in 1792, did not live so long to see that. In the time of Kościuszko Insurrection, in

Warsaw, a throng probably incited by the creditors or political opposition,

plundered Tepper�s department store and the �Banking House� at Miodowa street.

Tepper, defending himself in his house, was wounded and died on April 26th

1794. He was buried in his family tomb at evangelic cemetery at Powązki.

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Wojciech Rogowski, National Bank of Poland

P.S.

For the next two centuries Falenty estate luckily was in the hands of a few good

owners, merited for Poland�s economy and culture. It was a witness of the Battle of

Raszyn in 1809, bearing a lot of consequences for resumption of Poland�s

independence, and in the last quarter of the 20th century � of the intensive town

planning development of the near Warsaw Raszyn � along the busiest in Poland

�road to Europe�.

Iconography

p. 1 - A view on buildings at Raszyn market from the side of Falenty (ponds), photo

www.raszyn.pl

p. 2 � a fragment of a map �Okolice Warszawy w diametrze pięciu mil� (�Surroundings of

Warsaw five miles around�) worked out by the court cartographer, Karol de

Perthees, in 1783, from www.warszawa.web

p. 3 - Portrait of Piotr Tepper Senior (1702-1790), in collegiate room of the evangelic-

augsburg community in Warsaw, photo Z. Kornatowski (1937)

p. 4 - the palace in Falenty, south elevation, 1916, fot. Z. Fabianowicz (1999)

p.5,6 � 1 zloty coins from 1766 and 1787, photo from Korzon (undated)

p. 7 - scenic park at Falenty estate, photo by the author

p. 8 - a sketch drawing of the Ball Room in Falenty, by S.B.Zug, 1784, photo Jaroszewski,

Baraniewski (1992:39);

p. 9 - the Church of Saint Szczepan parish in Raszyn, photo by the author

p. 10 - Palace in Falenty, south elevation, 1997, photo from www.raszyn.pl

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Skodlarski J., 1997, Zarys historii gospodarczej Polski do 1945 roku, PWN;

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End notes: i To compare it�s worth to quote exemplary prices of that period: ray � a bushel (about 120 l) � 12.5 Polish zlotys (in Warsaw), 12 Polish zlotys (in Kraków), wheat - a bushel (about 120 l) � 18 Polish zlotys (in Warsaw), 15.5 Polish zlotys (in Kraków), meat � 0.5 kg � 7.5 grosz (in Warsaw), 4 grosz (in Wilno) a cow � 50 Polish zlotys, a coach manufactured by T.Dangel from 1,800 to 36,000 Polish zlotys peasants� boots � 6 Polish zlotys, Gentleman�s boots � 26 Polish zlotys, an ell of domestic woolen cloth � from 3 to 12 Polish zlotys, an ell of linen canvas � from 20 grosz to 1 Polish zloty. Carpeter�s day�s work � in Kraków � 2 Polish zlotys and 7.5 grosz, a quarterly pay of cavalry soldier � 300 Polish zlotys, Delegation of envoys from Warsaw to Grodno and back � 4183 Polish zlotys A letter sent by Crown Post � domestic 12 grosz, a parcel to Paris � weighing about 2 kg � 237 Polish zlotys. Three months trip of the King with his court to Dnieper Sich, to Kaniów � about 3 million Polish zlotys According to Korzon (undated: 16), Jasienica (1986: 412), Jezierski, Leszczyńska (1997: 85), Gieysztor (1980: 85) and Kornatowski (1937: 31). ii Beginning from 1717 the State budget was passed by the Sejm, and regularly from 1768. In 1791 it amounted to about 50 million Polish zlotys. iii He was a managing director in Tepper Bank. iv That building is still standing and adorns Małachowski Square in Warsaw. v According to the words of Adam Stanisław Naruszewicz, the King�s secretary, in the �Diary from the trip of His Majesty Stanisław August, the king of Poland to Ukraine and his stay in Kraków, till his coming back to Warsaw on July 22nd 1787, printed in that year in Warsaw, according to Fabianowicz (2001:22).