Monday, December 27, 2010

Banking: Ducats for Caravaggio, The Genoa Connection and Medici Moolah

A threefer from The Economist:
Ledgers that throw light on the past
SAINTS are important in Italy, nowhere more so than in Naples where San Gennaro is patron and protector. Three times a year, including December 16th, an ampulla containing the saint’s blood leaves a sanctuary in Naples Cathedral’s richly decorated royal chapel, a treasury of candelabra, frescoes, bronze and silver statues and quarry-loads of marble. Neapolitans gather to see the congealed blood liquefy.
Through a paper trail of documents authorising payment of craftsmen and painters, historians can piece together what the chapel cost when it was built and decorated in the 17th century. Not far from the cathedral, down one of the narrow streets that thread through the city’s historic heart, is Europe’s largest archive of banking and economic records. Owned by the Istituto Banco di Napoli Fondazione, it contains 300m documents and 25,000 huge ledgers (a few of which are shown above).

A deposit of 60 ducats (about 200 grams or seven ounces of gold), the rent for a farm in 1569, is the oldest piece of paper, from a time when Spanish kings ruled the Italian south. In 1794 the Bourbon monarchy created the Banca Nazionale di Napoli, bringing together eight public banks, including the Banco dei Poveri which was established in 1563. More name changes followed until the Piedmontese monarchy settled on Banco di Napoli in 1861 after ousting the Bourbons and unifying Italy....MORE
The Genoa connection
WHO were civilisation’s first financiers—the moneymen who could transform one man’s deposits into another customer’s credit? Perhaps they were the Egibi family in Babylon as early as the 7th century BC, though a more plausible case can be made for Pasion, an Athenian contemporary of Socrates at the start of the 4th century BC, when bankers were already the butt of music-hall humour (“the most pestilential of all trades”). Egyptians were using cheques 70 years before the birth of Christ, but Eurocentric historians look no further back than medieval Europe.

Even then, there is confusion about where the first European bankers banked. For example, Niall Ferguson, in his entertaining British television series, “The Ascent of Money”, is so dazzled by the magnificence of the Medici in Florence in the 15th century that he gives them more credit, as it were, than they deserve.
If European banking was invented anywhere, it was probably in Genoa in the 12th century, spurred on by the revival of trade in the Mediterranean. That, at least, is the case convincingly put forward at a website devoted to the history of the bank of San Giorgio. The site was formally launched at the end of 2008 at the conclusion of a 25-year study of Genoa’s early economic history in the voluminous and carefully preserved state archive. The prize possessions are documents from the 12th century describing financial instruments that are commonplace today....MORE
Medici moolah
TIM PARKS is a polymath among authors. He is a prolific novelist. In Italy, where he lives, he is a translator, an essayist, a memoirist and a professor. He also writes authoritatively about football. The subject of his new book extends his range even further, though Cosimo and Lorenzo de Medici would make convincing fictional characters. They are the two greatest celebrities in the history of banking, rivalled only by Nathan Rothschild.
Cosimo was the Renaissance man, well-read, with educated taste in painting and sculpture, and immensely skilled at having his cake and eating it. (In an aside, Mr Parks reports that the equivalent Italian expression is to have your wife drunk and your wine keg full.) Cosimo's reward for financing the restoration of the convent church of San Marco in Florence was a Papal bull absolving him of his sins—each and every one. Cosimo's grandson, Lorenzo, known as the Magnificent—though that is how Medici bankers generally referred to the boss—was a great patron in the time of Ghirlandaio, Pollaiuolo, Botticelli and Leonardo, all Florentine painters of genius.

No doubt the Medicis truly appreciated art, but Mr Parks is under no illusions about the ultimate purpose of the family's patronage. It was designed to make Florentines feel so good about the city that they were willing to suppress their republican instincts, and surrender political power to the Medici. It was brilliantly done. Niccolò Machiavelli praised Cosimo's ability to mix power with grace. But one of his first acts on becoming leader in 1434 was to change the rules which had curtailed banking operations. Mr Parks is a quick study, and his explanation of bills of exchange and trade finance in 15th-century Europe is a model for all economic historians. Consequently, when he says that one of Cosimo's first actions was to legalise "dry exchange"—a clever banker's shortcut to escape the church's strict laws against usury—we understand that the inspiration is self-interest and the motive is profit. Mr Parks, who is sceptical about bankers, writes about them with pace, wit and some passion.

The Medici dynasty was not long-lived. It began with Cosimo's father in 1397 and ended in 1494 with the flight of Lorenzo's son, Piero. Mr Parks asserts that the bank's attraction to political power eventually proved fatal. No banker can be a prudent lender when he is buying influence in court and financing armies, and lending to clients who considered repayment somehow undignified....MORE