Episode 25: Banco dei Medici

This episode is brought to you by Audible. Audible is the leading destination for audiobooks and other digital media. Audible has hundreds of history titles related to the Italian Renaissance. With your free trial, you can download The House of Medici Its Rise and Fall by Christopher Heber. Just go to AudibleTrialcom. Forward slash I Take History to sign up today. By getting a free trial, you would also be supporting this podcast. I Take History with My Coffee Podcast, episode 25, Banco dei Medici. "They gave an opportunity to the family of the Medici to recover their influence. The first to do so was Giovanni Di Bicci di Medici who, having become one of the richest men and being of a humane and benevolent disposition, obtained the Supreme Magistrate by the consent of those in power. Niccolò Machiavelli. History of Florence and the Affairs of Italy, book 4, 1525. Welcome back to the I Take History with My Coffee Podcast and thank you for continuing our exploration of the early modern period. To start this episode, I'm going to talk briefly about currency. Fourteenth-century Florence had both silver coins and gold coins. The silver coin was known as a picciolo and the gold coin was the Florin. But the picciolo could not add up to the gold Florin. They operated as two separate currencies. The logic of this was that gold and silver were separate metals and each metal had its own value. To fix a relationship between gold and silver would be like fixing a relationship between apples and oranges. Two separate currencies also had the practical effect of social division. The picciolo was the money of people with low incomes. This was how wages were paid. It was the price of bread and other foodstuff. The florin was the money of the wealthy. It was the currency for luxury goods and international trade. One needed to save up a lot of picciolo to make the jump from poverty to riches. To move from one currency to another required the services of the money changers at the cost of a small commission. This class division in the self-styled Republic of Florence was evident in another critical way. Not everyone was equal and not everyone could participate in the city's government. There was the Popolo, or the people, but this did not encompass all the citizens of Florence. The Popolo represented the members of the mercantile, artesian and professional classes, that is, notaries, judges, doctors, merchants, master craftsmen and bankers. The popolo itself was divided. The popolo grasso wealthy businessmen from the major guilds, wool and silk merchants, bankers, lawyers and other professionals, and then the popolo minuto, those we would call small business owners, shopmasters, and retail shopkeepers. These all belonged to the minor guilds. As we saw in episode 22, power within the Florentine government was concentrated among the major guilds, the popolo grasso. These distinctions of social status became important in how their supporters and critics perceived the Medici. Like other great families, the origins of the Medici are obscured by myth and a lack of records. The legend mentions a knight of Charlemagne by the name of Averado. This knight had once passed through Tuscany. On his way to Rome, in an area north of Florence known as the Magello, Averado came upon a fearsome giant who was terrorizing the countryside. Averado fought the giant and killed him. During the fight, Averado's shield was dented in several places by the giant's mace. As a reward, Charlemagne allowed him to represent his victory with red balls on a gold field as his coat of arms. This here after became the insignia of the Medici family. Others suggest that the balls represent pills or cupping glasses due to the Medici, as the name implies for once, doctors and apothecaries. Another suggestion is that the red balls are coins, the emblem of pawnbrokers and money changers. What is certain is that by the 13th century, the Medici had become a respectable but unassuming family in Florence. By the end of the century, two family members had served as Gonfaloniere, the standard bearer of justice, the office in charge of internal security and maintaining public order. The family suffered a slight downturn in fortunes in the early decades of the 14th century, but they were still substantially well off. In 1370 and 1378, a Medici was again elected Gonfaloniere, indicating a resurgence in the family's fortune. This was Salvestro de' Medici, but 1378 was the year of the Ciompi revolt in Florence. The aftermath of the Black Death in Italy and elsewhere meant a shifting dynamic between peasant and lord and laborer and employer. The profound labor shortage caused by the plague years meant workers could compete for higher wages. In the latter half of the 14th century, the working class tried to translate newfound economic power into political power. In many places In Florence, the lowest class of workers, particularly those in the essential woollen industry, organized a revolt against the ruling oligarchy of merchants, bankers and lawyers. They were referred to as the ciompi, for the style of wooden clogs that they wore. This revolt reflected a growing discontent with income disparity and unfair labor practices. The ciompi also wanted greater government representation and more exclusive political participation. For a brief time they expanded the definition of the popolo to include much of the lower classes of Florence, granting them a short-lived voice in the city's political life. The Salvestro de Medici attached himself to the cause of the ciompi and his reputation grew with their brief success. But their ultimate failure was also the Salvestro's undoing. Ruin ed, the Medici family name would always be associated with the party of the people, an association regarded with suspicion by the other leading families of Florence. Yet it would be Salvestro's grandson, Giovanni de Bicci de Medici, who would resurrect the family's reputation. Giovanni was born in 1360 in Florence. His father was Alverado de Medici, one of Salvestro's sons, but he died in 1363, perhaps of the plague, but he died with a respectable amount of wealth to be divided up between his five sons. Giovanni ended up with little of this inheritance. Giovanni went to work for his cousin, Vieri di Cambio de Medici. Vieri had already established himself as a prominent banker. His main office was in Rome, but he had already expanded to Venice, Genoa and Naples when Giovanni became an apprentice. After his marriage in 1385 brought in a substantial dowry of 1200 florins, Giovanni settled in Rome as the executive partner of cousin Vieri's bank. Here he learned everything he needed to know about the banking business, the importance of a bank having branches in major commercial cities and how to mix financial and commercial transactions across international boundaries. In 1393, Vieri retired and Giovanni bought out the Rome branch of the bank. Under Giovanni's guidance, the bank expanded quickly, including a second Rome branch and a new branch in Geneva. But in the fall of 1397, Giovanni de Bicci de Medici registered his bank with the regulatory authority in Florence, the Arte di Cambio, the Exchanger's Guild, and this marks the beginnings of the Banco dei Medici that would dominate international trade, culture and politics. Giovanni put in 5,500 florins to start his new bank. He had two other partners Benedetto di Lippaciccio of the Bardi banking family and Gentile di Baldessarboni. Benedetto contributed 2,000 and Gentile added 2,500. But Gentile pulled out within a few months, taking his share with him, and Giovanni increased his stake to 6,000 florins. After paying rent and salaries and reserving for bad debts, the bank made a profit of 1,200 florins in the first 18 months, or about 10% annually. This early foundation was built upon Giovanni de Medici's careful cultivation of a relationship with the papacy. Ironically, the institution that condemned usury would be the agent of growth in international banking. The church collected tithes from all over Europe, and this was essentially an international tax, but no physical money was sent. Most of it was paid through bills of exchange paid out through bank offices or corresponding agents in Rome. Pilgrims, too, carried bills of exchange or letters of credit. Currencies are exchanged and the bankers skim off their service fees. When he worked for his cousin in Rome, Giovanni learned the subtle tricks of working with the papal curia, which handled the church's finances. When the church needed a loan, the bank could not ask for interest. This was a sin. Most bankers, though, functioned also as traders, and in this role they sold goods to the church. Interest was built into the price of the goods. When church officials wanted to play investor and see a return on their investment, bankers would pay out at the end of the year and call it a gift. Thus, both church and banker danced around the sin of usury. Like their peers, the Medici were merchants as well as bankers. They procured goods for their affluent clientele: wa ll hangings, painted panels, manuscript books, jewels and enslaved people. They speculated with alum, wool, spices and silk commodities. Giovanni owned two wool workshops and was a member of the powerful Arte della Lana, the wool merchants guild. The church at the start of the 15th century was still in a sorry state of affairs. There were two claimants to be the spiritual authority of all Christendom. A pope still existed in Avignon, Benedict XIII, and an Italian pope, Gregory XII. In 1409, a church council met in Pisa. This council deposed both popes and elected a new pope, Alexander V. This effectively created a situation where there were now three popes. Alexander V died shortly afterward and Baldassare Cossa was elected in 1410. Cossa came from an old Neapolitan family and once had been a pirate. He was a sensual, adventurous person as well as being unscrupulous. Many looked at him with suspicion as he entered the church's service. Cosa took the name of Pope John XXIII. A new council convened in 1414 in Constance, Switzerland to resolve the issue. Among Pope John's traveling party was a representative from the Medici Bank acting as the pope's financial advisor. By this time the Medici Bank had firmly established itself as the pope's bankers. Initially, the amount of business with the Papal Curia had been small, as other Florentine banking houses acted as agents in the past. But the volume of business would increase when Giovanni de Medici took over his cousin's branch in Rome between 1386 and 1397. But it would be with Pope John XXIII that the association between pope and banker would become closer. It was rumored that the Medici had provided the funds to Cossa with which he purchased his cardinal hat. And while he was cardinal legate in Bologna between 1403 and 1410, he had been in constant correspondence with Giovanni de Medici. With the ascension of Baldasare Cossa to the papacy, the Medici began to reap the profits of its relationship with the Papal Chamber, the avenue by which the Church's revenue was collected and distributed. The Medici were the principal backers of Pope John's war against the King of Naples who supported the rival Gregory XII. When Pope John made peace in 1412, the Medici found the 95,000 florins to be paid as part of the treaty. Over half the profits of the Medici bank now came through its two Rome branches. The Council of Constance in 1414 could have gone better for the Medici. Pope John XXIII arrived to face several accusations, from heresy to tyranny, to the seduction of the women of Bologna. The accused Pope tried to escape in disguise but was betrayed and brought back to face the Council. The Council deposed him and Benedict XIII, forced the resignation of Gregory XII, and elected a new pope, Martin V. Ill and destitute, the former Pope John remained a prisoner at Heidelberg for three years. He was released when the Medici paid the ransom through their Venetian branch. He returned to Florence, where Giovanni provided him with a comfortable home for the remaining months of his life. Under Martin V, the Medici were not wholly excluded from the financial affairs of the Curia, but they did not enjoy the same special privileges as before. Their rivals, the Spini, now enjoyed that special relationship until 1420, when the Spini Bank failed and went bankrupt. The Medici manager in Rome took over the Spini business and the fortunes of the Medici Bank were again improved. In a few years they became the most successful enterprise in Italy and the most profitable family in Europe. When Giovanni retired in 1420, the Medici Bank made 152,820 florins in profit. Giovanni took three quarters of this. Given that the florin is roughly $200 in today's money, the Medici profits amounted to nearly $30 million. Giovanni de Bicci de Medici had not been born rich. He made his fortune and was determined not to lose it. Though his sympathies might lay with the Popolo Minuto and garnered their support, he acted with discretion, aware of the Florentine distrust of overly ambitious men. He displayed modesty and restraint. He was known to be kind, honest and humane, but everyone recognized his shrewdness. He would have preferred to stay out of the public eye, but he knew that a man in his position was obligated to serve the state. So he reluctantly served as prior in 1402, 1408, and 1411. In 1421, he accepted the office of Gonfaloniere. Outside of this, he was content to remain in the shadows, allowing others to control the government As he was dying in 1429, he advised his sons "do not appear to give advice, but put your views forward discreetly in conversation. Be wary of going to the Palazzo della Signoria. Wait to be summoned and when you are summoned, do what you are asked to do. And never display any pride should you receive a lot of votes, pride, litigation and political controversy. And always keep out of the public eye, despite his presence to follow his father's advice and remain modest and reticent to hold office, Cosimo de Medici was more ambitious than his father. He would build upon and expand upon his father's success and become the first citizen of Florence. We will discuss Cosimo de Medici in the next episode. As always, maps and other supporting resources for all episodes are listed in the episode description. In the meantime, for more historical content, please visit the I Take History With My Coffee blog at itakehistory.com and also consider liking the I Take History With My Coffee Facebook page. Feedback and comments are welcome at itakehistory@gmailcom or you can leave a review on Apple Podcasts or on Spotify. 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