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BANKING THROUGH THE AGES 
 
Digitized by the Internet Archive 
 
 in 2012 with funding from 
 
 LYRASIS members and Sloan Foundation 
 
 http://archive.org/details/bankingthroughagOOhogg 
 
-' 
 
 From a Painting by George Harcourt 
 
 Royal Exchange, London 
 
 GRANTING THE CHARTER FOR THE FOUNDING 
 OF THE BANK OF ENGLAND 
 
BANKING 
 
 THROUGH THE 
 
 AGES 
 
 BY 
 
 NOBLE FOSTER HOGGSON 
 
 ILLUST RATED 
 
 NEW YORK 
 
 DODD, MEAD & COMPANY 
 
 1926 
 
 5 r 
 
 VU<o 
 

 COPYBIQHT, 1926 
 
 By NOBLE FOSTER HOGGSON 
 
 First Printing, February, 1926 
 
 Second Printing, February, 1926 
 
 Third Printing, February, 1926 
 
 THE VAIL-BALLOU PRESS 
 
 BINGHAMTON AND NEW YORK 
 
PREFACE 
 
 Back in the pre-historic days when our Aryan fore- 
 fathers roamed the plains, and when a cow or an ox 
 was the standard medium of exchange, the crude cat- 
 tle pens in which these forerunners of our modern 
 currency were confined became, in effect, the first 
 banks. Indeed, our own word "pecuniary" is derived 
 from the Latin word pecus, meaning cattle. 
 
 Between those primitive cattle pens and the tower- 
 ing citadels of modern commerce stretches a romantic 
 story that epitomizes the upward struggle, not of a 
 calling alone, nor of a people but of human civi- 
 lization itself. For the pyramids of Egypt, the 
 temples of Greece, the Street of Janus of Rome, the 
 palaces of the Medici, all repositories of treasure and 
 centres of financial activity, were tokens of the devel- 
 opment of the artistic impulses and ideals of the na- 
 tions, but more particularly were they reflections of 
 the trade, the commercial relationships and the inter- 
 national amities that in our own day find their loftiest 
 expressions in the magnificent structures that are the 
 outgrowth of the needs of the great financial institu- 
 tions of the world. 
 
 In this volume the author gives brief but illuminat- 
 ing glimpses of the progress of banking, told not in 
 
 [5] 
 
 ^7 
 
PREFACE 
 
 the academic idiom of the historian but in the informal 
 and casual manner of the banker who is conscious of 
 the spirit of romance with which his calling is imbued. 
 That the story of banking trails back into the dim 
 mists of antiquity everyone knows. But the fact that 
 this story is replete with intense human interest, with 
 colourful detail, with stirring drama and with a sig- 
 nificance to civilization so profound as to be unparal- 
 leled in the history of any other vocation, comes to 
 us with a shock of surprise. Yet wars have been de- 
 clared because bankers have financed them, and peace 
 has been maintained because bankers have withheld 
 aid, and kings and nations and peoples have fought 
 and won and lost because their destinies were decided 
 in the counting rooms. It is with fragments of 
 such a history, told with the vision of a poet who, 
 while treating of the details of his narrative is yet con- 
 scious of their larger significances, that this informa- 
 tive volume deals. 
 
 [6] 
 
FOREWORD 
 
 The world tends more and more to organize itself 
 on a business basis. The underlying principles 
 which govern business relationship have proved 
 themselves sound and abiding while political and so- 
 cial systems have changed from age to age. 
 
 Perhaps, here in America, the breadth and zest of 
 our business enterprise were absorbed from the stim- 
 ulating freshness men found in the New World. 
 But the tradition and structure of business were cer- 
 tainly a heritage from the slow and painful develop- 
 ment of the Old World. 
 
 F. S. Chapin, author of "Introduction to the Study 
 of Social Evolution/' says: "Probably no other sin- 
 gle force in human history has been more important 
 in bringing about the complete transition from tribal 
 to civil society than the growth of commerce." And 
 this growth began along the borders of the Mediter- 
 ranean basin where our civilization was born. How 
 long ago may be judged by what is perhaps the oldest 
 commercial record which we have thus far traced. It 
 is the rock-graven story in the Valley of Hamma- 
 mat, Egypt, describing an exhibition sent by 
 Pharaoh Sankh-ka-ra to trade with the people of 
 the "Land of Punt," which was possibly the Somali 
 
 [7] 
 
FOREWORD 
 
 coast of Africa on the Gulf of Aden. This was ap- 
 proximately thirty-nine hundred years ago and the 
 commercial organization it implies must have long 
 preceded it. 
 
 But it was in Babylonia, rather than in Egypt, that 
 business first developed as an integral factor in 
 the lives of the people. Though Egypt was the 
 mother of most of the industrial arts, the people 
 were so bound to the land and intercourse among 
 them was so restricted that commerce as the fruit 
 of those arts never fully matured. 
 
 In the Mesopotamian valley, on the other hand, 
 when the curtain of history lifts, we encounter an eco- 
 nomic organization as advanced, in many ways, as it 
 was in Elizabethan England. This is disclosed in the 
 laws of Hammurabi, promulgated in Babylon 2,000 
 b. c, and in the many legal and business documents 
 from the period of this great king's reign which have 
 come down to us in the form of cuneiform inscriptions 
 on baked clay tablets. 
 
 These records, of which there is a surprising quan- 
 tity, give a fairly accurate picture of what must have 
 been the daily life of the community at that time. 
 
 The prosperity of the country depended on the 
 preservation of dikes which confined the waters of the 
 Tigris and Euphrates and the irrigating canals by 
 which the life-giving waters were distributed through 
 
 [8] 
 
FOREWORD 
 
 the fields. A strong administration naturally kept 
 up these important works while a weak and inefficient 
 one let them decay. Because the king was thus the 
 key to the prosperity of the nation he came to control 
 its agriculture and finally all its industries. So, issu- 
 ing from the king, there were laws regulating the use 
 of irrigation water, the rent of land, grazing, the 
 wages of workmen, the business of the commission 
 men or agents, debts, interest and virtually every- 
 thing pertaining to the economic life of the realm. 
 
 Rent was fixed at about six bushels of wheat an 
 acre. Interest might run as high as thirty-three and 
 one-third per cent. Imprisonment for debt and sale 
 into slavery were legal, but at the end of the fourth 
 year the debtor had to be freed. The wages of 
 skilled workmen were about thirty-five cents a month 
 based on wheat that sold for seven cents a bushel. 
 
 There were many slaves, as there were among all 
 conquering peoples of antiquity, but side by side with 
 them worked free farmers, laborers and tradesmen 
 who were permitted within legal limits to exercise 
 their own initiative, to undertake business ventures 
 at home or abroad and to make contracts for the 
 future. 
 
 These undertakings are set forth and described in 
 the Babylonian clay tablets. In this enduring form 
 our archeologists have found deeds and leases of land, 
 wills of personal and other property, accounts, notes, 
 
 [9] 
 
FOREWORD 
 
 mortgages, receipts for storage, agreements, and va- 
 rious other business forms which must be considered 
 the progenitors of those of to-day. 
 
 Neither need business efficiency be regarded as a 
 wholly modern development. These clay records 
 could be, and were, made in duplicate by the simple 
 process of pressing wet clay over a tablet which was 
 already baked and then baking the wet impression. 
 The process could, of course, be repeated as often as 
 desired, or at least until the original impression was 
 blurred in transfer. These records were stored in the 
 temples or courts in much the same way that our legal 
 documents are at present kept in halls of record. 
 
 This general economic system of Babylon was the 
 primal influence, in fact, the direct ancestor of the 
 system developed by Assyria and Persia, as well as 
 by such highly important commercial states as Phoe- 
 nicia and Lydia. The bare records naturally do not 
 fully disclose the actual practice of business in these 
 remote periods but we know that it resulted in great 
 prosperity. Here and there particular provinces or 
 cities became renowned for their wealth and enor- 
 mously rich individuals occasionally appeared. One 
 man, for example, is said to have entertained the 
 whole of Xerxes' army. 
 
 Directly connected with these prosperous commer- 
 cial nations but a little out of spiritual touch with the 
 development of their civilizations, were the Jews, later 
 
 [10] 
 
FOREWORD 
 
 to become the shrewdest of trading peoples. In an- 
 cient times Palestine was essentially an agricultural 
 community and for that reason the first business prin- 
 ciples of the Jews were an outgrowth of farming or 
 grazing. 
 
 One of the most striking of their legal provisions 
 was that land could not be sold in perpetuity, though 
 it could be leased. The date of consummating a lease 
 automatically determined its length, as all leases ter- 
 minated each jubilee year. A Hebrew could sell 
 himself or his children into slavery, but for no longer 
 than a seven year's period. It was also compulsory 
 to settle or cancel debts at the end of a seven year's 
 period. Workmen's wages had to be paid at the end 
 of the day on which they were earned. Interest was 
 not only illegal but was forbidden by the priest- 
 hood, yet it was permissible to take it from for- 
 eigners. This provision of Old Testament law was 
 of the utmost importance in that it became the basis 
 of the pronouncements of the mediaeval Catholic 
 Church against usury. 
 
 Athens was superbly situated to become a great 
 commercial centre and, driven by the necessity of im- 
 porting wheat and other food stuffs for her growing 
 population, extended her trade almost to the ends of 
 the then known world. At the time of her suprem- 
 acy business was closely controlled by the govern- 
 ment. Details of administration were largely en- 
 
 en] 
 
FOREWORD 
 
 trusted to commissions and there were innumerable 
 commissioners. Ten market commissioners saw to it 
 that articles offered for sale were wholesome and 
 priced fairly and ten other commissioners looked after 
 weights and measures. Thirty-five grain commis- 
 sioners, chosen by lot, fixed the price of grain in the 
 market, insisted that the millers sell their meal in 
 proper relation to the price of grain, and that the bak- 
 ers did not make more than a reasonable profit. Mer- 
 chants in the seaports tributary to Athens were com- 
 pelled to bring to the market two-thirds of the grain 
 imported from abroad. Materially speaking, Athens 
 was one of the great cities that lived by bread alone. 
 
 While private trade thrived in the city, Athens and 
 all Greece in the Fourth Century b. c, was built so- 
 cially on a foundation of slave labor. As against 
 100,000 free Athenians, and another 100,000 free for- 
 eigners resident in Athens, there were, according to 
 Ctesicles, 400,000 slaves. All the great industries, 
 such as silver mining and the manufacture of armor, 
 depended on slave labor. Nicias paid their masters 
 an obol (about three cents of our money) a day for 
 each of the many hundred slaves he worked in the 
 mines. The father of Demosthenes, the orator, 
 owned thirty-two slave sword cutlers, which cost him 
 more than one hundred dollars apiece but brought him 
 in a yearly profit of six hundred dollars. 
 
 Before the time of Solon slavery for debt among 
 
 [12] 
 
FOREWORD 
 
 the citizenry was a general cause of complaint, but the 
 great law-giver, according to Aristotle, freed these 
 people once and for all by prohibiting all loans on the 
 person of the debtor. 
 
 Rome after her supremacy presented a new phe- 
 nomenon in the business world. Before the Roman 
 conquest each of the nations, Persia, Phoenicia, 
 Egypt, and Carthage, was content with her own de- 
 velopment and without regard for the growth and ex- 
 tension of International Commerce. And prior to 
 the "pax Romana," that Roman peace of almost 400 
 years which spread over the then civilized world, the 
 only blending of international interests ever at- 
 tempted was that brief conquest of the east by Alex- 
 ander of Macedon and his immediate successors. 
 
 In early Rome, as in Greece, slavery for debt was 
 permitted under the law. In 450 b. c. the twelve 
 tables provided that a debtor might have thirty days 
 in which to pay after a judgment had been rendered 
 against him, but, that if he failed to settle, his person 
 might be seized by his creditors. A father was also 
 permitted to sell his son into slavery but after he had 
 done so three times the son was released from pa- 
 ternal control. 
 
 Tacitus, the Roman historian, tells us that the 
 twelve tables limited interest to one-twelfth for the 
 lunar year or ten per cent for the solar year but that 
 this regulation was constantly evaded. In 342 B. c. 
 
 [13] 
 
FOREWORD 
 
 Roman citizens were forbidden to accept interest at 
 all but they managed to continue their usurious prac- 
 tices by arranging loans through the Latins and 
 dummies of other Italian states. In 326 b. a, it was 
 made unlawful for the first time to pledge the person 
 of a freeman for debt. This statute, Livy declares, 
 was the beginning of the rise of the plebes. 
 
 Sheep raising, according to Cato, was the most 
 remunerative industry in Rome in his time, and led 
 to the development of great estates as well as the 
 extension of the slave system. 
 
 It was a political rather than a business system 
 which Rome gave the people of antiquity. At no 
 time did the city ever become a great exporting centre, 
 though her seaport, Ostia, where grain and plunder 
 were brought in, hummed with activity. Between 
 300 and 146 b. c. Rome slowly conquered the Medi- 
 terranean world and thus opened hitherto undreamed 
 of avenues of wealth. Riches poured in, all taxation 
 within the city ceased and the populace received free 
 grain. 
 
 Naturally the most direct revenues of the city were 
 the spoils of conquest. It was to the political ad- 
 vantage of the various generals to send home the 
 plunder of their legions and this slowly became a 
 continuous golden stream. A second source of 
 wealth also based on conquest was the farming of 
 the revenues. The taxes to be collected from the 
 
 [14] 
 
FOREWORD 
 
 various subject provinces were discounted, or at least 
 bid in by associations of tax gatherers, who then felt 
 free to exact all, and sometimes more than the amount 
 they were legally allowed from their districts. This 
 profitable business fell chiefly into the hands of the 
 knights and proved to be the beginning of their rise 
 to power. 
 
 A third source of wealth, and a more legitimate 
 one, was likewise based on conquest and naturally 
 flowed from it. Commerce inevitably followed the 
 sword. As Carthage was subdued and the Mediter- 
 ranean freed from pirates, Roman ships swept into 
 the Black Sea and even into the Atlantic as far north 
 as England. Overland great military highways were 
 constructed and these finally became the roads of 
 commerce which were rendered comparatively safe 
 even to the uttermost rim of the Empire. 
 
 Vast enterprises in time forced the Romans to 
 look more kindly on the charging of interest. In 
 88 b. c. interest was legally fixed at one per cent 
 a month and in 50 b. c. this rate was made standard 
 throughout the Empire. In Rome itself, however, 
 trade continued to languish. Retail business chiefly 
 in the hands of foreigners and freedmen was carried 
 on with such utter lack of principle that Cicero 
 sweepingly condemned such merchandising as un- 
 ethical and unworthy of a Roman's attention. Yet 
 Cicero did not condemn commerce as a whole, ad- 
 
 [15] 
 
FOREWORD 
 
 mitting that it might even be honourable if conducted 
 in a large way from a country estate and without too 
 much attention to sordid detail. It is not of record 
 that Cicero ever tried to conduct a successful busi- 
 ness on this basis. 
 
 Senators were still forbidden to enter trade but 
 nevertheless managed to do so through the agency of 
 freedmen and associations. Thus many freedmen 
 rose to wealth under the Empire, and in some cases 
 to power. The government continued to exercise 
 a benevolent control over economic affairs. The edict 
 of Diocletian in 303 a. d. promulgated a long list of 
 what the government considered reasonable prices 
 and wages. Though it probably did not remain long 
 in force it is an important historical document and 
 throws a sharp light on the economic conditions of 
 that period. 
 
 But the authority of Rome had already begun to 
 decay. With the fall of the Empire the roads were 
 destroyed, pirates again infested the seas and foreign 
 commerce virtually ceased. Business once more be- 
 came local and confined to the individual town or dis- 
 trict which was obliged to depend largely upon its 
 own resources. 
 
 So, as the opportunity for enterprise ceased, the 
 value of interest became obscured. The church, re- 
 viving the old Jewish law, forbade any interest what- 
 soever, though, as a matter of fact, certain exceptions 
 
 [16] 
 
FOREWORD 
 
 were made in practice. The crusades, those huge en- 
 terprises of the church, were financed by loans against 
 pledges, but not at interest. 
 
 By the Twelfth Century the guild system had be- 
 come well established and for the next four or five 
 hundred years European industry was organized on 
 that basis. If a tradesman or craftsman needed a 
 little money he could borrow it from his guild and 
 occasionally the guild entered into operations on be- 
 half of all its members. Thus business was again 
 bestirring itself in a small way. 
 
 But as commerce gradually increased in the Italian 
 cities and the Hanseatic towns of Germany, capital 
 came more and more into demand because it could 
 be used at a profit. Loans at interest once more be- 
 came common, though they were usually in the form 
 of discount or exchange. Yet it was not until after 
 the discovery of America that interest was legalized 
 either in France or in England. Then such a flood 
 of gold and silver overflowed into the Old World from 
 the mines of Mexico and Peru that business was 
 stimulated to a degree where the appreciation of the 
 function of interest was completely re-established. A 
 new business era had set in. 
 
 Through all this vast stretch of history the opera- 
 tion of banking can not be better summarized than 
 by H. R. F. Bourne, author of "Romance of Trade," 
 who says: "The banker's calling is both new and 
 
 [17] 
 
FOREWORD 
 
 old. As a distinct branch of commerce and a separate 
 agent in the advancement of civilization, its history 
 scarcely extends over 300 years, but in a rude and 
 undeveloped sort of way it has existed during some 
 dozens of centuries. It began almost with the be- 
 ginning of society." To-day it is the foundation on 
 which is being built the great structure of modern 
 civilization. 
 
 Noble Foster Hoggson. 
 
 [18] 
 
CONTENTS 
 
 Foreword 7 
 
 CHAPTEB PAGE 
 
 I Early Money and the First Coinage . . .25 
 
 II Sacred Safe Deposit Vaults of Ancient Greece 33 
 
 III Banking During the Roman Era of Prosperity . 39 
 
 IV Commercial Development of the Jews ... 45 
 
 V Bankers of the Venetian Fleets 55 
 
 VI Renaissance of Banking and the Bank of St. 
 
 George 63 
 
 VII The Florentine Guild and the Bank of the 
 
 Medici 71 
 
 VIII Finances of Barcelona 81 
 
 IX Birth of the English National Debt and Found- 
 ing of the Bank of England 89 
 
 X The Amsterdam Bourse in the Seventeenth 
 
 Century 97 
 
 XI Rise of the Rothschilds . 103 
 
 XII Development of Banking in the Land of the 
 
 Vikings Ill 
 
 XIII Finances of the French Revolution . . . .119 
 
 [19] 
 
ILLUSTRATIONS 
 
 Granting the Charter for the founding of the Bank of 
 
 England Frontispiece 
 
 FACING 
 PAGE 
 
 Bartering in Egypt before the invention of money ... 25 
 
 An ancient Babylonian record in baked clay .... 26 
 
 Ancient Egyptian bracelets used as money 28 
 
 Some of the earliest discovered coins ...... 30 
 
 A Greek temple used in ancient times as a depository for 
 
 valuables 33 
 
 Banking establishments of the Roman Republic . . .41 
 
 The triumph of commerce at Ostia 43 
 
 The house of Aaron of Lincoln 46 
 
 The first coined shekels of the Jews 50 
 
 The Bank of Venice 57 
 
 One of the first Venetian coins 60 
 
 The Palace of St. George, Genoa 63 
 
 Genoese bankers in conference 66 
 
 Lorenzo the Magnificent 71 
 
 Coat of Arms of the Medici 72 
 
 Loggia del Mercato Nuovo 76 
 
 Settlement of accounts by a mediaeval guild . . . . 82 
 
 Mediaeval coinage of Barcelona 84 
 
 The Royal Mint, a portion of the Tower of London . . 91 
 
 English officers receiving and weighing coin at the Ex- 
 chequer . 94 
 
 The Amsterdam Bourse 99 
 
 The Forum, Amsterdam 100 
 
 [21] 
 
ILLUSTRATIONS 
 
 PACING! 
 PAGE 
 
 Nathan Rothschild 103 
 
 Coat of Arms of the Rothschilds 104 
 
 Coining or stamping copper money in Sweden in mediaeval 
 
 times . 114? 
 
 Bourse. Banking headquarters in Stockholm . . . .116 
 
 The official burning of the Assignats 119 
 
 One of the Assignats 124 
 
 [22] 
 
BANKING THROUGH THE AGES 
 
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BANKING THROUGH 
 THE AGES 
 
 CHAPTER I 
 
 EARLY MONEY AND THE FIRST COINAGE 
 
 AS individuals we are grateful enough when 
 any of our immediate ancestors leaves us a 
 little money to ameliorate the struggle of this 
 complicated modern world in which we live. Yet we 
 seldom stop to consider what a debt of gratitude we 
 owe that dim, remote ancestry of ours which slowly, 
 after much puzzled trial and error, evolved the system 
 of money on which our whole modern world is based. 
 Money is a symbol. It stands for a thing offered 
 or a thing desired. It is a standard of value in con- 
 venient form and therefore a medium of exchange. 
 But in the early days when civilization was just be- 
 ginning to crystallize from barbarism, the things 
 themselves — cattle, shaped pottery, weapons, woven 
 cloth or what not — still had to be exchanged directly. 
 This was barter. And from the clumsiness and dif- 
 ficulty of barter, a clumsiness and difficulty of which 
 we, with our bills, checks, notes and ever ready change 
 
 [25] 
 
BANKING THROUGH THE AGES 
 
 can scarcely conceive, the invention of money natu- 
 rally and inevitably developed. 
 
 There may have been coined money at an un- 
 suspectedly early date among the peoples of the sub- 
 merged civilizations of antiquity such as that of the 
 Cretans, which flowered at Cnossos. There are hints 
 of it among the records of the Sumerians of the First 
 Babylonian Empire, in India, and in the half legend- 
 ary histories of early China. But in the Seventh or 
 Eighth Centuries B. c. virtually the whole trade of 
 the ancient world centring about the Mediterranean 
 basin was being conducted through barter, and the 
 former monetary refinements of lost empires, if they 
 existed, had been forgotten. 
 
 Barter exists sporadically in the world to-day, 
 as among the Esquimaux and in parts of Russia 
 where the organization of society has broken down. 
 As late as the middle of the last century the British 
 economist Jevons, at one time assayer of the Mint 
 at Sydney, was able to study the practice in its 
 most primitive form. He cites it amusingly to illus- 
 trate the embarrassment of Wallace, the natural- 
 ist, in the Malayan archipelago* 
 
 "In some of the islands," says Jevons, "where there 
 was no proper currency, Wallace could not procure 
 supplies without a special bargain and much chaf- 
 fering upon each occasion. If the vendor of fish or 
 
 [26] 
 
AN ANCIENT BABYLONIAN RECORD IN BAKED CLAY 
 BROKEN TO SHOW THE DUPLICATE 
 
EARLY MONEY AND FIRST COINAGE 
 
 other coveted eatables did not meet with the sort of 
 exchange desired he would pass on, and Mr. Wallace 
 and his party had to go without dinner. . . . The 
 first difficulty in barter is to find two persons whose 
 disposable possessions mutually suit each other's 
 wants. There may be people wanting, and many 
 possessing the things wanted; but to allow of an 
 act of barter there must be a double coincidence, 
 which will rarely happen. . . . Sellers and purchas- 
 ers can only be made to fit by the use of some com- 
 modity . . . which all are willing to receive for a 
 time, so that what is obtained by sale in one case, 
 may be used in purchase in another." 
 
 Almost everything, at one time or another, has 
 been used as this commodity — wampum, or strung 
 shells among our own Indians and the primitive 
 Chinese, tobacco by our early colonists, bottles of 
 trade gin in West Africa, stamped leather among the 
 Carthaginians, iron among the Hittites and the 
 British Picts. 
 
 But no matter what form the earliest money took, 
 among our Aryan forbears, from Dravidian India 
 through Doric Greece to pre-Roman Italy, it was 
 curiously associated with cattle. The Aryans were 
 nomadic or grazing peoples, before they gatheiod into 
 cities, with great herds of oxen, cows, and sheep. 
 Cattle were what they chiefly had to barter for de- 
 
 [27] 
 
BANKING THROUGH THE AGES 
 
 sired luxuries, and so cattle became the customary, 
 and eventually the traditional, standard of value. 
 The Latin word for money, pecunia, is derived from 
 pecus, cattle. 
 
 From time immemorial in India, through the whole 
 Vedic Age (2000 to 1400 b. c.) the cow was the chief 
 standard of value in matters of barter. As the cow 
 is thus mentioned in the Vedas so the ox appears as a 
 unit of value in the Homeric poems. When the 
 direct transfer of oxen was not convenient or desir- 
 able among the Greeks or Trojans, Homer tells us, 
 a weight of uncoined gold equivalent in value to an 
 ox was fixed and called a "talent." In such a primi- 
 tive society wherever precious metals were used as a 
 medium of exchange they were regarded as mer- 
 chandise — more convenient for exchange in many 
 cases, but not in themselves measures of the value of 
 other commodities. The ox talents, gradually com- 
 ing more into use, were finally coined with the head 
 of an ox impressed on one side, and came to be called 
 "oxen." 
 
 It was usually thus, as a precious metal, that money 
 came into being. Toward the end of the Age of the 
 Vedas in India ornaments for the neck were used as 
 money. The word "nishka," which originally was 
 merely the name of such an ornament, gradually ac- 
 quired the meaning of money. In some passages of 
 the Sanskrit manuscripts it is impossible to tell 
 
 [28] 
 
EARLY MONEY AND FIRST COINAGE 
 
 whether a neck ornament or money is referred to. 
 The nishka appears to have corresponded to the cop- 
 per anklets or bracelets used by the Egyptians of the 
 Seventeenth Dynasty (1600 B.C.) as a medium of 
 exchange. 
 
 In the Indian Epic period (1400 to 800 b. c.) the 
 word "nishka" had definitely come to mean a gold 
 piece; and a silver "karshapana," or coin, is men- 
 tioned in various Buddhist works. Somewhat later, 
 metal pieces begin to appear, marked to show their 
 weight and hence their value. These copper coins, 
 which were the basis of value in India in the Seventh 
 Century b. c, weighed about 150 grains and show by 
 their punch marks that they were struck, not by the 
 government, but by private individuals. 
 
 There were also silver coins in India, oblong or 
 square in shape, and apparently cut from strips of 
 metal. They were without inscription except for the 
 rough outlines of natural objects such as the sun, a 
 man, or a tree, which perhaps sufficed to identify the 
 person who issued them. From their shape, no 
 doubt, the writers of South India called these coins 
 "salakas" or dominoes. 
 
 Money in Egypt evolved in much the same way. 
 As late as the New Kingdom, which dates from 1600 
 B. c, there was no coined money. Up to that time 
 the value of commodities, for purposes of exchange, 
 had been stated in weights of copper. 
 
 [29] 
 
BANKING THROUGH THE AGES 
 
 The copper anklet, previously mentioned in con- 
 nection with the Indian nishka, weighed a "deben" 
 and was worth about five cents in our money. A 
 deben of silver was valued at about $4.00. A com- 
 mon price for an ox was 120 debens of copper, or 
 $6.00 ; while a bushel of wheat sold for approximately 
 two copper debens, or ten cents. 
 
 The first actual coins in Egypt seem to have come 
 from the iEgean Islands, perhaps through Minoan 
 traders. The first coins struck within Egypt itself 
 were the silver coins made by the Persian conquerors 
 of Egypt (525 B.C.), bearing an owl and flail de- 
 sign. 
 
 One other interesting monetary development in the 
 ancient world precedes the period of definite histor- 
 ical coinage — the silver units used by the Babylonians, 
 and probably adopted by them from an earlier 
 Sumerian people who had already established a 
 flourishing civilization around the upper waters of the 
 Persian Gulf. Here the lowest unit was a grain of 
 silver, which weighed about as much as a grain of 
 barley. One hundred and eighty such grains made 
 an ordinary shekel and 360 grains constituted a great 
 shekel. Sixty shekels made a "maneh," and sixty 
 "manehs" a talent. These units suggest the division 
 of the circle into 360 degrees and of time into hours 
 and minutes, both contributions of Chaldean or Su- 
 merian astronomical science to our heritage of culture. 
 
 [80] 
 
God Coin 
 Persia 
 
 Crab of Cos 
 Asia 
 
 Lion's Head of Lydia 
 Asia 
 
 Wheel of Chalcis 
 Greece 
 
 SOME OF THE EARLIEST DISCOVERED COINS 
 SEVENTH CENTURY, B.C. 
 
EARLY MONEY AND FIRST COINAGE 
 
 The elaborate mathematical system of the Sumerians 
 progressed by twelves instead of tens, and this system 
 is imbedded in many of our conceptions to-day, 
 especially those involving the division of time. 
 
 As early as the ascendency of the Babylonians 
 there is mention of silver being stamped with the 
 image of some god or temple — a device like the later 
 one of the Greeks who used "Temple" as well as 
 other coins. Despite such official impressions, how- 
 ever, the metal coins passed by weight and not by 
 fixed value — in a word, they were still merchandise. 
 In time various shekel pieces came to be cast in half 
 shekel, shekel and five shekel pieces — representing 
 probably the first uniform coinage. 
 
 That cast money was being coined by the state 
 in Nineveh may be gathered from graven records 
 of the Assyrian Sennacherib, who thus describes 
 the casting of huge winged lions for the palace: 
 
 "According to the commands of the god, I fashioned 
 molds of clay, and poured the bronze as easily as 
 though I iwere casting half shekel pieces." 
 
 This date, about 690 B. c, perhaps fixes the be- 
 ginning of real coinage, though Gyges of Lydia, 
 whose reign was synchronous with that of Senna- 
 cherib's successor, Esarhaddon, is generally credited 
 with having issued the first coins. Herodotus, in 
 
 [31] 
 
BANKING THROUGH THE AGES 
 
 Book I, says: "The Lydians are the first of all na- 
 tions that we know of that introduced the art of coin- 
 ing gold and silver." 
 
 In China the earliest tokens seem to have retained 
 in their very shape the idea of the barter from which 
 they originated. Those of the state of Chi (1122 to 
 224 b. c. ) were in the form of knives, spades, axes, 
 bells and other familiar objects, suggesting that the 
 knife piece was of the value of a knife, the spade 
 piece of a spade, and so on. The knife tokens were 
 all pierced for stringing, as were the shells used in 
 the earliest dawn of Chinese history. Round cast 
 coins, perforated with a square hole in the middle, 
 were introduced in the Chow Dynasty, about 600 b. c, 
 but they were still inscribed as "equal to one axe," 
 one spade, one gong, or one knife. Perforation is 
 still a familiar attribute of Chinese coins. 
 
 Thus, through the ages and in all countries which 
 developed a civilization, money of a sort struggled 
 into existence. With the development of the art of 
 casting, coinage passed from its primitive form into 
 something similiar to that which we use to-day. 
 
 [32] 
 
A GREEK TEMPLE USED IN ANCIENT TIMES AS A 
 DEPOSITORY FOR VALUABLES 
 
 The proportions and details of this building have been used as an 
 inspiration in designing many modern bank buildings. 
 
I 
 
 CHAPTER II 
 
 SACRED SAFE DEPOSIT VAULTS 
 OF ANCIENT GREECE 
 
 'TfF a man gives to another silver, gold, or anything 
 else to safeguard, whatsoever he gives he shall 
 show to witnesses, and he shall arrange the con- 
 tracts before he makes the deposits." So ran the 
 statutes of Hammurabi as early as 2000 b. c. Thus 
 twenty centuries before the Christian era we find the 
 Babylonians placing their treasure for safe-keeping 
 with trusted men, to whom they paid as much as one- 
 sixtieth of the treasure for that service. 
 
 It is true that the Egyptians had what might be 
 looked upon as treasure houses long before this, and 
 even the Pyramids might be considered safe deposit 
 vaults, for in the belief that the soul would live as 
 long as the mummy remained intact, the wealthy 
 Egyptian planned for the safe-keeping of his mummy 
 with more concern than for the most precious of his 
 possessions. With this very personal and distinctly 
 mortuary attitude prevailing along the Nile, it is not 
 surprising that we are obliged to leave this river in 
 favour of the Euphrates to find a practical conception 
 of trust responsibilities. 
 
 [33] 
 
BANKING THROUGH THE AGES 
 
 From Greece, however, came the real inspiration 
 for the safe deposit department as we know it to-day. 
 Unlike Egypt and Babylonia, both blessed with 
 strong central governments, Greece was divided into 
 many practically independent states and cities which 
 were usually at war with one another or with foreign 
 powers. When not at war they were in a constant 
 state of unrest through the activities of opposing 
 political factions. 
 
 By sad experience, or perhaps by happy accident, 
 the Greeks discovered in the Temple the only safe 
 depository which the turbulent times afforded, and 
 which usually remained inviolate. The strong re- 
 ligious principles of the educated classes, as well as 
 the superstitions and fears of the unscrupulous and 
 non-believers, combined to create about the Temple 
 an atmosphere of greater security than could have 
 been attained by any mechanical devices then known. 
 
 To the Temples of Greece, therefore, one may look 
 for the first real safe deposit vaults as well as for the 
 beginnings of the functions of our banks of domestic 
 and foreign commerce. On behalf of timid or absent 
 owners, the priests of the Temples received money, 
 precious stones, silver and gold plate, jewelry, im- 
 portant documents, and practically every other form 
 of valuables. 
 
 For the safeguarding of treasure there were at first 
 no standard charges made by the Temple banks, but 
 
 [34] 
 
DEPOSIT VAULTS OF ANCIENT GREECE 
 
 records show that the obliging priests received liberal 
 presents for their conscientious services. Later when 
 the Temples safeguarded valuables as a matter of 
 business, they made regular and substantial charges 
 and the records indicate that they also lent their own 
 funds at interest. 
 
 In the history of some of the more important Tem- 
 ples in which the handling of treasure grew into 
 an important activity, one may trace many of the 
 functions of our modern bank. In the Parthenon, 
 for example, and at Corinth, a special chamber called 
 the "Opisthodomus" was partitioned off as a storage 
 vault for gold and silver belonging to the Temple it- 
 self and for valuables deposited by the worshippers. 
 In some Temples without such treasure rooms, a por- 
 tion of the portico was screened off from the central 
 passage for use as a combination safety-vault and 
 museum. 
 
 With private bankers as with the smaller Temples 
 where there was no equipment for the proper and 
 safe storage of deposited treasure, such as separate 
 vaults or individual boxes, many mistakes were made 
 resulting in claims which had to be settled by the 
 courts. A typical case is that of a Greek named 
 Timosthenes who left some valuable cups with the 
 best known banker of Athens, a foreigner named 
 Pasion. The banker loaned the cups to a relative to 
 be used at a banquet and they were never returned. 
 
 [35]' 
 
BANKING THROUGH THE AGES 
 
 The case was brought into court to settle the value 
 of the cups, and Timosthenes was indemnified. 
 
 Inventories of the Parthenon incised on marble 
 tablets show that its storeroom was equipped with 
 shelves and cupboards; various objects are listed as 
 being on the first, second or third shelf or in a certain 
 cupboard. 
 
 When the richer Temples at Delphi and Olympia 
 became overcrowded with gold and silver and other 
 valuables, small treasure houses were built within the 
 sacred precincts to accommodate the overflow. Rows 
 of these at Olympia, described by Pausanias, the 
 Greek traveler, were designed like miniature Tem- 
 ples. 
 
 Although superstition and religious veneration 
 kept these structures safe from ordinary robbers and 
 sometimes even from raids during violent revolutions, 
 ambitious conquerors and wilful tyrants, now and 
 then, swept aside all such scruples and appropriated 
 the treasures for their own aggrandizement. The 
 Persians during the invasion of Xerxes felt no qualms 
 about the sacking of the great Temple at Delphi. As 
 a matter of desperate necessity it was again looted by 
 the Phocians about 350 b. c. While Dionysius the 
 elder (430 b. c-367 b. c.) of Syracuse was carrying 
 out his operations against the Carthaginians, he 
 seized from the Temples of Syracuse golden mantels, 
 golden vases, crowns, silver tables, and even the 
 
 [36] 
 
DEPOSIT VAULTS OF ANCIENT GREECE 
 
 golden beard of Esculapitjs, and having found this 
 method of securing funds for his campaigns success- 
 ful, carried the practice into other lands, even allying 
 himself with the Illyrians for the express purpose of 
 plundering the Temple of Delphi, in which enter- 
 prise, however, he was defeated by the Greek troops. 
 
 With the Temple at Agylla he was more successful, 
 relieving the Etrurians of treasure valued at 1000 
 talents, or about one million dollars. Sailing back 
 from one of these raids before exceptionally favour- 
 able winds, the graceless plunderer cynically re- 
 marked to his friends, "You see how the Greek gods 
 favour sacrilege." 
 
 In those hardy days, even if at intervals some ruth- 
 less Dionysius resorted to plunder, the rights of prop- 
 erty were beginning to be respected and many phases 
 of the banking business were established on solid 
 foundations. Nevertheless, despite the atmosphere 
 of religious awe which surrounded the Greek Tem- 
 ples and tended to keep them inviolate, these treasure 
 houses of the Hellenes were by no means as efficient 
 and secure as the average safe deposit vault of to- 
 day. 
 
 [37] 
 
M 
 
 **TV yfTONEY is indeed the most important thing 
 in the world; and all sound and success- 
 ful personal and national morality should have 
 this fact for its basis/' 
 
 Geo. Bernard Shaw. 
 
CHAPTER III 
 
 BANKING DURING THE ROMAN ERA OF 
 PROSPERITY 
 
 IMPRESSIVE, indeed, and vividly suggestive of 
 the economic life of the ancients, are the ruins 
 which remain of what were once the banking 
 establishments of the Roman Republic. These of- 
 fices were situated in a row along the north side of 
 the Forum on the street of Janus, the Wall Street 
 of the time. This locality named after the double- 
 faced God, Janus, is known to have been frequented 
 by bankers and money-changers from the fourth cen- 
 tury b. c, although the present ruins are of buildings 
 which date from a period two hundred years later at 
 about which time they were destroyed by fire. When 
 reconstructed they were amalgamated into The 
 Basilica Aunilia, the new courthouse built by Lucius 
 Aeurilius Paulus, overlooking the public square. 
 
 The offices were distinguished by numbers on the 
 pillars of the portico outside. There is a reference 
 to one of them in the works of Catullus. 
 
 Our sense of the actuality of ancient civilizations 
 is, perhaps, never stirred so strongly as when we look 
 upon the scenes of their every-day transactions. The 
 
 [39] 
 
BANKING THROUGH THE AGES 
 
 Parthenon and the Coliseum fail to give us that feel- 
 ing of intimacy with the Greeks and the Romans 
 which we enjoy when we see what is left of the less 
 pretentious buildings in which the ordinary business 
 of the day was carried on. 
 
 The well-worn marble floors of these rediscovered 
 offices were found covered with loose coins which must 
 have been scattered at the time of a great fire, as 
 many coins have been melted and welded together 
 and cemented to the slabs of the pavement. 
 
 An ancient bank consisted of a large, solidly con- 
 structed, though sparsely furnished and badly lighted 
 apartment in which the money-changer sat on a high 
 stool with his coins spread out before him behind a 
 bronze mesh screen. His clients entered from the 
 portico in front ; now a lawyer to deposit the fee won 
 in the Forum across the way ; now a young patrician 
 on his way to the circus, comes to draw a thousand 
 resteatii to bet on his favourite gladiator ; now a Thes- 
 salian slave to add a little to the growing sum with 
 which he hoped to purchase his freedom. 
 
 An American bank teller would speedily have felt 
 at home in these surroundings. We are apt to think of 
 Roman bankers merely as money-changers, forgetting 
 that the broad and complicated commerce of Rome 
 required a banking system of nearly as high a de- 
 velopment as our own. A part of an ancient banker's 
 daily routine included the opening of accounts, the 
 
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BANKING DURING ROMAN ERA 
 
 receipt of deposits, the issuing of bills of exchange, 
 the furnishing of letters of credit, the making of loans, 
 the purchase of mortgages ; in fact most of the trans- 
 actions performed by a bank cashier of to-day and his 
 assistants. Interest was paid on time deposits, such 
 deposits being termed credits as distinguished from 
 those which were subject to call, and on which no 
 interest was paid. The sanctioned rates of interest 
 were, at first, high, but decreased in the last days of 
 the Republic until, under the Empire, they were close 
 to the modern rates, two and a half per cent being 
 once recorded. 
 
 Judging by the extensive and varied facilities of- 
 fered to Roman citizens for the safe keeping and the 
 safe investment of the sums of money which consti- 
 tuted the surplus of their yearly balances and savings, 
 it is evident that thrift as well as profitable investment 
 were practiced and encouraged. 
 
 Although we have no evidence as to the existence 
 of regular savings banks, we know that money could 
 be put at interest or laid by for future emergencies in 
 three ways: First, by entrusting it to bankers; 
 second, by placing it in the care of priests ; and third, 
 by depositing it in safes guarded by the State. In 
 the first case, which was to save the depositor the 
 trouble and danger of keeping the money and making 
 payments from his home, the banker received the de- 
 posit but paid no interest. He simply honoured the 
 
 [41] 
 
BANKING THROUGH THE AGES 
 
 checks of the client as long as there was a balance in 
 his favour; but when the money was deposited as a 
 creditum, that is, for a specified period of time, at 
 interest, the banker was allowed to use and invest it 
 to the best of his judgment. 
 
 Ample facilities were furnished by the State for 
 the safe-keeping of money and other valuables. 
 Public repositories were maintained by the govern- 
 ment in which the citizens were given the use of 
 guarded safe deposit vaults. The ruins of the build- 
 ings used for this purpose, some of which are of vast 
 extent, give a very definite idea of the solidity of the 
 Roman economic system and the secure and firm 
 foundation upon which its wealth was founded. 
 
 The true foundation of Roman prosperity was, 
 however, the independence and self-sufficiency of the 
 Roman citizen, and, when these were corrupted and 
 destroyed, the whole superstructure was undermined. 
 When the emperors converted the repositories of the 
 Republic into storehouses for the keeping of grain to 
 be doled out to the mobs instead of providing them 
 with work from which they could earn sufficient to 
 meet their necessities, then the overthrow of Roman 
 rule and prosperity was imminent. Partem et cir- 
 ceuses were the forerunners of their downfall. 
 
 To a considerable extent the success of Rome 
 sprang from an essential quality which was the thor- 
 ough and enduring manner in which details were 
 
 [42] 
 
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BANKING DURING ROMAN ERA 
 
 worked out. The truth of this is strikingly apparent 
 when we study such relics of Roman greatness as we 
 have been discussing. It savours of triteness to say 
 that the Romans built for eternity, yet the words are 
 expressive. The utmost care was given the smallest 
 detail, and construction of a superficial nature was 
 scornfully avoided, whether in the building of a public 
 repository or the organization of a department of 
 the government. 
 
 [43] 
 
**TV ill* ONE Y which represents the prose of life, 
 JkV JL an ^ which is hardly spoken of in the 
 parlors without an apology, is in its effects and 
 laws as beautiful as roses." 
 
 Emerson. 
 
CHAPTER IV 
 
 COMMERCIAL DEVELOPMENT OF 
 THE JEWS 
 
 w 
 
 'E are accustomed to-day to regard the 
 Jews as a great commercial people with a 
 special aptitude for banking, finance and 
 business of all sorts. But this direction of their 
 genius was forced on them by their evolutionary en- 
 vironment as a homeless and oppressed race. 
 
 Until they were driven from their homeland the 
 Jews were probably the least commercial people of 
 civilized antiquity, though they were surrounded on 
 all sides by other Semitic races who had developed 
 business as a fine art. The Jews, however, in the be- 
 ginning, were nomads who, after settling down in the 
 Land of Canaan, devoted themselves to agriculture 
 in the intervals between their rather unsuccessful 
 wars with the original land-holders, the Canaanites, 
 on the north, and the Philistines, on the south. The 
 Philistines, who do not appear in the earlier stories 
 of the Jews, seem to have been a Mediterranean peo- 
 ple who were driven into Palestine when Cnossus, 
 in Crete, was destroyed, 1000 b. c. 
 
 The second reference to money in the Bible de- 
 
 [45] 
 
BANKING THROUGH THE AGES 
 
 scribes a real estate transaction in which the Jews 
 clearly enough appear as nomads, or tent people, and 
 the Canaanites as town-dwellers. The thirty-third 
 chapter of Genesis tells how Jacob came to "Shalem, 
 a city of Shechem". 
 
 "And he bought a parcel of a field where he had 
 spread his tent at the hand of Hamor, Shechem's fa- 
 ther, for an hundred pieces of money.' ' 
 
 This was undoubtedly the currency of another race 
 for, until the second century b. c, the Jews continued 
 to weigh out gold and silver as payment for mer- 
 chandise or used the money current in Syria, Persia, 
 Phoenicia, Athens, and the cities of the Seleucidae. 
 Simon, the Maccabee, is said to have been the first to 
 issue the shekel as a coin. 
 
 But this is late in the story of Israel. Por many 
 centuries the Jews were neither craftsmen nor trad- 
 ers. In I Samuel, Chapter 13, it is stated: "There 
 was no smith throughout all the land of Israel. . . . 
 But all the Israelites went down to the Philistines to 
 sharpen every man his share and his coulter." Hence 
 it would seem that they had not even learned the 
 rudiments of metal working. 
 
 Under their third king, Solomon, the Jews enjoyed 
 a brief burst of glory, which has become a tradition of 
 great grandeur, though compared to the magnificence 
 of other potentates of his time it was very limited in- 
 deed. Solomon's reign may be set down as some- 
 
 [46] 
 
THE HOUSE OF AARON OF LINCOLN, AT LINCOLN, 
 ENGLAND TWELFTH CENTURY 
 
COMMERCIAL DEVELOPMENT OF JEWS 
 
 where around 960 b. c. and its success seems to have 
 been largely due to his alliance with the Phoenicians. 
 This advanced people supplied the Jews with what 
 they lacked, taught them the ways of craftsmanship 
 and commerce, and thoroughly exploited their king- 
 dom as a highway for trade with nations beyond the 
 Red Sea. 
 
 When Solomon decided to build his temple he im- 
 ported Hiram, the worker in brass, from Tyre, to 
 make the brazen vessels and decorations used in his 
 famous monument. In fact the whole impetus 
 toward a wider civilization among the Jews at this 
 time seems to have come from the Kingdom of the 
 Phoenicians. We are told in I Kings, Chapter 9, 
 how Solomon constructed a navy of ships and sent 
 them to Ophir. But this navy, beside the servants 
 of Solomon, was manned by "shipmen that had 
 knowledge of the sea" sent by Hiram, King of Tyre. 
 Obviously the Jews had no previous maritime ex- 
 perience. 
 
 Precious metals were also imported into Israel. 
 King Hiram sent Solomon six score talents of gold, 
 together with the timber and metal for the temple 
 and was repaid by the cession of twenty cities to- 
 gether with great quantities of wheat and oil. In 
 the Jewish fleet which the Phoenicians manned, Sol- 
 omon was later able to bring gold to the amount of 
 420 talents from Ophir. Though gold was thus 
 
 [47] 
 
BANKING THROUGH THE AGES 
 
 brought in there was no coinage in general use until 
 after the overthrow of Jerusalem by the Assyrians. 
 
 Indeed, the laws of the Jews were wholly unfa- 
 vourable to the financing of trade or the development 
 of banking. 
 
 In Exodus, Chapter 12, stands the injunction: 
 "If thou lend money to any of my people that is poor 
 by thee, thou shalt not be to him an usurer, neither 
 shalt thou lay upon him usury." In Leviticus, 
 Chapter 25, is found a similar command: "Thou 
 shalt not give him the money upon usury, nor lend 
 him thy victuals for increase." 
 
 Such biblical rules as these virtually kept the Jews 
 from banking throughout the early ages and exer- 
 cised a tremendous influence upon the development 
 of banking in the Middle Ages. Yet the Israelites 
 were crowded in between the Assyrians and other 
 peoples of western Asia, all of whom had legalized 
 the use of interest from time immemorial. It is pos- 
 sible for this reason that in Deuteronomy, Chapter 
 23, it is expressly declared that "Unto a stranger 
 thou mayest lend upon usury." 
 
 This permission was the foundation upon which 
 Jewish banking developed many centuries later. In 
 fact the restrictions against usury may have some- 
 what broken down even as early as the Roman occu- 
 pation, during the life of Christ, for in the parable of 
 the unfaithful servant (Luke, 14) we find this 
 
 [48] 
 
COMMERCIAL DEVELOPMENT OF JEWS 
 
 question: " Wherefore, then, gavest thou not my 
 money into the bank that at my coming I might have 
 required mine own with usury?" It was a time of 
 the violation of tradition. The Herodian family, 
 ignoring the injunction against graven images, was 
 issuing a coinage adorned with the representation of 
 living things. 
 
 Many Jews had begun to leave Palestine. In 
 Alexandria, during the reign of the Ptolemies, there 
 were more Hebrews than there were in Jerusalem 
 itself. And after the fall of Jerusalem, of course, 
 they were scattered throughout the territory of the 
 Roman Empire. It is then that they began to de- 
 velop tendencies toward trade and commerce as well 
 as toward philosophy, medicine and such other sci- 
 ences as then existed. Under the Roman Emperors 
 the Jews, with certain exceptions, were compelled to 
 reside in restricted areas. Thus, not having access 
 to the land, they were obliged to turn to trade. 
 
 Under the laws of the Roman Empire interest was 
 legal at one per cent a month. As the Jews were 
 expressly permitted by their own laws to take interest 
 from non-Jews the field of money lending was left 
 open to them and they gradually began to specialize 
 in it. 
 
 When the Mohammedans swept over northern 
 Africa and Spain the Jews found themselves in the 
 midst of a people whose religious authorities frowned 
 
 [49] 
 
BANKING THROUGH THE AGES 
 
 upon interest. Among these also the Jews gradually 
 entered the money lending business, though at first 
 rather timidly and in a small way. There are ref- 
 erences to their operations in Alexandria in the Sev- 
 enth Century, and in Spain soon after the Moorish 
 conquest in the Eighth Century. 
 
 Among the Christian countries France, under 
 Charlemagne, was a haven for the Jews. Char- 
 lemagne, that great liberal, was unusually lenient for 
 his time and even permitted the Jews to hold land. 
 Louis, the Pious, in the first half of the Ninth Cen- 
 tury, was still more kindly disposed toward them and 
 his reign was long looked back to as a golden age. 
 
 Meanwhile one synod of the church after another 
 began to take a stand against lending at interest. 
 As early as the Eighth Century there were synodic 
 denunciations of usury and disapproval of lending at 
 interest was established as sound Christian doctrine. 
 This attitude was based not merely upon the Old 
 Testament but upon the statement of Aristotle that 
 "Money in itself cannot grow." 
 
 Finally in 1146, Pope Eugenis declared all inter- 
 est void, and in 1179 Pope Alexander III publicly 
 excommunicated all usurers. The effect of this bull 
 upon the fortunes of the Jews was curious. The ex- 
 coitimunication, of course, did not embrace the Jews 
 and only tended to make them still more valuable 
 commercial agents, especially to kings and rulers of 
 
 [50] 
 
THE FIRST COINED SHEKELS 
 OF THE JEWS 
 
COMMERCIAL DEVELOPMENT OF JEWS 
 
 provinces. Israelites, as a result, became the money 
 lenders for rulers in many lands and districts of 
 western Europe. It was possible for them to lend 
 the money of a prince at interest where a Gentile 
 could not, if he wished to remain a good Christian. 
 It was also possible, and even customary, for the 
 ruler to seize their property after the profits had ac- 
 cumulated. 
 
 So useful did the Hebrews become that some 
 monarchs objected to having them converted to 
 Christianity. Both the kings of England and of 
 France demanded compensation for such conver- 
 sions, and until 1281 the English king declared the 
 property of a converted Jew forfeited to the crown. 
 
 One of the most picturesque of these early Jewish 
 financiers was Aaron, of Lincoln. He was born in 
 the city for which he was named some time before 
 1125 and died in 1186. His financial operations were 
 so wide that he had agents in a number of the English 
 cities. Oddly enough, one of his chief sources of 
 profit was advancing money for the construction of 
 abbeys and monasteries. It was through his accom- 
 modation that St. Albans, Lincoln Minster and at 
 least nine Cistercian abbeys were built. At his death 
 these monasteries still owed him equivalent to $24,- 
 000 which, judged by the time, was an enormous 
 sum, as wages were then only seven cents a day. 
 
 He also advanced money on houses, armour and 
 
 [51] 
 
BANKING THROUGH THE AGES 
 
 grain. At his death Henry II seized his property 
 as the estate of a Jewish usurer, devolving by right 
 to the crown. Henry used the cash to wage war 
 against Philip Augustus of France, while the ac- 
 counts receivable formed a special department in the 
 treasury. Aaron's house still stands in Lincoln and 
 is probably the oldest private dwelling in all Eng- 
 land. 
 
 The seizure of Aaron's property after his death 
 was typical of the period. Royalty professed to 
 believe that the Jews had no right to wealth gained 
 by money lending and that it was mercy enough to 
 allow them to hold it while they lived. This belief 
 grew into a custom which proved extremely con- 
 venient, not to say remunerative, whenever a rich 
 Jew died. 
 
 Aaron of York was another English Jew most of 
 whose property, acquired by the practice of interest, 
 went after his death, to the king. He himself stated 
 that he satisfied the demands of Henry III to the 
 extent of 30,000 marks in silver and 200 marks in 
 gold. 
 
 A similar sufferer was Ezmel de Ablitas, a wealthy 
 Jew of Navarre. His business of usury was very 
 extensive but he was compelled to grant large loans 
 to the King of Aragon and the nobles of Navarre, 
 none of which he ever recovered. After his death his 
 
 [52] 
 
COMMERCIAL DEVELOPMENT OF JEWS 
 
 property was confiscated by the Queen of Navarre 
 on the same grounds urged by other rulers whose ex- 
 cessive piety led them to filch the estates of all Jews 
 who died rich enough for royalty to consider. 
 
 [53] 
 
**TTT is not by augmenting the capital of the 
 II country, but by rendering a greater part of 
 that capital active and productive than would 
 otherwise be so, that the most judicious operations 
 of banking can increase the industry of the 
 country." 
 
 Adam Smith. 
 
CHAPTER V 
 
 BANKERS OF THE VENETIAN FLEETS 
 
 THE flat mud islands on which Venice stands 
 were made by the waters of eleven rivers flow- 
 ing into the Adriatic. Her intricate lagoons 
 made her a city of asylum and refuge when Attila 
 drove her first inhabitants before him from the north. 
 The Adriatic, lapping against her door sills, made 
 Venice the carrier of Europe's might into the East 
 throughout the Crusades. And the waters of the 
 Mediterranean, subdued and controlled by the prows 
 of her galleys, made her the mightiest city of the con- 
 tinent when Constantinople fell in 1204 and Venice 
 claimed and received, in her own words "one half and 
 one quarter of the Roman Empire." 
 
 Venice eventually became mistress of the seas, as 
 far as they were known in the Middle Ages. But 
 long before that the city had launched upon the mari- 
 time career which was to bring such a rich yield. 
 Never has there been a city where business was more 
 remunerative or more highly regarded. By the end 
 of the thirteenth century Venice had become an ab- 
 solute oligarchy of the wealthier families who formed 
 themselves into a closed guild for no less a pur- 
 
 [55] 
 
BANKING THROUGH THE AGES 
 
 pose than the exclusive exploitation of the Levant. 
 
 Business was more important to many of the 
 Venetians than religion, even in a religious age. As 
 early as 991 Orseolo II had made a commercial treaty 
 with the Mohammedans and a little later, after the 
 conquest of Dalmatia, the city had established con- 
 trol of the Adriatic. Even at that time there was a 
 municipal mint which issued the first reliable coinage 
 of the Middle Ages. 
 
 But it was the Crusades which gave Venice her real 
 start along the pathway toward imperial wealth. 
 Throughout the First, Second and Third Crusades, 
 Venice, together with Genoa, her great rival, sup- 
 plied the transport which moved the armies of the 
 Lord against the Saracens — always at a handsome 
 profit. As a result Venetian settlements began to 
 spring up all over the East. There were Venetian 
 quarters both in Sidon and in Tyre and it is said there 
 were fully 200,000 Venetians in Constantinople when 
 the Byzantine Emperor Manuel stripped them of 
 their possessions and turned them out, precipitating 
 a war with the mother city. To carry this particular 
 war to its disastrous conclusion Venice was obliged 
 to levy a forced loan of one per cent on all net in- 
 comes, guaranteeing the loan at four per cent. This 
 was in 1171 and is supposed to be the earliest instance 
 of the issue of government bonds. 
 
 When the Fourth Crusade was proclaimed at 
 
 [56] 
 
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 ■" ■ . .. "'■• : ,: ..... 
 
 
 
BANKERS OF VENETIAN FLEETS 
 
 Soissons it marked the dawn of the full glory of 
 Venice. The city agreed to transport 4,500 horses, 
 9,000 knights and 20,000 foot soldiery together with 
 provisions for one year at a price of 85,000 silver 
 marks of Cologne and one half of all conquests. 
 Dandalo was the Doge at that time and proved him- 
 self not only a clever financier but a political and 
 military genius. 
 
 When the time came to move the great army the 
 Crusaders could not pay. Zara and Dalmatia were 
 at the time in revolt against Venice so Dandalo 
 agreed to postpone exaction of the payment if the 
 Crusaders would undertake the suppression of the 
 rebellion, which they did promptly. But Dandalo 
 had only begun his operations. He managed to turn 
 the whole Crusade against Constantinople, which had 
 so thoroughly humbled Venice thirty years before. 
 Largely through his own intrepid leadership the cap- 
 ital of the Byzantine Empire was captured and 
 sacked. That was when Venice received "one half 
 and one quarter of the Roman Empire." Venice 
 was no longer a city. She had become a European 
 power. 
 
 Thenceforth the community became absorbed in 
 trade. Each year Venice acknowledged its indebted- 
 ness to the sea when the Doge cast a ring from the 
 state barge into the waters thus betrothing the city as 
 the "bride of the Adriatic." Each year the control 
 
 [57] 
 
BANKING THROUGH THE AGES 
 
 of affairs came more into the hands of the great 
 patrician families, organizing themselves for commer- 
 cial loot. Finally in 1308 all power was concen- 
 trated in the terrible Council of Ten. Wars, 
 government, statesmanship — all were directed toward 
 the one ideal of trade expansion. 
 
 Naturally, in a city-state organized on this basis, 
 finance and banking had developed as an early neces- 
 sity. The germ of a state bank was planted in 1160 
 when the government borrowed 150,000 silver marks 
 from half a dozen of the more important merchants. 
 This was the Monte Vecchio, known as the old debt. 
 Thirteen years later came the forced loan to prose- 
 cute the war with Constantinople which added greatly 
 to the government's financial responsibilities. 
 
 The right of banking remained virtually free in 
 Venice but does not seem to have been fully used. 
 Before 1300 we read only of camsores, or money 
 changers, with benches in the market. Even these, 
 however, made loans at interest. From 1318 there 
 are references to a bancherius de scripta which im- 
 plied genuine bankers who received deposits of 
 money. Thereafter many of the patricians became 
 bankers. 
 
 By 1300 the city was already using bills of ex- 
 change to send money to its representatives abroad. 
 These were really business agents and made frequent 
 and full reports of commercial opportunities more 
 
 [58] 
 
BANKERS OF VENETIAN FLEETS 
 
 efficient than those of any consular service to-day. 
 
 In many cases loans made by the Venetian bankers 
 were a form of bottomry as they depended for se- 
 curity on the prosperous outcome of some venture by 
 sea. The risk being great, the interest was corres- 
 pondingly high, averaging in the fourteenth and fif- 
 teenth centuries, perhaps twenty per cent. 
 
 Shakespeare's "Merchant of Venice" reflects con- 
 ditions on the Rialto at this time, for Antonio's ship- 
 ping venture furnished the banker Shy lock's 
 opportunity for revenge. The Jews, however, were 
 accepted as bankers only on probation, and their li- 
 censes were frequently revoked. 
 
 Ventures, such as Antonio's, were part of the daily 
 life and business of Venice. Besides innumerable 
 minor voyages to nearby ports in the Mediterranean, 
 great trading fleets were periodically sent out to dis- 
 tant countries. For these the state leased galleys 
 already supplied with arms, ammunition and food 
 and for protection dispatched naval convoys. 
 
 The Tana fleet sailed to the Black Sea for trade 
 with the Russians and Tartars ; the Syrian fleet sailed 
 to Asia Minor; the Roumanian fleet skirted Greece 
 and penetrated to Roumania ; the Egyptian fleet an- 
 chored at Alexandria; while the Flanders Squadron 
 sailed through the straits of Gibraltar to trade in 
 Bruges, Antwerp and London. Though the fleets 
 were under government control, each ship was a 
 
 [59] 
 
BANKING THROUGH THE AGES 
 
 separate venture with its own owner who, in turn, had 
 his private banker. 
 
 The camera, or bank, which made loans to the gov- 
 ernment, was receiving about 200,000 ducats in inter- 
 est at the end of the fourteenth century. By special 
 concession foreigners were permitted to hold stock in 
 the camera and it is of record that the Cardinal of 
 Ravenna held 12,000 ducats worth of this stock and 
 the Duchess of Milan 100,000 ducats. 
 
 Doge Tomaso Mocenigo declared in a speech de- 
 livered in 1423 that the Venetian exports, which cov- 
 ered the "whole world from east to west," amounted 
 annually to 10,000,000 ducats, with imports at about 
 the same sum. The profits on this he calculated at 
 about 4,000,000 ducats, or twenty per cent. As most 
 of this trade was financed by the bankers it is ob- 
 vious how extended their operations were. 
 
 In 1428 the Venetian script outstanding amounted 
 to 9,000,000 gold ducats. In 1482 all the old debts 
 were consolidated in the Monte Vecchio and a new 
 loan of five per cent was placed against special taxes. 
 Various bankruptcies among private bankers in 1502 
 led to the establishment of a Supervisor of Banks, 
 who had the power to examine the solvency of any 
 firm. In 1525 the city, in order to raise money, be- 
 gan to offer annuities in return for deposits in the 
 mint or, if the depositor preferred he could have per- 
 petual interest at a lower rate. 
 
 [60] 
 
ONE OF THE FIRST VENETIAN 
 COINS, NINTH CENTURY 
 
BANKERS OF VENETIAN FLEETS 
 
 By a decree of the Senate the first official state 
 bank of Venice was established in 1587. A second 
 institution, the Banco del Giro, known as the Bank 
 of Venice, was founded in 1618, based on a loan of 
 600,000 ducats advanced to the city by Giovanna 
 Vendarmin. 
 
 Both of these banks were without capital and 
 functioned merely as depositories under the manage- 
 ment of public officials. They received funds from 
 the state and individuals, charging the latter a stipu- 
 lated rate. On order of depositors transfers were 
 made on their books and bills of exchange were paid 
 by similar transfer. It was Venetian law that the 
 tender of such a bank credit for more than a hun- 
 dred ducats could not be refused. It was a basic 
 principle of these banks that their cash or bullion on 
 hand should equal their receipts but, as they were 
 compelled to make loans to the government, they 
 were forced to suspend payment more than once. 
 
 Nevertheless the bank prospered when the de- 
 mands on it were not too heavy. In 1754 interest 
 was temporarily reduced to three and one-half per 
 cent, but in 1766 it was restored to four per cent with 
 a promise to pay depositors on demand. 
 
 But all this later bank development constituted 
 mere vestigial remains of financial over-lordship. 
 Venice had long since lost her power and with it 
 much of her affluence. When the Portuguese began 
 
 [61] 
 
BANKING THROUGH THE AGES 
 
 to sail round the Cape of Good Hope the Mediter- 
 ranean ceased to be the sole highway to the East. 
 Even before this, exhausting though victorious wars 
 with Genoa, and equally exhausting and losing wars 
 with the Turks had sapped the strength of the state. 
 Yet Venice remained a free city until Napoleon 
 brought the first victorious enemy within its water 
 gates. 
 
 The French even burned the famous "Golden 
 Book" in which were entered the names of the great 
 patrician merchants, the hereditary princes of trade 
 and finance. Since then Venice has possessed only a 
 past. 
 
 [62] 
 
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CHAPTER VI 
 
 RENAISSANCE OF BANKING AND 
 THE BANK OF ST. GEORGE 
 
 FINANCE — what we understand to-day as the 
 power of money and credit — collapsed in Eu- 
 rope with the fall of the Roman Empire. 
 All through the Dark Ages, banking, save as it func- 
 tioned clumsily through the unskilled hands of feudal 
 bursars, lay under an eclipse. 
 
 But along with that extraordinary reflowering of 
 civilization which we call the Italian Renaissance it 
 came to life once more. Indeed, so vigorous was the 
 new commercial growth that in a number of the more 
 splendid Italian civic republics it threatened to swal- 
 low the state itself. 
 
 Before Columbus opened the highways of the 
 western ocean the Mediterranean, of course, was the 
 great avenue of freighted ships. The cities of the 
 Italian peninsula, which seemed to reach down like a 
 sickle to reap the sea-borne harvest, naturally became 
 thriving centres of this maritime trade. Banking, 
 which early developed as a necessary adjunct of their 
 water traffic, became a passion, then an art, and fi- 
 nally almost a form of government. 
 
 [63] 
 
BANKING THROUGH THE AGES 
 
 Venice, Florence and Genoa were the chief bene- 
 ficiaries of this commercial revival and the repositories 
 of the accruing wealth. The business methods of 
 all three showed a general similarity, but each devel- 
 oped a characteristic phase of banking. In Flor- 
 ence, for example, banking fell largely into the hands 
 of great private families. In Genoa, perhaps, bank- 
 ing most nearly approached a public function through 
 the famous Bank of St. George. 
 
 The Bank of St. George, which eventually ruled 
 a whole broad territory along the north-western 
 Italian littoral, was at once one of the oldest and 
 longest lived of the institutions sprung from mediae- 
 val finance. So firmly was it founded, so sagaciously 
 directed and so tenaciously jealous of its privileges 
 that it was able to function continuously through 
 seven centuries. In fact, it may be studied as the 
 epitome of that system which enabled these tiny 
 Italian republics, politically so weak they could never 
 successfully defend their own borders, to finance the 
 wars of emperors and develop within themselves a 
 standard of culture unmatched by any contemporary 
 court of Europe. 
 
 The name of the bank itself suggests its mediaeval 
 origin at a time when all human enterprises, even 
 those on which the Church looked somewhat coldly, 
 must have a patron saint. Saint George was that 
 gallant Roman military tribune in Cappadocia who 
 
 [64] 
 
RENAISSANCE OF BANKING 
 
 became a Christian and for his faith was put to 
 death by the Emperor Diocletian in 303 a. d. His 
 spirit, invoked by the Genoese bankers, is the same 
 ghostly presence which marches ahead of the armies 
 of England and Portugal and is supposed to have 
 swung a doughty blade with the Crusaders against 
 the Turk. In 1101 the fleets of both Genoa and 
 Venice had played a prominent part in reinforcing 
 the First Crusade. In 1147 came the Second 
 Crusade, with the spirit of St. George still leading. 
 
 It was only a year later when the initial step in the 
 organization of the bank was undertaken and Genoa 
 contracted her first formal loan. The money was 
 borrowed on future custom duties and the creditors 
 formed a council to protect their interests. Each 
 hundred lire of the debt was called a luogo, or share. 
 Any number of shares issued to an individual com- 
 prised a column, as they were entered in a book called 
 the cortulario. New loans were separately kept. 
 Each was called a compera and together they were 
 known as the "Compere of St. George." 
 
 Within the next hundred years loans became 
 numerous and their management correspondingly 
 complicated. In 1252, therefore, they were placed 
 under the control of a single corporate body with a 
 chancellor and various other officials. Each loan, as 
 before, was kept separately, with different security 
 and interest. The name "Compere of St. George" 
 
 [65] 
 
BANKING THROUGH THE AGES 
 
 was officially adopted so that the date, 1252, is often 
 cited as that of the founding of the bank. 
 
 Genoa continued to prosper and expand. Loans 
 multiplied right and left. In 1302 it was necessary 
 to call a great assembly which appointed commis- 
 sioners to draw up 271 articles for the control of the 
 compere. One of these stipulations was that the 
 city was thereafter to contract no loan without the 
 sanction of the consuls of the compere. 
 
 The Bank of St. George operated essentially as a 
 loan bank and in this respect offered a complete con- 
 trast to the Bank of Amsterdam. Sometimes the 
 loans were made on curious security. In 1336 Car- 
 dinal Fieschi received a loan on the sacred parossidis, 
 or holy basin. Although the Catholic Church through 
 the Middle Ages officially frowned on bankers and 
 held interest in any form to be mere usury, this little 
 business arrangement with the Cardinal indicates the 
 beginning of a certain latitudinarianism. In the 
 15th century the Popes Calixtus III and Sixtus 
 IV formally granted permission to hold shares in 
 the bank. These were a profitable investment, for 
 the bank, in return for loans, received the pledge 
 of the city for its future taxes, or in the case of in- 
 dividuals, the profits of business enterprises. Jewels, 
 also, were a customary form of security. 
 
 Like all the Italian mercantile republics Genoa 
 was turbulent. During the revolution of 1339 all 
 
 [66] 
 
GENOESE BANKERS IN CONFERENCE LATE 
 
 FOURTEENTH CENTURY 
 
RENAISSANCE OF BANKING 
 
 the old books of the bank were burned and new com- 
 missioners appointed to regulate the compere. The 
 city treasury was completely exhausted by building 
 and outfitting twenty-six galleys required in one of 
 the innumerable naval wars and was forced to cede 
 the loot of conquest to the compere. 
 
 By 1371 more wars and constant internal conflict 
 had utterly destroyed the credit of the city. Fran- 
 cesco Vivaldi, an old patrician, rose before the as- 
 sembly, and, after explaining the principle of com- 
 pound interest, gave his shares in trust to the consuls 
 of the compere to use the interest on them in buying 
 other shares and the interest on these, in turn, to buy 
 still others. This gift, accumulating as it was bound 
 to, is said to have saved the credit of the state. 
 Vivaldi having shown the way, similar trusts were 
 formed for the maintenance of churches, bridges, 
 fountains and other public improvements. 
 
 It was in 1407 that the bank evolved fully into a 
 great public institution. The republic had borrowed 
 huge sums and had assigned various revenues as se- 
 curity. To avoid confusion, all the shares were 
 united in the compere, or, as it now became known, 
 the Bank of St. George. 
 
 The management was placed in the hands of eight 
 protectors, who were elected annually by the share- 
 holders from a list of thirty-two chosen by lot. 
 Each protector (or director) was obliged to hold 
 
 [67] 
 
BANKING THROUGH THE AGES 
 
 shares amounting to 1,000 Genoese florins. This 
 directorate of eight filled the offices of president, 
 treasure general, superintendent for the sale of 
 shares, three judges and two secretaries. The gen- 
 eral council consisted of 480 members, elected by 
 ballot, and qualified by the ownership of at least ten 
 shares. It is a striking testimony to the breadth of 
 Genoese business practice that even foreigners were 
 eligible. 
 
 The assumption by the bank of state affairs is il- 
 lustrated in a remarkable floating debt voted by the 
 directors in 1456. As a result of the war against the 
 Turks it was necessary to delay the payment of 
 certain loans for three years. These were listed 
 separately as entered debts to be repaid three years 
 after each matured. By this time the bank had 
 gradually become an independent government within 
 a government. When Mohammed II and his Otto- 
 man army captured Constantinople in 1453 Genoa 
 ceded its Black Sea possessions to the bank. At one 
 time, also, Corsica, Cyprus, and the towns along the 
 Riviera were under the direct government of the 
 bank. Its directorate did not deign to acknowledge 
 allegiance to the city even by so much as flying the 
 red cross of Genoa but proudly unfurled the ban- 
 ner of St. George. 
 
 Machiavelli, from his neighbouring retreat at San 
 Casciano, noted the growing power and independence 
 
 [68] 
 
ANCIENT EGYPTIAN BRACELETS USED AS MONEY 
 
RENAISSANCE OF BANKING 
 
 of the bank. Such a successful oligarchy fitted in 
 well with his subtle system of government. In his 
 History of Florence he remarked: "If it should 
 happen that Genoa should fall entirely into the pos- 
 session of the Bank of St. George, it will then be- 
 come a republic of greater importance than even that 
 of Venice." 
 
 This tendency of the bank to arrogate state powers 
 to itself had been anxiously observed within the city. 
 In 1528 an effort was made to curb it by a law pro- 
 viding that anyone who held an appointment under 
 the government could not hold one under the bank. 
 But as a result of the famine of 1550 the government 
 was forced into a new and supine policy which held 
 the possibility of complete absorption within the bank. 
 In return for a heavy loan it agreed to turn over cer- 
 tain taxes, not merely for a limited period, but in per- 
 petuity. In a word, it sold the people's tax power 
 for the loan. 
 
 Throughout this period of growing power the bank 
 had continued to sell shares in different loans, even by 
 auction on the street corners — a scheme which sug- 
 gests a resemblance to the New York curb market. 
 In 1675, however, the bank ceased these street sales 
 and established four branches in the city. Thence- 
 forth the term compere went out of usage and the 
 institution was known exclusively as a bank. 
 
 The credit of the organization remained unim- 
 
 [69] 
 
BANKING THROUGH THE AGES 
 
 paired until its gold reserve was carried off by the 
 Austrian army in 1740. Even then the interest due 
 was carried as new loans and eventually repaid. 
 But the death Stroke came in 1800, during the French 
 Revolution. The revolutionaries deprived the bank 
 of its dearest privilege, the right to receive taxes 
 which had been pledged as security for loans. This 
 was its chief source of income. Shortly after the 
 passage of this fatal decree the Bank of St. George, 
 which dated its beginning from 1148 and had, at the 
 height of its influence, exercised all the functions of 
 a principality, closed its doors for ever. 
 
 [70] 
 
LORENZO THE MAGNIFICENT, PINNACLE OF THE 
 FAMOUS FAMILY OF THE MEDICI 
 
CHAPTER VII 
 
 THE FLORENTINE GUILD AND THE 
 BANK OF THE MEDICI 
 
 IN 1252 the bankers of Florence, acting through 
 an already well organized guild, issued the first 
 gold florin. It was a handsome coin, displaying 
 on the obverse a lily and on the reverse an effigy of 
 John the Baptist. But more important than that, 
 it was an honest coin and instantly rang true among 
 the various and somewhat dubious currency on which 
 the world then depended. In other cities of Italy, in 
 France, Spain and even Germany, the florin rapidly 
 became a standard of value because it was depend- 
 able in weight and pure in quality. 
 
 In 1492 died Lorenzo, the Magnificent, pinnacle 
 of the famous family of the Medici. Florence, rich- 
 est of the renaissance cities, was richest of all, per- 
 haps, in great names — Giotto, Michel Angelo, 
 Andrea Pisano, della Robbia, Leonardo da Vinci, 
 Machiavelli, Vasari, Boccaccio, Tasso, Galileo. But 
 all the dazzling qualities of the city seemed to flower 
 in the illustrious name of Lorenzo, banker and 
 Maecenas. 
 
 [71] 
 
BANKING THROUGH THE AGES 
 
 Between these two dates, each typical of a period, 
 Florence became not only the wonder city of Italy, 
 but the financial, artistic and intellectual capital of 
 Europe. Only Athens in the age of Pericles can 
 be compared to Florence in the time of Lorenzo. 
 And as for the eminence of the Medici in finance, 
 nothing quite like it had been heard of in the world 
 before. But curiously enough, Lorenzo died in the 
 very year of a discovery that was inevitably to shift 
 the tide of progress westward and change Florence 
 from a world capital once more into a provincial 
 centre. 
 
 The Medici, like most of the great families of the 
 city, were bankers and members of the bankers guild, 
 which had produced other financiers of continental 
 calibre in the Bardi and the Peruzzi, while the Medici 
 were still struggling for a commercial and political 
 foothold. The bankers, fourth of the seven great 
 guilds, which through their representatives largely 
 controlled the city, was as exclusive as it was inclu- 
 sive. No man, no matter what his connections, could 
 bank in Florence unless he was a member and had 
 served an apprenticeship with the guild. 
 
 The bankers guild was a very ancient and honour- 
 able society. As far back as 1204 the consuls of the 
 guild of bankers and money changers appear, along 
 with the consuls of the other guilds, as signatories to 
 the treaty with Sienna. Records of this interesting 
 
 [72] 
 
COAT OF ARMS OF THE MEDICI 
 
 Today the only survival of the famous 
 Bank of the Medici is the familiar sign 
 of the three golden balls displayed above 
 pawnbroking establishments, an adapta- 
 tion from the six red balls on the gold 
 field of the Medici shield and the guild 
 shield with its red field strewn with 
 eleven gold florins. 
 
THE FLORENTINE GUILD 
 
 organization are still extant. They reveal in detail 
 the mediaeval formula for creating a banker. 
 
 If a boy wished to enter the guild he first signed 
 the matriculation roll and then submitted to an ex- 
 amination before the consuls. The aptness and 
 capacity of the candidate were, of course, taken into 
 consideration, but five qualifications were regarded as 
 absolutely essential. It was required of him to be a 
 native of the city, to have two sponsors, never to have 
 been arrested, to be himself a property owner (or heir 
 to property) and to have paid the state tax. If he 
 was accepted an entrance fee was exacted, which 
 varied from time to time but was always compara- 
 tively high. 
 
 The fledgling banker remained an apprentice for 
 from five to seven years. During this probationary 
 period his wages were never more than ten lire a 
 year, but his board and lodging were found for him. 
 If he proved a satisfactory apprentice he was ad- 
 vanced to a clerkship in which he was supposed to 
 acquire additional knowledge for another three years 
 before he was permitted to set up in business for him- 
 self. 
 
 Members of the guild had the exclusive right to 
 favoured locations in the market, such as those in the 
 Mercato Nuovo or along the Via di Tavolini. The 
 outfit of the guild money changer and lender was a 
 simple one — a chair and table for his convenience and 
 
 [73] 
 
BANKING THROUGH THE AGES 
 
 a green table cloth as the official and protected in- 
 signia of his trade. A daybook of ordinary paper, a 
 few sheets of parchment and a balance for weighing 
 coins completed his office paraphernalia. 
 
 His stock of gold coin he carried in a pouch fast- 
 ened to his girdle. Silver for small change was kept 
 in a bowl on the table. It was customary, certainly 
 in the earlier days of the guild, to test both gold and 
 silver by weight, though the florin, worth about $2.40, 
 was presumed to be standard. 
 
 Under the rules of the guild members were com- 
 pelled to keep books which were open to the inspec- 
 tion of its officers. It was also required that these 
 accounts be kept legibly in Roman figures without 
 capitals or special punctuation. The new-fangled 
 Arabic notation, lately introduced from Spain, was 
 not acceptable. 
 
 Up to the time of the Medici books were kept on 
 the single entry system, but there were duplicate sets 
 and the daybooks were copied into master ledgers. 
 These were stoutly constructed with leaves of parch- 
 ment and clamped and locked bindings. Such master 
 ledgers, of course, were retained at the offices of the 
 guild. A general balance was struck once a year 
 and at the same time the value of coins and rates of 
 interest were officially fixed. 
 
 Interest was very high and, according to our stand- 
 ards, simply crushing to the debtor. The disap- 
 
 [74] 
 
THE FLORENTINE GUILD 
 
 proval of the church seemed to make little difference. 
 In 1427, for example, according to the ledger of 
 Bardi and Piccioli, the interest on 2,928 lire was 878 
 lire, or almost 30 per cent. Apparently the legal 
 rate was based on what the traffic would bear. But 
 the guild itself seemed to be conscious of the exor- 
 bitance of these exactions, for three years later it 
 forbade its members to charge more than four denari 
 a month. As this rate, however, amounted to 20 per 
 cent a month, the bankers still remained fairly well 
 protected. 
 
 Many of the terms of the Florentine bankers have 
 come down to us and form a substantial part of our 
 own financial glossary, — cassa, for instance, as cash; 
 banco as bank; giornale as journal; debitor e as 
 debtor; and creditor e as creditor. 
 
 The headquarters of the guild long stood in the 
 Mercato Nuovo. This splendid building was a 
 monument to the prosperity and culture of the city. 
 Its ceilings glowed with many-coloured murals by the 
 most distinguished Florentine artists and its walls 
 were hung with rich tapestries and pictures in the 
 then newly discovered oil paints as a background for 
 exquisite Florentine sculpture and the marvellously 
 wrought furnishings of the period. The opening and 
 the closing of the city's business day hung upon the 
 toll of the great bell in the bankers guild. 
 
 It was inevitable that a system so well organized 
 
 [75] 
 
BANKING THROUGH THE AGES 
 
 and perfected should develop international banking 
 on a large scale. As early as 1260 the guild had be- 
 gun to issue letters of credit through the individual 
 bankers and funds were sometimes sent as far away 
 as Jaffa, or Tana, on the Sea of Azov. 
 
 There were two great eras of international bank- 
 ing in Florence. The first centred around the Bardi 
 and Peruzzi who were, in their time, the supreme 
 financiers of mediaeval Europe. In the 14th century 
 the Bardi established agencies as far north as Eng- 
 land and Germany and as far east as Rhodes, while 
 the 130 agencies of the Peruzzi extended from Lon- 
 don to Constantinople. 
 
 Both houses advanced huge sums to Edward II 
 and III of England, and to the King of Sicily, and 
 both were thrown into bankruptcy when the English 
 King and Parliament refused to repay £700,000 and 
 the King of Sicily defaulted at about the same time. 
 
 It was not until the rise of the Medici that Flor- 
 ence recovered from this blow. Banking had been 
 the profession of the Medici for a long time but the 
 first of the family to attain pre-eminence was Gio- 
 vanni de Medici. Giovanni was born in 1360 and as 
 a young man went through the regularly prescribed 
 steps of an apprentice in the bankers guild. 
 
 As Giovanni rose to wealth and power he left his 
 green-covered table in the market place and built 
 
 [76] 
 
LOGGIA DEL MERCATO NUOVO 
 
 Built by G. B. del Tasso, 1547, especially for the money changers 
 
 and used by the bankers in the days of the Medici. 
 
THE FLORENTINE GUILD 
 
 himself a palace in the hall of which his main business 
 was conducted, though he had branch banks in a 
 number of Italian cities. These bankers' mansions 
 were a feature of Florence and gave the names to 
 many of the principal streets such as the Peruzzi, 
 Tornabucai, Albizzi, Greci, Bardi and Cerchi. 
 
 Perhaps Giovanni's most successful venture was 
 during the council of Constance, from 1414 to 1418, 
 when he cleared a fortune. In 1429 his estate was 
 reckoned at 180,000 gold florins, or $450,000 which at 
 that time had an enormous purchasing power. As 
 Machiavelli phrases it: "He died exceedingly rich 
 in money, but still more in good fame and the best 
 wishes of mankind ; and the wealth and respect he left 
 behind him were not only preserved but increased by 
 his son Cosmo." 
 
 Cosmo remained a banker, conserving and develop- 
 ing his patrimony into another great fortune. But 
 he enjoyed an even wider success in politics and be- 
 came, in effect, the dictator of Florence, though he 
 made a pretence of ruling through the old republican 
 forms. In 1449 Cosmo's son Lorenzo was born and 
 lived to earn the title of "the Magnificent." 
 
 Lorenzo lived in princely style and his lavish pat- 
 ronage of the arts attracted about him most of the 
 great figures of his time into a veritable court of 
 talent. He was a man of no mean talent himself and 
 
 [77] 
 
BANKING THROUGH THE AGES 
 
 wrote vivacious prose as well as excellent poetry. 
 Indeed, he was not above singing carnival songs of 
 his own composition in the public streets and these 
 were not less appreciated because they were often 
 indecent. 
 
 But though Lorenzo busied himself less about his 
 business than his father and grandfather had done, 
 the reputation of the banking house of the Medici 
 continued to mount so high that it was recognized all 
 over Europe. The standing of the Medici may be 
 gauged from the fact that when Edward of England 
 invaded France in 1475 and was bought off by Louis 
 XI on the promise of 50,000 crowns a year for a 
 hundred years, it was stipulated that the Bank of the 
 Medici should be made surety for the continued pay- 
 ment of the indemnity. In other words, Louis XI 
 was to establish a trust fund with them for the period 
 of a century. Other events prevented the fulfilment 
 of this agreement but it illustrates the enormous pres- 
 tige of the Florentine Magnifico. 
 
 After Lorenzo another branch of the family car- 
 ried the name to further fame and into the papacy 
 itself, but it was not essentially as financiers that they 
 prospered. Two centuries after Lorenzo's death the 
 family had withdrawn from all direct connection with 
 banking. 
 
 To-day the only survival of the famous Bank of the 
 Medici is the familiar sign of the three golden balls 
 
 [78] 
 
THE FLORENTINE GUILD 
 
 displayed above pawnbroking establishments, an 
 adaptation from the six red balls on the gold field of 
 the Medici shield and the guild shield with its red 
 field strewn with eleven gold florins. 
 
 [79] 
 
B 
 
 44 1C5 ^ doing good with his money, a man as it 
 were stamps the image of God upon it, and 
 makes -both pass current in the merchandise of 
 Heaven." 
 
 Rev. E. Rutlkdge. 
 
CHAPTER VIII 
 
 FINANCES OF BARCELONA 
 
 IF one wished to be fanciful he might say that the 
 Gods had assured Barcelona of a fortunate fu- 
 ture. For there is a tradition that Hercules 
 founded the city four hundred years before Romulus 
 had thought of building Rome. 
 
 However that may be, the origin of Barcelona is 
 ancient enough. It seems to have been established 
 during the Carthaginian supremacy in Spain by 
 Hamilcar Barca, father of Hannibal, who was to 
 come nearer the conquest of Rome than any of the 
 ancients. The city at that time was called Barcina, 
 after its founder, and so derives its present name 
 which was officially confirmed when the Bishopric of 
 Barcelona was created in 343 a. d. 
 
 After the Roman power was withdrawn from Fa- 
 ventia, as the city was known for a time, it underwent 
 a number of vicissitudes and fell before the Moorish 
 invasion in 713. It was probably shortly after this 
 that the Jews who later played an important part in 
 the economic life of the town, became prominent. 
 The Christians, aided by Charlemagne, recaptured 
 Barcelona in 788. Thenceforth, until the union of 
 
 [81] 
 
BANKING THROUGH THE AGES 
 
 Catalonia with Aragon in 1149, it was nominally 
 ruled by the counts of Catalonia, who claimed to be 
 independent. 
 
 Through all this time the superb situation of Bar- 
 celona had constantly tended to make it an impor- 
 tant city and eventually it became supreme on the 
 eastern coast of Spain. As early as 1227 the Bar- 
 celonian fleet was so numerous that it was decreed 
 these ships should monopolize the trade with Egypt 
 and Barbary. 
 
 Most important among the industries of the city 
 was woollen manufacture. This must have been or- 
 ganized before 1257 because there is a record that 
 the wool dyers had a guild at that date. In 1258 the 
 great municipal council numbered one hundred and 
 fourteen representatives of the various trades. 
 Among them were six cloth merchants, nine wool 
 dealers, and four cotton spinners. And to show that 
 banking, even at that time, was looked on as an es- 
 sential vocation, there were four money changers. 
 
 Barcelona lies at the foot of Mount Monjuich. 
 In Roman times this elevation was known as the 
 Mount of Jove but in the Middle Ages it was called 
 Mons Judacius and seems to have been set aside en- 
 tirely as a Jewish quarter. Therefore, it is quite 
 natural to find a Jew as the first famous financier of 
 Barcelona. 
 
 This was Benveniste de Porta, a man of wide rep- 
 
 [82] 
 
SETTLEMENT OF ACCOUNTS BY MEDIEVAL GUILD 1466 
 
FINANCES OF BARCELONA 
 
 utation in his day. In 1257 he had become a backer 
 of royalty, for the records show that on December 
 seventeenth of that year he advanced 3,863 sueldos 
 to King James I of Aragon. The loan was secured 
 and was to be collected from the dues of his bailiwick. 
 
 Repeatedly during the next few years he acted as 
 the King's financier. In January, 1258, for ex- 
 ample, he received the right to dispose of the taxes 
 of Barcelona and Gerona for two years. Again, in 
 return for a loan of 200,000 sueldos to the King, he 
 was authorized to collect the revenues of Lerida and 
 other places. On June 12, 1260, King James drew 
 a draft against him for 5,000 sueldos, which is one of 
 the earliest references to such a commercial paper. 
 
 In 1262 Benveniste advanced 15,221 sueldos to 
 the account of the Infanta Donna Juana and re- 
 ceived in return the dues of Villafranca and twenty 
 squares of land. This land grant is of peculiar in- 
 terest and significance as in most places throughout 
 Christendom the Jews were forbidden to hold land. 
 King James, however, was a liberal minded ruler, 
 and to prove it once listened to a debate between a 
 Christian, a Mohammedan and a Jew. 
 
 Benveniste seems to have financed most of the op- 
 erations in Barcelona at this time. In 1264 he 
 loaned 15,000 sueldos to the Bishop of Barcelona, 
 indicating that religious intolerance was rampant on 
 neither side. Four years later he was again granted 
 
 [83] 
 
BANKING THROUGH THE AGES 
 
 the right to collect the dues of Gerona. All this time 
 the King seems to have regarded him with the most 
 friendly spirit. As a token of his favour James even 
 went so far as to pardon Benveniste's brother for de- 
 faming the Christians. 
 
 The sheep raisers formed a guild in 1273 which 
 continued an economic factor in the life of the city 
 for hundreds of years. The next year, however, 
 commerce was threatened when trade with the Mo- 
 hammedans was forbidden. But Barcelona was too 
 near Moslem territory for such a suppression to be 
 entirely effective. About this time, churchly influ- 
 ence also brought about a limit of twenty per cent 
 on interest, which still further turned the money lend- 
 ing business into the hands of the Jews. 
 
 During the reign of Pedro III, from 1276 to 1285, 
 Sicily was conquered. This put Aragon into close 
 touch with Italy, as well as Sicily, resulting in the 
 spread of Italian influence into Barcelona itself. 
 During this period the merchants of Barcelona com- 
 peted with Italy for the trade of the Levant and 
 were among the earliest to establish consuls and fac- 
 tories in distant ports. The celebrated code of mar- 
 itime law, Consolato del Mar, is believed to have been 
 drawn up at Barcelona. The extension of commerce 
 developed the issue of marine insurance at an early 
 date. 
 
 Sicily was an island of mixed population and har- 
 
 [84] 
 
MEDIEVAL COINAGE OF BARCELONA. SOME OF THESE 
 COINS WERE ISSUED BY JAMES I OF ARAGON 
 
FINANCES OF BARCELONA 
 
 bored Greeks and Mohammedans as well as Italians. 
 Sericulture had long been introduced there and after 
 Pedro's conquest silk manufacture spread to Aragon 
 and other Spanish provinces. But wool remained 
 the great staple of manufacture. By that time the 
 woollen guild was importing wool from England and 
 sending back shipments of finished cloth not only to 
 Britain but also to many other countries. Thus the 
 guild was forced into banking operations for its mem- 
 bers as early as 1349. An agent in England could 
 pay a bill there with a draft drawn on the guild, while 
 the guild paper was generally accepted in the cities of 
 Spain and Italy. 
 
 In importing wool from England the guild acted 
 as buyer for its various members and in disposing of 
 goods abroad exercised a similar general sales func- 
 tion. Members could also borrow from the guild 
 when necessary. They were not expected to pay 
 interest but were required to give pledges unless 
 the loan was so small that their ability to repay was 
 unquestioned. 
 
 Throughout western Europe there were riots 
 against the Jews toward the end of the Fourteenth 
 Century. Superstitious charges that the Jews had 
 introduced the Black Death, or pestilence, which 
 again and again ravaged the most populous commu- 
 nities, were at the bottom of these uprisings. In one 
 such riot at Barcelona, in 1391, the Jewish quarter 
 
 [85] 
 
BANKING THROUGH THE AGES 
 
 was virtually wiped out and many Jewish money 
 lenders were driven from the city. 
 
 This left a void which the thriving commerce of 
 the city compelled the citizens to fill. Acting on the 
 example of the drapers' guild and of some of the 
 Italian cities, the municipality thereupon established 
 the Bank of Barcelona as an official institution. 
 
 This bank received deposits and served as a me- 
 dium of exchange, issuing drafts and accepting 
 drafts drawn upon it. Unlike the drapers' guild it 
 was open to every one, including not merely the cit- 
 izens of Barcelona and Aragon, but all foreigners as 
 well. Foreigners were no doubt admitted to help 
 solve the problem of exchange of money which had 
 become almost inextricably complex. Barcelona 
 maintained commercial relations with Aragon, Cas- 
 tile, France, Mohammedan Spain, Sicily and various 
 cities in Italy and all of these issued distinctive coin- 
 ages of their own. 
 
 Barcelona always remained proud of her position 
 as a commercial city and fostered her trade and 
 manufacture in every way. Business there was 
 never regarded as degrading as it was in many other 
 Spanish cities. The municipality was controlled by 
 the council which was itself composed of representa- 
 tives of the guilds, as in Florence. Indeed instances 
 are recorded of some of the lesser nobles renouncing 
 their rank for the privilege of entering a guild and 
 
 [86] 
 
FINANCES OF BARCELONA 
 
 thus establishing their eligibility for municipal offices. 
 
 The bank was under the general supervision of the 
 council and so, indirectly, under the control of the 
 guild members whose interests it served. As a result 
 of this close business relationship the bank enjoyed 
 a long and prosperous career. 
 
 The discovery of America, which changed the 
 course of commerce throughout the world, affected 
 Barcelona adversely along with the other Mediter- 
 ranean cities. The cities of the Atlantic coast leaped 
 into sudden importance and Barcelona, though it re- 
 mains an important industrial centre to this day, 
 never recovered the prestige it enjoyed before Co- 
 lumbus ventured across the western ocean. 
 
 [87] 
 
M' 
 
 "TV >(r ONEY > the life blood of the nation, 
 
 Corrupts and stagnates in its veins, 
 Unless a proper circulation 
 
 Its motion and its heat maintains." 
 
 Dean Swift. 
 
CHAPTER IX 
 
 BIRTH OF THE ENGLISH NATIONAL 
 
 DEBT AND FOUNDING OF THE 
 
 BANK OF ENGLAND 
 
 THE banker of to-day should find it a curious 
 and interesting diversion to consider how 
 much he owes to the tyrants of the past. It 
 is a commonplace, in all nations derived from English 
 stock, that existing political and legal institutions 
 represent mainly the outgrowth of the struggle of 
 popular rights against the absolutism of kings. To 
 an extent this is also true of banking and currency, as, 
 for instance, the issuance of bank-notes backed by the 
 national governments. 
 
 It may fairly be said that such standard features 
 of the modern banking world as the central bank of 
 issue and the national debt come to Americans almost 
 as the direct fruit of the Divine Right of Kings, as 
 this right was perversely applied by two Stuart kings 
 of England, Charles I and Charles II. It was due 
 primarily to the lawlessness and corruption of the 
 second of these kings that England created a national 
 debt and a central bank of issue. 
 
 The astonishing crudity of the devices which served 
 
 [89] 
 
BANKING THROUGH THE AGES 
 
 England in place of a banking system in the Middle 
 Ages — almost incredible to the modern mind — made 
 possible the forays of the Stuart kings ; and by mak- 
 ing these raids possible drove home the necessity of 
 regulating the financial relations between the Gov- 
 ernment and the people to whom the Government 
 looked for funds with which to carry on. 
 
 Charles I set two unfortunate precedents for his 
 immediate successor by twice losing his head. The 
 second loss, as is well known, was fatal to Charles. 
 The first was when he raided the Exchequer or Gov- 
 ernment Treasury (then housed in the Tower of 
 London), causing a loss to the merchants who had 
 deposited their money there to the amount of £120,- 
 000. This was the precedent which the second 
 Charles followed, on a ten times larger scale, with 
 results probably much more than ten times as far- 
 reaching. 
 
 In the careless days of Charles I the methods 
 both of banking and of taxation were crude and 
 confused. For nearly five hundred years before his 
 time the Mint had been a place of deposit for the 
 merchants. Because of the worn condition of the 
 coins, which made them of unequal value, the officials 
 weighed each man's deposit and recorded the amount 
 of the deposit by notches on a stick, which afterwards 
 served as ledger and pass-book. According to Sir 
 John Lubbock, president of the Bankers' Institute 
 
 [90] 
 
o 
 
 ° £ 
 « o 
 
 K 
 H 
 
 W 
 
 w 
 
 Hi 
 
 P 
 
 P 
 
BIRTH OF ENGLISH NATIONAL DEBT 
 
 of London in 1879, it was not until 1826 that the old 
 wooden tallies entirely passed out of use in England. 
 "The tally," says Sir John, "was a willow stick about 
 five feet long, an inch in depth and thickness, with 
 the four sides roughly squared." 
 
 The amount of the deposit was recorded by means 
 of notches on one side of the tally stick, and a descrip- 
 tion inscribed on the two sides adjoining the notched 
 side. The tally stick was then split in half through 
 the notches, one half going to the depositor, the other 
 half being retained by the bank as its record. 
 
 Cromwell, who sanctioned the beheading of Charles 
 I, and who ruled England as "Protector," had a 
 hand in devising the effective and productive system 
 of monthly taxes which enabled the Parliamentary 
 Government to get through periods of great difficulty. 
 This new system was largely continued under the 
 second Charles. 
 
 But Cromwell, like the king before him, had to 
 take in his pocket Parliament's authorization for a 
 loan and dicker with the money lenders when in need 
 of funds, the security offered being repayment out of 
 the proceeds of the authorized tax-levy. By this time 
 the former money-lending supremacy of the Jews 
 had passed to the goldsmiths who came to England 
 from Lombardy, and who have left their own monu- 
 ment in modern London in the name of Lombard 
 Street — the Wall Street of the British capital. 
 
 [91] 
 
BANKING THROUGH THE AGES 
 
 Following the raid of Charles I on the Exchequer, 
 the confidence of the merchants in government de- 
 positories began to weaken and they gradually turned 
 to the goldsmiths' strong boxes for a safer depository 
 for their funds. On short time deposits, the gold- 
 smiths levied a small charge for the accommodation; 
 but they paid as high as six per cent interest on de- 
 posits placed with them definitely for a year or more. 
 
 The charge they made for loans to the Government 
 was generally eight per cent, leaving for themselves, 
 as bankers, a profit of two per cent. 
 
 In January, 1672, when the Mint contained some 
 .£1,328,000 of bankers' funds advanced to the Gov- 
 ernment, Charles II acted on the precedent set by 
 his father. In the pay of the King of France, and 
 conspiring against England's safety, he had promised 
 by way of repayment to produce a war between Eng- 
 land and Holland. Like many another spendthrift 
 he ran out of funds and, losing his head almost as com- 
 pletely as his father had done, executed his most 
 lamentable raid upon the Mint, seized the funds, and 
 closed the Exchequer, prohibiting its reopening in 
 order to prevent the merchants from cashing their 
 tallies. This famous raid has been known in history 
 ever since as "The Stop of the Exchequer." 
 
 This seizure proved to be a serious matter for all 
 concerned. The money, though advanced by the 
 bankers to the Government, represented the fortunes 
 
 [92] 
 
BIRTH OF ENGLISH NATIONAL DEBT 
 
 of some ten thousand individuals who had entrusted 
 their funds to the goldsmiths. The bankruptcy and 
 ruin which followed Charles' raid was therefore wide- 
 spread, and so disastrous that an attempt was made at 
 partial reparation, — an attempt which resulted in the 
 birth of the national debt of England. Charles, in 
 his proclamation closing the Exchequer, declared that 
 the money he had taken would be retained for only a 
 year, but this promise, like most he made, was not 
 kept. The Government paid six per cent interest on 
 the seized funds for six years, from 1677 to 1683, 
 after which all interest payments ceased. No interest 
 was paid during the following short reign of James 
 II, and it was not until another revolution had put 
 William of Orange on the British throne that real 
 reparation came into sight. 
 
 An attempt by the Government's creditors to get 
 restitution by action through the courts at first came 
 to nothing since it was ruled that Charles II, and not 
 the Government headed by William, had made the 
 seizure. Years later the House of Lords upset the 
 court decision and partial restitution was made. 
 
 Before the end of the litigation was in sight a plan 
 of settlement, based on the creation of a regular Gov- 
 ernment debt and a bank of issue, was put before 
 Parliament by an obscure Scotchman named William 
 Patterson, who was backed in his efforts by a number 
 of rich London merchants. Taking advantage of 
 
 [93] 
 
BANKING THROUGH THE AGES 
 
 the Government's need for money, Patterson, in 
 1692, offered a plan whereby the creditors or their 
 assignees would forego the interest on £1,340,000 
 owed them, and would advance another sum equal to 
 their principal if six per cent should be secured by 
 act of Parliament, and the bills of the company be 
 made legal tender up to the total amount. Parlia- 
 ment objected to the legal tender feature and nothing 
 was concluded for a year or more. 
 
 The plan was revived, however, by Charles Mon- 
 tagu, Lord of the Treasury, who sent for Patterson, 
 to whose assistance later came the astute Michael 
 Godfrey. A loan to the Government of £2,000,000 
 at seven per cent interest was contemplated at this 
 meeting, but the low rate of interest seemed so pre- 
 posterous to royal ministers accustomed to waste 
 nearly half the proceeds of a loan in extravagant com- 
 missions, that they turned from Patterson's plan to 
 other ways and means. 
 
 Two years later the Patterson-Godfrey plan, re- 
 vised, was carried through a scantily attended session 
 of Parliament as a rider to the Ways and Means Bill. 
 It emerged May 4, 1694, as the charter of "The 
 Governor and Company of the Bank of England." 
 Under the terms of this charter the company was al- 
 lowed to lend the Government £1,200,000, was au- 
 thorized to issue notes, deal in bullion, and to make 
 advances on merchandise. Because the bill to which 
 
 [94] 
 
ENGLISH OFFICERS RECEIVING AND WEIGHING COIN 
 AT THE EXCHEQUER, A.D. 1130 — 1174 
 
BIRTH OF ENGLISH NATIONAL DEBT 
 
 the Bank rider was attached levied tunnage duties, 
 the Bank itself was long known as "The Tunnage 
 Bank." 
 
 Thus England acquired a national debt and a 
 central bank of issue — unforeseeable fruits of the 
 tyranny of the Stuart kings. 
 
 [95] 
 
**^"^l ET all you can without hurting your soul, 
 ^JT your body, or your neighbor. Save all 
 you can, cutting off every needless expense. 
 Give all you can. Be glad to give, and ready to 
 distribute; laying up in store for yourselves a 
 good foundation against the time to come, that ye 
 may attain eternal life." 
 
 John Wesley. 
 
CHAPTER X 
 
 THE AMSTERDAM BOURSE IN THE 
 SEVENTEENTH CENTURY 
 
 N August 14, 1597 the somewhat sedate 
 streets of Amsterdam suddenly began to 
 echo to the sound of bells ringing in mad 
 excitement. In no time at all a crowd of burghers 
 had gathered at the waterfront, overjoyed at the 
 spectacle they witnessed there. Four Dutch ships, 
 absent more than two years, had returned trium- 
 phantly from the Spice Islands of the far-away 
 Indies. 
 
 But there was a sober note in the triumph. The 
 little fleet, backed largely by the money of the local 
 merchants, had set out manned by two hundred and 
 fifty men. Only ninety-four of them came back, 
 and these after incredible hardships. But they had 
 successfully defied the power of Spain which, in clos- 
 ing the ports of her then dependency, Portugal, to all 
 Dutch traders, had threatened the very existence of 
 the mercantile navy of the Netherlands. 
 
 That memorable voyage marked the metamor- 
 phosis of the Dutch from European into World 
 traders. From various ports of Zeeland and Hoi- 
 
 [97] 
 
BANKING THROUGH THE AGES 
 
 land eighty vessels sailed the following year to 
 America, Africa and India. In 1602 the celebrated 
 Dutch East India Company was organized under a 
 charter granted by the States-General with a sub- 
 scribed capital of 6,000,000 guilders. Within six 
 years this company sent out forty-six ships armed for 
 war, if necessary, and as thoroughly equipped for 
 trade. Holland had begun to take her position as a 
 world power. 
 
 Commerce, developing so rapidly, was naturally 
 in confusion. Amsterdam, long a city of import- 
 ance, had suddenly grown to be a great centre of 
 international trade. It was overrun with foreigners. 
 Its imports and exports reached staggering figures. 
 Indeed, it was the main transfer port between north 
 and south. 
 
 The money current in the city flowed in from many 
 lands. It was worn with constant use and where it 
 had not lost weight from long service it was clipped 
 by sharpers. The bulk of it was worth from ten to 
 fifteen per cent less than the new coinage from the 
 mint. This was one of the potent reasons which led 
 to the establishment of the Bank of Amsterdam. It 
 was also urgently necessary to ease the payment of 
 foreign bills of exchange and most of the merchants 
 also desired to avoid the inconvenience of making 
 their payments in actual coin. 
 
 Therefore in 1609 the city itself established the 
 
 [98] 
 
H 
 
 o 
 
 W 
 H 
 
 oa 
 
 W 
 
 H 
 
 CO 
 
 P4 
 
 o 
 
 ffl 
 
 < 
 
 M 
 
 H 
 
 Cfl 
 
 W 
 
 W 
 
 H 
 
THE AMSTERDAM BOURSE 
 
 bank. It belonged to the city, its credit was guarded 
 by the city, the cost of management was undertaken 
 by the city and if there were any profits they accrued 
 to the city. At a glance, this has the look of an ad- 
 vanced enterprise in municipal ownership. 
 
 Yet the old Bank of Amsterdam is of peculiar in- 
 terest to-day because it was in many ways so primitive 
 and because it was based on principles so different 
 from those which regulate modern banks. Its de- 
 posits, for example, were presumed always to be 
 equal to its liabilities. It was not intended as a loan 
 bank at all but as a convenience in commercial ex- 
 change. 
 
 The institution accepted foreign and domestic coin 
 at its actual value by weight and fineness. This was 
 credited on the books and the depositor was given 
 both a credit slip and a receipt for the coin each of 
 which was used independently as commercial paper. 
 Gold and silver bullion was received on the same 
 basis. Both coin and bullion, however, were credited 
 at about five per cent below the mint value. 
 
 The bank exacted an additional charge for the 
 storage of bullion if it remained in the vaults more 
 than six months. For gold this charge was one half 
 of one per cent and for silver one quarter of one per 
 cent. It was considered more difficult to test the 
 fineness of gold and the risk involved in guarding it 
 was held to be greater. If coin was left in the bank 
 
 T991 
 
BANKING THROUGH THE AGES 
 
 for a period beyond six months the same charge as 
 that for silver bullion was required. Obviously, a 
 considerable part of the bank's income was derived 
 from these charges, though the canny founders had 
 not neglected other sources of profit. 
 
 Under the law all monies received and paid, 
 amounting to more than 600 guilders, had to be 
 cleared through the bank and this limit was later 
 reduced to 300 guilders. Bills of exchange, to be 
 legal, had likewise to be paid through the bank. 
 The law was framed to prevent fraud, to provide 
 legal records and to assure safety in the handling of 
 funds. 
 
 Perhaps it was merely an incidental consideration 
 that the business of the bank would be enormously 
 extended. However, for each of these multitudinous 
 transactions the institution received not less than two 
 stivers, or four cents. If the transfer fell below 300 
 guilders the charge was tripled. The results were as 
 profitable as a government stamp tax on all commer- 
 cial paper. 
 
 Another source of profit lay in the multiplication 
 of accounts. Every new depositor was charged ten 
 guilders, or four dollars, and every new account 
 started by him yielded another three guilders. Each 
 deposit was regarded as a separate account and might 
 be negotiated from merchant to merchant for many 
 years. Under the Dutch system the deposit was the 
 
 [100] 
 
OEN BAM, V*L» VQCANT. 
 
 THE FORUM, AMSTERDAM EARLY EIGHTEENTH CENTURY 
 
THE AMSTERDAM BOURSE 
 
 unit whereas to-day the individual is usually regarded 
 as the unit. 
 
 Certain specific penalties enforced by the man- 
 agement also added to the profit of the bank. 
 
 If bullion was not withdrawn within six months 
 after the deposit, or if a new storage charge was not 
 paid, it was supposed to revert to the bank. As a 
 matter of fact bullion was seldom forfeited and stor- 
 age payments on it often ran over long periods. If 
 a depositor failed to balance his account every six 
 months he was fined twenty-five guilders, or ten dol- 
 lars. 
 
 The profits of the bank, though substantial, varied 
 enormously from year to year. The exact figures 
 were kept secret. But according to old city records 
 of income the profits ran anywhere from 25,000 to 
 300,000 guilders, and might jump or drop as much 
 as 100,000 guilders from one year to the next. 
 Nevertheless, this was doing very well as the bank 
 was supposed to make no loans to individuals and 
 had not that profitable field to exploit. 
 
 The Bank of Amsterdam was under the direction 
 of the four ruling burgomasters of the city, who were 
 changed each year. Every year just before the bank 
 was handed over to the new burgomasters a balance 
 was struck and the transfer was attended by solemn 
 ceremonies. However, the actual figures were not 
 made public. 
 
 [101] 
 
BANKING THROUGH THE AGES 
 
 In 1672, when Louis XIV captured Utrecht there 
 was a run on the bank but it met all demands 
 promptly. Some of the coin paid out at that time 
 had evidently been lying in the vaults of the bank 
 since it had been founded. 
 
 Yet perhaps even then all was not as serene as it 
 seemed. Or possibly the following century devel- 
 oped a looser management. At all events when the 
 French captured Amsterdam in 1795 and seized the 
 bank a balance was taken which revealed that the 
 deposits were far below what the receipt book called 
 for. It developed that money had been loaned to 
 Holland, West Friesland, the City of Amsterdam 
 and the Dutch East India Company. How these 
 loans could have been kept secret from one adminis- 
 tration to another, with the four burgomasters 
 changed every year, and in the midst of bitter party 
 politics, is a mystery. It must be assumed that the 
 true condition of the bank was considered a state 
 secret outside the realm of internal politics. 
 
 Though the city managed to pay the depositors in 
 full before 1802 these revelations had hopelessly 
 ruined the credit of the bank and it soon ceased to 
 exist. Through other means, however, Amsterdam 
 managed to maintain her financial supremacy until 
 it passed to London during the Napoleonic wars. 
 
 [102] 
 
NATHAN ROTHSCHILD 
 Founder of the Famous House of The Rothschilds. 
 
CHAPTER XI 
 
 RISE OF THE ROTHSCHILDS 
 
 LOST in the obscurity of the humble, somewhere 
 in the second quarter of the "excellent, indis- 
 pensable Eighteenth Century," a Jewish ped- 
 lar, Amschel Moses Bauer, decided to settle down at 
 Frankfort, Germany. He had hawked his goods 
 about at Hanover and countless country fairs and he 
 was tired. 
 
 The restlessness that was already in men's minds, 
 and was later to set all Europe in flames, had not yet 
 ripened. Bauer opened a little shop in the Juden- 
 strasse. Over his door, as a sign, he swung a red 
 shield. From that house, named from that modest 
 shield, sprang the greatest firm of international 
 bankers of the next century — until our own day the 
 most powerful family of money lenders the world has 
 known. 
 
 Bauer had a son, Maier Amschel, the apple of his 
 eye. Maier was a smart boy, and studious. His 
 father, in a wild flight of ambition, decided to make 
 him a rabbi and sent him to the Talmud school at 
 Furth. But in 1754, when Maier was only eleven 
 years old, Moses Bauer died. The boy had to go to 
 work. Eventually he managed to get a clerkship in 
 
 [103] 
 
BANKING THROUGH THE AGES 
 
 the Oppenheimer bank at Hanover and after a num- 
 ber of years became a junior partner. Yet his mind 
 turned back to Frankfort. Returning, he set up 
 there as a banker in his own right. As a filial gesture 
 he bought the little house with the red shield and as- 
 sumed the name "red shield" himself — the first of 
 the Rothschilds. 
 
 As a boy at Furth, Maier had developed an in- 
 terest in ancient coins and medals. As a banker he 
 made this interest rather a hobby. This hobby re- 
 sulted in a contact which influenced his own fortune 
 and that of many others. 
 
 Chief of the local connoisseurs was William, Land- 
 grave of Hanau, afterward Elector of Hesse Cassel. 
 In 1785 the Landgrave and General Estorff were 
 disputing the origin of an old coin when the General 
 suggested Rothschild as an expert. 
 
 Arriving on summons, Maier found the two at 
 chess. 
 
 "Do you play?" the Landgrave condescended to 
 ask. 
 
 "A little," responded Rothschild. "And if I may 
 suggest this move your highness will win the game in 
 three moves." 
 
 So it turned out. A decidedly tactful suggestion. 
 The victorious Landgrave turned to his friend. 
 "General," he announced, "This is certainly no fool 
 you have brought me!" 
 
 [104] 
 
COAT OF ARMS OF THE ROTHSCHILDS, 
 
 WHICH INCLUDES THE ORIGINAL 
 
 RED SHIELD IN THE CENTER 
 
RISE OF THE ROTHSCHILDS 
 
 And he, in his turn, was right. From time to time 
 Maier Rothschild bought rare coins for the Land- 
 grave and negotiated bills on London. Like his 
 predecessors, Rothschild's patron was virtually sell- 
 ing soldiers to Great Britain. In 1787, for example, 
 he forwarded 12,000 men and received £80,000 for 
 their services. Thus he became one of the richest men 
 in Europe, often having as much as half a million 
 pounds in his vaults at Cassel, besides substantial 
 deposits in London and Amsterdam. Naturally, 
 this profitable practice made him the enemy of France 
 and when Napoleon crossed the Rhine he was com- 
 pelled to flee. But he had developed a firm faith in 
 the integrity and shrewdness of Rothschild and left 
 most of his wealth with him. The latter hid £250,- 
 000 in the cellar and sent much more than that to his 
 son Nathan, in London. 
 
 This Nathan was not merely the third of Maier's 
 five sons. He was the greatest financial genius of 
 his generation. He was born in 1777 and when he 
 came of age went to England. Manchester attracted 
 him because he saw how three profits could be made 
 in the cotton trade. There, by supplying both 
 materials and dyes and selling the finished product, 
 he expanded his capital from £20,000 to £60,000. 
 
 By 1800 he was rich enough to set up as a London 
 banker. Through his father he became within a year 
 the purchasing agent for the Landgrave. Within 
 
 [105] 
 
BANKING THROUGH THE AGES 
 
 six years he had attracted considerable attention in 
 the financial world by engineering a loan of 10,000,- 
 
 000 thalers to Denmark. Indeed, so important was 
 this loan, that Amsterdam never recovered the pres- 
 tige in financial affairs which London, through Roths- 
 child, had wrested from her. 
 
 Naturally, then, when the Landgrave fled, his 
 funds went to Nathan for safe-keeping. Nathan in- 
 vested them shrewdly and when the time came to make 
 return added five per cent interest. The Landgrave, 
 astonished and delighted, became the firm's greatest 
 advertiser, shouting praises of the House of Roths- 
 child throughout the courts of Europe. 
 
 England was now at death grips with Napoleon. 
 Sir Arthur Wellesley, later Duke of Wellington, 
 fighting the power of France in the Spanish penin- 
 sula, had drawn numerous orders on the treasury 
 which it could not pay and which were consequently 
 selling at a big discount. Nathan Rothschild had 
 always believed in the ultimate defeat of Napoleon. 
 Acting on that faith, in 1809 he bought up many of 
 these orders and held them as an investment. It was 
 Wellington himself who later said: "Rothschild and 
 
 1 owe something of our .success to knowing what is 
 doing on the other side of the wall." 
 
 Meanwhile Rothschild learned that the East India 
 Company wished to sell 100,000 pounds of gold bul- 
 lion. This he bought, confident that it would soon be 
 
 [106] 
 
RISE OF THE ROTHSCHILDS 
 
 needed by the government. His guess was correct. 
 Soon after, the government sent for him and bought 
 his gold to send to Wellesley, who was desperately in 
 need of cash for his army in Portugal. Rothschild 
 himself undertook to deliver it for the sake, as he 
 afterward said, of the extra profit. Not only did he 
 deliver the gold to Wellesley but he sent it boldly 
 through France, the country of the enemy. 
 
 By this time Wellesley's treasury orders had been 
 discounted in Portugal and Italy and, in fact, were 
 scattered all over the continent. By 1813 Rothschild 
 had traced most of these down and purchased them 
 for about <£700,000. Of course it was necessary that 
 this be done quietly so as not to disturb prices, but 
 Rothschild managed the deal without exciting a rip- 
 ple. 
 
 When two years later Napoleon returned from 
 Elba, England faced another and her greatest crisis. 
 
 If Napoleon triumphed Rothschild was ruined. 
 But as usual he was in a strategic position. Adolphe 
 Thiers, the French statesman and financier, tells the 
 story of what happened. 
 
 Rothschild was at Ghent. In the next house to his 
 was Louis XVIII of France, driven into exile by 
 Napoleon and now waiting the issue of the field of 
 Waterloo. Through his window Rothschild could 
 see what was taking place in the hall of the King next 
 door. The only news of the battle of Waterloo that 
 
 [107] 
 
BANKING THROUGH THE AGES 
 
 had yet penetrated to the outside world was that 
 Blucher had heen defeated. Yet the watching banker 
 saw a messenger from the battlefield enter the King's 
 presence and kneel as though to a reigning sovereign. 
 
 This was enough for Rothschild. He felt sure 
 Napoleon was defeated. He started post haste for 
 London. Reaching Ostend he found a furious storm 
 driving across the Channel. Still gambling with f ate, 
 he paid a sailor 2,000 francs in advance to land him 
 safely in England. In the morning he was able to 
 take his place in the London stock exchange. None 
 knew what he knew. What tidings the city had from 
 Waterloo were bad. Consols were selling at bargain 
 prices. Rothschild bought all he could lay his hands 
 on. When the nation finally learned of Welling- 
 ton's decisive victory the banker's profits amounted 
 to £1,000,000. 
 
 Again and again Rothschild profited by his ap- 
 preciation of the value of news. He had carrier 
 pigeons trained to bring him the latest tidings from 
 Europe and used clipper ships to outrun the ordinary 
 channels of intelligence of his time. Once he had the 
 news, his own extraordinary judgment equipped him 
 to meet and best any competitor. 
 
 Rothschild preferred lending money to states 
 rather than to individuals. In time he became the 
 fiscal agent of virtually every civilized government on 
 the globe, with the exception of Spain and the United 
 
 [108] 
 
RISE OF THE ROTHSCHILDS 
 
 States, from which countries he consistently declined 
 all contracts. His house advanced £18,000,000 to 
 states at war with Napoleon and about £5,000,000 
 to Prussia after peace had been declared. 
 
 All Nathan's four brothers were able bankers and 
 the firm functioned throughout Europe. When 
 Nathan died in 1836 the family rested at the apex of 
 the financial structure of the world. His son Lionel 
 was elected to Parliament but firmly refused to take 
 his seat until the disabilities against Jews had been 
 removed. Honours and titles descended upon the 
 House of Rothschild and to this day it has continued 
 one of the great financial powers of Europe. But 
 always the central office of the firm has been main- 
 tained at Frankfort, where it began in the House of 
 the Red Shield. 
 
 [109] 
 
^TTTT OW a man uses money — makes it, saves 
 II II it, and spends it — is perhaps one of the 
 best tests of practical wisdom. Although money 
 ought by no means to be regarded as a chief end 
 of man's life, neither is it a trifling matter to be 
 held in philosophic contempt, representing as it 
 does to so large an extent, the means of physical 
 comfort and social well-being." 
 
 S. Smiles. 
 
CHAPTER XII 
 
 DEVELOPMENT OF BANKING IN 
 THE LAND OF THE VIKINGS 
 
 POPULAR misconception of a name and the 
 very real tradition of terror they left on the 
 coasts of their visitation have combined to 
 create a false notion of the Vikings. Literature has 
 insisted on regarding them as scions of a wild north- 
 ern royalty, corsairs certainly and perhaps savage 
 princelings. As a matter of fact they were not Vi- 
 kings at all, but merely Vik-ings — "men of the in- 
 lets," or fjords. 
 
 As most of the records we have access to were com- 
 piled by their Christian and fear-shaken enemies the 
 extremely courageous yet pagan Vikings loom in 
 history chiefly as the deadly scourge of that first, 
 feeble feudalism which was struggling to revive some 
 spark of civilization from the ashes of the Roman 
 Empire. Issuing from their long boats, those 
 dragon ships which were a sign of peril wherever 
 their sails rose above the horizon, they did harry Eng- 
 land, Ireland, France, Spain and even the coast of 
 Italy, leaving waste and destruction where they did 
 not actually kill and colonize. 
 
 [Ill] 
 
BANKING THROUGH THE AGES 
 
 But the Vikings were much more than pirates. 
 At the height of their vigour their governance em- 
 braced the whole northern top of the world, from 
 North America which they discovered and, in some 
 sense settled, hundreds of years before Columbus 
 was born, to the steppes of Russia where Rurik, a 
 Norseman, is the first great historical figure. There 
 is reason to believe the Norsemen sailed up the Great 
 Lakes in America and penetrated as far as Minnesota. 
 In Russia, on the other wing of their far flung ex- 
 ploration, Novgorod is merely the Norse name for 
 "new fort." 
 
 All this implies a tremendous maritime energy and 
 an enormous extension of trade, for with the Norse- 
 men trade was a foster sister of the sword. They 
 were a congeries of peoples rather than a nation and 
 in the early mediaeval world some impulse, the cause 
 of which we do not know, inspired them with a cosmic 
 restlessness which brought successive eruptions of 
 their fleets against the coastwise monasteries of 
 France and England and carried them up the Baltic 
 and across the North Atlantic. It is said that the 
 first idea of galleys came to them from the Romans, 
 but the Romans never proved half so venturesome. 
 
 Often making their first approach as traders they 
 would return as raiders and finally as conquerors. 
 Thus they came again and again to the shores of 
 France and, sailing up the Seine, at last besieged 
 
 [112] 
 
BANKING IN THE LAND OF VIKINGS 
 
 Paris. To shake them off it was necessary to cede 
 them the whole province of Neustria which then be- 
 came Normandy. These Normans, or Norsemen, 
 learned to speak French and within a century con- 
 quered England, settled by earlier Norsemen (An- 
 gles and Saxons) who had been fighting vigorously, 
 but only half successfully, to keep out their Norse 
 kindred, the Danes. 
 
 Throughout all this fierce ferment the Norsemen, 
 or at least that branch of the race which called them- 
 selves Swedes, had maintained the city of Visby, on 
 the island of Gottland, as their chief commercial cen- 
 tre. Visby, which retains to-day some of the most 
 interesting mediaeval remains in Europe, is believed 
 to have been one of the most ancient trading centres 
 in the world. There are indications that it was a post 
 of exchange even in the Stone Age when bronze was 
 just being introduced from the valley of the Mediter- 
 ranean. Old Arabic and even Chinese coins dug up 
 there suggest the almost incredible spread of early 
 Norse commerce. 
 
 As the Vikings became Christianized Visby pros- 
 pered and developed as a thriving commercial repub- 
 lic, sending expeditions eastward into Russia and 
 south through Europe. The whole fur trade of the 
 north centred in the city and pelts were exchanged 
 for the various wares of more luxurious civilizations. 
 
 Russia, first developed by the Norsemen, was a 
 
 [113] 
 
BANKING THROUGH THE AGES 
 
 great field for their exploitation. But after the con- 
 quest of Russia by the Mongols the trade of Visby 
 was considerably impaired. It also suffered through 
 the rivalry of other Hanseatic towns, which won away 
 much of its southern trade. Finally it was raided 
 by King Valdemar Atterdag of Denmark in 1361 
 and never afterward managed to recover its prestige. 
 
 Even in those early days furs were so much desired 
 that enormous prices were paid for them. Never- 
 theless silver and gold were scarcely known in the 
 north and the currency was copper. In large 
 amounts copper was heavy and cumbersome. For 
 this reason there developed in Visby a system of 
 written orders for the payment of goods which cor- 
 responded somewhat to drafts or checks, except that 
 they were based on furs rather than on specie. 
 
 As Visby declined Stockholm became the chief 
 Swedish commercial centre. Trade there was fos- 
 tered by the Hansa towns of Germany, but their 
 privileges gradually became so oppressive that they 
 were set aside by Gustavus Vasa. Vasa evinced a 
 keen interest in the extension of trade and endeav- 
 oured to secure business both in Russia and with the 
 German cities. 
 
 Charles XI of Sweden divided the communities 
 into inland and staple towns. These latter were 
 centres for the export of certain staple products, and 
 
 [114] 
 
COINING OR STAMPING COPPER MONEY IN 
 SWEDEN IN MEDIEVAL TIMES 
 
BANKING IN THE LAND OF VIKINGS 
 
 it might be that a town would export but one staple 
 and thus be known particularly for that product. 
 
 Gustavus Adolphus, that great commander, found 
 time between his campaigns to encourage commerce 
 and business and is reported to have said: "The 
 Kingdom's welfare depends on commerce and ship- 
 ping." 
 
 The first chartered public bank in Sweden was 
 founded in 1656. An excellent account of this is 
 given in the report to Lord Chancellor Hardwicke 
 which has never been published but is treasured in 
 manuscript by the New York Public Library. 
 
 Sole rights for the institution were given to John 
 Palmstruch, head of the merchants guild and a prom- 
 inent miner. The only capital required was what- 
 ever cash Palmstruch might have had and the credit of 
 his various mines. The bank was divided into two de- 
 partments, — the deposit branch which could make no 
 loans, and the loan department which was permitted 
 to lend money on real estate and commodities. 
 Within two years the bank was issuing notes payable 
 on demand, some to order and some to bearer. 
 These were probably the first standard-sized payable- 
 on-demand bank bills ever issued. 
 
 The loans of the Palmstruch bank were legally 
 limited to one year and six weeks. The six weeks 
 was perhaps time added to the regular term to per- 
 
 [115] 
 
BANKING THROUGH THE AGES 
 
 mit making a readjustment. The loans were al- 
 lowed from six to ten per cent interest and as long 
 as the interest was paid that was sufficient to prevent 
 the calling of the loan. There was also a charge for 
 the transportation and storage of securities. 
 
 It seems strange that even at that time the coinage 
 of Sweden was based on copper. As the value of 
 copper continued to rise the issuing of bank notes 
 became a losing venture. Another source of loss to 
 the bank was through the extensive forging of notes. 
 
 At all events the issue of bills soon exceeded the 
 available funds and during the panic of 1664 the bank 
 ceased to redeem them and they dropped in value 
 even though they were made legal tender by law. 
 In an effort to remedy this situation silver currency 
 was introduced. 
 
 Palmstruch himself was subjected to considerable 
 criticism for intermingling the two departments of 
 loan and exchange. The King, however, retained 
 full confidence in him. He was allowed a substan- 
 tial profit on the coinage of 500,000 hundred-weight 
 of copper, received other presents and marks of es- 
 teem and was finally made a noble of the kingdom. 
 
 In 1668 the affairs of Palmstruch's bank was par- 
 tially liquidated and it was merged into the new Riks- 
 bank, or Bank of Sweden. Like the earlier institu- 
 tion this also had two departments, one for loans and 
 one for bills of exchange. The loan department 
 
 [116] 
 
THE STOCKHOLM BOURSE IN THE MIDDLE OF THE 
 EIGHTEENTH CENTURY 
 
 This building was the Banking Headquarters in Stockholm in 
 1782 and today houses one of the oldest Stock Exchanges in the 
 world. While the exterior has not been altered, the accommo- 
 dations and equipment are modern in every detail. 
 
BANKING IN THE LAND OF VIKINGS 
 
 received deposits on interest and loaned money for 
 six months or a year on security in hand or on mort- 
 gage. In the exchange department, depositors by 
 paying an extra fee had the privilege of drawing on 
 the bank by check. But deposits might be made free 
 if they did not bear interest. Thus the revenues of 
 the King's mines, the taxes and the royal court cash 
 were kept on deposit without interest. 
 
 Launched under government auspices, the bank 
 was given a site free and permitted to operate a spe- 
 cial paper mill for the manufacture of bank notes. 
 This government favour injured the business of the 
 private money changers and bankers and they started 
 slanderous rumours regarding the conduct of the in- 
 stitution causing a run on the bank, which was 
 promptly halted by a royal proclamation denouncing 
 these misrepresentations. 
 
 At first the Bank of Sweden was prohibited from 
 issuing notes, but in 1701 the state deputies decided 
 on a note issue as a separate section of the exchange 
 department. The notes were made transferable but 
 only by written indorsement. Nineteen years later 
 these notes were actually at a premium, possibly be- 
 cause of their great convenience in business. The 
 currency was still on a standard of copper which was, 
 in most cases, too bulky for transfer. 
 
 About 1717 Charles XII drew heavily against the 
 funds of the bank, to such an extent indeed, that its 
 
 [117] 
 
BANKING THROUGH THE AGES 
 
 credit was impaired. But strangely enough, the 
 exactions of Baron Goetz, who was afterward be- 
 headed, proved of benefit to the bank. He de- 
 manded that the people deliver their gold and silver 
 for copper checks, or tokens of coin, and they hurried 
 to deposit their specie in the bank. Goetz sought to 
 influence the King to seize these funds, but His Maj- 
 esty refused and in consequence the bank acquired a 
 great reputation for security. 
 
 This was lost, however, in 1740 when government 
 loans had forced the issue of unprotected notes until 
 the liabilities reached about thirteen times the coin 
 reserve. By 1750 the notes had declined in value 
 and in 1776 a readjustment was necessary by which 
 the old notes were redeemed at fifty per cent of their 
 face value. The redemption was not by specie but 
 merely by new transferable notes based on silver. 
 
 By this time the finances of Sweden had come a 
 long way from the old fur currency of the Vikings and 
 the rest is merely a phase of modern financial history. 
 
 [118] 
 
THE OFFICIAL BURNING OF THE ASSIGNATS IN PARIS 
 END OF EIGHTEENTH CENTURY 
 
CHAPTER XIII 
 
 FINANCES OF THE FRENCH REVOLUTION 
 
 IN one sense the French Revolution was a great 
 bankruptcy. It was the outcome of bankruptcy 
 and it resulted in bankruptcy. Therefore it rep- 
 resents the one period — and the most violent period — 
 in the ferment of modern civilization when banking 
 was virtually suspended. 
 
 The beginning, progress and culmination of that 
 vast cataclysm we call the Revolution may be 
 summed up in three historic epigrams. The first is 
 the slogan under which that magnificent monarch, 
 Louis XIV, governed: "The state, it is I." The 
 second is the prophecy of his successor, Louis XV: 
 "After me the Deluge." And the third is that fe- 
 rocious reply of Danton's to armed threats against 
 the Republic: "The kings of Europe would chal- 
 lenge us. We throw them the head of a king." 
 
 It was the grandiose designs of Louis XIV, suc- 
 cessful enough at first but all at last winding into a 
 weary futility, which bled France white and even- 
 tually resulted in the loss of the head of Louis XVI. 
 The monarchy was exacting in its demands far be- 
 yond the taxable capacity of the country. The na- 
 
 [119] 
 
BANKING THROUGH THE AGES 
 
 tion, or at least its favoured few, consumed far beyond 
 its power of production. A tower of luxury and 
 privilege had been built on a foundation of misery 
 and poverty. Meanwhile the Encyclopaedists and 
 the Physiocrats wrote and preached assiduously, 
 hoping to philosophize and teach the coming genera- 
 tion. In reality they sowed in men's minds those 
 explosive seeds which were finally to blow the whole 
 social and political structure to atoms. 
 
 But in the beginning the Revolution had merely 
 the aspect of a fiscal reform. 
 
 Toward the end of the reign of Louis XVI all 
 those questionable shifts to raise money which so 
 pleased and satisfied his queen, Marie Antoinette, 
 had failed. The financial condition of the govern- 
 ment was desperate. The national debt amounted 
 to 6,000,000,000 livres, or about $1,200,000,000. 
 There was a yearly deficit of 150,000,000 livres which 
 seemed to have become static. 
 
 Underlying all this was a tax system inexcusably 
 unjust. The nobles, who held title to one-third of 
 France, and the clergy, who controlled one-fifth, paid 
 no land tax whatever. This left a grossly dispro- 
 portionate share to be paid by the common people, 
 or Third Estate. The people also paid a tithe, or in- 
 come tax, which had originally been one-tenth of the 
 gross production, but under the exactions of the state 
 had risen to a full quarter. 
 
 [120] 
 
FINANCES OF FRENCH REVOLUTION 
 
 As a result economic conditions were terrible. 
 Most of the industries had been farmed out as official 
 monoplies. It cost from 3,000 to 5,000 livres to be- 
 come a master craftsman. The ordinary labourer 
 was only able to earn about a bushel of wheat a week 
 and the skilled workman about half again as much. 
 Piled on top of this were an almost incredible number 
 of legalized corvees, or forced labours due from the 
 peasants to the nobles. 
 
 To consider this festering situation the govern- 
 ment convoked the States General, a mediaeval in- 
 stitution faintly analogous to the British Parliament, 
 which had not been called for centuries. To the as- 
 sembled deputies the King delivered a speech urging 
 a reform in the finances. 
 
 The Third Estate, or commons, having by far the 
 greater number of votes, promptly took matters into 
 its own hands and organized a national assembly. 
 At its demand the King declared on June 23, 1789, 
 less than two months after the calling of the States 
 General, that there should be no loans or taxes with- 
 out the consent of the deputies. In so short a time 
 France had changed from an absolute into a condi- 
 tional monarchy. Necker proposed a tax of twenty- 
 five per cent, and it was carried, but even this was 
 wholly inadequate to the need of the country. 
 
 On October tenth, Talleyrand took the first great 
 step toward what was to end in a social revolution. 
 
 [121] 
 
BANKING THROUGH THE AGES 
 
 He engineered through the assembly a measure 
 nationalizing all church property. This was a com- 
 plete expropriation, though the State agreed to con- 
 tinue paying clerical salaries. 
 
 Necker also sought to bolster the financial situa- 
 tion with a bill to make the Caisse d'Escompte, which 
 was a private banking company founded in 1776, a 
 national bank, with a proviso that it advance 170,- 
 000,000 livres to the treasury. In return it was to 
 have the privilege of issuing 240,000,000 livres of 
 national bank notes. Unfortunately, however, this 
 bank was already in a shaky condition because of 
 previous loans wrung from it by the government, and 
 it was considered the part of wisdom to lay the bill 
 on the table. 
 
 In November the government virtually confessed 
 bankruptcy by suspending all payments until Jan- 
 uary 1, 1790. Desperate attempts at rehabilitation 
 followed. A strange plea for voluntary gifts was 
 issued and produced what might have been expected. 
 Church and state property to the amount of 400,- 
 000,000 livres was ordered sold. Despite the fact 
 that 184,000,000 livres had been pried out of the 
 Caisse d'Escompte, it was forced to lend the govern- 
 ment 80,000,000 livres more. 
 
 The most significant step, however, and typical of 
 the frenzied finance of the revolution, was the issue 
 of 400,000,000 livres in assignats. These were bonds 
 
 [122] 
 
FINANCES OF FRENCH REVOLUTION 
 
 or promissory notes secured by the nationalized 
 church property, the public domain, and later, by the 
 estates of the emigres. The first issue bore interest 
 at five per cent and none was printed with a face 
 value of less than 200 livres. It is possible to justify 
 this first attempt to stem the financial tide but it 
 soon led to the wildest monetary excesses. On April 
 15, 1790, the interest was reduced to three per cent 
 and the assignats were made forced legal tender. 
 
 On September twenty-ninth, of the same year the 
 limit of the issue of assignats was raised to 1,200,- 
 000,000 livres and all interest on every issue, not 
 alone of the present and future, but also of the past, 
 was abolished. The Assembly had reversed itself in 
 an ex post facto law. Thus, having made a good 
 start with the assignats, 600,000,000 were authorized 
 on June 19, 1791, and it was decided to issue them in 
 smaller denominations. 
 
 All this time innumerable finance committees were 
 at work with a firm determination to solve the finan- 
 cial problems before them but without achieving any 
 commensurate results. The difficulties piled up for 
 years under the old regime and fresh crises spring- 
 ing from unsettled revolutionary conditions proved 
 too much for the deputies. 
 
 The sale of the national estates, embracing chiefly 
 the old church properties, did not yield the expected 
 profit. They were largely sold on small partial pay- 
 
 [123] 
 
BANKING THROUGH THE AGES 
 
 ments and the nominal purchasers in too many cases 
 cut down the timber, got rid of the furnishings, dis- 
 posed of everything else movable and simply de- 
 faulted on the subsequent payments. Perhaps the 
 only beneficial result flowing from the financial re- 
 forms of the Constituent Assembly was the abolition 
 of inequitable taxes and the detested corvees. 
 
 But even these were hastily abolished before other 
 and better sources of income had been developed. 
 As a result, the legislative assembly which convened 
 October 14, 1791, was obliged to issue 3,300,000,000 
 livres more in assignats within the next seven months. 
 Such enormous issues could have but one effect. 
 Value began to evaporate from the assignats. Dur- 
 ing the year 1792 they depreciated from seventy-two 
 to fifty-one per cent of their face value. 
 
 On January 25, 1793, King Louis XVI was 
 guillotined. War with most of the rest of Eu- 
 rope followed as a matter of course. Driven on by 
 the need of financing its campaigns, the new republic 
 once more resorted to an issue of assignats. The 
 consequent drop in their value was as sudden as it 
 was irretrievable. By July they had reached twenty- 
 three to the hundred. 
 
 The Convention had been responsible for the issue 
 of 7,274,000,000 of assignats. But the Directory, 
 infected by a kind of frantic insanity to raise money, 
 limited the issue of assignats only by the capacity of 
 
 [124] 
 
•H^rie 760 
 
 HB5TS15 1 
 
 11? 7 $2 
 
 
 
 
 7i.° 7%% 
 
 TJ-i !! se«JT76o" 
 
 ONE OF THE FRENCH ASSIGNATS — 1792 
 
FINANCES OF FRENCH REVOLUTION 
 
 the presses. The total was raised to 45,578,000,000. 
 The price to which they fell may be guessed. 
 
 All sorts of bolstering legislation was attempted. 
 Various severe terms of imprisonment were decreed 
 for those who refused to accept them as legal tender. 
 But the people, now finally aware of the value of such 
 legal tender, simply hoarded their metal money and 
 this disappeared entirely from circulation. In terms 
 of assignats, the prices of commodities rose enor- 
 mously. Sugar, for example, sold at 400 livres a 
 pound. Soap brought 230 livres a pound. 
 
 The frenzy of the revolution had now spent itself, 
 but not its effects. When Napoleon set out on Feb- 
 ruary 23, 1796, to take command of the army in Italy, 
 the treasury, exercising the utmost exertion, could 
 raise for him but 2,000 louis in coin. This he carried 
 in his carriage. At Nice he allotted four louis to each 
 general, but the amount as expressed in assignats 
 seemed fabulous. Perhaps at this time the assignats 
 were worth one per cent of their face value. 
 
 On May 21, 1797, all assignats were demonetized 
 and repudiated. 
 
 The government had found a new source of in- 
 come — loot. Its armies had already demonstrated 
 their ability to support themselves from the countries 
 which they occupied. Napoleon discovered that he 
 could force loans so successfully from the Italian 
 cities that he could not only finance his soldiery but 
 
 [125] 
 
BANKING THROUGH THE AGES 
 
 was able to send substantial sums to the government 
 at Paris. 
 
 As early as 1796 the necessity for a national bank 
 had been foreseen. But it was only after the coup 
 d'etat by which Napoleon made himself First Consul 
 that it became a reality. Napoleon directed M. 
 Mollien to organize the Bank of France, pointing 
 out the commercial losses sustained through the lack 
 of such an institution and the advantages to industry 
 inherent in its operation. At first the bank was per- 
 mitted to transact business only in gold and silver, 
 a provision due to poignant experience with the ill- 
 fated assignats. 
 
 Subscriptions for the new bank were opened in 
 January, 1800. It was capitalized at 30,000,000 
 francs, split into 30,000 shares at 1,000 francs each. 
 As a gesture of approval and support Napoleon him- 
 self subscribed for 100 shares. In effect, the bank- 
 ruptcy of the revolution had ended. 
 
 Though the revolution itself had ended, it left in its 
 wake a disturbing influence that lingered long in the 
 minds of men. In a short while the make-believe 
 Mediaeval Empire which Napoleon so spectacularly 
 erected was also to end. The currency convulsions 
 which shook America during our revolution, as well as 
 those that shook France, were not to be repeated on 
 any such national scale until more than a century 
 
 [126] 
 
FINANCES OF FRENCH REVOLUTION 
 
 later. The world, wearied with strife, had slowly and 
 reluctantly decided to modernize itself. 
 
 For more than a decade Europe had been a vast 
 battlefield with its national boundaries fluctuating 
 like tree shadows on a windy day. It now became a 
 congerie of nations intent on restoring some measure 
 of prosperity, and some semblance of social order and 
 stability. Overseas, new nations were rising to 
 power. Colonies were springing into a new import- 
 ance. Communications were being reestablished. 
 Trade revived, then flourished. And the banker 
 resumed his natural function. 
 
 ******* 
 
 In this modern world, as it has gradually taken 
 shape from the wild chaos of ancient and mediaeval 
 times, banking has assumed a significance far beyond 
 what could have been anticipated at any period dur- 
 ing the early history of civilization. It ceased to be 
 the convenience of a class, and became the necessity of 
 a people. It is now one of the foremost functions of 
 government. Our social and economic organization 
 is inconceivable without the great banking systems 
 which knit the whole commercial fabric together. 
 The tide of our prosperity rises and falls through, 
 and is gauged by our banking institutions. Our 
 material civilization is indeed built foursquare on 
 these institutions which might be called the trans- 
 
 [127] 
 
BANKING THROUGH THE AGES 
 
 formers through which the twin currents of industry 
 and commerce flow. 
 
 Perhaps the future historian will look back to the 
 boiling commercial activity of to-day and, pausing for 
 a salient phrase, set down this age in his record as 
 The Age of Banks. 
 
 [128] 
 
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