The Florentines and Venetians, who succeeded the Lombards, did much to reorganize credit and formed great houses with branches directed by the co-partners. The Medici in the fifteenth century had not less than sixteen branch houses in the principal commercial cities.' When Holland became a centre of capital and enterprise, Amsterdam superseded Antwerp in commercial influence, and the available capital of the world was attracted there by the excellent organization of the Bank of Amsterdam. The Jewish colony included Jews from Portugal, Spain, Italy, and Germany. At Hamburg the Jewish community, formed from Portuguese refugees, was credited with a considerable share in the creation of the public bank.'

The word "bank" is derived from the public loans made by the Italian cities rather than to the business of banking as understood in later times. The usual Italian name of a public loan was monte, signifying a joint-stock fund. The Germans were influential in Italy during the Middle Ages, especially about the time when a forced loan of one per cent. was levied by the city of Venice in 1171 upon the property of all citizens. Their name for a joint-stock fund was banck, meaning a heap or mound, which the Italians converted into banco and employed for an accumulation of either stock or money. The definition of a bank given in an Italian dictionary in 1659 was "Monte, a standing Bank, or Mount, of money, as they have in divers cities in Italy." A more recent writer, Cibrario, says: "Regarding the Theory of Credit, which I have said was invented by the Italian cities, it is known that the first Bank, or public debt (il Prio Banco o Debito Pubblico), was erected in Venice in 1171.' "'' The word was adopted into English, meaning indifferently public loans

'Jannet, Le Crédit Populaire et les Banques en Italie, 6.

2

Jannet, Le Capital au XIXe Siècle, 434.

3 MacLeod, Theory of Credit, II., 578. Professor MacLeod insists that the common derivation of the word "bank" from the counter upon which the money-changers kept their money, is without foundation. He says: "The Italian money-changers, as such, were never called Banchieri in the Middle Ages."

or stocks of money. Benbrigge, in 1646, speaks of the "three Bankes" at Venice, meaning the three public loans or Monti. The issue of paper money directly by the state was spoken of as "raising a Banke" in colonial days in Massachusetts, the word "bank" standing for the money rather than the institution which put it in circulation.'

The banks of Venice have attracted wide attention because of the long-preserved legend, that a public bank issuing negotiable securities used as money was created there in 1171. This legend has been proved unfounded by recent investigations of Lattes and Ferrara. Banking in Venice was entirely in private hands during the early centuries and was a subject of legal regulation from time to time between 1270 and 1584. It was not until the latter year that an attempt was made to create a public bank. Private banking acquired a wide scope as the gradual outgrowth of the business of the campsores. The latter were required as early as 1270 to give security to the government as the condition of carrying on their traffic. Tommaso Contarini, in a speech delivered in the Senate in 1584 in favor of establishing a public bank, declared that there had been one hundred and three banks, of which ninety-six had come to a bad end and only seven had succeeded. Yet, says Professor Dunbar, "notwithstanding a train of disasters nearly two centuries and a half long, the service rendered by the banks to commerce had been such, on the whole, as to lead Contarini to

Weeden, Economic and Social History of New England, 318. The results of their inquiries were printed by Professor Lattes in La Libertà delle Banche a Venezia dal Secolo XIII. al XVII., published at Milan in 1869, and by Professor Ferrara in the Nuova Antologia for January and February, 1871. They have been carefully analyzed and summed up by Professor Dunbar, Economic Essays, 143-167. The true status of the Venetian banks seems to have been known to Blanqui, for he says that "what we know of the Bank of Venice and that of Genoa does not permit a doubt that these banks were nothing else than great tax-farming enterprises (grandes régies de perception) for the objects of the Government.”Histoire de l'Économie Politique, II., 41.

argue that to preserve the trade of the city without banking was not only difficult, but impossible."

These early banks first did business with their own money and then with deposits, like the London goldsmiths at a later date. The use of the deposits was not at first intended to economize cash, but simply to avoid its frequent handling. The transfer of credits upon the books of the bank transferred the title to cash in the custody of the bank, and, so far as this rule had been violated by grants of credit to persons who had not deposited cash, it was treated by Contarini as a grave abuse. He saw in the banking system only a method of transfer by book accounts, by which "buyer and seller are satisfied in a moment, while the pen moves over the page, whereas a day would not be enough to complete the contract for a great mass of merchandise by counting a great number of coins." Notwithstanding the attempt to keep banking within these limits, the bankers employed the money entrusted to them in more or less speculative ways, and an act of 1374 forbade dealings in certain specified commodities or the opening of credits for such dealings. The banks came by degrees to make advances to the state and to grant credits to merchants and traders without full cash security. They thus became substantially banks of issue. They did not formally issue notes, but banking credits came to constitute certificates of deposit which circulated as currency.

The creation of the Bank of St. George at Genoa and the bank at Milan were due in some degree to the survival of the Roman system of farming the taxes. A single individual was hardly equipped with sufficient capital to carry on the large operations involved, and associations were formed for dealing with the state on the one hand and the taxpayer on the other, which became the nucleus of larger banking operations. Thus great financiers grew up, who dominated the politics as well as the finance of European states as soon as centralization had reached a point which called for a paid

1

1 Dunbar, Quarterly Journal of Economics, April, 1892, VI., 314.

military force and made money the nerve of war. One of the great houses which wielded a remarkable influence in the fifteenth and sixteenth centuries was that of the Fuggers. The founder, Hans Fugger, came to Augsbourg from a country village in 1367 and died in 1409, leaving a fortune of 3000 florins. It was Jacob Fugger, his grandson, who gave the house a national character and international power. The business of trade in silks and other stuffs was at first mingled with mining and banking operations. It was in 1487 that Jacob Fugger concluded an arrangement with Duke Sigismund, by which he acquired the rich silver mines of the Tyrol as the guarantee of a loan. Maximilian, the successor of Sigismund, obtained large loans from the Fuggers, they had important transactions with Pope Julius II., and their operations were extended to Antwerp and India.

The election of the Roman Emperor after the death of Maximilian afforded the opportunity to dictate world politics. Francis I. of France had already announced that he would obtain the Empire at any cost, and it was necessary for Charles V. to appeal to the Fuggers for money to influence the electors. The aggregate cost of the election of Charles was stated at 850,000 florins, of which the Fuggers provided 543,000.' Charles V. endeavored to have the debt assumed by Spain and had such trouble in raising funds that Francis I. was able to win from him his German mercenaries. The Fuggers had great difficulty in recovering their advances to the Spanish king and in 1524 assumed the farming of a large part of the Spanish land taxes and the mines. Jacob Fugger was at this time the most potent financier in the world, with establishments in Poland, Hungary, Spain, Antwerp, and Naples. After his day, the prestige of the house gradually declined. As late as 1560 a "Fugger bill of exchange "" was synonymous with cash, but in 1562 it was necessary to borrow to meet obligations and the assets of the house only slightly exceeded its liabilities. The King of Spain in

1L'Époque des Fugger, in Annales de l' Institutes Sciences Sociales, III., 108.

1631 accorded the Fuggers an extension for paying their debts and their affairs thereafter consisted of a process of liquidation.

The business of banking was only a branch of the great affairs of these finance houses of the sixteenth and seventeenth centuries. The Fuggers endeavored to acquire large territories in Chile, and the Welsers of Augsbourg under Charles V. obtained an entire province of Venezuela. The bankers of Genoa advanced to the kings of Spain the amounts required for their destructive wars in Italy, France, and the Netherlands, upon the guarantee of the product of the mines of the new world.' The Hochstetters of Amsterdam were among the greatest of the Dutch houses and it was declared by a chronicler that "princes, counts, nobles, tradesmen, peasants, valets, and servants have placed with Ambrose Hochstetter all their money, for which he pays five per cent." The Hochstetters endeavored between 1511 and 1517 to corner" the tin market. They bought up the entire visible supply, but new mines were opened in Spain and Hungary which they were unable to control, and they lost a third of their investment. The house became involved in further difficulties within another generation and accused the Greshams of England of overthrowing their credit.'

Banking in France before the experiments of John Law was largely in the hands of the farmers-general and "financiers." The farmers-general have often been confounded with the other class, but they were for the most part respectable officials upon fixed salaries, who were connected with the financiers only through dealings with them and the efforts of the financiers to obtain admission to the official body as a badge of respectability.' The Ferme Générale was given a permanent organization only in 1680. The financiers were the adventurers and kings of finance, but lacked social prestige and were the subjects of many jibes for efforts

1 Nys, 164.

Annales de l'Institut des Sciences Sociales, III., 365. 3 Gomel, Causes Financières de la Revolution, I., 317.