One says, “the money is sent,” but in fact it was paid out on order to the Curia in Rome, either by a branch of the same bank that had received the money abroad or by a trusted correspondent bank. Actually to travel on horseback or by foot across Europe with money was dangerous. “Beware of rivers in flood,” one messenger is warned. “Go armed and in company.” So a pilgrim, or priest, or choirmaster traveling to Rome goes first to his nearest bank, in London, Bruges, Cologne, Avignon — except for Constantinople, there are no banks east of the Rhine — buys a letter of credit, travels to Rome, and cashes it on arrival. A little is lost on the exchange rate, a little is paid in bank services, but he cannot be robbed. More than any other organization, it is the Church, then, that, despite its condemnation of many banking practices, needs and stimulates the growth of the international bank. Because the Church is the largest international economic entity. It will be hard for the pope to send to hell the people who collect his taxes and make his grandiose projects possible.
And more than any other organization, it is the Church that aggravates the difficulties of balancing the cash flow around Europe. For how can the banks in Rome continue to pay out Church tributes collected elsewhere if they don’t take in any cash? There is already a trade imbalance between Italy and northern Europe. London and Flanders are buying silks, spices, and alum from and through Italy in considerable quantities, but all they have to offer in return are raw English wool, some wall hangings, some Dutch linen. However many of these things they send, it never seems to amount to the value of what they want to buy. Already, then, more money has to be brought into Italy, in coin, than sent out of it. The Rome anomaly makes the situation worse; the papal court is sucking in huge quantities of cash and not sending any back. What arrives in Rome is spent mainly on luxury goods — heavy brocades, silks, artwork, and silverware — and these don’t come from Northern Europe.
As far as possible, the bankers, who are also merchants, get around the problem with triangular movements. Florence buys raw wool from the English Cotswolds. The Florentine banks in London can pay the sheep farmers with the money they have taken in for papal tributes. Florence cleans and weaves the wool and sends finished cloth for sale in Rome, where the local branch of the same Florentine banks can now recover some of the cash previously paid out on behalf of their London branches. There are similar triangles through Venice and Barcelona. But the problem is complicated and sometimes gold or silver has to be sent directly to Rome, hidden in a bale of wool perhaps. Or the Germans send ingots from their silver mines under armed guard. It is not very convenient. Fortunately, there were also the so-called discretionary deposits.
In his twelve years working in his cousin’s business in Rome, Giovanni di Bicci must have learned everything he needed to know to set up a major bank. He learned how important it was for a bank to have its own branches in the major business centers and how to mix financial and commercial transactions across different countries to keep his capital at work. But most of all, he would have learned how important was the difference between the spirit of the law and its application. When the Church asked for loans from a bank, for example, the bank could not ask for interest in return, because usury was a sin. So in its role as trading company, it would increase the price of the goods it sold to the Church to the tune of the interest it felt it deserved from the loans it had made. All the same, when a bishop, or a cardinal, or the pope himself had money to put in a bank and wanted to play investor rather than borrower, he was eager to get something in return. Though it must not be called an interest. And this, as we shall see, was the discretionary deposit.
There were those priests who denounced sin and screamed foul and promised damnation. And there were those who studied canon law to find the loopholes in it. One suspects an underlying complicity between the two groups, the fundamentalists and the compromisers, as between any permanent enemies. They need each other to become themselves. In any event, both sides put a lot of pressure on words, on the way in which a transaction can be described. So discretionary deposits involve discretion in two senses. The name of the deposit holder is kept secret, hence the arrangement is discreet. The holder’s return on the money he deposits is at the discretion of the banker, and thus is a gift and not a contracted interest rate at all, even if it can usually be expected to work out in the region of 8 to 12 percent per annum. Since the banks do not enter into a contractual obligation to make this gift, for that would be usury, and since, on rare occasions when they are losing money, they will not make it, some theologians decide that the arrangement is not usury since there is no certain gain. Others, notably Archbishop (later Saint) Antonino of Florence, consider that since the deposit is made in the hope of gain — for the gift is certainly discussed — then this is “mental usury”; the intention is there and the absence of a contract makes no difference. It is a mortal sin.
Despite the secrecy, we know of many famous holders of discretionary deposits. One was Henry Beaufort, bishop of Winchester, half brother of Henry IV. Was his soul at risk? Cardinal Hermann Dwerg, close friend of Pope Martin V, is said to have lived in “a spirit of evangelical poverty,” while keeping 4,000 Roman florins in a discretionary deposit and accepting Cosimo de’ Medici’s annual gifts. Perhaps the cardinal really did live a frugal life. Perhaps he gave generously to the poor.
Occasionally, arguments would develop when a “gift” rashly promised was not forthcoming. The government of Florence, which of course abhorred usury, considered the habit of giving gifts in return for deposits “laudable” and ruled that promises of gifts must be honored. “Contracts were written in obscure and ambiguous language,” writes the historian Raymond de Roover, “and so became fertile ground for expensive litigation.” The anxiety over mortal sin thus affected not only the actual nature of the financial services offered but also the banking trade’s attitude toward language. A transaction would always be recorded, but its true nature was often camouflaged. What matters, the bankers appreciated, is that you must not be manifestly in the wrong. Obviously, if a bank failed to produce its gift, the clerical customer took his cash elsewhere.
But why would a cardinal in Rome put his money in a bank that — quite apart from the problem of usury — might, and often did, fail? Why not invest it, sin-free, in property, which was rapidly increasing its value in the city and immediately surrounding countryside, or again in jewels? Alas, it was illegal to transfer the Church’s wealth, which included your cardinal’s salary, into the private sector. A new pope was within his rights to confiscate the properties of those who had become rich under his predecessor. Land was visible and vulnerable. The papacy changed hands eleven times in the fifteenth century, not counting the periods when there were two or even three popes. “Sell all that you hath and follow me,” Christ said, but the rich clerics were eager to leave their wealth to their families, their brothers or nephews or bastard children. Given the availability of new credit tools, money had the advantage that it could be deposited secretly and, in the event of trouble, withdrawn in a foreign city.
So, together with the effects of usury, which dislodged a man from his station in life, something else quite unnatural was happening: A person’s wealth was no longer tied to the local community. The actual coinage paid into the bank in Rome by members of Pope Martin V’s family might be quickly paid out in the same place against letters of credit, or tributes collected abroad. Meanwhile, in Avignon, Cologne, or Bruges, the Italian banker who had sold those letters of credit, or collected the tributes, could invest the money in a shipment of almonds from Barcelona, or alum from Turkey, which could then be sold on to London. The Church’s wealth circulated for fear of a new pope, who, unlike a new king or duke, would come from a different family and very likely a different city than his predecessor, bringing an agenda and an entourage all his own.