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TOO BIG TO FAILJuraj KittlerPublished online: 20 Mar 2012.

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TOO BIG TO FAIL

The 1499�1500 banking crisis in Renaissance

Venice

Juraj Kittler

In a rapid sequence of events in 1499�1500 the maritime Republic of Venice lost three of its four

chief private banking institutions, labeled by the contemporary observer as the ‘four columns of

the temple’. While economic historians have already analyzed the immediate causes of the crisis

as well as its short-term impact on the Venetian economy, this study sees it from the perspective

of the longue duree, as a surface manifestation of some deep historical trends that ultimately

ushered in major structural shifts in the social fabric of the republic. It follows the gradual

unfolding of the crisis through the eyes of contemporary Venetian chroniclers whose detailed

accounts give the social and cultural historian one of the earliest opportunities to reconstruct the

internal dynamics of a full-blown fiscal and economic crisis taking place in the midst of the public

sphere of a society whose constitution already contained some important elements of democratic

culture. The study points out the complex web of social and cultural tendencies that tied together

the militaristic attitudes of the state with its overall fiscal policies, and their combined impact on

the long-term social stability and political culture.

KEYWORDS: Renaissance Venice; banking crisis; mercantilist state; hegemony; public sphere

On the first day of February 1499 the Garzoni bank in Venice, the republic’s chief

private financial institution with a 70-year legacy, announced bankruptcy. It defaulted by

an astronomical sum of some 250,000 ducats (Priuli 1:260).1 Rumors about the bank’s

insolvency had been circulating for several weeks. Four days earlier the doge convened a

secret meeting of the heads of all governing bodies in order to ‘keep this bank on foot for

the sake of the city and its reputation’ (Sanudo 2:377). For two weeks at this point the

Signoria discreetly pumped money into the bank, trying to increase its liquidity, but to no

avail. Thus in the morning of the first day of February an infuriated crowd gathered in front

of the bank’s seat in the Rialto, the financial heart of the city, demanding its savings. ‘It was

getting late, yet none of the Garzoni showed up, which only reinforced the suspicion and

generated great rumors spreading around the whole country,’ observed chronicler Sanudo

(2:391, 332).2 By the end of the day it was clear that one of the ‘four columns of the

temple’ � as the quartet of the key Venetian banking institutions was described by

chronicler Malipiero (1843�1844, p. 532) � was out of business. The Milanese ambassador

pointed out in his dispatch from Venice that day that ‘as a result of this crash many other

bankruptcies may follow’ (cited in Mueller 1997, p. 242 n32).

Journal of Cultural Economy, Vol. 5, No. 2, May 2012ISSN 1753-0350 print/1753-0369 online/12/020165-14

# 2012 Taylor & Francis http://dx.doi.org/10.1080/17530350.2012.660783

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A Republic Run by Merchants

In the course of the fourteenth century, the Republic of Venice successfully built its

reputation as one of the chief powers of Christendom. As the key port through which

spices, silk, and precious metals moved between East and West, it boasted an economy

whose GDP was commensurable with the kingdoms of France, Spain, or England (Braudel

1982�1984, vol. 3, p. 120). Crusaders who used the city as the main port of departure for

their adventures in the East practically financed the building of legendary Venetian navy,

which had no equals in the West (Pirenne 1937, p. 31). The economic and military

hegemony of Venice was further reinforced by its rising reputation as the center of

Renaissance art and architecture. All this was crowned by a republican system of

government that presided over a socially stable state, making Venice a matter of common

admiration in the West and ultimately earning the republic its nickname la Serenissima �the most serene one (compare Bouwsma 1973).

Venetian political institutions were proudly modeled on Plato’s and Aristotle’s

utopian philosophy that constituted the backbone of classical republicanism. The

republic’s circa 300 ruling noble families, each represented by 8�10 adult male members,

enjoyed full democratic rights in the system of representative government that was a

blend of three political philosophies. At its head was an oligarchic doge, whose every

decision was controlled by an aristocratic Senate that was in turn elected by the Great

Council � a democratic assembly of all noble citizens (George of Trebizond 1997,

pp. 128�129; Contarini 1599, p. 65; compare King 1986, pp. 182�185). As a result, Venice

pioneered a classical republican system that, in its rough outline, was still clearly

recognizable in the US political culture under George Washington. This is precisely the

moment which makes understanding the history of the Venetian financial system so

intriguing for a modern scholar. More than any other early-modern state that contained a

kernel of the democratic ideal in its constitution, Venetian public life fully depended upon

‘republican institutions in which monetary policies were decided by debates and by votes

in elected councils’ (Lane and Mueller 1985, p. 91).

While the nobles as a class had an obvious common interest in preserving the fiscal

health of the state � which they de facto collectively owned � each individual nobleman

was also interested in the effects a particular policy would have on the viability of his own

commercial endeavors and investment strategies. This fundamental dialectic tension was

endemic to any deliberative process that shaped public policies. Marin Sanudo (2:391),

who as a member of the Senate had access to sensitive information concerning the

financial difficulties encountered in 1499 by the Garzoni bank, hastily dispatched his

brother to run to the Rialto to withdraw the family savings before the bank collapsed. It

could be implied that Sanudo wasn’t the only one who resorted to such ‘insider trading’.

Three months later, when the state tried to rescue the Lippomano bank by offering it a

10,000-ducat bailout, chronicler Malipiero (1843�1844, p. 715) noted that it was the same

leaders of the Senate who, immediately after approving the bridge loan, rushed to the

Rialto to withdraw their own savings � de facto undoing the effects of the rescue mission.

As Priuli put it, despite of all talk about the republican unity and common good, when it

came to a vote on an important policy, there were always ‘diverse opinions which regularly

tended to reflect more private interests, than common good’ (1:256).

Consequently, the dialectic tension between the private and public interest was very

well understood in Venice. Both Plato’s Laws (11.918�919) and Aristotle’s Politics (7.1328b),

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on which the classical republican systems were modeled, stipulated that in an ideal state

the merchant class would play only a marginal political role because its lifestyle was

‘ignoble and inimical’ to republican virtues. Domenico Morosini (1969, pp. 178�182)

echoed this imperative when in the 1490s he suggested that Venetian nobles abstain from

deliberations pertaining to matters in which they had some private interests. Paolo Sarpi,

who a century later wanted merchants completely out of the government, argued that a

merchant ‘is of a necessity in some measure a foreigner’ in his own country, because his

interest lies elsewhere (1693, pp. 24�25). Yet, for Venetian nobles to choose between

participation in the city’s republican government and their own commercial interests was

almost an impossible task. After all, trade was an issue of destiny derived from the

necessitas loci � not a matter of choice for Venice (Tucci 1977, p. 341). Paraphrasing Robert

Lopez (1963, p. 35), Venice was a republic of merchants, by merchants, for merchants � a

typical mercantilist state whose protectionist and regulatory policies permeated every

aspect of social and political life.

A Few Words on the Methodology

The 1499�1500 collapse of the banking sector in Venice has been the subject of

several studies, mainly by economic historians (i.e. Lane 1937; Brunetti 1950; Mueller 1997;

compare Labalme & Sanguinetti White 2008). The authors chronologically reconstructed

the gradual unfolding of the crisis, pointing out immediate causal factors � a war financing

system as well as speculation in commodities such as silver, copper, and wheat � that

ultimately led to the collapse of the Venetian banking system. For the most part, such

studies look at the crisis as a single event privy of any context or long-term impact. Indeed,

Frederic Lane in his seminal study of the crisis (1937, p. 199) argued that it was short-lived

and by the end of 1502 the banking sector rebounded due to the peace treaty with the

Ottoman Empire. Consequently, this study would like to offer a different perspective,

based on a new and more complex interpretation of the collapse.

In collecting empirical evidence, I rely mostly on three main chroniclers of

Renaissance Venice by Marin Sanudo, Girolamo Priuli, and Domenico Malipiero, who

captured the day-by-day events shaping the political, military, and economic fortunes of

the republic (compare Neerfeld 2006, pp. 27�110). An indisputable advantage is the fact

that their respective vantage points were between the two centers of power in Venice: the

Piazza San Marco and the Rialto. Sanudo, the compulsive recorder of everything ever

discussed in the Ducal Palace, mainly gives the reader insights into the political fallout of

the crisis. At the same time the merchant Priuli spends his days in the locus of economic

power in the Rialto, observing first-hand the vicissitudes of the market. Somewhere in

between is the former navy commander-turned-politician Malipiero, whose chronicle may

be considered the least authentic of the three chief sources.3

Contrary to previous studies, I argue that the crisis itself was just a symptom, a

surface manifestation of a series of long-term trends, which in the fatal period 1499�1500

created a perfect storm whose consequences went far beyond the temporary collapse of

the Venetian banking system. They started gradually eroding the social and political

system which, throughout the long fifteenth century, secured Venice’s economic, political,

military, and ultimately also its cultural hegemony. Therefore, the turbulent markets of

Renaissance Venice hold a lesson for the attentive reader, one that offers numerous

parallels and junctures that ultimately lend themselves to stimulating speculative historical

THE 1499�1500 BANKING CRISIS IN RENAISSANCE VENICE 167

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comparisons with the fiscal and economic challenges faced by many Western societies on

the threshold of the third millennium.

The Perpetual State of War

In 1423, the dying Doge Tommaso Mocenigo left behind what may be one of the

most intriguing political testaments in early modern history. Mocenigo represented a

political philosophy which held forth that the rule of law at home and international trading

contacts, not expansionistic wars, were the best way to assure Venetian greatness. Paolo

Paruta later summarized this creed as ‘not placing the chiefest glory in extent of empire, or

in the praise of other men; but in the good government of the city’ (1658, book 1.1, p. 3).

In the testament, Doge Mocenigo explicitly warned his compatriots not to elect the war-

party candidate Francesco Foscari as his successor to the Ducal Palace. By electing Foscari,

‘you will soon be at war,’ the dying doge admonished the Venetians, but ‘if you follow my

advice, you will find that you are the masters of the gold of Christendom’ (cited in Braudel,

vol. 3, p. 120).

Just a few days after Doge Mocenigo’s death, Foscari was indeed elected his

successor, and Venice embraced a political philosophy leading to a series of incessant wars

that first dramatically expanded her dominions, but simultaneously caused ‘the envy of

many other people’ (Paruta 1658, book 1.1, p. 3). By the end of the fifteenth century,

Venetians amassed enormous riches, but they were also routinely fighting multiple

conflicts at once, and their treasury was barely able to sustain the constant pressure of

commissioning new military ships and paying mercenary armies. After the devastating

battle at Agnadello in 1509, in a dramatic speech Doge Loredan openly challenged ‘the

stupidity’ which pushed Venice into a permanent state of war. As a result, the doge

admitted, ‘we are obliged to furnish ourselves with armies at intolerable expense and be

placed in the hands of foreign captains, who involve with ourselves more for gain than

anything else’ (cited in Chambers and Pullan 1992, pp. 396�398).

Venetian war finance traditionally relied on state bonds called Monte Nuovo and

Monte Vecchio, which were a form of forced loans imposed on the well-to-do segment of

the population in exchange for 5 percent interest. The amount of bonds each citizen had

to purchase was based on real estate and trade profits, and assessed as the war tax called

diecima. Sanudo explained the mechanism in detail in De Bello Gallico (1883, p. 123),

adding that this was the ancient custom by which the Venetians supported the war effort

without the need of touching the regular state budget. During peacetime, the Monti were

the safest way of investing in Venice. Yet, due to the permanent state of war, at the end of

the fifteenth century many taxpayers were increasingly forced to sell their old bonds in

order to purchase the new ones that were continuously pushed upon them by the

government. As a result, between 1497 and 1500 the value of the Monte Nuovo

bonds plummeted from 80 to 52 ducats ‘and still nobody wanted to buy them’ (Priuli 1:71,

141; 2:7).

According to Sanudo (2:392), in the 17-year period leading to the Garzoni bank

failure in 1499, the Signoria issued 70 impositions of diecima. In December 1498, two years

after Venice entered the war against Florence over Pisa, chronicler Malipiero noted that

‘the government is tired because we have already spent half a million ducats; nobody even

bothers to pay the newly imposed diecime anymore; in the situation when Monte Nuovo

and Vecchio are not able to generate revenues, it is not known any longer how to find

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money’ (1843�1844, pp. 528�529). In the time of ultimate need, the Signoria decided to

auction 300,000 ducats-worth of real estate belonging to tax-defaulters. But there were no

buyers even at one-tenth of the calling price. Yet, the armies on land and at sea must have

been paid in cash, which created pressure on bullion reserves and ultimately led to the

lack of liquidity. The land was ‘completely emptied of money,’ Malipiero summed up the

situation (p. 532).

The Chain Reaction

After the Garzoni bank closed on the first day of February 1499, the writing was on

the wall. It was only a matter of time until others would follow. On May 15, Sanudo

reported that the secretive Council of Ten met hurriedly to discuss the building pressure

on the Lippomano bank which ‘could not resist anymore the fury of those demanding

their savings’ (2:723). Indeed, the next day the bank defaulted on some 120,000 ducats � a

sum that equaled the cost of ten prominent palaces on Canale Grande. From its

accounting books was clear that the owners may have brought the bankruptcy upon

themselves by using a large portion of bank deposits to sustain their own luxurious

lifestyle (Sanudo 2:478, 738�739). The fallout was enormous since the bank kept 1,248

accounts � of which about 700 belonged to the Venetian noble class � involving almost all

of the better-off population of the city (Sanudo 5:654�655).

The small square in front of San Giacomo church in the Rialto, surrounded by

merchant loggias where Venetian banks had their headquarters, had already seen many

fortunes made or lost. Renaissance banks were relatively modest operations, with a simple

bench in the portico, maybe a small room in the back. Yet, Lane (1937, p. 199) estimates

that in the period leading to the crisis they oversaw the enormous sum of one million

ducats. Thomas Coryat (1905, p.314) observed that twice a day � every morning between

six and eleven and then in the evening between five and eight � not only the Rialto square

but also its adjacent streets were literally flooded with the Venetians and foreigners who

came there to sell or buy. Despite the fact that people of different cultures mingled in the

crowd, raised voices or open quarrels were rare. Instead, all talk was done ‘with soft voice

as if to confirm the common saying that the straight way of doing business doesn’t need

too many words’ (Sabellico 1957, p. 18). After reaching a deal, merchants and brokers went

to see the nearby office of a banker to settle the accounts. Cash rarely changed hands.

Before the 1499 crisis, banks usually did not pay interest on deposits; their services were

more for convenience of merchants to avoid carrying cash, like the use of modern credit

cards (compare Pacioli 2010, pp. 66�67).

Considering the quiet nature of everyday business in the Rialto, the rushes on the

banks in 1499 must have been an enormous spectacle attracting large crowds. Almost in

unison, Venetian chroniclers report the morning scene on May 17, 1499, the day following

the Lippomano failure (Sanudo 2:276�277; Priuli 1: 123�124; Malipiero 1843�1844,

pp. 715�716). A multitude of panicked depositors besieged the two remaining banks of

the Pisani and the Agostini families. Alvise Pisani was sitting as usual at the bank, updating

his accounting books. But the crowd was pushing on the table, demanding its deposits. At

one moment, someone grabbed the pen from Pisani’s hand to force the banker to listen to

the demands of the crowd. Alvise Pisani immediately dispatched two of his relatives to the

Ducal Palace for help. His family clearly learned a lesson from the previous day’s

Lippomano bank failure and had a plan. The Signoria itself understood that the failure of

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another large bank in Venice would lead to a full-blown economic crisis. It immediately

sent a small delegation of dignitaries to the Rialto, which announced that the state had

just approved a 100,000-ducat bailout to assure all deposits in the Pisani bank. Wealthy

members of the Pisani clan, who in the meantime all rushed to the Rialto, joined the

government officials in a chorus, adding another 100,000 ducats to the assurance. Once

the news spread, the tide turned in the Pisanis’ favor. One after another, Venetians but also

foreign merchants all ran to the rescue in an attempt to use the situation ‘to generate

some good publicity for their own nation.’ At the end of that day, the total pledges on

behalf of the Pisani bank reached 320,000 ducats. Even those who earlier withdrew their

savings from the bank were now joining the crowd to pledge. ‘And because such a thing

had never been seen in our times, I considered it proper to describe it in detail,’ Priuli

concluded his account of the day (1:124).

In the meantime, the neighboring Agostini bank, the last of the four major financial

institutions in Venice, had an even better day. In the morning, the bank lost 16,000 ducats

to the crowd withdrawing savings. Once the news about the government’s willingness to

bail out the remaining principal banks spread, the same people returned to deposit their

money back in the bank. Before it closed that day, the Agostini proudly boasted about

40,000 ducats of new deposits (Malipiero 1843�1844, p. 716). As a later chronicler

observed, the sixteenth-century banking crises already fully reflected the fact that ‘this

market and the city of Venice are naturally very much inclined to love and trust

appearances’ (cited in Chambers and Pullan 1992, pp. 174�175).

A Premature Hope

The tide may have been turning. Yet, this was not the end of the story. Early the next

year, the Garzoni family was preparing to reopen its failed bank. Priuli noted that the

Garzoni had many friends through whom they successfully lobbied the government. The

family argued that it was always at the service of the republic. From 1471, the Signoria �the supreme executive body � allegedly borrowed a total sum of 1.2 million ducats from

the Garzoni bank. Many creditors of the first Garzoni bank supported the comeback,

hoping that they would be able to recover their savings if the family reopened with

government support. Ultimately, the Senate pledged 20,000 ducats in the form of

guarantees on the second Garzoni bank deposits, a sum required by a 1455 banking

regulation. The Garzoni family itself declared it had 50,000 ducats in cash and another

100,000 ducats in real estate to support the bank. Yet, the chronicler sarcastically added

that the Garzoni failed to mention some 200,000 ducats still owed to their clients (Priuli

1:260�261). On February 3, 1500, a solemn mass attended by many senators took place in

the church of Saint John the Almsgiver, adjacent to the Rialto. After the mass, somberly

dressed in black and without the usual fanfare, the Garzoni put bags of coins on the

benches of their new bank in the Rialto. ‘And then Andrea di Garzoni went to the bank,

opened the book and began to write,’ wrote Sanudo. The same day many merchants

ceremonially entrusted a total of 50,000 ducats to the new bank. But gossip spread that

the bags the Garzoni so proudly boasted during the opening ceremony were not filled

with money. Thus Andrea Garzoni was forced to empty them the next day to demonstrate

that his enterprise was indeed well funded (Sanudo 3:96�98).

The new Garzoni bank was short-lived. Six weeks later, it was out of business again.

This time the family fled town, reportedly hiding in a monastery with all the deposits (Priuli

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2:229). Despite the fact that the Garzoni men obtained safe conduct from the Signoria in

order to return to Venice and negotiate with its creditors, it took years to settle the

accounts (compare Priuli 2:229; Sanudo 7:33�34, 151, 641). The Lippomani, who in March

1500 were getting ready to reopen their bank as well, saw what happened to the second

Garzoni bank and in an atmosphere increasingly hostile to the bankers, cancelled their

plans (Sanudo 3:98, 153). Soon after, they ended up in jail for not being able to pay their

debts. After a year of incarceration, the bankers escaped with the help of their armed

servants and took exile in the Santa Lena monastery. It was not until 1504 that the

Lippomano family finally reached a settlement with their creditors (Sanudo 3:1066, 3:49�50, 6:21; Priuli 2:173, 346).

In the meantime the third of the key banking families, the Pisani family, seeing the

tumultuous situation and ‘the squads of nobles who were demanding to withdraw their

savings from the banks in light of previous failures’ decided to close its own bank. On March

28, 1500, the public crier announced from the steps of the Rialto � to the customary sounds

of trumpets � that all holding an account in the Pisani bank were asked to withdraw their

savings. Only a year and a month after the first Garzoni failure on February 3, 1499, ‘the land

was left with one sole bank, that of the Augustini,’ added Priuli, laconically (1:286).

The Banking Crisis and Venetian Hegemony

The international ‘reputation and prestige of the city of Venice’ was tied directly to

the fate of the Rialto banks. Just as any newly-opened bank resulted in ‘great honor to the

city of Venice,’ any subsequent bankruptcy was a source of its ‘great infamy and damage’

(Priuli 1:123, 283). In the 1490s, Venice already enjoyed a system of regular postal services

through which news travelled with an increasing speed (Behringer 2006, p. 341). The

Signoria was well aware that the soft power of the republic depended on the perception by

international audiences of its economic might and carefully safeguarded its own image.

Priuli noted that after the Lippomano failure in May 1499, ‘the news spread through the

entire world’ and it ‘had such negative impact on the city of Venice that it is beyond my

capacity to describe it to you’ (1:122). Any sign of Venetian weakness was immediately

captured by foreigners in their letters ‘through which the news spread not only across Italy,

but often crossed the Alps’ to the ‘great satisfaction and joy’ of the republic’s foes (2:31�32).

Renaissance political writers often contrasted the socially and politically stable

Venice with the much more volatile Florence, ascribing the differences to the diverse

republican political philosophies encapsulated in the forms of their respective govern-

ments (Bouwsma 1968, p. 52). For both contenders, the success of their respective

economies was an important way to demonstrate the superiority of their political

organizations. And at the outbreak of the banking crisis, Venice was at war with its old

rival, Florence, over Pisa. Not surprisingly, it was Florentine merchants who were accused

by Venetians of triggering the collapse of the first Garzoni bank (Sanudo 2:391, compare

Mueller 1997, pp. 240�241). The charge was not completely unsubstantiated, which

indicates that mutual attacks on financial systems may have been already used by early

modern European powers to achieve political goals (compare Priuli 1:32�33). The avvisi

from Lyon, Turin, and other key markets in Europe reported that Florentine merchants

were spreading rumors about the insolvency of Venice (Sanudo 2:465, 1001; Priuli 1:111).

Consequently, Pope Alexander VI famously declared before all the cardinals that with the

collapse of their banks, the Venetians ‘are absolutely impotent, nobody cares with whom

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they make military alliances anymore.’ He further ridiculed Venetians who yesterday ‘were

trying to play arbiter in the feud between Florence and Pisa, today they are giving safe

conduct to their failed bankers’ (cited in Malipiero 1843�1844, p. 715).

After the Lippomano failure in March 1499, Malipiero lamented that it was ‘worse

than the loss of Brescia,’ one of the Lombard cities under Venetian dominance, ‘especially

because the Florentines still have the benefit of ten banks, which are all standing firm’

(1843�1844, p. 715). Indeed, while the Florentine banking sector was diversified, with a

nucleus of ten strong banks complemented by 20-odd small banking houses, the Venetian

banking sphere was for most of the Renaissance single-handedly dominated by three to

four strong private institutions. Goldthwaite claims that in while Florence ‘the banking

industry enjoyed certain stability because it was fragmented among so many relatively

small firms,’ in Venice ‘failures were frequent and all the more disastrous because of the

concentration of deposit banking in just a few firms that were giants compared with

Florentine banks’ (2009, p. 457). While in the past the Venetian economic, military, and

political position in Europe was strong enough to weather such dramatic failures, the

1490s political climate of the embattled republic increasingly resonated with what later

became known as the ‘too big to fail’ syndrome, an assumption that certain private

financial institutions are simply too important for the overall interest of the state and as

such must be saved even at a very high cost.4

The Impact on the Foreign Merchant Community

The collapse of the banking system in Venice significantly affected city’s foreign

merchant communities, and through them, also the foreign relations of the republic. A few

days after the first failure of the Garzoni bank, the Duke of Savoy petitioned the Signoria

for full restitution of his merchants’ lost savings. Several weeks later, the brother of the

marquise of Mantua intervened on behalf of his brother, who had deposits in the Garzoni

bank. Finally, the ambassador of the Duke of Milan demanded safe-conduct for his

merchants who lost money in the Garzoni and the Lippomano banks and were not able to

pay their own obligations in Venice as a result (Sanudo 2:484, 751, 736).

The Venetians were aware that the failures gave a ‘significant jolt’ especially to the

merchants at the Fondaco dei Tedeschi, the German trading house, which played a critical

role in the Venetian economy (Sanudo 2:391). Johannes Keller, the factor of the famous

Fugger trading house from Augsburg, came to the Signoria in the company of his own

lawyer to complain that he lost 10,000 ducats in the Lippomano, and 30,000 ducats in the

Garzoni bank (Sanudo 2:736). German merchants were the main importers of silver to

Venice, a trade representing about 20 percent of the overall business done in the Rialto

(Mueller 1997, p. 142). With the failure of the banks that were main mediators between

precious metals dealers and the Venetian mint, many Germans were stuck with their

supplies, lacking the necessary capital to purchase spices in Venice and to return home

(Sanudo 2:736�737; 3:1091).

The Risk for Social Stability

Paul A. Volcker, the former US Fed chairman, pointed out that the collapse of large

banking organizations is often seen as ‘posing significant risk to other financial institutions,

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to the financial system as a whole, and possibly to the economic and social order’ (2004,

p. ix). From Byzantium Venetians inherited a tradition of class solidarity and protectionism

that pervaded every sector of society, laying the foundations of the modern social state

(compare Lopez 1963, p. 38). As the papal envoy observed in Venice, the state role in

providing for the poor was seen as the best way to dissuade them from ‘holding evil

thoughts’ and consequently ‘plotting unrest and the like in the state because of dire need’

(cited in Chambers and Pullan 1992, p. 222). Paolo Sarpi advised Venice to employ ‘as

many of the people as may be in the service of the publick, that so drawing their

livelyhood from the government, they may have affection for it’ (1693, pp. 22�23). The

1499�1500 banking crisis put social stability to a serious test, and the price that Venice had

to pay for maintaining its internal peace was the gradual corruption of its social and

political system.

The impact was far-reaching. Two years after the 1499�1500 bank failures Sanudo

reported that ‘many of those who lost their savings died by grief; dowries invested in

banks and now lost led many would-be-brides to become prostitutes; cloisters and

hospices were deprived of their savings; [many] are forced to sell the long-established

family estates to be able to pay war taxes and to their own creditors’ (4:115). Indeed, Cessi

and Alberti (1934, p. 282) assess that it was around 1500 when the prostitution, previously

restricted to the brothels in Rialto, started to invade new spheres of the urban social

landscape, and assumed also gentler forms as the common whore had to compete with

the often well-educated courtesan of noble birth whose marriage prospects were marred

by the lack of adequate dowry.

The main sources of income for those who depended on the government were state

offices, shipbuilding, and the naval trade. Each year, the Signoria would send several fleets

of galleys to various Mediterranean, Black Sea, and Atlantic trading ports to import mainly

spices, silk, and wool. Such groups of great galleys usually sailed for several months and

employed up to 3,000 oarsmen. On each ship there were eight supervising positions

reserved for impoverished nobles to supplement their income (Priuli 2:171; Lane 1973, pp.

167�168). Yet, because the Garzoni and the Lippomano bank failures tied up a significant

pool of already-scarce capital, in the spring of 1499 Sanudo (2:731) observed that the

merchant community itself was not able to raise enough money to equip the two most

important annual fleets that imported spices from Beirut and Alexandria. Thus the state

offered financial assistance. But in the city where every political decision was made by

merchants, the ‘full warehouses were always fighting the empty ones’ and those who had

enough spices in storage were not interested in bringing in more, regardless of the impact

on the state (Priuli 2:256). In the meantime, the war with the Ottoman Empire broke out

and as a consequence no galleys were sent out in 1499 at all, fueling the rising social

tensions.

Due to the Venetian inability to dispatch its own annual fleets to import spices from

the Middle East, the price of pepper temporarily skyrocketed in markets across Europe

(Priuli 1:255). Seeing an opportunity to undercut the traditional Venetian spice-trade

monopoly, in the following year other European nations dispatched their merchant ships

to Syria, Lebanon, and Egypt (Priuli 2:65). As a result, in 1501 Priuli recorded the dramatic

collapse of spice prices on the Rialto within several hours of the opening of the annual

Lent trade fair. In the early morning, black pepper was selling for 132 ducats a cargo (ca.

120 kg). Yet, German merchants, who could now purchase spices in Lyon and Genoa, were

reluctant to buy. Suddenly, a Venetian merchant anxious to get rid of his supplies offered

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to sell for 102 ducats a cargo. Others followed because, as Priuli masterfully captured the

irrationality of the early markets, ‘when one starts to buy, all want to purchase, and when

one starts to sell, all follow his example without any middle ground; everything in

extremity, once touching the heavens, another time falling to the ground.’ By the end of

the day, the price of black pepper plummeted to 70 ducats a cargo (2:117).

The Portuguese Takeover of the Spice Trade

There were other important parallel developments with far-reaching impacts that

the previous studies of the 1499�1500 banking collapse for the most part overlooked. On

August 7, 1499, an avviso from the Egyptian port of Alexandria speculated that a fleet of

Portuguese caravels landed in India. It may be the earliest surviving report about Vasco da

Gama’s discovery of the alternative spice route around Africa. Priuli concluded in his diary

that ‘if this news is true indeed, its effect seems to me of great consequences; but I don’t

assign it too much credibility’ (1:153).

Venetians had a full grasp of the commercial and political value of information. This

fact was reflected in an elaborate system of merchant and diplomatic channels that, in the

words of senior statesman Antonio Loredan, were always ready ‘to search out the secrets

of the universe, sending one’s mind in an instant to every single part of the world’ (cited in

Chambers and Pullan 1992, p. 271). Yet, it is almost inconceivable how a republic whose

fortunes fully depended on the spice trade underestimated Portuguese attempts to find

an alternative route. Sanudo, obsessed with every detail of government deliberation, never

even mentioned it in his diary.

There are only two possible explanations for such laxity. First, Venetian resources

were totally consumed by the wars in which the republic had been entangled by now for

practically two decades. Second, throughout the centuries of economic hegemony over

the Eastern Mediterranean, the Venetian state in collaboration with leading merchants set

up a sophisticated system of naval forts, diplomatic missions, and trade factories in the

eastern Mediterranean. Each year this mechanism was able to deliver more than sufficient

profits to sustain a luxurious way of life back home. It apparently worked so well none of

the noble citizens in 1490s Venice saw the need to change the ‘way of life’ of their country.

On July 24, 1501, when the news finally reached Venice that Vasco da Gama’s

caravels had landed in Lisbon loaded with spices, both political circles as well as the Rialto

merchant community were stunned. This time it was not just rumors but an official

dispatch by the Venetian ambassador in Lisbon that was confirmed subsequently by

several private merchant letters (Priuli 2:153�157, 169, 175). The dispatch was immediately

printed and passed from hand from hand. ‘The entire city was distressed by this news,’

admitted Priuli, ‘everybody was astounded that at this time an alternative journey was

discovered that our ancestors neither heard of nor saw.’ This was the worst possible news

Venice could have received, ‘the thing mattered more to the state than the war with the

Turks or any other possible war situation’ (2:153�154). The reaction of markets, already

weakened by the ongoing banking crisis, was predictable: the prices of spices dropped

overnight even further. The Hungarian, German, Flemish, and French merchants who for

generations came to Venice to purchase pepper and other spices, now headed towards

Lisbon. Priuli estimated that the Portuguese king turned a 100-fold profit on each invested

ducat (2:156�157, 201�202, 255, 335).

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In the following years, Venetian galleys often struggled to find spices in the Middle

East because the Portuguese merchant fleet completely undercut the Arab mediators by

purchasing almost all available supplies in India. ‘One can clearly see the ruin of the city of

Venice, because the lack of commercial traffic will result in the lack of money, which is the

foundation of Venetian glory and reputation,’ noted Priuli (2:156).

The Impact on the Political System

In the aftermath of the banking collapse, in a desperate attempt to cover the

deepening fiscal deficit, the Signoria started increasingly offering important government

positions in exchange for loans from private individuals. One of the first officials to ‘buy’ an

office was Antonio Grimani, ‘moneywise the first head in Venice,’ but otherwise a relatively

inexperienced military commander. There are indications that Grimani obtained the

privilege to lead the Venetian navy against the Ottoman fleet in exchange for a 16,000-

ducat loan to the state (Priuli 1:118). But in August 1499, just a few months into the

banking crisis, Grimani’s weak military leadership in two consecutive naval engagements

in the Ionian Sea resulted in a total disaster for the previously invincible Venetian fleet and

led to the loss of several strategic naval outposts on Greek territory. Admiral Grimani was

consequently arrested and forcibly returned to Venice where he was put on trial (Sanudo

3:46�48).

Yet, the Venetians still did not learn their lesson. The practice of selling offices

accelerated as the financial situation of the state worsened in the period leading to the

historical defeat by the European continental powers at Agnadello in 1509. On the one

hand, the government was trying to cut administrative costs (Priuli 1:78�79, 126; 2:49�50,

79), yet at the same time the nobles who had lost their savings during the banking crisis

and the ensuing collapse of the markets were increasingly looking to the state as their

ultimate savior. Those who held government offices were more than ever before

supplementing their income by accepting bribes (Priuli 2:78�79). Young nobility, seeing

the possibilities for its prosperous merchant career vanishing, pressed on the Signoria to

be included in the governing bodies (2:54). In order to improve their electoral chances,

relatives of Venetian ‘war heroes’ invaded the Broglio � a little square adjacent to the

Doge’s Palace known also as the Piazetta � before every election, bragging about

the patriotic sacrifices of their families (2:176�177). Because public offices in Venice were

numerous and periods of service relatively short, ‘the city was so infected by those

damned bribing practices that there was no remedy to this situation’ (4:174).

The very term broglio, seen previously in Venice as a synonym of an ideal Habermasian

public space, gradually became a symbol of political corruption and electioneering.5 In the

aftermath of the 1499�1500 banking crisis the state increasingly appointed only those

candidates who pledged to loan money. According to Marcantonio Michiel, when

nominations for a particular office were made in the first round of elections, those whose

names were on the list ‘immediately ran to the tribune of the Signoria to offer money; and

when their competitors outbid them, they would turn back to add on more by yelling, as is

done at auctions’ (cited in Finlay 1980, p. 179). Many nobles who refused to submit to such

practices lost the election despite their experience and qualification, lamented Priuli (2:177).

This was the case of Sanudo (22:172; 27:684), whose modest financial situation was the cause

of numerous electoral defeats, making the chronicler increasingly bitter. Yet, in 1510, Priuli

himself acquired a year-long non-voting seat in the Senate in exchange for a loan of 1,000

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ducats in order � he claimed � to better capture in his diaries everything that took place

behind closed doors (Neerfeld 2006, p. 106). Six years later the Signoria had to add additional

benches in the Great Council to accommodate many under-aged nobles who purchased

their early admission to the legislature. Their inexperience often caused significant blunders

in the way the republic was run. And all this just because of the incessant need for money,

complained Michiel (Neerfeld 2006, p. 187). In 1526, when the practice of buying offices was

also applied to the highest ranks of the governing councils, Sanudo decried it, claiming that

‘our fathers did not make war by trafficking with offices and positions, but we are selling out

our government now’ (42:317�319).

Aside from a small group of nobles who clearly profited from the wars and did not

mind paying for the honor of holding public office, a growing number of families saw their

economic status deteriorate significantly. This endangered the entire mechanism which

secured social stability (compare Sanudo 4:201�202). Poor nobles who did not have

enough money to pledge loans to the state, and thus did not stand a chance to be

elected, were now increasingly selling the only commodity they were left with � their own

votes. The practice grew into outright political corruption. Rich candidates, clearly marked

by a stole laid across one shoulder, chased the support of their poor colleagues in the

Broglio. ‘Everybody knows it. It is very obvious that he who doesn’t have a list of poor

nobles whom he pays in advance and then continues to pay during the entire time after

being elected, doesn’t have any chance to hold an important office,’ Sanudo lamented

near the end of his life (54:7�8).

Epilogue

As I argued in the beginning of this paper, the banking crisis was only a surface

manifestation of more significant trends that shaped the overall public sphere in Venice at

the peak of its hegemonic period. Focusing solely on the crisis would be equal to

committing the error of putting too much emphasis on the event-driven histories that

Braudel compared with dust. For Braudel, it was a double-sided metaphor. Such history not

only deals with ephemeral matters, but as ‘dust’ it gets into our eyes, preventing us from

seeing single events in the context of long-term trends and their conjunctures visible only

from the vantage point of the longue duree. Consequently, he argued, human history should

not be seen as a ‘mechanism that can be stopped at leisure in order to reveal a frozen image.’

On the contrary, the social and cultural historian must be able to place any studied social

structure ‘both in itself and even more in relation to the movement of associated structures’

(Braudel 1980, p. 78). This is the inspiring philosophical manifesto that is driving my study.

In 1507, to the sound of trumpets, the merchant-chronicler Girolamo Priuli

announced the opening of his own bank in the Rialto. With the surviving banking house

of the Augustini and Pisani that reopened in 1504, there were now again three large

private banking institutions in Venice and another two were getting ready to launch their

operations (Sanudo 7:30). Two years earlier the German trade house burned down and the

government erected in its place a new impressive Renaissance palace that was supposed

to attract more traders from across the Alps (Simonsfeld 1887, 1:346�361). The banking

crisis may have been over for the moment, but the deeper social problems which

precipitated it in the first place remained. ‘We have a new merchant house but very little

trading, enough banks but not enough liquidity, enough ships in the port but very few

trade journeys, only the electoral frauds are in abundance,’ complained Sanudo (7:42). The

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rich, who largely profited from wars and financial speculations, became even richer while

the poor lost the little savings they had � and political corruption was booming.

Trust in the economic might of Venice was seriously undermined. At some point, the

Venetian middle classes ceased investing in tangible properties, since almost all real estate

profits were consumed by the diecima war tax anyway. But public bonds imposed by the

state in the form of forced loans turned out to be even worse investments. Their proliferation

in the earlier three decades, combined with the constant fluctuation of their prices, created a

securities market of an unprecedented magnitude in the early 1500s Venice. People were

‘continually buying and selling them as if they were commodities,’ observed Priuli (4:333).

Therefore, when the state bonds plummeted from 103 to 40 ducats in the aftermath

of the catastrophic Agnadello defeat in 1509, many Venetian families again lost dowries

for their daughters, poor widows, orphans, and monasteries saw all their savings vanish

overnight. ‘I was one of those stupid people,’ admitted Priuli whose family had 20,000

ducats in the Monte Nuovo bonds (4:15�16, 411). To the old-fashioned merchant, used to

trading all his life only with tangible commodities and ‘being now able to observe this new

development’ in the Rialto market, it was suddenly clear that the bonds were only ‘painted

paper, a paper covered with ink void of any foundation.’ But he also noted that a new type

of merchant was emerging, one who knew when to buy and sell, who became rich in an

instant through speculation with this new sort of intangible wealth � ‘a practice that I

don’t laud and I am not fond of’ (4:333).

NOTES

1. Priuli’s diaries are usually attributed by the volume number followed by the page number

corresponding with the Muratori edition.

2. Sanudo’s diaries are traditionally attributed by the volume number followed by the page

number that follows the Visentini publication.

3. Neerfeld (2006, pp. 83�95) recently claimed that the actual author of the Annali Veneti

was Pietro Dolfin.

4. The history of the ‘too big to fail’ policies with their implications is in detail discussed in

Gup (2003).

5. The selling of offices had some historical precedence in Venice. Sanudo (24:656�659)

traced the earliest legislation against this practice to the year 1448.

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