In no place was this inconvenience more felt than at the Romish court, even at a time when it boasted of divine infallibility; and nowhere was more care employed to remove it. A plan, therefore, was at length devised, by which the evil, as was supposed, would be banished. A capital was collected from which money was to be lent to the poor for a certain period on pledges without interest. This idea was indeed not new; for such establishments had long before been formed and supported by humane princes. The emperor Augustus, we are told, converted into a fund the surplus of the money which arose to the State from the confiscated property of criminals, and lent sums from it, without interest, to those who could pledge effects equal to double the amount3. Tiberius also advanced a large capital, from which those were supplied with money for three years, who could give security on lands equivalent to twice the value4. Alexander Severus reduced the interest of money by lending it at a low rate, and advancing sums to the poor without interest to purchase lands, and agreeing to receive payment from the produce of them5.
These examples of the ancients were followed in modern Italy. In order to collect money, the popes conferred upon those who would contribute towards that object a great many fictitious advantages, which at any rate cost them nothing. By bulls and holy water they dispensed indulgences and eternal salvation; they permitted burthensome vows to be converted into donations to lending-houses; and authorised the rich who advanced them considerable sums to legitimate such of their children as were not born in wedlock. As an establishment of this kind required a great many servants, they endeavoured to procure these also on the same conditions; and they offered, besides the above-mentioned benefits, a great many others not worth notice, to those who would engage to discharge gratis the business of their new undertaking; but in cases of necessity they were to receive a moderate salary from the funds. This money was lent without interest for a certain time to the poor only, provided they could deposit proper pledges of sufficient value.
It was, however, soon observed that an establishment of this kind could neither be of extensive use nor of long duration. In order to prevent the secret lending of money, by the usurious arts which had begun to be practised, it was necessary that it should advance sums not only to those who were poor in the strictest sense of the word, but to those also who, to secure themselves from poverty, wished to undertake and carry on useful employments, and who for that purpose had need of capitals. However powerful the attractions might be, which, on account of the religious folly that then prevailed, induced people to make large contributions, they gradually lost their force, and the latter were lessened in proportion, especially as a spirit of reformation began soon after to break out in Germany, and to spread more and more into other countries. Even if a lending-house should not be exhausted by the maintenance of its servants, and various accidents that could not be guarded against, it was still necessary, at any rate, to borrow as much money at interest as might be sufficient to support the establishment. As it was impossible that it could relieve all the poor, the only method to be pursued was to prevent their increase, by encouraging trade, and by supplying those with money who wanted only a little to enable them to gain more, and who were in a condition and willing to pay a moderate interest. The pontiffs, therefore, at length resolved to allow the lending-houses to receive interest, not for the whole capitals which they lent, but only for a part, merely that they might raise as much money as might be sufficient to defray their expenses; and they now, for the first time, adopted the long-established maxim, that those who enjoy the benefits should assist to bear the burthen – a maxim which very clearly proves the legality of interest. When this opening was once made, one step more only was necessary to place the lending-houses on that judicious footing on which they would in all probability have been put by the inventor himself, had he not been under the influence of prejudice. In order that they might have sufficient stock in hand, it was thought proper to give to those who should advance them money a moderate interest, which they prudently concealed by blending it with the unavoidable expenses of the establishment, to which it indeed belonged, and which their debtors, by the practice a little before introduced, were obliged to make good. The lending-houses, therefore, gave and received interest. But that the odious name might be avoided, whatever interest was received, was said to be pro indemnitate; and this is the expression made use of in the papal bull.
All this, it must be confessed, was devised with much ingenuity: but persons of acuteness still discovered the concealed interest; and a violent contest soon arose respecting the legality of lending-houses, in which the greatest divines and jurists of the age took a part; and by which the old question, whether one might do anything wicked, or establish interest, in order to effect good, was again revived and examined. Fortunately for the pontifical court, the folly of mankind was still so great that a bull was sufficient to suppress, or at least to silence, the spirit of inquiry. The pope declared the holy mountains of piety, “sacri monti de pietà,” to be legal; and threatened those with his vengeance who dared to entertain any further doubts on the subject. All the cities now hastened to establish lending-houses; and their example was at length followed in other countries. Such, in a general view, is the history of these establishments: I shall now confirm it by the necessary proofs.
When under the appellation of lending-house we understand a public establishment where any person can borrow money upon pledges, either for or without interest, we must not compare it to the tabernæ argentariæ or mensæ nummulariæ of the Romans. These were banking-houses, at which the state and rich people caused their revenues to be paid, and on which they gave their creditors orders either to receive their debts in money, or to have the sums transferred in their own name, and to receive security for them. To assign over money and to pay money by a bill were called perscribere and rescribere; and an assignment or draft was called attributio. These argentarii, mensarii, nummularii, collybistæ and trapezitæ followed the same employment, therefore, as our cashiers or bankers. The former, like the latter, dealt in exchanges and discount; and in the same manner also they lent from their capital on interest, and gave interest themselves, in order that they might receive a greater. Those who among the ancients were enemies to the lending of money on interest brought these people into some disrepute; and the contempt entertained for them was probably increased by prejudice, though those nummarii who were established by government as public cashiers held so exalted a rank that some of them became consuls. Such banking-houses existed in the Italian States in the middle ages, about the year 1377. They were called apothecæ seu casanæ feneris6, and in Germany Wechselbanke, banks of exchange; but they were not lending-houses in the sense in which I here understand them.
Equally distinct also from lending-houses were those banks established in the fourteenth century, in many cities of Italy, such, for example, as Florence, in order to raise public loans. Those who advanced money on that account received an obligation and monthly interest, which on no pretext could be refused, even if the creditor had been guilty of any crime. These obligations were soon sold with advantage, but oftener with loss; and the price of them rose and fell like that of the English stocks, but not so rapidly; and theologists disputed whether one could with a safe conscience purchase an obligation at less than the stated value, from a proprietor who was obliged to dispose of it for ready specie. If the State was desirous or under the necessity of repaying the money, it availed itself of that regale called by Leyser regale falsæ monetæ, and returned the capital in money of an inferior value. This establishment was confirmed, at least at Florence, by the pontiff, who subjected those who should commit any fraud in it to ecclesiastical punishment and a fine, which was to be carried to the papal treasury: but long before that period the republic of Genoa had raised a loan by mortgaging the public revenues. I have been more particular on this subject, because Le Bret7 calls these banks, very improperly, lending-houses; and in order to show to what a degree of perfection the princely art of contracting and paying debts was brought so early as the fourteenth century.
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