A Venetian Meltdown

from the Rialto to Wall Street

At the end of the XVth century the banking system in Venice collapsed. The meltdown was chronicled by the diarist Marin Sanudo and recounted, four hundred years later, by Thomas Okey in his delightful "The Old Venetian Palaces and Old Venetian Folk" of 1907. The following passage is an excerpt from it. If we change the names of the Italian banks to Lehman Brothers, Citigroup and AIG, and substitute our President and the Senate for the Doge and the Collegio, the events seem to be taken from the pages of the New York Times. Read on...

“The reaction to these discoveries [a route to India by circumnavigating Africa, by the Portuguese; the Americas by the Spaniards] and the crushing burden of the war expenses fell heavily on the mercantile and patrician houses of Venice. On March 3, 1499…the Doge, turning to the Councillors, said: Signori, this Pisan war is ruining the city: let the officers make the rich pay and deal leniently with the poor who have not wherewithal to live.”

“A month prior to this incident Sanudo and the Savii were summoned to the Doge’s room to confer on grave matters with the chiefs of the Ten: Andrea de’ Garzoni the banker had attended before the Seigniory, with tears in his eyes, saying he must close his doors. The house of the Garzoni, founded in 1430, was one of the four banks known as the four columns of the Temple, and the Ten had decided that for the honor of the city it must be propped up, and that the procurators of Saint Mark must advance money: and so gold to meet present claims was brought to the palace in sacks and delivered to the Garzoni, the Savii being bound to secrecy by solemn oaths. Sanudo, however, prudent man, acting on his privileged information, warned his brother to withdraw 500 ducats belonging to their mother, and saw them safely brought home in bright Hungarian pieces just before the bank failed….The tottering condition of the Garzoni bank was soon known, and, on February 1 – Marin well remembered the day, for he always prided himself of being first at the collegio, and was annoyed at finding Batista Zustignan had preceded him – the Capi of the Ten entered with grave faces and “we the Savii were ordered out.” The bank has failed owing to the furious withdrawals, crowds of creditors were clamouring at the offices, and , although it was late, none of the Grazoni had appeared. On the 4th the Capi again entered, the Savii were excluded, and Andrea de’ Garzoni, his sons and grandsons, were introduced displaying gran dolore, Andrea, an aged and most worthy merchant, imploring the Doge to grant him time to realize his assets: the bank has paid out 128,000 ducats since Christmas, and an angry crowd was clamouring outside the palace as he spoke. On March 18 the second of the great banks. That of the Lippomani, was in trouble; 30,000 ducats had been withdrawn that day, and the Seigniory advanced 10,000 ducats to help them; but to no purpose, they too failed, to the great shame of our city. It was worse, says  Malipiero, than if we had lost Brescia. On the 27th the Capi, notes Marin, entered “in great fury and sent us all out of the Collegio”: it was about the bank of the Pisani. Sier Alvise was sitting as usual before his day-book when a tremendous crowd of creditors pressed in, clamant for their money. Alvise flung down his pen, shouting: “One after another, ye shall all be paid.” One creditor seized the pen and began to write; never had there been such scenes in living memory. The bank of the Agostini, too, was run upon, and such was the excitement that the Ten sent their officers, who cleared all the creditors out of the Pisani premises, and a cry was made by the herald of the Seigniory detailing the measures to be taken for the restoration of confidence: the Agostini paid out no less than 16,000 ducats, and after dinner 40,000 more, in gold, and other monies were placed upon their counter. Alvise Pisani, when he saw the crowd outside, shouted: “What a dirty business this of the Lippomani, they have ruined themselves and others by running away.”

“In March 1500 the Marconi, good and worthy citizens, failed, and the creditors of the Garzoni were called publicly to assemble at the church of S. Zuan di Rialto to elect a committee of inspection; in April the creditors of the Lippomani met in the same sacred edifice and agreed to accept a promise to pay in instalments. Merchants’ promises are easier made than kept, and the defaulting Lippomani were subsequently laid in jail. They were influential citizens, and their imprisonment was made less irksome by many favors, it being rumored that the Avogadori told the Captain of the Watch that even if their wives and children came twenty times a day they must be allowed to enter. It soon became customary to open the door when their dinners were sent, instead of putting the dishes through the valve, and on September 8, 1501, three stout fellows came with the meal, which included hot tart, and the door being opened to him who carried the tart, Hieronimo Lippomani rushed forth, flung a coat over the warder’s head, and, putting a knife to his throat, secured the keys. Setting free his brothers, Sier Bartolo and Sier Vettor, all three escaped in their jackets and bareheaded into three armed boats, and took refuge at the monastery of Sta. Elena. Thence they mocked at their creditors, who, after much negotiation, to the number of 600, held a stormy meeting at S. Zuan di Rialto on March 21, 1502, to consider a further offer to pay in two years. Angry declamation ensued, and moving recitals were made of the misery consequent on the bankruptcy of the house: many creditors had died of malinconia; maidens whose dowries had been lost, being unable to marry, had fallen to the streets; hospitals languished for their invested funds; houses had been sold up to meet the demands of the taxgatherers. They rejected indignantly the offer, and prayed the chiefs of the Ten to realize the bankrupts’ estate and pay whatever composition might be possible.”

…” on March 3, 1504, the Doge and many councilors, senators, and gentlemen, after a solemn mass in S. Giacomo, accompanied Sier Alvise Pisani in a procession headed by fifes and trumpets to re-open his old bank at Rialto in the name of the Holy Ghost. On March 15, 1507, a new bank was established by the diarist Sier Hieronimo de’ Priuli in place of the Garzoni house, and opened with the usual solemn ritual."