Florentine Usury, Medici Style

This was a story originally told to an employee at his bank by his manager that wanted to cheer him up. The following happened in the Florentine Republic, during Lorenzo de Medici's time (a.k.a. Lorenzo the Magnificent) during The Renaissance. Lorenzo said to someone who was interested in taking a loan out from "[Lorenzo's]...bank of some forty employees" (but reluctant to do so because of a few unsavory details in the agreement), "This is Tuaca. A brandy based liqueur of my concoction that brilliantly blends vanilla and orange. Vanilla and orange, star-crossed lovers not unlike Tristan and Isolde: one a spice, the other a fruit. Truly, fate hath conspired against such metaphysically unlawful unions but alas through a fine, cask aging the impossible was made possible and through Tuaca, vanilla and orange are finally free to love. Tuaca, I think is best served, chilled and served neat. It can also be mixed with ginger ale or hot apple cider, of which I enthusiastically recommend a chaser made of the former. Now about this loan you are so persistent to refuse. I don't understand what grievance you have with it. It is a good offer. Business requires capital and the easiest way to come about capital is to acquire it from someone who has it. I have it. Of course, I wouldn't just give money without an incentive to make it worth my while. For every florin, I lend out is a florin I do not have for my own. Fair compensation is necessary to make the whole venture of lending out florins in the first place to be worth my while."

"It's extortion, fair and simple," answers The Man in Lorenzo's home, "Any pretense to suppose otherwise is fraud or delusion on your part."
"The rate is competitive."
"Two-hundred and fifty-percent interest are far from competitive. It is robbery. There is no other word for it."

"I can think of another word to call it."

"What singular word could best personify the sentiment other than extortion and its myriad of synonyms?"

"Investment..." answers Lorenzo de Medici, who soon after offers two more off the top of his head, "Opportunity...privilege."

"I would hardly see myself as privileged if I took upon myself the burden of this loan. To damn myself to  pay two and a half florins for each one borrowed would be a folly bordering on madness. In the spirit of pragmatism, I could see myself paying a hundred and ten percent, perhaps up to one hundred and fifty for the right to borrow money at a time most necessary to commerce. For as you said, the venture should be made worth your while. However, this is too much. Like a gluttonous child needs to be told to abstain from sweet things I must be firm and resolute and say, 'no'."

Lorenzo, clever as he was, knew exactly how to respond to the man refusing a loan on general principle. "I understand," he said, "Your reservations are not without merit. I want you to know that I respect your decision despite obviously wanting you to have made the other. It is an example of pragmatism at its finest. You have proven yourself today a wise man who does not care what other people think of him. A wise man who does not care that people will make fun of him and like the currency of some nation low in esteem to all the others, truly debase their value of him in their eyes. I am glad that you have both the confidence and self awareness of your poverty to know you should not take upon, as you said so eloquently, the burden of a Florentine loan because you know you can't afford to pay it back. We both know that if you want to pay a reasonable interest, that is, in essence, a discount compared to one I would furnish you with, you must go to a Jew in the foundries, ghettos. A most loathsome race of men certainly but they do not charge more than forty-five percent interest. If you do not mind doing business with such men who routinely desecrate hosts well power to you, I suppose. I wish I, myself, had the courage and the confidence to go to a discount bank, such as a Jew, because I was both aware and willing to follow the logical conclusions of my awareness, to not be able to pay back the extravagant rates of a real loan. If you can't afford to pay back two-hundred and fifty percent interest, I understand. If you must get a frugal loan because you know, as well as your friends who will know eventually, that you're a small fish in large ponds well that is your prerogative and who am I, the gentleman Florentine, that I am, to stop you.”

“What if my friends find out? They’ll think I can’t afford to pay back two-hundred and fifty percent interest. I will be less in their eyes.”

“Yes,” Lorenzo says, “They’ll think you’ll only be able to pay forty percent interest. However, if you’re fine with your friends thinking less of you in their eyes because financially you're not really an aristocrat well that is your business to be minded and none of their own. If necessity dictates that you must do business with the ones with the weird clothes, wearing that patch with a six-sided star, who often smell because they often live near tanneries and have bizarre customs and names such as Shlomo or Chiam, well be my guest and only pay forty-percent interest, while your friends will have the means to pay me back the other two-hundred and ten percent because they are wealthy enough to afford the indulgence and prove it through action.”

”I can’t do that," the man says, “I just can’t. It’s two-hundred and fifty percent interest. Can’t you, as a gesture of friendship, lower it to one hundred and fifty percent, maybe one seventy-five?"

“This,” said Lorenzo, “Cannot be done.”

”When would the debt, if I were to do it with you, be amortized?”

”That all depends on when you pay it back. Obviously, the sooner you pay it back the less the overall repayment will have been”

”I have a shipment coming into the new world. I need only to pay Ottoman tariffs to clear the merchandise from their customs. I need some capital to pay normal duties, fees. Wet a few Turkish and Balkan beaks to, of course, expedite the process. You know how it is."

“Of course.”

”I am short of cash right now. I would be able to pay it back after I successfully sold the merchandise in Europe.”

“I understand,” Lorenzo said just before his client said, “When can I get the loan?”

“As soon as possible,” answered Lorenzo de Medici, “As soon as possible.”