Medici Bank branches lent eight cities into ruin while Lorenzo looked away

Founded in 1397, the Medici Bank grew under Cosimo de' Medici into the largest banking house of its century, with branches from Rome and Venice to Geneva, Bruges and London. Cosimo kept it coordinated: he understood the business, watched the managers, and treated the branches as one concern. His death in 1464 marks the boundary between the bank's expansion and its decline.

His grandson Lorenzo — 'the Magnificent' — took no interest in the firm. When Angelo Tani appealed to Lorenzo to restrain the London branch's lending, Lorenzo replied that 'he did not understand such matters' (che lui non se n'intendeva) and handed all authority to the general manager, Francesco Sassetti. De Roover names Sassetti 'the initiator of mistaken policies which brought about the disastrous decline of the Bank.' Lorenzo's own later memorandum admitted he had been 'duped' by Tommaso Portinari, the Bruges manager — schemes Sassetti had encouraged without consulting him.

The branches ran onto the rocks one after another. The London branch lent heavily to Edward IV of England; when the debts went unpaid it was liquidated in 1478 with losses finally written off at 51,533 gold florins. The Bruges branch under Portinari lent recklessly to Charles the Bold of Burgundy and ended in what de Roover calls its 'disastrous liquidation.' Branch managers were 'insubordinate and prevaricating,' and the top management 'failed to curb their activities' — mounting losses sharpened the infighting and stood in the way of any adjustment.

The end was political. In 1494 Charles VIII of France invaded Italy; the Medici were expelled from Florence, and all their property — business investments and real estate alike — was seized and placed in the hands of receivers. The bank, ninety-seven years old, was dissolved along with every branch. It coincided with the collapse of Florentine banking more broadly: the great banks (banchi grossi) fell from seventy-two in 1422 to fewer than half a dozen by 1494.