The Richest Man Who Ever Lived: The Life and Times of Jacob Fugger

by Greg Steinmetz

  The benefits of the bribes became evident after an otherwise forgettable dustup called the War of Landshut Succession. In September 1504, Maximilian put on a suit of armor to fight not the French, the Italians nor the Swiss but one of his bosses: Philip of Wittelsbach, the elector of the Palatinate. Philip had declared war against the Munich branch of his own family over some territory in Bavaria. The other electors asked Maximilian to mediate and he took it as a call to arms. The fight riveted the Augsburg financial community because it featured their customers fighting to the death only miles away. In what would have been a particularly scary moment for Fugger had he known about it, a Bohemian mercenary dragged Maximilian off his horse and came at him with a pike. After a friend beat back the attacker, Maximilian won the battle and, in the peace negotiations, he fought hard and won for himself Kufstein, the textile cities of Kirchberg and Weissenhorn and the silver mine of Rattenberg.

  Rattenberg excited the bankers. Maximilian had already pledged every morsel of his silver production. Now, with Rattenberg, he had something new to offer. Fugger wanted it as did every other lender in Germany. But Fugger faced long odds because Maximilian was angry at him. It had dawned on him that Fugger sold him copper—copper from his own mines—at premium prices. “From our treasury to our armory in Innsbruck are perhaps thirty steps,” he wrote. “And does the copper in these thirty steps alter its value? We still have to pay for the copper like a stranger, as if the copper did not belong to us, which is unreasonable.”

  If Sigmund Gossembrot, Maximilian’s former financial advisor, had still been alive, he or one of Fugger’s competitors might have won Rattenberg. But Gossembrot’s replacement, Paul von Liechtenstein, saw things differently. Liechtenstein was a curious figure. Later Liechtensteins served the Habsburgs so skillfully that the Habsburgs gave them a mountainous sliver between Austria and Switzerland that is now the country of Liechtenstein. But Paul von Liechtenstein put his loyalty to Fugger first because Fugger had him on the payroll. Fugger paid Liechtenstein the handsome sum of 2,000 florins a year. Liechtenstein knew better than to cross him. Fugger offered Maximilian 60,000 florins for three years of Rattenberg’s production. That sounded good to Liechtenstein. Maximilian accepted.

  On a July day in 1509, Fugger took a seat in a coach pulled by twenty-five horses en route to the Swabian village of Schmiechen. As he bounced along the dirt road, he spotted a farmer and ordered the coach to stop. He gave the farmer a coin. His generosity continued once he got to town. He gave money to the peasants and their wives. He gave money to servants and maids. The stable boy got two kreuzers—twice what the farmer got. The bailiff got fifteen kreuzers. Fugger recorded the sums in his ledgers.

  A sense of feudal responsibility explained Fugger’s largesse. Augsburg had long ago bought its way out of feudal commitments and now reported to no one but the emperor. But Schmiechen still operated under the old feudal contract. The residents weren’t freemen like the citizens of Augsburg. They were serfs who bound themselves to a master. They paid the lord tribute and the lord played the part of a tribal chieftain. He protected them from attack. “Thou art our duke,” went a Dutch saying. “Fight our battles for us.”

  The lord during Fugger’s visit was Fugger himself. He had become Lord of Schmiechen. In Augsburg, people called him Herr Fugger. But in Schmiechen, the farmer, the stable boy and his other serfs called him by his noble title. To them, this grandson of a village peasant was Count Fugger.

  Fugger broke into the nobility after a remarkable string of events that began more than a decade earlier in far-off Spain. Fugger’s resources, skill and bravado played a part in the story. But so did the astonishing ups and downs of his clients the Habsburgs. In 1496, when Fugger was busy in Hungary, King Ferdinand of Spain—the same Ferdinand who with Queen Isabella sent Columbus to America—was fighting the French and sought Maximilian’s support. To get it, he proposed a marriage between his daughter Joanna and Maximilian’s son Philip. Maximilian accepted because it put Philip in line to rule Spain. Her older siblings had to die first for him to become king. But as luck would have it, they died young and, when Queen Isabella died a couple of years later, Philip became king of Castile. He also stood to inherit Ferdinand’s Aragon, the other half of Spain, after Ferdinand passed on. This was an incredible turn of fortune. A generation earlier, the Habsburgs had nothing but a few claims. Even Vienna belonged to foreigners. Now, with Philip on the rise in Spain, the Habsburgs had Austria, the Low Countries, Castile and Castile’s growing holdings in the New World. Frederick’s silly dream of AEIOU—All Earth Is Under Austria—was becoming reality. All the world was coming under control of mountainous, landlocked and hopelessly small Austria.

  But just as the Habsburgs and Fugger seemed poised for even bigger things, the skies darkened for them when typhoid fever claimed Philip and imperiled the Habsburg dream. He was twenty-eight when he died and had been king for only three months. Fortunately for the Habsburgs, Joanna was still the queen and her children—Habsburg children—were in line to take over. But Ferdinand, her father, wasn’t about to let the Habsburgs take Spain that easily. He was the last of his line, fifty-two years old and impotent. But he was a man possessed. He remarried and took a virility potion with the idea of creating a new set of heirs and taking back Spain for his family. If all went well, his family, the Trastamáras, would inherit Spain, not the Habsburgs.

  The possibility of losing Spain threw Maximilian into a panic and offered another opportunity for Fugger. Back in Spain, Joanna tried to shore up Habsburg legitimacy by going on a macabre tour of Castile with her husband’s corpse. She aimed to raise awareness and, by doing so, solidify the claims of her sons, ages three and six, to Philip’s throne. But the tour did nothing but confirm suspicions of her insanity, earn her the nickname Juana Loca and give Ferdinand an excuse to lock her up. Maximilian responded by redoubling efforts to reach Rome and get the imperial crown. He believed more than ever that he needed it for strength.

  Liechtenstein outlined the reality to the emperor. To get to Rome, he would need to slip through the French forces in Milan and then fight his way through the Venetians, who rightly suspected that Maximilian wanted to exercise old claims on its hinterland. The math was daunting. Liechtenstein calculated Maximilian needed 30,000 soldiers. Even if the electors offered some troops, he would still need mercenaries at a cost of 120,000 florins. Liechtenstein told Maximilian to forget about a coronation. He couldn’t afford it. Maximilian was undeterred and ordered Liechtenstein to get the money. “Work it out with Fugger,” he said.

  Liechtenstein met Fugger in Innsbruck and offered to sell him the two up-and-coming textile cities of Kirchberg and Weissenhorn that the emperor had snatched in the Landshut War. Liechtenstein threw in the surrounding countryside, including any castles in the area, to sweeten the deal. The sale offered Fugger tax revenue; he could collect whatever he could ring out of the citizenry. It also offered him a chance to join the landed gentry and slingshot his family into a higher social orbit.

  Anyone with the means could buy a city. But there was a catch: The buyer had to be of noble birth. Fugger was, of course, a commoner. Despite his wealth, his coat of arms and his old-money wife, he was nothing more than a glorified peasant in the caste system. He and Maximilian had a way around that. Just as old Frederick could turn Charles the Bold into a king with a turn of his orb and a wave of his scepter, Maximilian could turn Fugger into a count. Political hurdles stood in the way because the lesser nobles—the knights—would resist being leapfrogged. They would have to be won over. But Liechtenstein promised to manage it. Fugger considered the offer. Kirchberg and Weissenhorn were close enough to Augsburg for Fugger to to keep an eye on. But the tax revenues were meager. Fugger could earn more on other investments.

  While Liechtenstein worked Fugger, Maximilian worked the electors. Once more, this heir of Charlemagne who called himself Caesar came to an imperial diet to beg for money. Constance, a lakefront city near the Swiss border, hosted the di
et. Maximilian argued that he needed the crown to legitimize his rule. The electors voted Maximilian 9,000 foot soldiers and 3,000 men on horse. This was helpful but only a token. The emperor would need more help to hack his way to the Eternal City.

  Querini, the Venetian ambassador to the diet, wrote the doge and told him to relax. No need to prepare for an imperial invasion because the diet had given Maximilian almost nothing. But Querini had spoken too soon. The situation changed when Fugger agreed to the emperor’s offer and bought Kirchberg and Weissenhorn for 50,000 florins. Fugger made a show of it. Rather than shipping cash into the battlefield to pay the mercenaries, Fugger sent wagons stuffed with gold coins and protected by a small army to the Constance diet. He parked the wagons in the public square to create the idea that the emperor had bottomless resources. It was an illusion, but it just might scare Venice into letting the emperor through unimpeded.

  The theatrics caused a sensation. Querini alerted the doge and word spread that Maximilian had a banker who could produce impossibly large sums in an instant. Machiavelli was traveling through Switzerland at the time and ran into two Genovese businessmen. They told him that Maximilian visited Fugger in Augsburg and left with 100,000 florins. The story was not quite accurate, but it was close.

  Maximilian signed papers proclaiming Fugger as lord over several cities and thousands of people. On New Year’s Day, 1508, the people of Weissenhorn, the largest of the cities, gathered under the winter sky to pledge loyalty to a new master. The details are lost. But records of a ceremony in the Austrian city of Karnberg, not far from Fugger’s factory in Arnoldstein, give the flavor of such events. There, a peasant sat on a round stone carved with the crest of the territory. The new lord, dressed as a peasant, approached the stone. After being introduced, the real peasant turned to the crowd of onlookers, pointed to the lord and asked, “Is he a righteous judge? Will he promote the well-being of our land and its freedom? Is he a protector of the Christian faith and its widows and orphans?” The people shouted, “This he is and will ever be so.” The peasant gave the lord a symbolic rap on the ears and pledged his fidelity. We don’t know if Fugger ever joined in a ceremony like this. But we know the citizens of Weissenhorn gave Fugger the keys to the city—keys that actually opened the city’s gates—and read an oath: “I praise and swear that I will give Fugger my obedience, loyalty and support.” The people of Schmiechen, which Fugger added to his collection a year later, did the same.

  Shortly after buying Weissenhorn, Fugger wrote a letter that offered a defense of capitalism and revealed his worldview as never before. To modern ears, his arguments sound as unimaginative as those at a Chamber of Commerce mixer. But capitalism was still feeling its way and, although merchants had been around for centuries, big business was new. Fugger’s arguments provoked his listeners because they were hearing them for the first time.

  Fugger made his argument in a complaint to Maximilian about his latest fund-raising scheme. The emperor worried Fugger’s contributions weren’t enough to get him to Rome, so he tried to raise more with a financial tool created in Venice. Since 1171, Venice had been selling tradable financial certificates that offered a fixed rate of interest. This was the start of the bond market, now worth $80 trillion. That part of the story is well known. The forgotten part is that investors bought the bonds at the point of a sword. Venetian bankers and merchants had riches that the government wanted for conquest. Rather than raise taxes, it ordered investors to buy the bonds.

  Maximilian drew up papers to make Fugger and the other bankers of Augsburg, Nuremberg and the other imperial cities buy his bonds. To the bankers, it was bad enough that Maximilian wanted to force this on them. Even worse was that the bonds came with no collateral, only Maximilian’s promise to pay. Where he would get the money to repay was anybody’s guess. Maximilian justified the move with a fairness argument that sounds familiar to modern ears. Fugger and the others might think they made their own breaks, but the truth was they benefited from being citizens of an imperial city. The empire provided security. Imperial protection let the merchants lead lives of peace and run their businesses without the distraction of invaders.

  Fugger was furious. “His majesty wants to take it out of my pocket,” Fugger huffed. To him, it smacked of a tax. He already paid property taxes. He and other Augsburg property owners had to pay 1 percent on the value of their real estate every year. Wasn’t that enough?

  In his letter, Fugger started with what he said was obvious: Companies like his benefited every level of society, producing jobs and wealth for all. Business could only work its magic if the government left it alone. If politicians threw up roadblocks and killed the profit motive, business had no chance. Merchants and bankers were good citizens, he argued. They treated each other and their customers fairly. Sure, self interest propelled them. But they knew better than to cheat customers. Reputation was everything and the need for credibility checked the urge to lie, gouge and steal. Hinting at the allure of tax havens (the Swiss border was only sixty miles away), he declared that other countries showed businessmen more respect. He then blasted those who condemned commerce and enterprise. They failed to understand that “it is for the common good that honorable, brave and honest companies are in the realm. For it is not disreputable but rather it is a wonderful jewel that such companies are in the kingdom.” He ended the letter with a vague threat: “Reasonable people know this and would be wise to consider.”

  Who knows what he meant by the last line. But maybe the fact that it could mean anything was the point. Fugger wanted the emperor’s imagination to fill the blanks. Maybe Fugger would refuse Maximilian future loans. Maybe Fugger would move to Switzerland. Maybe Fugger would fund the emperor’s enemies. The last line is also noteworthy because of the implied insult. It suggested that the emperor was something other than reasonable. The implication would have shocked his contemporaries for its impudence.

  Maximilian won the day; the bankers gave him a loan. But they gave him less than he wanted and Fugger’s share was minimal. Fugger’s jawboning paid off in another respect. Maximilian pledged to never again use force to get a loan.

  Smart business people are politically neutral. Knowing that today’s loyal opposition could be tomorrow’s leaders, they play both sides of the fence and make friends with everybody. The fence for Fugger in 1508 was the Italian-Austrian border. Maximilian’s desire to see Rome put Fugger in a bind. Venice and the Vatican were two of his best customers, and neither wanted Maximilian and an army of ravenous, booty-hungry mercenaries storming their way through Italy. Venice feared for its mainland holdings. The Vatican, whose secular inclinations never ran higher, feared losing territory of its own. Fugger could probably risk irritating Venice. Since Portugal had won the spice war, Venice’s share of the pepper trade shriveled to almost nothing. Fugger had lost so much regard for Venice that he opened an office in Genoa, the republic’s archrival. And Venice would still want to trade Fugger’s copper even if Fugger did business with an enemy.

  Fugger had to be more careful with the Vatican. Over the years, Fugger had come to dominate the business of transferring collection plate donations from Germany to Rome. Rome lived on the transfers. Italian bankers had the business before Fugger. But Fugger could move money more safely and efficiently than the others because of the size of his branch network. He had so many offices and handled so much money that he could create a closed loop where he could debit an account in one branch and credit an account in another. Actual coins never changed hands. This made him different from other bankers and endeared him to the Vatican because the pope could get his money without the risk of highway robbers seizing it en route. Like a credit card company taking a cut on every swipe, Fugger collected 3 percent on each transfer.

  Fugger was more than just the Vatican’s transfer agent in Germany. He was by now “God’s Banker,” the top financier to Rome. He had expanded the transfer business to eastern Europe, Sweden and parts of France. He took it upon himself to pay Swiss
mercenaries to protect the pope, starting the tradition of the Swiss papal guards. He contributed 4,000 ducats (5,600 florins) to the papal campaign of Julius II and greased the cardinals’ palms to get him elected. On the day Julius took the tiara, the coronation parade passed in front of Fugger’s Vatican branch. The bank managers hung banners with the blue-and-white lilies of their employer. They wanted to remind Julius of Fugger’s reach. Julius showed his gratitude by awarding Fugger the contract to mint the papal currency, the zecca. Minting had been the exclusive domain of the Florentines. Julius broke a five-year contract with the incumbent and awarded a fifteen-year deal to Fugger. Fugger served seven popes and minted coins for four of them, marking them with an F or the family symbol of a trident.

  Fugger didn’t need to be reminded not to help Maximilian march on Rome. But the Vatican reminded him anyway. Julius sent Bernardino Caravajal, his top man in Germany, to Augsburg to warn him to tread carefully. Caravajal’s visit created all sorts of problems for Fugger. Augsburg was by now the financial capital of Europe. In addition to Fugger, the Welsers, Hochstetter and others played at high levels. The others would be angling to get the cardinal’s attention while he was in town and steal Fugger’s Vatican business for themselves. Determined to prove he was the richest of them all and the most valuable to Rome, Fugger hosted a party on the cardinal’s first night with a twelve-course meal followed by music and dancing. Augsburg’s rich and powerful came as well as the prettiest girls in town.