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

by Greg Steinmetz

  Caravajal enjoyed himself but remembered his mission. He told Fugger that Julius wanted Maximilian to stay home and that Fugger should not bankroll him or else. Fugger knew his best course was to stay neutral and sit the whole thing out. But that became impossible after the diet again refused to step up for Maximilian. To keep Maximilian happy, Fugger had to give him something. He gave him just enough to get him started, but no more.

  Maximilian crossed the Alps with 10,000 men—only a third of what Liechtenstein said he needed. He got as far as Trent, north of Verona, when he ran out of cash. Maximilian refused to yield. He declared he would press ahead with a smaller contingent even if it meant getting killed. Better to die than to abandon the imperial crown. The emperor’s attitude exasperated his advisors. “The wall of difficulties which opposes us is as hard as the head of the emperor,” wrote a counselor, “and yet he will run against it without a helmet.” His team devised a plan to keep the emperor breathing and their livelihoods intact. What about a coronation ceremony right away, on the spot, without the pope? Maximilian could get his friend Matthaus Lang, the bishop of Salzburg, to officiate. There was enough money in the till to hold a procession down the main street and scrounge up a proxy for the actual crown. Lang could, with full solemnity, put it on Maximilian’s head and the pope could sanction the coronation from afar. The scheme was without precedent. Popes had always crowned the emperor. But the aides knew that Venice would fight if Maximilian entered its territory. Their boss might end up like his father-in-law Charles the Bold, who shortly after losing his jewels lost his life in battle and was barely recognizable after dogs dug into his remains.

  Reason won the day. Lang crowned Maximilian in Trent Cathedral. Celebrants held a parade. Fireworks lit the sky. The imperial mint in Hall—the one run formerly run by Fugger’s grandfather Franz—stamped coins with Maximilian’s image and the word “Caesar.” They put the coins in circulation to proclaim his greatness to the world.

  Maximilian should have been happy but something nagged him: How could he be great if he settled for a coronation among the small, half-timbered houses of Trent rather than the temples of Rome? How could he be Caesar if a friend dressed in bishop’s purple instead of papal white handed him the crown? Maximilian immediately regretted his ceremony and declared it a farce. If anything, it made him look weak. As soon as Lang gave him a crown, Maximilian took his forces farther south and into battle. He was more determined than ever to see the pope. Fugger, who must have been jarred by the emperor’s insistence, risked the emperor’s wrath and contributed nothing to the venture.

  Venice met Maximilian and his soldiers at the frontier. Like his uncle Sigmund in his first battle with Venice, Maximilian surprised everyone by winning. He demanded money from Fugger to press on. This put Fugger back in the same spot as before the phony coronation. Once more, he had to choose between customers. Once more he gave the emperor just enough to do his part but not so much as to alienate the doge and, more importantly, Pope Julius. His 4,000-florin contribution was too little to make a difference and, as the Venetian forces grew in number, Maximilian’s luck ran out. The Venetians killed his best commander, forcing Maximilian to retreat. The Venetians followed him into Austria. It became personal for Fugger when Venice attacked Fuggerau because the compound supplied the emperor with guns. Fuggerau had the strength to resist robber barons, Turkish looters and maybe even the Venetian army. But Fugger saw no value in trading bullets with the Republic. Fuggerau surrendered. As Fugger considered how to get his smelter back, Liechtenstein pleaded for more money. “God must help,” he wrote Fugger. “I know of no other way.”

  God failed to intervene, but Fugger did. To save Maximilian, Fugger made him his fourth and largest loan of the Venetian war. He attached two conditions to his 20,000 florins. The first: Under no circumstances could Maximilian turn to the Welsers or any other Fugger rival for more money; he had to give Fugger exclusivity. The second: Maximilian had to immediately sign a peace treaty. All this crossbowing, cannon blasting and marching back and forth over the Alps was bad for business. If Maximilian wanted more cash, he had to make nice with Venice and stop scaring the pope. This time, Fugger gave Maximilian enough to force the Venetians back to Italy. Peace returned, the combatants signed a treaty and Fugger recovered Fuggerau.

  4

  BANK RUN

  If Fugger wanted to unwind, he could always find a seat at the Gentlemen’s Drinking Room, the members-only tavern for Augsburg’s elite. The average German in Fugger’s time drank eight glasses a day of beer. Brewed under purity laws still in force, the beer was tough on the liver but safer than water from the sewage-filled streams. Inside the tavern, the men sat at long tables and swapped stories about servant girls, adventures at the Frankfurt fair and, if they were rich enough, their private zoos and golden saltcellars.

  Others may have been better storytellers than Fugger, but it’s hard to imagine anyone had better material. Only Fugger could describe the emperor as a friend or complain about the burden of yet another dinner with the papal legate. The men in the room most wanted to know the secrets of his success. But his secrets weren’t all that mysterious, only hard to duplicate.

  Fugger had a remarkable talent for investing. He knew better than the rest how to size up an opportunity and where to park his money for the best return at the least risk. He knew how to run a business and make it grow and how to get the most out of his people. He knew how to exploit weakness and negotiate for favorable terms. But perhaps his greatest talent was an ability to borrow the money he needed to invest. With what must have been enviable charm, he convinced cardinals, bishops, dukes and counts to loan him oceans of money. Without their support, Fugger would have been rich but no richer than the others at the club. The fund-raising—and with it the courage to risk debtor’s prison if he couldn’t repay—explains why he went down in history by the name Jacob the Rich. Financial leverage catapulted him to the top.

  He borrowed in the most mundane way imaginable: He offered savings accounts. Banks litter every street corner these days. They cheerfully open accounts for anyone who walks in. But savings accounts were new in Fugger’s time. Before they arrived, bankers funded loans and other investments with their own money and took in partners if they needed more cash. That diluted ownership, but they had no other choice. The easy way to raise money—borrowing—was off limits because of the church’s ban on charging interest on loaned money. The church considered anything involving interest—even interest on lowly savings accounts—as usurious.

  Venetians lived by the motto of “First Venetians, then Christians.” They preferred making money to pleasing God. They ignored the ban and invented bank deposits. Venetian investors could leave their money with a bank, return a year later and get more back than they put in. Deposits gave banks a new way to grow and gave their customers an easy way to put their money to work. Everyone was happy except the church. The rest of Italy recognized the brilliance of savings accounts and offered their own. Germans respected canon law more than the Italians and observed the usury ban more faithfully but they, too, eventually came around.

  Fugger’s contemporary, the Augsburg banker Ambrose Hochstetter, took the retail route to deposit gathering. He accepted money from farm workers, maids and anyone else with something to spare. It took work to reach all these people, yet he still raised a million florins. Fugger followed a quicker but riskier path of taking money from big depositors. If a peasant withdrew money from the Bank of Hochstetter, Hochstetter himself would not notice. If a duke left the Bank of Fugger, Fugger could be ruined unless he had ready cash to cover the withdrawal. Both men would have found our modern banking system curious. They would be struck that a banker could run his institution into the ground and still keep his house, not to mention his freedom. They would scratch their heads over deposit insurance, although they would have liked the idea of someone else paying the bill for reckless behavior. They would be even more curious about our currency system where nothing bu
t faith in the government, rather than gold and silver, backstops legal tender. Fugger and Hochstetter had enough trouble trusting that their coins weren’t clipped. But currency backed by nothing but a promise? They may have said faith was for church, not for money. For them, banking was like any other business. A banker put his own money on the line and depositors put up theirs. Both sides accepted the possibility of catastrophic loss. Fugger promised to pay his investors 5 percent interest a year. The return was compelling, certainly more attractive than buying land or silver plate to store in a cupboard. Fugger targeted about a 20 percent return for himself. His fortune came from the 15 percentage-point spread between what he earned on investments and what he paid his lenders.

  Savings accounts funded the biggest loan Fugger ever made to Maximilian. After the farce of the Trent coronation and the Fugger-decreed peace treaty with Venice, Maximilian took advantage of a spat between Venice and Rome (Venice claimed some papal territory, Julius excommunicated Venice) to renounce the treaty. He wanted to try again for Rome. In his desperation, he considered the unthinkable: an alliance with France.

  Before the quest for a papal coronation consumed him, France had been Maximilian’s obsession. His late wife, Mary of Burgundy, had died in a riding accident in 1482. She was the only woman he ever loved and their romance was one of the greatest and the most tragic in history. He wrote touching letters describing her beauty. He let her keep hunting falcons in their bedroom and let the birds go with them to church. Before they married, he wooed her with the gift of a diamond ring, an offering now described on the De Beers website as the world’s first engagement ring. After she died, he hired a magician to summon her and, after France grabbed Burgundy, he went to war and tried to win it back for her memory. But now he wanted the imperial crown more than Burgundy and, to get it, he needed to go through Venice. He could only succeed if France and its large army joined him. Against the advice of his clear-eyed daughter Margaret, who warned of French betrayal, he struck a deal with his longtime enemy. They agreed to carve up the Venetian hinterland. France would get Brescia and Cremona up north and Maximilian would get Verona, Padua and what he wanted most: unobstructed access to Rome. The pope and King Ferdinand of Aragon, eager to take Venetian territory in southern Italy, joined them.

  Fugger liked the plan because victory looked assured. How could a combined force like that lose? He chipped in with his biggest loan yet; he agreed to give the emperor 300,000 florins, a sum large enough to pay 25,000 common laborers for a year. In return, Fugger received several more years of Tyrolean metal production. All of Fugger’s deals were risky, but this one was a whopper and would leave him with dangerously little cash. Ill-liquidity was perilous, especially for a banker. If a large depositor asked to withdraw his money, Fugger might have to sell his fiefdoms, the Burgundian jewels and even his home to satisfy the claim. If things got really ugly, he could end up like his bankrupt cousin Lucas and have to flee to his grandfather’s village. He’d be living in a hut, disgraced and surviving on gruel. But Fugger didn’t dwell on the possibility of ruin. He had a war to finance.

  Through his offices in Antwerp and Lyon, Fugger handled the money transfers from France with such speed that it enhanced his reputation as a financial miracle worker. Everything was in place to carve up Venice. The republic realized it could not fight four opponents at once and immediately surrendered territory to the pope and Ferdinand in order to concentrate on Maximilian and the French. The French routed the Venetians near Milan and took the city. Maximilian, too, won every territory he targeted. Venice only saved itself by invoking the sixteenth-century version of the nuclear option: It threatened to invite the Turks to Italy to let them sort it out. No one wanted that. Once peace returned, the French, as Margaret predicted, lost interest in Maximilian and did nothing to help him reach Rome. Without French support, he lost Padua and every other conquest to the Venetians except Verona. His debts to Fugger remained.

  Just as the war with Venice wound down, Fugger received alarming news: Cardinal Melchior von Meckau had died. The news could not have been worse. Meckau was Fugger’s biggest depositor. He had given Fugger 200,000 florins and, with interest, Fugger now owed Meckau’s estate 300,000 florins. The only trouble was that most of his cash had gone into the hands of Maximilian’s mercenaries. He had enough to stay afloat for a while but not for long.

  Meckau, a dodgy opportunist, came from a noble family in the Saxon city of Meissen. After completing his studies in Leipzig and Bologna, he became a priest and paid the required fee to become bishop of Brixen in what is now the Italian part of Tyrol. He moonlighted in the secular world. Maximilian was too busy to administer Tyrol himself, so he assigned the job to Meckau.

  Like Schwaz, Brixen had silver mines. Their output paled beside Schwaz, but they still had a lot of ore. The deposits belonged to the diocese. They might as well have belonged to Meckau personally. As bishop, he could sell the ore and, if he chose to cheat parishioners, deposit the money into his own accounts. That’s what he did. He kept two personal accounts, one in Venice and one in Nuremberg. He moved his accounts to Fugger after he met him and learned how much interest he paid and how efficiently he moved money.

  Meckau and Fugger helped each other. Shortly before Pope Alexander VI—two popes before Julius II—died in 1503, Alexander promoted a number of bishops to cardinal. Meckau was the only German. His installation came after Fugger’s agent in Rome, Johannes Zink, of whom we will hear more shortly, bribed the pope with 20,000 florins. For his part, Meckau sang the praises of Fugger in Rome and attracted a number of high church officials to follow his lead by becoming depositors. Meckau also got him out of jams. During the incident years earlier when Maximilian got angry at Fugger and threatened to seize Fuggerau, Meckau was instrumental in getting the emperor to relent. Fugger became dependent on Meckau. He borrowed from him whenever he needed cash in a hurry. The Meckau relationship was among the factors that differentiated Fugger from his banking competitors. Their backers weren’t as rich as Meckau.

  Meckau’s death sparked a treasure hunt. His assistants knew that the mines generated piles of money that vanished before they saw it. The money had to be somewhere. Two days after Meckau died, some monks rummaging through his belongings at the Brixen palace found a receipt. It disclosed that, with interest, Meckau had 300,000 florins on deposit with Fugger. The sum was unfathomable for the monks.

  They also found a will. In it, Meckau gave his possessions to the Hospice of St. Anima, a clerical order in Rome to which he belonged. The will made no mention of amounts but the receipt was all the monks needed. The hospice demanded that Fugger pay the 300,000 florins at once. Nearby at the Vatican, Pope Julius heard about the money, too, and had another idea: Fugger should give him the money instead. As Julius saw it, the will counted for nothing under clerical law. Anything belonging to a cardinal belonged to the church, and Julius, as pope, was the church.

  Fugger had few options. He could try to raise the money to pay off the pope by going back to his other investors. But that would put him even more dangerously in debt. He could also sell assets. But that would take more time than he had. And if he started dumping assets, rumors would spread that he was in trouble. That was suicide. The rumors would panic his other depositors and they would demand repayment, too. He’d be finished. Even if he could find a way to pay Julius, he could not pay all his creditors at once. Fugger was staring at a bank run. Grandpa’s hut might not be so bad, at least compared to debtor’s prison.

  Fugger claimed that stress never bothered him. “When I go to bed,” he once said, “I face no obstacles to sleep. I remove with my shirt all the cares and battles of business.” During the Meckau crisis, he kept his cool. Of course, he said nothing about his plight. But he worried about rumors, so he kept up appearances by making loans to competitors and making his gift-giving visit to Schmiechen. He had money to burn or at least that’s what he wanted everyone to think.

  But he could stall for only so long. Out of t
ime and out of options, he turned to his man in Rome, Johannes Zink, who he knew could get things done. Like Fugger, Zink was from Augsburg. He was shuffling papers for a living at a monastery when Fugger hired him to run his operation in Rome in 1501. Zink performed spectacularly, but the way he achieved success left a permanent stain on Fugger’s reputation and made Fugger an easy target for reformers, including Martin Luther. Fugger had been trying to bust up the Italian monopoly on Vatican banking for years, but he only succeeded after Zink arrived. Zink took a different approach to winning business than his predecessors. He stopped talking about cost advantages and superior service. Instead, he endeared himself to Vatican officials with bribes and gifts. He went right to the top by contributing to papal election campaigns and doing odd jobs like being Meckau’s bagman. Fugger became the lead banker to the Vatican within only a few years of Zink’s arrival in Rome. The timing wasn’t coincidental. Zink made it happen.

  In the process of doing well for Fugger, Zink did well for himself. Among the many corrupt practices of the Renaissance church was the buying and selling of church offices. The jobs were for life and came with comfortable, tax-free incomes. High demand turned the sales into auctions where cash trumped qualifications. The Vatican got hooked on the cash, and outraged observers called the sales “simony,” after Simon Magnus, an early Christian who tried to buy blessings. Zink bought more offices than anyone. He weighed the income stream against the up-front cost, liked the returns and bought as many as he could. All told, he bought fifty-six positions. They stretched from Cologne in the west to Bamberg in the east. He was a scribe in one city, a notary in another and a papal knight in a third. He delegated the work to underlings and he was rarely—if ever—in these places. He had five jobs in Augsburg alone.