[Jacob Fugger] Banking history: Goldenballs (The Economist – August 1, 2015)


Not for nothing was Jacob Fugger known as “Jacob the Rich”

ALBRECHT DÜRER’S portrait of Jacob Fugger shows a man with thin lips and unforgiving eyes. He wears a fine fur tippet about his shoulders and a brown cap; for the time, his dress is strikingly plain. Greg Steinmetz, formerly a journalist with the Wall Street Journal and now a securities analyst in New York, declares that he was the most influential businessman who ever lived. He makes a better case for this extravagant claim than for his assertion that Fugger was also the richest man in history.

A late-medieval banker from Augsburg in southern Germany, Fugger has never been as celebrated as Cosimo de Medici and his Florentine sons and cousins, whose reputation as bankers was burnished by their excellent taste in Renaissance art.

But Fugger was the better banker. Were he alive today, he would have cut a swathe through Wall Street and the City, and yet his remarkable history is still little known. Mr Steinmetz’s prose does not always sparkle and some arcane details of banking history are fuzzy, but the tale of Fugger’s aspiration, ruthlessness and greed is riveting.

He was born into a family of well-to-do textile traders and bankers in Augsburg in 1459. He grew rich and powerful by risking his capital and his reputation to finance the territorial ambitions of the Habsburgs. Jacob relished the relationship, which began when Frederick III, the Holy Roman Emperor, was given a loan by Fugger’s brother in spite of a dreadful credit rating.

Jacob became principal banker to his son, Emperor Maximilian I, who established the Austro-Hungarian Empire, and to Charles V of Spain, whose victory at the Battle of Pavia entrenched the Habsburgs’ hegemony. His huge loans were backed by collateral, and his Habsburg clients frequently paid them off in kind rather than cash.

Fugger was able to obtain control of commodities such as silver, from Austria, and copper, from Hungary. He built a smelter to refine the copper and traded it himself quite pitilessly. When he joined a cartel of copper producers in Venice they agreed to push up the price by squeezing the supply, but Fugger put pressure on his co-conspirators and rivals instead.

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