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PART I

HISTORICAL SIDELIGHTS

F we would begin with the beginning of the literature of banking, we must go back to the Chinese, with whom so many good things originated.

The first known work on finance is "The Examination of Currency," by the Chinese banker, Ma-twan-lin, published in 1321. In the highly poetical language of the Flowery Kingdom, bank notes were by him called "flying money." Some of us still find the term singularly appropriate!

Marco Polo, in the thirteenth century, and Sir John Mandeville, in the fourteenth, pioneers in the literature of travel, tell of the fiat money banker, Kublai Khan, showing that the autocrat of the East anticipated our modern fiatists by nearly seven centuries. Polo quaintly adds to his description: "Now you have heard the ways and means whereby the great Khan may have, and, in fact, has, more treasure than all the kings in the world."

Naturally enough, this fiat system of financing an empire and its emperor led to abuses. Mandeville, who followed Polo to Tartary, says:

"The Emperour may dispenden als moche as he wile withouten estymacioun. For he dispendeth not, he maketh no money, but the lether emprented, or of papyre. . For there and beyonde hem thei make no money, nouther of gold nor of sylver. And therefore he may despende ynow and outrageously."

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But the archeologists go many centuries back of Kublai Khan. We find the earliest banking house of record to be that of Egibi & Company, of Babylon. The records of this house when unearthed were found to be on clay tablets, kept in an earthen jar. Its commercial paper-paper by courtesy-was clay and consequently non-negotiable!

Xenophon throws a flood of light upon early banking in Greece, showing that the Athenian bankers paid four per cent. on deposits, and exacted anywhere from ten per cent. per annum to twenty-five per cent. per month-the rate presumably proportionate to the risk. The historian himself tried his hand at finance—and with the usual result when one with purely theoretical knowledge attempts the practical. He proposed the organization of a gigantic bank, absorbing all the private banks in Athens, which, after paying big dividends, would enable the city to build temples, chambers of commerce and wharves,

making Athens for all time the commercial center of the world. The proposed absorption never took place the private bankers, like one of Dickens's characters, refusing to be swallowed up!

Anacharsis, the Scythian prince and sage, after a careful study of Athenian affairs in Solon's time, shrewdly observed that their gold and silver seemed to him of no real use except to assist the Greeks in their commercial calculations-thus by many centuries anticipating the modern relegation of coin to vaults.

The thrift of the Greeks found early lodgment in Rome. The old Latin comedies contain many allusions to wealthy and influential bankers—some of the allusions respectful; others mercilessly satirical. Cicero and Justinian in their turn attempted, and in part succeeded, in curbing the avarice of Rome's private bankers.

The letter of credit was slow to win its way in Greece and Rome. When Cicero sent his son to Athens, he wrote to Atticus inquiring whether or not it would be possible for the boy to procure a letter of credit that would be honored by Athenian bankers.

It is interesting to note that the famous mansion unearthed in Pompeii was that of a Pompeiian banker, the elegant furnishings of which indicate that the prehistoric banker conducted his

business not wholly on a philanthropic basis!

The Bank of Venice, founded in 1171, became a lender to individuals too late to serve Shakespeare's "Antonio," in "The Merchant of Venice." Had the bank been doing a commercial business in the modern sense, satisfied with reasonable profits, the Council of Ten would have accepted his sureties and loaned him the "necessary ducats," and Shylock's occupation would have been gone.

Memory alights upon that famous body of bankers and promoters, the Medici, of Florence, who, though only private citizens, in their time were loved and hated, ardently wooed and savagely pursued; a family whose history is the history not alone of Florence but of Italy and much of continental Europe, whose banking house in Florence, with its sixteen branch houses in the principal cities of the continent, made terms with cities and nationalities, its final yes or no making and unmaking emperors and kings; a family whose loves and hates, weaknesses and strength, private and public demands and benefactions were the themes of historians, romancers and poets. Hallam illustrates the complete surrender of Florence to its bankers by stating that at one time the Medici, unable to realize on some of their

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