“Monte di pietà, an institution of Christian piety,
may licitly charge money for outlays, losses, and even for a moderate return.” 4
— Pope Leo X, 1515
Some of the earliest financial institutions devoted to credit were not profit-making enterprises but charities. In fifteenth-century Italy, outraged by the high rates charged by moneylenders, the papal governor of Perugia established the first monte pietatis, a public pawnshop that charged only enough interest to cover the costs of the loans. In 1515 Pope Leo X issued a papal bull confirming that charitable pawnshops were exempt from the prohibition on lending at interest, and the innovation spread rapidly through Catholic Europe.
The montes (in the Italian vernacular, monti di pietà) typically took the same general form. The monte di pietà employed an appraiser to value the goods, salesmen to auction off the unredeemed collateral, and a notary to keep legally binding records of every transaction in an account book such as this one. As this ledger reveals, most borrowers pawned small items for small sums-typically ten florins or less. Most pledges were redeemed on schedule and the entries crossed out.
Though borrowers regarded the monti as an important resource in times of scarcity, a large pamphlet literature is evidence of ongoing hostility. Professional moneylenders strove to halt their spread; moralists feared that the monti encouraged theft. Despite the opposition, they persisted: the mont de piété of Paris survived the French Revolution and two World Wars to become the Crédit Municipal of today and Mexico City’s Monte de Piedad is still in operation.
The montes pietatis did not succeed in their immediate aim of driving usurers out of business, but in the long run they played a crucial role in making finance culturally acceptable and laying the foundations of European banking. “Although the montes themselves were pawnshops,” writes medieval historian John Noonan, “their acceptance led to the acceptance of much of the structure of institutional banking.” 5
4 Papal Bull “Inter Multiplices,” Roman Catholic Church, Bullarum, privilegiorum ac diplomatum Romanorum Pontificum, collectio C. Cocquelines, 14 vols. (Rome, 1733-48) 3: 408-409.
5 John T. Noonan, The Scholastic Analysis of Usury (Cambridge, Mass.: Harvard University Press, 1957), 294.