New tariffs had been introduced in July 1887 on agricultural and industrial goods and a trade war with France followed, which badly damaged Italian commerce.
[7] Additionally the collapse of a speculative boom based on a substantial urban rebuilding programme gravely damaged Italian banks.
[10] A former farm hand and former spy during the Roman Republic in 1849, he made his career in the bank in the Papal State, providing illicit entertainment to Vatican officials.
[9] Over the years, Tanlongo had built an influential network through strong personal connections with Roman aristocrats and businessmen, freemasons and Jesuit clerics, top government officials and industrialists, including the Royal Family.
[6][11] They were allowed to issue bank notes in excess of their reserves and legal limits in an attempt to steer clear of economic recession.
In June 1889 inspections of the Banca Romana by a government commission revealed serious irregularities in its administration and accounts and that 91 percent of the assets of the bank were illiquid.
[12] The Banca Romana had loaned large sums to property developers but was left with huge liabilities when the real estate bubble collapsed in 1887.
Both Crispi and his successors, Antonio Di Rudinì and Luigi Luzzatti, preferred to rely on time rather than daring to face the revelations of fraud and the political mayhem that any serious attempt to reform the banking system would inevitably trigger.
[7] Before Giolitti could appoint the former bank governor, the report was leaked to deputies Napoleone Colajanni and Lodovico Gavazzi who divulged its contents to the Parliament at the end of 1892.
[14] On 20 December 1892 Colajanni read out long extracts in Parliament and Giolitti was forced to appoint an expert commission to investigate the note-issuing banks.
[9][16] Tanlongo accused Giolitti of receiving money through the Director General of the Treasury Carlo Cantoni, Agriculture Minister Pietro Lacava, and Grimaldi.
Within a few months, a new Banking Act was introduced in August 1893 that liquidated the Banca Romana and reformed the entire system for issuing banknotes.
The reform neither immediately restored confidence nor achieved establishment of a single note issuing bank, as envisaged by Finance Minister Sidney Sonnino, but it was nevertheless a sound reform, strengthening the leading role of the newly formed Banca d'Italia which was seen as a decisive step towards the unification of note issuance and the control of money supply in Italy.
As Prime Minister he had borrowed from the Banca Romana for governmental purposes in August 1892, had nominated the bank's governor, Tanlongo, to the Senate, and had resisted a parliamentary enquiry, encouraging suspicions that he had something to hide.
While the President of the Chamber, Giuseppe Zanardelli, and the minister left the session, deputies refused orders to leave until the light was turned off at 10 PM.
The Commission concluded that pressing charges that Giolitti had used the bank's money in the last election campaign could not be proved although it declined to affirm that it was disproved.
Tanlongo and his co-defendants were acquitted on the grounds that the "major criminals are elsewhere" – an obvious reference to Giolitti (and a striking contrast to the sentences passed on the leaders of the Fasci Siciliani).
In September 1894 Crispi subsequently ordered the prosecution of police officials for abstracting documents from Tanlongo's house that allegedly incriminated Giolitti.
[26] After the publication of the committee's report on 15 December 1894,[26] Crispi dissolved the Chamber by decree amidst increasing protests, which compelled Giolitti – now that his parliamentary immunity was lifted – to leave the country; officially to visit his daughter in Berlin.
[25] On 24 July the Government decided to present Giolitti's evidence about the role of Crispi in the scandal and other matters to the Chamber of Deputies and to have a special commission examine them.