It suffered from some initial mismanagement (by the factor who had previously done so well—he made the fatal mistake of violating the partnership agreement and loaning money to Germans; on a more humane note, he would eventually become a pauper and be sent 20 florins by Giovanni, who felt that a past partner deserved some charity), but soon was prospering.

This date is interesting because Ilarione's contract with his principal was done in the name of Cosimo and Lorenzo, and not their father Giovanni; this perhaps marks the beginnings of a transfer of responsibility and power in the Medici bank from one generation to the next.

Over time, the Medici progressively reduced their investment in this partnership, and it appears that they withdrew completely sometime shortly after 1457, with only one partner keeping it running until 1476.

[21] The structure and functions of the Medici bank were largely settled into their final form by this point; a branch would be opened in Milan in late 1452, or early 1453, at the instigation of the grateful Sforza.

Its first manager Pigello Portinari (1421–1468) was very capable and this branch did well in loaning to the Sforza court and, like the Roman branch, selling luxuries such as jewels, until Pigello died and was replaced by his feckless brother Accerrito (1427–c.1503) who could not manage the massive amounts lent to the Milanese court and to Duke Sforza (who did not repay his debts of 179,000 ducats[22] before his death in 1478).

Edward IV amortized a portion of his debt, but these reductions were soon rendered less helpful (but not negated outright) by fresh loans and sales of silk.

Portinari had managed the Bruges branch for decades, and had steadily proven himself to be a poor manager—he engaged in business dealings on the side, ingratiated himself with the Burgundian court by excessive loans (first to secure the farming of the toll of Graveline—which was never very profitable—and then to mingle socially and elevate himself), made poor business deals like purchasing two galleys (which would be partially sold off at a loss; the rest would be lost to shipwreck and piracy).

So when King Edward IV demanded loans, the London branch had little choice but to oblige him if it wanted to continue to export English wool to Florence.

The branches that did not die off on their own generally met their end with the collapse of the Medicis' political power in Florence in 1494, when Savonarola and the Pope struck against them.

This left minimal time for the careful selection of branch managers and the maintenance of an alert watch against fraud within the bank, which was greatly needed.

Most of the financial duties handed over to Francesco Sassetti, who had risen from being a mere factor in the Avignon branch to its general manager, and then a post in Geneva eventually to end up in 1458 in Florence proper at Cosimo's side.

Whether simply due to bad luck, old age, increasing laziness, or diversion of his time to studying humanism like Cosimo, Sassetti failed to discover the fraud at the Lyons branch until it was too late for it to hope to remain solvent.

It appears more likely that the contraction and decline of the Medici bank under Lorenzo—it was reduced to branches in only Florence, Rome and Lyons by the time he died in 1492—were due simply to bad management.

Lorenzo's interest in politics and art (which led to his appellation "the Magnificent") forced him to rely on his ministro Francesco Sassetti to handle most affairs of the bank.

Service to the court and the aristocracy was probably the chief reason for establishing branches in both Milan in 1452 or 1453 and Naples in 1471, and over-extension of credit through personal loans created severe and ultimately insurmountable problems for both operations.

Niccolò Machiavelli gave a more contemporary viewpoint in his Istorie fiorentine, asserting that the fall of the Medici was due to their loose rein on their bank's managers who began to act like princes and not sensible businessmen and merchants.

[49] The fact that it seems to have been a common practice for Florentine banks to operate with as little as 5% of their deposits held in reserve lends further support to the idea that collapses could happen abruptly when bad loans were discovered.

Eventually, the Medici family's fiscal problems grew severe enough to force Lorenzo to begin raiding Florence's state treasuries, at one point defrauding the Monte delle doti, a charitable fund for paying for dowries.

[21] The once voluminous internal documentation has been grievously reduced by the passage of time: This study is based mainly on the business records of the Medici Bank: partnership agreements, correspondence, and account books.

[67] If the bank could not establish a branch somewhere, then they would usually contract with some Italian banker (preferably one of the Florentine banks) to honor drafts and accept bills of exchange: So the Medici were represented by the firm of Filippo Strozzi and Co. in Naples, by Piero del Fede and Co. in Valencia, by Nicolaio d'Ameleto and Antonio Bonafè in Bologna, by Filippo and Federigo Centurioni in Genoa, by Gherardo Bueri[68]—a close relative of Cosimo—in Lübeck, and so forth.

Clearly the branches would want to try to maximize sales of bills of exchange in the former situation, where the rate of the issuing currency increases between the time of issuance and payment.

Similarly, they could be fairly certain of a profit when a bill was issued in one of the Italian branches because they could demand a premium of sorts for being asked to deliver money in a far away place at however far in the future usance set the maturation date.

[76] De Roover offers this real example: Around July 15, 1441, the Medici of Venice bought a bill on Bruges at the rate of 541⁄2 groats per Venetian ducat.

The last shop was apparently being liquidated in 1480 amidst a general decline in the Florentine textile industry, and does not appear again in the tax records.

[85] The Roman branch of the bank was not merely charged with the normal deposit and bill of exchange business of the bank, nor with just the mechanics of being "fiscal agents of the Holy See"[86] (which entailed handling and moving the papal revenues, paying out designated subsidies to countries fighting the Turks, fees, etc., but the Medici did not actually collect the monies from sales of indulgences or taxes due the Papacy), but also with managing a certain piece of Papal property: the Tolfa alum mines, an interest they had acquired in 1473 in exchange for forgiving some of the Pope's long overdue debts to the Medici, although they had a previous interest in the "Societas Aluminum" (the company which farmed the mines after their discovery in 1460 in Tolfa near Civitavecchia; the agreement forming this company had three partners, one of whom was the mines' discover Giovanni da Castro, and was ratified by the pope on September 3, 1462[87]) dating back to 1466, expecting that by breaking the Turkish monopoly of alum imported from the Middle East (from the mines in Asia Minor, at Phocaea near Smyrna[85]) they could reap far more than their investments in the form of never to be repaid loans.

The Pope's share of the revenue was to be used to finance campaigns against the Hussites as well as the Turks, so buying Turkish alum was declared by him to be utterly immoral in that it helped the infidel enemy and hurt the faithful.

The Bruges branch and its manager Tommaso Portinari were convinced that the papal mines were simply producing far too much alum and glutting the market.

Regardless of its success, or lack thereof, the alum interest ended after the Pazzi Conspiracy, in 1478, after which Pope Sixtus IV confiscated as much Medici property as he was able to.

[91] To carry out their services, the papal bankers were often given considerable power: if a banker could not collect the rents due the pope, they had but to complain and the offending cleric would be summarily excommunicated (a threat aired in 1441 against the slow Bishop of Nevers[92]), or they could block appointments, as they threatened to do to John Kemp, whose nephew had just been appointed to the bishopric of London with their aid, if the proper payments were not soon made.

Because the branch had been doing so poorly, it owed more than it was due, so the Roman government was satisfied to allow Tornabuoni to assume the rest of the partnership's equity and debts.