Banca Romana scandal

Question 1

When was the Banca Romana founded?

Answer 1

1835

Question 2

What happened to the Banca Romana in 1851?

Answer 2

It became the official bank of the papal state

Question 3

What happened to the Banca Romana in 1874?

Answer 3

It was one of the six banks authorised by the Italian government to issue currency

Question 4

How did the Banca Romana respond to rising inflation?

Answer 4

It and the five other currency issuing banks began to steadily increase their note circulation

Question 5

What had happened to five of the six currency issuing banks by 1887?

Answer 5

They had exceeded their legal limit, a fact well known in government and financial circles

Question 6

What prevented the government from robustly dealing with the note issuing crisis?

Answer 6

Restricting the ammount banks could loan would be politically damaging

Question 7

What had been happening to the Italian economy since the late 1880s?

Answer 7

It had been sliding into a deep recession

Question 8

Describe the governor of the Banca Romana at the time of the scandal

Answer 8

• His name was Bernardo Tanlongo
• Peculiar man; semi-literate but a genius for accounts and finance
• Was at his post during Italian unification and was promoted to governor in 1881
• Had a remarkable ability to secure friendships by providing loans

Question 9

What happened to 3 Turin banks in 1889?

Answer 9

They began to fail and had to suspend payments

Question 10

What were the 6 note issuing bans persuaded to do by the government?

Answer 10

Bail the other banks out in order to prevent a major disaster

Question 11

What did the government allow banks to do to avoid recession?

Answer 11

Issue bank notes in excess of their reserves (more than they actually owned)

Question 12

What did the June 1889 inspections into the Banca Romana by the government reveal?

Answer 12

• Serious irregularities in its accounts
• 91% of the banks assets were illiquid, meaning they didn’t actually exist
• The banks directors had comitted an offence by permitting two copies of every banknote as a backup investment incase anything went wrong
• The Banca Romana had loaned large sums to property developers but were ledt with huge debts when these projects collapsed in 1887

Question 13

What was the government response into the Banca Romana inspection?

Answer 13

PM Crispi and his Treasury Minister Giolitti knew the report might undermine public confidence, so they suppressed it

Question 14

What was a more selfish reason the government suppressed the Romana report?

Answer 14

They wanted to keep a secret that the bank had given loans to politicians, often without interest. This was a way for politicians to pay election expense in return for favours. Crispi’s successors, Di Rudini and Luzzatti, did not have the courage to release the report either

Question 15

Why did the then PM Giolitti try to get tanlongo appointed as a senator?

Answer 15

Because this would have given him immunity from prosecution

Question 16

What foiled Giolitti’s plan to get Tanlongo off the hook?

Answer 16

Before he could be appointed a senator, the report was leaked to deputies, who divulged its contents in parliament

Question 17

What was Giolitti forced to do in December 1892?

Answer 17

Appoint another investigation of the banks

Question 18

What had Giolitti done to increase suspicions of wrongdoing?

Answer 18

• Fostered a close friendship with Tanlongo
• Passed a law that gave the six currency issuing banks the right to do so for a further six years

Question 19

When was the second report published?

Answer 19

January 1893

Question 20

In what ways did the second report confirm the scandal in the Banca Romana?

Answer 20

• No cash
• Fake accounts
• A note circulation of 135 million lire instead of the 75 million permitted by law
• Bad debts
• 40 million lire in a duplicated series of notes that had been printed in Britain
• Politicians had received money to finace their election expense and bribe newspapers

Question 21

What happened to Tanllongo following the second report?

Answer 21

He and several other bankers were arrested, but later acquitted by the court in July 1894. Tanlongo revealed that Giolitti had received money

Question 22

What did Giolitti do in response to the second report?

Answer 22

• Liquidated the Banca Romana
• Reformed the whole system of note issuance
• A new law demanded stricter state control of banknote issuance

Question 23

What was the cynical reason behind Giolitti’s banking reforms?

Answer 23

He wanted to cover up a scandal that involved many politicians, rather than wanting to create a new banking system

Question 24

Why was it impossible for Giolitti to politically survive the Banca Romana scandal?

Answer 24

• He had been finance minister when the government suppressed the original report in 1889
• He had borrowed from the Banca Romana for governmental purposes while acting PM in 1892
• He had tried to nominate Tanlongo to the senate
• He had resisted a parliamentary enquiry, which made it look like he had something to hide
• Tanlongo and the Banca Romana were quick to blame Giolitti, hoping a change in government would result in their release

Question 25

What did Giolitti, Crispi and Tanlongo all do in the wake of the crisis?

Answer 25

Leaked documents attacking one another

Question 26

What did the judge say upon acquitting Tanlongo and why?

Answer 26

‘The major criminals are elsewhere’. An obvious reference to Giolitti

Question 27

What was done to quell possible riots in the wake of the crisis?

Answer 27

5 battalions were sent to Rome

Question 28

What prompted Giolitti’s departure from Italy?

Answer 28

Accusations of embezzlement and libel against Crispi and his wife