Virus Revives Italy’s Age-Old Shadow Safety Net: The Pawnshop

ROME — The economic repercussions of Italy’s lockdown to contain the coronavirus nearly wiped Anita Paris out. Her son, a car mechanic whom she depended on for financial support, couldn’t work. Her small pension didn’t suffice. The welfare checks she had hoped would pour in from the government didn’t materialize.And so Ms. Paris, a 75-year-old widow, turned to a shadow safety net that Italians have relied on for centuries, through plagues and sieges, wars and downturns. She rummaged through her home for “rings, necklaces, bracelets, everything I had around” and turned to the pawnshops that constitute an official, if anachronistic, part of the Italian banking system.“I have bills to pay,” Ms. Paris said after pawning off her things under a vaulted ceiling in the “Valuables Appraisal” hall of a baroque palace that has housed a pawnshop and the pawn departments of major banks for more than 400 years. “I have to get to the end of the month.”The economic picture for Italy, and for Italians in need of cash, does not look good. Banks, laden with debt and wary of taking on toxic loans, are unlikely to extend credit. The government’s aid packages and job security measures that have delivered billions of euros to struggling Italians are set to expire at the end of the summer, though the government is considering extending benefits. The Italian economy is estimated to contract by nearly 13 percent this year.Anxiety is palpable among Italians on pawnshop lines around the country. They worry that their short-term job contracts will run out, that customers will not fill their stores, that American tourists will not rent their rooms.But the managers of the collateral loan sector — the institutional name for pawnshops — aren’t complaining. Activity increased from 20 to 30 percent immediately after the lockdown, as clients wanted to make sure they met their interest payments but also sought new loans. And with emergency benefits about to wind down, they expect business to surge.“In the autumn, we will see more financial problems than what we have seen,” Rainer Steger, the director general of the pawnbroker conglomerate Affide, said in his Rome office, where he looked like any bank manager in a suit and tie. “Maybe we can lend a hand.”In the United States, pawnshops are associated with bulletproof glass partitions, “Guns, Gold and Cash” lawn signs and reality show spinoffs (“Hardcore Pawn”). In Italy, they have been part of the banking system for centuries.Money changers in the Lombardy region worked with collateral in the Middle Ages. The Catholic church in the 15th century sought to combat usury by pooling the resources of wealthy locals into a Mount of Piety. The idea was to create a pile of cash to make no-interest — and thus no-sin — loans to the poor, and to undercut moneylenders, often consisting of a Jewish minority who had less access to other professions. To this day, these businesses remain a niche part of large banks.“When things are going well you can buy your stuff back,” said Claudio Lorenzo, 65, a crossing guard who stopped working when schools closed and who waited outside the pawnshop of a Milan bank to pay interest on his and his wife’s wedding rings. “When things are going bad, you can’t.”In July 2018, Affide’s parent company, Dorotheum, an auction house and pawn credit service based in Vienna that is more than 300 years old, bought the pawn unit of the Italian banking giant UniCredit. In February, Dorotheum bought its largest pawnbroker competitor, Creval, and now has more than 40 branches throughout Italy.Affide is headquartered in a 16th-century palace in the Mount of Piety square in Rome, the home of pawnshops for centuries, purposefully established near the old Jewish Ghetto.Mr. Steger said big banks had turned away from their pawnshop roots at precisely the wrong time, with the economic fallout from the virus sure to generate a need for ready cash.“There’s movement,” he said as he looked at experts examining gold rings and watches through loupes in a marble hall. In an adjacent “Renewal and Disengagement” department, clients paid interest or bought back their items. Above their heads, black numbered boxes transported possessions from an upstairs vault, moving slowly along a suspended track like an upside-down train set.The baroque palace’s coffers have held Giuseppe Garibaldi’s sword, elephant tusks and precious jewels, some of which, including an 80,000-euro diamond ring, are set to go to auction this month. Bids will soon be taken on the belongings of Moira Orfei, the so-called Queen of the Italian Circus.“They are making bucketloads of money,” Giuseppe Martino, a third-generation owner of one of the many gold-buying stores that have sprouted around the palace over the centuries, said spitefully. He complained that nobody was buying his gold, just pawning possessions off. “They are hoping this virus goes on and on.”Defenders of the big pawnshops say only 5 percent of items are put up for auction, and that they are providing a vital service to working- and lower-middle-class Italians who need cash, and that their microcredit — the average loan is for less than 1,000 euros — keeps the vulnerable out of the hands of loan sharks and prevents predatory usury.They say that they offer a more straightforward, and transparent, system than many modern banking instruments, and that unlike banks that check credit lines and investigate financial history, anyone who passes a criminal record check, satisfies money laundering precautions and presents items of real value (“not a fake Rolex,” Mr. Steger said) could get access to cash.Clients deposit valuables as collateral, and then pay interest over a set period. If the client fails to pay up, the item may be put up for auction. In that case, the pawnbroker recoups its loan, and if a profit is made at the auction, it goes to the client.On a recent morning in Naples, scores of people crowded outside the pawn branch of the Bank of Naples, which is owned by the financial giant Intesa Sanpaolo. Silvia Agora, 47, had nearly earned enough money as a hairdresser to redeem the gold bracelets her family had pawned. Then the lockdown closed her salon for three months. When it reopened in May, social distancing restrictions drastically reduced the number of customers. Now she was here to make more interest payments.“We were getting close,” she said, about reclaiming the heirlooms. “Now it’s impossible.”The Italian government pumped billions to Italian families, and made billions more in furlough payments to keep a promise that no Italian worker would be fired because of the virus.But Eleanora Fucci, 45, said she had not received those furlough payments. She used to sell bags at the Naples airport, but then the flights stopped coming. The store closed in March, tourism crashed and plans to reopen look doubtful. She said her savings were nearly used up. The mother of two said that her friends had started taking in laundry or ironing and that she was considering doing it also.“One way or another,” she said. “You have to find a way to make things work.”Francesco Nardelli, 43, who works as an orderly in a nursing home on short-term contracts, emerged from the bank, where he paid interest on his mother’s gold bracelets. He said his most recent contract had expired in March. He was put on a new month-to-month contract, which reduced his pay by half — a starting position, despite his previous experience.“I had to start all over again,” he said, his wife and son by his side. “There is no security.”The gold and jewelry-backed loans business of Gruppo Intesa Sanpaolo is in the process of being acquired by Banca Sistema, where a spokeswoman said new pawnbroker policies increased by 20 percent in March and April.Much of the increase has been in the Italian north, where the virus hit hardest. Outside UBI Bank in Milan, a furloughed cook, the owner of a ballet-costume company and dozens of others waited their turn on a recent day. Katia Marchesi, 57, stood in line to make an interest payment on the gold chains and medals she and her daughter had received for their christenings and communions. Ms. Marchesi said that she lost her cleaning job, but because it was off the books, she didn’t apply for government support.She was willing to pawn more valuables. “But,” she added, “I don’t have anything else.”Emma Bubola contributed reporting from Milan.


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