As Italy's Banks Tighten Lending, Desperate Firms Call on the Mafia
Sunday, March 1, 2009
ROME -- When the bills started piling up and the banks wouldn't lend, the white-haired art dealer in the elegant tweed jacket said he drove to the outskirts of Rome and knocked on the rusty steel door of a shipping container.
A beefy man named Mauro answered. He wore blue overalls with two big pockets, one stuffed with checks and the other with cash. The wad of bills he handed over, the art dealer recalled, reeked of the man's cologne and came at 120 percent annual interest.
As banks stop lending amid the global financial crisis, the likes of Mauro are increasingly becoming the face of Italian finance. The Mafia and its loan sharks, nearly everyone agrees, smell blood in the troubled waters.
"It's a fantastic time for the Mafia. They have the cash," said Antonio Roccuzzo, the author of several books on organized crime. "The Mafia has enormous liquidity. It may be the only Italian 'company' without any cash problem."
At a time when businesses most need loans as they struggle with falling sales, rising debt and impending bankruptcy, banks have tightened their lending to them.
Italian banks, which for years had been widely criticized for lending sparingly to small and medium-size businesses, now have "absolutely closed the purse strings," said Gian Maria Fara, the president of Eurispes, a private research institute.
That is great news for loan sharks. Confesercenti, the national shopkeepers association, estimates that 180,000 businesses recently have turned to them in desperation. Although some shady lenders are freelancers turning profits on others' hard luck, very often the neighborhood tough offering fat rolls of cash is connected to the Mafia, the group said.
"Office workers, middle-class people, owners of fruit stands, flower stalls are all becoming their victims. . . . We have never seen this happen," said Lino Busa, a top Confesercenti official. "It is as common as it is hidden."
Many experts say organized crime is already the biggest business in Italy. Now, Fara said, the untaxed underground economy is growing even larger. "Certainly I am worried," he said. "The banking system doesn't work, and the private one that is operating is often managed by organized crime."
The consequences for Italy and its 58 million people are huge, Fara said: "Stronger organized crime means a weaker state."
Nino Miceli, an adviser to Confesercenti, said the Mafia's goal is to take over the struggling businesses. When the loans, typically at interest rates in triple digits, are not repaid, the threats of violence begin, and restaurants, grocery stores and bars become the property of criminal gangs.
"As we sit here in this cafe," he said over an espresso near the Colosseum, "do we really know who owns it?"