Who Stole Westeros?
One of the most persistent controversies of fact among fans of A Song of Ice and Fire is the question of whether Robert Baratheon or Petyr Baelish is responsible for the Iron Throne’s bankruptcy. Many leading scholars of our community have tackled the question (including one of the contributors to this volume); it’s a common topic of debate on r/asoiaf and Westeros.org, as well. And one can see why – it plays a major part in Robert Baratheon’s story in A Game of Thrones as Exhibit A of his dereliction of duty as king, Tyrion Lannister discusses it at some length in both A Clash of Kings and A Storm of Swords, and it bears directly on the long-range plans of one of our most important players in the titular game of thrones.
In this essay, I intend to demonstrate that Littlefinger is the responsible party and that, furthermore, he engaged in a campaign of accounting and mortgage fraud, embezzlement, and corruption on a grand scale.
Why Robert Baratheon Isn’t Responsible
On first appearance, it seems most likely that Robert Baratheon is the culprit. As we learn in Eddard IV of A Game of Thrones: “the Crown is more than six million gold pieces in debt… Lord Arryn was a prudent man, but I fear His Grace does not always listen to wise counsel. My royal brother loves tournaments and feasts, and he loathes what he calls ‘counting coppers.’” In A Clash of Kings, it is stated that “King Robert had been a prodigious spender… the crown’s debts had grown vast, as well.” In A Storm of Swords, Tyrion states that while “crown incomes are ten times higher than they were under Aerys… [so] are the crown’s expenses. Robert was as generous with his coin as he was with his cock… the incomes are considerable, but they are barely sufficient to cover the usury on Littlefinger’s loans.”
However, there’s a problem with the math.
We know from Eddard IV of AGOT that the crown owes more than six million gold; given average medieval interest rates of about 12%, the interest on that debt, which has to be paid regularly to powerful political forces like House Lannister, House Tyrell, the Iron Bank, and the Faith of the Seven, who would loudly object to not being paid, comes out to 720,000 gold per annum. Given that the Red Keep, the royal court, the gold cloaks, the royal navy, the royal bureaucracy, the royal prisoners, etc. are all functioning, we know at the very least that income must exceed that figure.
While great houses might be willing to loan money to the Throne for political influence rather than in hope of being repaid (although Tywin Lannister clearly isn’t the type to forgo repayment), we know that the Faith, the Iron Bank, and the Tyroshi trading cartels closely monitor the crown’s ability to repay them. No financial institution offers loans to people who clearly can’t pay them back, so they must have been presented with statements of the royal finances that showed that the crown could afford to do so – rather than statements that royal revenues could barely pay the interest on their loans.
In modern times, a ratio of debt-to-income of 31% front-end (i.e., percent of income going to all housing costs) to 43% back-end (percent of income going to all debt) is the limit for “conforming” mortgages; at the height of the financial bubble in the early 2000s, a back-limit ratio of 55% was the maximum for sub-prime mortgages. These figures were much more restrictive as recent as the early 20th century, as the lack of federal mortgage guarantees and stable, long-term, fixed-rate mortgages meant that lenders had to be much stricter, with 25% being a more common figure. Given that medieval finance was incredibly riskier – with the weakness of the state to enforce contracts, the danger of royal confiscation, and the limited supply of financial capital (in part due to religious prohibitions on usury) – one can only assume that the number that the Iron Bank of Braavos would accept was far lower.
But let’s be generous and take the early 20th century figure. By that ratio, royal income must be at least between 1.9 million and 2.4 million gold per year – or 2.15 million annually, to take the average. In order to generate a debt of six million gold at a 12% yearly interest rate over 15 years, Robert would have to have spent the entire reserves King Aerys II Targaryen left him, plus 2.15 million a year in royal income, plus an additional 1.1 million in gold annually over his revenues, and never paid down the principle.
As Ragnorak on Westeros.org points out, “The normal expenses under Aerys, plus an equal amount in Robert’s waste, would only account for 20% of the total expenses of a ten-fold increase. Robert could waste four times as much money as was spent under Aerys each year and still pay the normal expenses that existed under Aerys, and that only accounts for half of the money spent.” Let me put that another way: the Hand’s Tourney is seen as a lavish affair, and it cost 90,000 dragons for the prizes and another 10,000 for the feast. In order to equal his yearly income, let alone exceed it and have to borrow, Robert would have to throw 22 tourneys a year.
However, the textual evidence doesn’t support anywhere near that number. We know of two tourneys in 299 AL, but one is a small affair to celebrate King Joffrey Baratheon’s name day, and the other is only a melee at Bitterbridge that Renly uses as a recruitment event. In all of 298, there’s only the Hand’s Tourney. In 297, we know only of Joffrey’s 12th name day; there’s an unnamed tourney in 296; in 294, a name day tourney for Mace Tyrell; a tourney in celebration of Balon Greyjoy’s defeat in 289 AL; the unnamed tourney at which Oberyn Martell crippled Willas Tyrell; and the one thrown for King Robert’s wedding to Cersei. At most, we’re seeing one, maybe two a year.
Moreover, not all of these are tourneys the crown would be on the hook for – King Robert’s wedding was undoubtedly paid out of royal funds, but the tourney at Lannisport would be paid for by Tywin Lannister as his obligation as the host; likewise, Lord Mace Tyrell would have been responsible for his own name day celebrations. Even adding every unnamed tourney to Robert’s column, we’re looking at only five Robert would have paid for (that we know of).
In addition to this shortfall, there’s also the larger problem of an absence of evidence of other sources of spending.
Sources of Royal Bankruptcy
Historically, it was fairly common for monarchs to go bankrupt. While the bankruptcy of Louis XVI in the 1770s and 1780s is perhaps the most historically important one of all time, many of Robert Baratheon’s parallel historical contemporaries went broke – and more than once. Even after he expropriated one-third of England’s wealth from the Catholic Church, Henry VIII was £3 million in debt (or £1.2 billion in today’s money). His contemporaries didn’t fare much better: Henri II of France (1547-1559) owed 48 million livres compared to an income of 12 million livres, and went bankrupt in 1557. The French monarchy’s finances didn’t recover until around 1600, when the duke of Sully became superintendent of finance and modernized the French bureaucracy for the first time. Henri’s contemporary, Phillip II of Spain, despite all the gold and silver of Mexico and Peru, went bankrupt four times (1557, 1560, 1575, and 1596), and historians suggest that his personal debts were equal to 60% of Spain’s GDP at the time.
However, we know why these monarchs went bankrupt – war. Henry VIII fought wars in 1511, 1513, 1521-25, a rebellion in 1536, spent a bunch of money on coastal defenses against a Franco-Spanish invasion in 1539, invaded Scotland in 1542, France in 1544, and Scotland again in 1545. Under Francis I and Henri II, France was pretty much constantly at war in Italy between 1494-1559. The Emperor Charles V of Spain (Phillip’s father, and the source of most of the bankruptcies he faced), was constantly at war against the French, the Ottomans, and the Protestant Schmalkaldic League, and kept himself busy conquering most of the New World. Phillip fought the Ottomans, the Dutch, the Germans, the English, the Pope, and on and on. Moreover, these wars were fought during the military revolution of the 16th and 17th centuries, when armies grew massively in size and expense as they shifted from knights to huge blocs of pikemen and musketeers and artillery.
Beyond that, they also lived lavishly – Henry VIII was mad for building, constructing Nonsuch Palace, and rebuilding the Palaces of Whitehall and Hampton Court. Charles V and Phillip II poured money into the Alcazar Palace in Madrid. And we all know how the kings of France liked their palaises and chateaux.
The issue is…we don’t have evidence of either of these causes from Robert Baratheon. Aside from his eponymous rebellion, Robert only fought one war, and that was a limited rebellion that was over and done with inside a year. Moreover, there is no tradition of mass-infantry standing armies in Westeros; Robert fought his wars with feudal levies, and the great thing about them is you don’t have to pay them. As for castles, Ragnorak once again points out that “Harren the Black built Harrenhal with the revenues of one of the Seven Kingdoms without bankrupting that kingdom, and Robert didn’t have a remotely similar money drain.”
Simply put, it’s just not possible for Robert to have actually spent Aerys’s reserves plus 2.2 million gold a year without creating some grandiose symbol of his lavish spending significant enough that it would have been mentioned in the text by someone. We would have had to be seeing massive castles and talk of renovations to many existing castles, huge new public works, and multiple and multi-year wars.
Evidence of Baelish’s Malfeasance
Just as the details don’t add up in regards to Robert’s spending, there are things we learn about Petyr Baelish’s tenure as master of coin – and, before that, as master of customs for the port of Gulltown – that also don’t add up.
Scale of Increase
To begin with, there’s the issue of scale. As both the master of customs and as master of coin, Littlefinger achieves increases in revenue of unprecedented scale: we’re more familiar with the ten-fold increase as master of coin, but he also achieved the same feat at Gulltown. This scale of increase, which comes out to 143% per year, without any mention of an increase in tax rates, new taxes (prior to the outbreak of the War of Five Kings), or enhanced enforcement, in such a limited timeframe is highly improbable. The “Six Sigma” efficiency program at General Electric (which you might remember from the TV show 30 Rock) proudly touts 1.8% in cost savings per year; the once-ballyhooed “Business Process Reengineering” program that was a big business fad in the 1990s tended to get 5% or less savings on average. Baelish’s figures are orders of magnitude larger than what we see today, at a time when we have far more sophisticated mechanisms for studying and measuring institutions than would be available to the master of coin.
In addition, there’s an interesting discrepancy in these figures: in A Storm of Swords, Lysa Arryn says that “Jon [Arryn] gave him the customs for Gulltown to please me, but when he increased the incomes tenfold, my lord husband gave him other appointments.” However, in A Clash of Kings, Tyrion says that “Jon Arryn had given him a minor sinecure in customs, where Lord Petyr had soon distinguished himself by bringing in three times as much as any of the king’s other collectors.” Now it’s entirely possible that George R.R. Martin made a math mistake (it’s been known to happen with the height of the Wall, etc.), but it is suggestive that Baelish’s figures are questionable.
Bribery and Kickbacks
It is well established that Littlefinger was involved in a widespread campaign of corruption in which he took kickbacks from patronage appointments under his purview, who, in turn, accepted bribes to recoup the costs: “The keepers of the keys were his, all four. The king’s counter and the king of scales were men he named. The officers in charge of all three mints. Harbormasters, tax farmers, custom sergeants, wool factors, toll collectors, pursers, wine factors; nine of every ten belonged to Littlefinger.” Notably, these officials include all the men who look after the physical vaults of the royal treasury, as well as the men who keep track of the number of coins in the royal vaults, as well as their purity. It also includes the people who collect the various taxes – customs, tolls, harbor fees, and unnamed provincial taxes – owed to the crown, as well as the wine and wool merchants who pay excise taxes on those commodities (wine and wool being historically some of the biggest export/import commodities in the medieval world, along with spices, precious metals, worked cloth, and metalworks).
This systematized corruption extended far beyond the economic bureaucracy under the master of coin – as we learn from Stannis Baratheon in Storm, “[Janos Slynt] may have been the first commander to fatten his purse by selling places and promotions. By the end, he must have had half the officers in the City Watch paying him part of their wages… Littlefinger had a nose for gold, and I’m certain he arranged matters so the crown profited as much from your corruption as you did yourself.”
While Robert wasn’t interested enough to do much about it, absent the testimony of murdered witnesses, this kind of corruption has serious consequences. As Stefan Sasse has pointed out, while we do have evidence of some government bureaucrats (although we don’t know whether they get paid out of general funds or whether they have to collect their own wages), the mentioning of “tax farmers” points to a dangerous situation in which the people collecting royal revenue now not only have to recoup the costs of the tax license, but also a bribe to the man who granted them the tax license, who is also the man who’s keeping the books on what revenue they paid to the crown for their license and what revenue they’re bringing into the crown as its share of their “farming.”
The only way that kind of scheme draws a profit is if tax farmers take in more than they pass on to the king, and, moreover, more than they paid for the license and the kickbacks, and if the factors are getting to avoid taxes they would otherwise have to pay. Hence, total royal taxation and total royal revenues would be coming below what they would have been without Littlefinger’s system of skimming.
Littlefinger’s Wealth and Diversion of Royal Funds
One of the things we learn about Lord Baelish almost immediately upon being introduced to him in A Game of Thrones is that, in addition to handling enormous sums of money on the king’s account, he’s also a very wealthy man himself – to begin with, he owns several brothels, intends to buy more, and speaks casually of purchasing merchant ships, all of which requires a good amount of capital. Second, he employs quite a few people to work as spies for him. Third, he casually gambles in the hundreds of gold dragons without worrying about the loss, which suggests that his income is measured in the several thousands. Fourth, he owns at least one vessel that we know of. Fifth, it’s established that he’s able to lend money at some volume to quite a few noblemen, who like to live high off the hog, and he does so in order to gain political influence rather than to live off the interest – which means that money is a deadweight loss on his books from a financial perspective.
At no point do we learn of a legitimate source of his income – Littlefinger’s lands are virtually worthless, and the position of master of coin couldn’t possibly provide enough of an income to account for his financial activity. His historical counterpart, the chancellor of the exchequer, was paid only £200 a year up until 1685, because the kinds of men picked for the job were universally independently wealthy. After 1685, this was increased to a mere £1,600 a year. There’s no way that Littlefinger could generate enough money from what he owns legally to explain his activities.
However, there is an inchoate area of economic activity that could explain his wealth – diversion of royal funds under his care. As we are told in Clash, Littlefinger uses royal finances in a number of unorthodox areas:
“He did not simply collect the gold and lock in a treasure vault, no. He paid the king’s debts in promises, and put the king’s gold to work. He bought wagons, shops, ships, houses. He bought grain when it was plentiful and sold bread when it was scarce. He bought wool from the north and linen from the south and lace from Lys, stored it, moved it, dyed it, sold it. The golden dragons bred and multiplied, and Littlefinger lent them out and brought them home with hatchlings.” (A Clash of Kings, Tyrion IV)
This is highly unusual economic activity – medieval governments didn’t usually invest in real estate, commodities, shipping, and manufacturing, and especially not to the extent of vertical integration that Littlefinger is engaging in from raw material to finished goods. Moreover, it’s highly unusual for a government institution so deeply in debt to be actively lending out money – after all, if the government has deep enough reserves of cash on hand to be acting as both investor and banker, it must have significant cash flows over its expenditures and, thus, no need to borrow.
Now, supposedly this economic innovation – as Littlefinger is engaging in large-scale commodities speculation and vertical integration of production and distribution – is the source of the ten-fold increase in revenue. However, we have no way of knowing how much made it into the royal coffers; after all, Littlefinger has purchased the loyalty of the men under him who keep the books and the vaults, and the loyalty of the same merchants who he’s buying and selling and lending to, and he’s the one presenting the figures to the king. One thing that suggests they aren’t finding their way into the crown’s vaults is that royal incomes don’t seem to be capable of reducing debt, despite sophisticated economic activity on a grand scale.
What we have is a situation in which Littlefinger displays wealth that he couldn’t have gotten legally and is engaging in unorthodox investments on the crown’s behalf at the same time that he himself is making investments on his own account with the same people, in a situation in which he commands the political loyalties of everyone concerned.
And it’s possible that all of this is above-board, but the example of the Antler Men suggests otherwise. This group of traders and merchants, who planned to open the Old Gate of King’s Landing and allow Stannis’s army to seize the city from the Lannisters, included more than a few names added onto the list by Littlefinger who “had taken loans from the crown.” One of two things must be true: if these individuals were actually Antler Men, then they were taking an enormous risk to life and limb to get themselves out from under Baelish; if they weren’t, then Littlefinger was using mass execution to either hide the details of his lending practices or to pour encourager les autres to pay up. However, unless we attribute this to Littlefinger already trying to destabilize the crown’s finances ahead of his departure to the Vale, this doesn’t make a lot of sense – as Tyrion notes, the mass execution of the crown’s debtors complicates collections from those outstanding loans, as their heirs are going to have every motive to stiff the king.
Either way, it doesn’t exactly make Littlefinger’s borrowing and lending practices look like your normal business practices. Speaking of which…
One of the things that pops out at the reader the longer he looks at Littlefinger’s practices as master of coin is that his accounting practices seem incredibly unorthodox to the point that I think they constitute malpractice and, likely, fraud.
To begin with, there’s the fact that Littlefinger “paid the king’s debts in promises, and put the king’s gold to work.” In other words, rather than doing the prudent thing for a government, which is to try to keep debt as a constant percentage of economic production so that economic growth gradually reduces the relative burden of debt, Petyr Baelish is paying down neither the principle nor the interest on the crown’s loans from its cash on hand – a policy guaranteed to cause an explosion of debt over time as interest keeps compounding.
Moreover, while the phrase “paid… in promises” is somewhat vague, the fact that Littlefinger also borrows large sums of money to pay for current expenditures (which is bad accounting practice; governments are supposed to reserve borrowing for long-term capital expenditures like public works), like the Hand’s Tourney, suggests that he is taking out loans to cover the interest on the original loans, another black mark against proper accounting principles, and a practice that guarantees a further explosion of debt as new loans accrue interest on top of old loans, with no reduction in principle or consolidation of costs.
In addition, it seems clear from Tyrion Lannister’s time as master of coin that Littlefinger has structured his accounts so that they are not legible to anyone above him in the political hierarchy. Tywin Lannister, a man with a fearsome attachment to the bottom line, understands only that “Crown incomes are ten times higher than they were under Aerys.” Even Tyrion, one of the best educated and most intelligent players in the game of thrones we meet, finds Baelish’s accounts extremely difficult to understand, as he “tr[ies] to track some golden dragons through the labyrinth of Littlefinger’s ledgers. Petyr Baelish had not believed in letting gold sit about and grow dusty, that was for certain, but the more Tyrion tried to make sense of his accounts, the more his head hurt. It was all very well to talk of breeding dragons instead of locking them up in the treasury, but some of these ventures smelled worse than week-old fish.”
What Littlefinger Did and How He Did It
Here’s the explanation of what was going on that best fits the facts: I think Petyr Baelish realized from the moment he became master of customs at Gulltown that Jon Arryn – and, indeed, every other nobleman in Westeros – didn’t understand finance and that he could put whatever he wanted into his books. I think he did increase revenues somewhat (but nowhere near ten-fold or, probably, even three-fold) by taking both royal customs and the bribes and kickbacks he took from allowing selected merchants to avoid customs duties, and then using that to borrow at low interest rates, lend at high interest rates, and buy and sell high-value commodities (again, leaning on the merchants who owe him for the pass on customs duties, and probably getting preferable rates as a result), and then diverting a portion of that money back into the customs accounts.
When he got to King’s Landing, I think Baelish realized that he could use the riotous living and the (no doubt) real debts of the king to vastly expand his previous operations. Once he had bought the loyalties of the men responsible for the royal vaults, the royal accounts, tax-collection, and tax-payment, he could easily falsify the books to show a vast increase in the king’s revenues, even when much of the increase was being taken by Littlefinger and his cronies. This on-paper wealth, added together with King Robert’s reputation for riches, would justify taking out massive loans from House Lannister, House Tyrell, the Faith of the Seven, the Tyroshi, and the Iron Bank.
By diverting both royal and loan revenues into his own account, Baelish was able to amass a concentration of liquid capital on a scale hitherto unseen on a continent in which wealth was primarily found in the land. This capital was then put to work allowing Littlefinger to become a major speculator in real estate, transportation, prostitution, and commodities, as well as a trans-continental “putting-out” system in the cloth trade, and, crucially, becoming one of the major bankers of Westeros. Given that many of the men he would be dealing with already owed him favors for being allowed to dodge their taxes (customs duties, excise taxes on wine and wool, etc.), Littlefinger could do so on his own account without the fear that he would be reported. Indeed, given his mandate to “rub two dragons together to make three,” he was able to do so openly under the guise that these investments were made solely on the crown’s behalf – given that the men who would otherwise have checked on where the investments were going also belonged to him.
Petyr no doubt eked out quite a profit on these investments – historically, many great fortunes were made in the textile industry, banking, real estate, shipping, and commodities, let alone all of them at the same time. Indeed, he probably made enough money to put the crown’s finances back on a stable footing had he otherwise engaged in good accounting practices. However, this would not have been in his interest; after all, if the crown’s finances are stable, then Littlefinger is no longer necessary.
Instead, Littlefinger encouraged debt by taking out new loans to pay the interest on the old ones. This increase of leverage meant that he became absolutely indispensable: the crown now absolutely required a financial wizard to service its debts and maintain economic confidence, just as Jacques Necker became absolutely vital to the French monarchy because its creditors only had confidence in Necker (despite the fact that his “Compte Rendu,” the first public statement of royal finances meant to increase confidence in public finance, was largely fraudulent). Likewise, his system of diversion of funds meant that, like the proprietor of a Ponzi scheme, when required to make gold “from thin air, with a snap of his fingers,” he could easily provide the necessary funds from the crown’s own revenue or from fresh loans, as he desired.
While these financial manipulations served the short-term purpose of enhancing Littlefinger’s political position within King’s Landing, there’s an irony to all of this that the civil war Littlefinger wanted to happen had nothing to do with the financial house of cards he had created. Prior to his discovery that Jon Arryn had been investigating the legitimacy of Cersei Lannister’s children, and that this would create the possibility of bringing the Starks, Lannisters, and Baratheons into conflict, Littlefinger had created the perfect scenario for a civil war. All he would have to do is leak accurate financial data, and the Lannisters would march to ensure that their debts were paid, or, if not them, the Faith of the Seven would stir up an insurrection against the crown, or, if not it, the Iron Bank of Braavos would finance an army to topple the king and replace him with someone more committed to loan repayment.
Instead, he stumbled onto a ploy that would allow him to create a civil war and maintain the illusion of financial competency until he was safe in the Vale. By that point, it would be too late.
 A Storm of Swords, chapter 32.
 A Game of Thrones, chapter 20.
 For Henry VIII, see M.A.R. Graves, The Parliaments of Early Modern Europe, p. 81.
For Henri II, see Lucien Romier, La Conjuration, d’Amboise, p. 6.
For Phillip II, see Mauricio Drelichman, “Lending to the Borrower From Hell,” p. 1.
 A Clash of Kings, chapter 17; A Storm of Swords, chapter 68.
 Littlefinger is master of coin for seven years, a lesser economic bureaucrat in King’s Landing for three, and master of customs for up to a year.
 A Storm of Swords, chapter 68.
 A Clash of Kings, chapter 17.
 A Storm of Swords, chapter 78.
 A Storm of Swords, chapter 53.
 A Storm of Swords, chapter 53.