The following is typical of the research methods I use when searching out obscure Luther quotes. Previously, I looked briefly at the way one particular Catholic apologist documented the quote. This time, I'd like to take a quick look at the interpretation of the quote.
The quote has been used by Luther's opponents as proof Luther was a gross heretic. For instance, Alfonso Maria de' Liguori's sees the citation as Luther's battle cry against the papacy. For de' Liguori, Luther was driven by a deep hatred for the papacy, provoking him to gross heresy:
Luther, as soon as he heard of the publication of the first Bull of 1520, and the burning of his books in Rome, burned in the public square of Wittenberg the Bull, and the Book of the Decretals of the Canon Law, saying: "As you have opposed the saints of the Lord, so may eternal fire destroy you;" and then, in a voice of fury, exclaimed: "Let us fight with all our strength against that son of perdition, the Pope, the Cardinals, and all the Roman sink of corruption; let us wash our hands in their blood." From that day to the day of his death, he never ceased writing against the Pope and the Catholic Church, and from the year 1521 to 1546, when he died, he brought to light again, in his works, almost every heresy of former ages. Cochlaeus, speaking of Luther's writings, says: "He thus defiled everything holy; he preaches Christ, and tramples on his servants; magnifies faith, and denies good works, and opens a license to sin; elevates mercy, depresses justice, and throws upon God the cause of all evil; finally, destroys all law, takes the power out of the hands of the magistrate, stirs up the laity against the clergy, the impious against the Pope, the people against princes" [source].
de Liguori cited a contemporary of Luther's: Johannes Cochlaeus. Cochlaeus cites the quote as Luther preaching actual war against Rome:
And so Luther, already secure in popular opinion, and propped up by the favor of certain nobles, and trusting in the praises and defenses of the rhetoricians and the poets, proceeded most boldly to all imaginable misdeeds. He renewed before the Council his appeal against the Pope, as though it were against the Antichrist and one who denied the Scriptures. He pursued the Director of the Sacred Palace with dire curses and insults, because of an Epitome the Director had published - indeed, he even publicly summoned him to arms. 'Truly it seems to me' (he said) 'that if the madness of the Romanists continues thus, no remedy will be left except that the Emperor, Kings, and Princes, girded with strength and arms, should attack these plagues of the entire earth, and decide the matter not with words, but with the sword. For what do these lost men - who lack even common sense - babble, except that which it was foretold the Antichrist would do? If we punish thieves with the fork, robbers with the sword, heretics with fire, why do we not all the more, with all available weapons, fall upon these teachers of perdition, these Cardinals, these Popes,and all that conflux of the Roman Sodom, which continually corrupts the Church of God? Why do we not wash our hands in their blood?'[Johannes Cochlaeus, The deeds and writings of Martin Luther from the year of the Lord 1517 to the year 1546 related chronologically to all posterity (Luther's Lives (New York: Manchester Press, 2002), p.76)].
Patrick O'Hare's Facts About Luther uses the quote to prove Luther's errors on "free will and Liberty of conscience":
The truth is that Luther rarely spoke or wrote of liberty in the sense in which we know and realize the God-given boon. It is a well-known fact of history that he did not favor that freedom of thought which later became the vogue among his progeny. Liberty, as he understood the word, was solely for himself, but not for others. With him it was a personal matter. All men were free to differ with the Pope, to reject his teaching, to curse him to the lowest depths, were even invited and encouraged to slay him like a wolf or robber, and wash their hands in his blood and that of his cardinals and other adherents, but they must not dare to differ from Martin Luther [source].
Catholic historian Hartmann Grisar sees the statement as proof for Luther's culpability in the peasants war that followed a few years later:
It was [Luther]who first raised the call to arms, and it was impossible for him to wash his hands of all share in the revolt, even though he had told the people that they were not to make use of force without the consent of the authorities and had subsequently condemned the rising with violence. "The common people pay no attention to that," he tells him, "but merely obey what pleases them in Luther s writings and sermons." "You declared in your public writings, that they were to assail the Pope and the Cardinals with every weapon available, and wash their hands in their blood. You called all the bishops who would not follow your teaching, idolatrous priests and ministers of the devil; you said that the bishops deserved to be wiped off the face of the earth in a great rising." "You called those, dear children of God and true Christians, who make every effort for the destruction of the bishoprics and the extermination of episcopal rule. You said also that whoever obeyed the bishops was the devil s own servant. You called the monasteries dens of murderers, and incited the people to pull them down" [Grisar, Luther Vol. 2, p. 190]
Grisar though admits, "No one, in the least familiar with Luther's writings, will be so foolish as to believe that it was really his intention to kill the Catholic clergy and monks. His bloodthirsty demands were but the violent outbursts of his own deep inward intolerance" [Grisar, Luther Vol. 6, p. 246]. Roman Catholic writer Henry O'Connor likewise thinks the quote indicts Luther for the peasants revolt, but suggests Luther's intentions were to incite the princes to battles against the Papacy:
In the same year, Luther wrote these remarkable words: "If we punish thieves with the gallows, robbers with the sword, heretics with fire, why do we not still more attack with every kind of weapon these teachers of perdition, these Cardinals, these Popes, and that whole abomination of the Romish Sodom, which, without ceasing, corrupts the Church of God, and why do we not wash our hands in their blood?" [O'Connor, Henry, Luther's Own Statements, New York: Benziger Bros., 1884. p. 41, (emphasis by O'Connor)].
"This inflammatory power of this violent language is not very much mitigated by saying, that Luther here addressed himself only to the princes" [Ibid.].
In a give-and-take historical analysis, a Catholic apologist presents the citation (among others) as proof that Luther's statements to violence had a direct effect on the peasants revolt, even if Luther didn't intend them to:
One doesn't “get a pass” in God’s eyes for real sins because of cultural context. It is all the more serious when such remarks are arguably a major cause in both provoking and violently quelling a rebellion in which some 130,000 human beings lost their lives: almost all violently and cruelly. Luther might indeed have meant one thing when he uttered his impassioned hyper-polemical, quasi-prophetic jeremiads, but he was (by the looks of it) so naive and lacking in practical wisdom about human nature and human affairs (“worldly” or “real life” considerations) that he apparently had no idea what harm and ill consequences his words might cause. In one sense, this gets him “off the hook” to some extent (I certainly freely grant him his good intentions and sincerity), but nevertheless, he bears much responsibility for the resulting extent of the sad division by virtue of his constant polemics (often involving much falsehood about the Catholic Church). [Source: Martin Luther: Catholic Critical Analysis and Praise, p.119]
These are only a sampling of Catholic polemics with this quote. Generally speaking, the protestant citations (and non-Catholic citations) of the quote tend to simply state it without indicting Luther's character. In one interesting review of Roland Bainton's famous biography, Here I Stand, The Westminster Theological Journal (May, 1951) sees Bainton's treatment of the quote as "...Dr. Bainton display[ing] a sympathetic evaluation of Luther’s thought and activities" [p. 168]. This though does not deter the reviewer from praising the value of the biography: "He treats Luther with evident sympathy, yet not with blind reverence" [Ibid.].
Karl Barth takes the quote at face value in its implication to avenge the wrongdoings of the Papacy, finding Luther's doctrine of the "two kingdoms" undeveloped. This writer identifies the passage in question as satire. David Bagchi's book, Luther's Earliest Opponents thinks the threat to violence isn't the real thrust of the quote. Rather, it's Luther call for a Council (p.260). Richard Marius simply cites the quote and calls it "one of the most ferocious and bloodthirsty cries ever written against the papacy (p. 282).