God's Bankers: A History of Money and Power at the Vatican

by Gerald Posner

  Unknown to State Department officials, by the time of that classified report, the Cold Warriors in charge of U.S. and British intelligence had struck a secret deal with the church to share its ratlines.96 The Americans and British were racing against the Soviets to scoop up the best Nazi intelligence agents and rocket scientists.97 The partnership with the Vatican worked well. SS officer Klaus Barbie—nicknamed the “Butcher of Lyon”—gave the British and Americans crucial information about the network of informants he had developed in occupied France. Once they had what they needed, the OSS handed Barbie over to Draganović at a Genoa railway station and paid the Croatian priest to get Barbie to South America.98 By putting Barbie and others into the Vatican’s ratline, the intelligence services created an additional layer of deniability for their own postwar utilization of the Nazis. And the church benefited. Both British and American intelligence promised to protect the Vatican in case any other Allied government division started an investigation. The OSS, for instance, ensured that the report like the one that arrived at the State Department was shelved. And it kept from the diplomats any knowledge of Bishop Hudal’s 1948 request to Juan Perón for five thousand visas for “anti-Bolshevik” German soldiers.99 The CIA picked up the costs for running Draganović’s ratline through 1951.100

  Pius’s obsession with communism made the Vatican a predictable Cold War ally. In men like Winston Churchill, Harry Truman, J. Edgar Hoover, and the Dulles brothers, Pius XII found that the British and American leadership embraced his anticommunist worldview.101 Pius printed and distributed copies of Churchill’s 1946 Iron Curtain speech. The Pope used the same hard-line rhetoric during some of his own talks to the faithful, referring to Catholics as “soldiers prepared for battle” with international communism.102 In June 1947, the U.S. announced the Marshall Plan, the massive American financial commitment to rebuild Europe. The Soviets condemned it as a blatant attempt to spread U.S. hegemony over Western Europe. The Vatican’s support was unqualified.103 No one but a handful of insiders knew that hidden inside the Marshall Plan was what New York’s Cardinal Spellman dubbed “black currency,” covert funds—some of which came from captured Nazi assets—to help the church offset anything it spent to help defeat the communists in the Italian national elections set for 1948.104

  The dominant role the United States played in the Allied victory tilted the political balance of power away from Europe and toward America. A similar dynamic played out inside the church. The Vatican’s core theological and political conservatives aligned themselves with America. Church leaders believed that the U.S. shared Christian values and that the war victory confirmed a new American century. The American branch of the church had an unparalleled fundraising capability. It raised more donations for the Pope than the next dozen countries combined. Preeminent among the U.S. prelates was New York’s Cardinal Spellman. Friendly with almost every key U.S. political power broker, Spellman was anticommunist and worked hard to arrange support among U.S. institutions for the church’s covert role in the first postwar Italian balloting. Upon returning from a visit to Rome, Spellman shared with friends that Pius was “extremely worried about the election results, and in fact had little hope of a success for anti-Communist parties.”105 The Curia dreaded a “disastrous failure at the polls which will put Italy behind the Iron Curtain,” noted a Vatican emissary, Bishop James Griffiths.106

  In the year leading up to Italy’s elections, Pius and President Harry Truman exchanged a series of letters, some of which leaked to the press before the election. Those letters cemented the Washington-Vatican alliance. Over domestic Protestant protests, Truman dispatched Myron Taylor back to the Vatican as the President’s personal representative. And Spellman—mocked as “the American Pope” by some Italian clerics—arranged a series of fall visits to the Vatican for eighteen U.S. senators and forty-eight congressmen.107 Some Vatican diplomats, such as France’s Jacques Maritain, resigned, protesting that Pius’s obsession with communism and his alignment with the United States had made him far too partisan.

  Pius ignored that critique as well as the Lateran Pacts’ prohibition against the church being involved in politics. He hoped that the relationships formed then put into play elements that would safeguard the Vatican for decades to come. If the communists won the election, Pius had decided to emulate Pius IX and become a prisoner Pope, never venturing outside Vatican City so long as the reds were in power.108

  The church revived Catholic Action—the lay social organization that Mussolini had shuttered—and it organized Italian voters across the country. The CIA sent in millions in covert aid and used the fear inside the Vatican to cement a firmer relationship with the ranking prelates who ran the city-state.109,V James Angleton, William Colby, and a support team (the Special Procedures Group) handpicked by Allen Dulles, orchestrated a campaign that mixed together propaganda and political sabotage (the lessons learned in that election became the template for helping handpicked candidates win in other countries).111 With some of the U.S. money, Monsignor Montini directed a campaign slush fund through the Vatican Bank.112 And the Vatican encouraged priests to condemn bolshevism from their pulpits and to remind worshippers that Catholicism and communism were incompatible. The Pope even gave a remarkably partisan pre-election speech, calling the vote “the great hour of Christian conscience.”113

  It marked the church’s greatest role in secular politics since the mid-nineteenth century when it controlled the Papal States.114 In April 1948, 90 percent of eligible Italians went to the polls.115 The Pope had backed the right side. The conservative Christian Democrats crushed the left-wing Popular Democratic Front.116

  The new Prime Minister, Alcide De Gasperi, an antifascist who had hidden inside the Vatican during the war while working as a librarian, embraced the country’s concordat with the church.117 The communists had vowed to repudiate all the church’s special treatment. De Gasperi reaffirmed Mussolini’s financial pact with the Vatican, including its tax-free status and complete independence from any Italian scrutiny regarding its financial affairs.

  In May 1949, Look asked Spellman to write a cover story titled “The Pope’s War on Communism.” He wrote that Pius had “embarked on a spiritual crusade against the atheistic philosophies of Communist Russia. . . . [the Pope’s] armies are the God-loving peoples of the earth.”118 Two months later, Pius announced that he would excommunicate any Catholic who “defend[ed] and spread the materialistic and anti-Christian doctrine of Communism.” The church’s harshest punishment now applied to anyone who even read communist newspapers or literature. The Holy See insisted the notice be posted in churches worldwide.119 Other Vatican officials followed Pius’s lead. Cardinal Tisserant decreed that communists could no longer receive Christian burials. And the cardinals of Milan and Palermo banned communists from confession or receiving absolution. In contrast to Pius’s laissez-faire attitude during the war, when it came to whether Catholicism was incompatible with Nazi Party membership, in the postwar the Pope was unequivocal: it was not possible to be a Catholic and a communist.

  * * *

  I. When a U.S. Army Counter Intelligence Corps (CIC) agent later questioned Pavelić, the Croatian leader admitted the British had detained him and his gang when they had crossed into Austria. The British threatened to turn them over to the new Yugoslavian communist government, where the gang was wanted for war crimes. Instead, Pavelić claimed they were set free after turning over two truckloads of gold to the British soldiers. The CIC officer thought Pavelić was lying to hide “where this money was.” There was also some suspicion inside the CIC that Angleton might have been the author of that Pavelić “admission,” to hide the real trail of the money.6

  II. Ratline is a sixteenth-century nautical word referring to crude ladders on the sides of ships made from strips of rope. Sailors on sinking ships climbed down the ratlines in the hope of reaching a lifeboat. As used in reference to World War II, it refers to the last escape routes for the Nazis.

  III. Pavelić
was badly wounded in a 1957 assassination attempt in Buenos Aires, and died from complications from his wounds two years later in the German Hospital in Madrid, Spain. As for Draganović, he stunned everyone by turning up at a Belgrade press conference in 1967 and praising Tito’s communist government. He lived there until his 1983 death. The debate over whether he voluntarily defected, or had possibly always been a communist double agent, or even whether he was kidnapped by Yugoslavian intelligence, remains heated among historians.58

  IV. Weber and other clerical helpers for Hudal did sometimes baptize Protestant SS fugitives as Catholics. Although that was in violation of canon law, the priests liked that the men they saved were now members of the Roman church.77

  V. During the run-up to the 1948 election, the CIA laid the groundwork for its alliance with Intermarium (Between the Seas), a strong Catholic lay organization composed primarily of Eastern European exiles. At least half a dozen of Intermarium’s chief officers were later identified as former Nazi collaborators. Draganović was the Croatian representative on its ruling council. With the help of the CIA, Intermarium morphed into Radio Free Europe. MI6, the British equivalent of the CIA, funneled money through the Vatican Bank to a related anticommunist group, the Anti-Bolshevik Bloc of Nations.110

  13

  “He’s No Pope”

  As Draganović and Hudal ran the Vatican ratlines and Pius and his cardinals waged war on communism, Nogara fine-tuned the IOR. The church was poised to benefit from the emerging new order of the Cold War. Many of Nogara’s worst fears had been realized by the ravaged conditions in postwar Europe. Industrial production had plummeted. Unemployment had soared. There were more than eight million displaced persons.1 A quarter of all German urban housing was destroyed, and the country’s gross domestic product had dropped off by an astonishing 70 percent.2

  The 1948 Christian Democrat election victory did lift Nogara’s mood since it put a stop to the communist threat to nationalize many industries. That would have wiped out huge Vatican investments and committed leftists would have replaced the church’s proxies on the boards of major firms.3 Although Nogara was confident the IOR could have survived nationalization, he knew it would have resulted in stunning short-term losses.

  Nogara turned seventy-eight a couple of months after the election. That his health was good and mind sharp had not prevented him from preparing for the day he was no longer at the Vatican. He had assembled a small team of trusted clerics and laymen. Monsignor Alberto di Jorio had worked with him longer than any other cleric. Di Jorio was the secretary to the IOR’s three-cardinal oversight commission (which did little more than review annually a single-page summary of the bank’s activities).4 Its chief was Nicola Canali, one of the prelates who had investigated Nogara when Pius XII first became Pope. Canali was also tasked with oversight of the Special Administration, responsible for the property the church received from the Lateran Pacts. Unofficially called the Minister of Finances, he was an adept Curia politician.5 Nogara liked Canali because he was a strict disciplinarian. Bernardino felt he would ensure that the IOR and Special Administration never veered far from their profitable course.6 Nogara did not, however, pin his hope for the future of Vatican finances on the clerics. He put his faith in a handful of younger laymen.

  Papal Count Carlo Pacelli was one of three of Pius XII’s nephews at the Vatican. He was the city-state’s General Counsel. During the war Nogara had relied on him for nuanced advice about the IOR’s international deals.7 Not only did Pacelli have Bernardino’s ear, but he was one of the few lay officials with whom the Pope met regularly.8

  Nogara had personally asked Massimo Spada to join the Vatican’s financial department in 1929. Spada, who was then a stockbroker, had never heard of the Administration of the Works of Religion. Nogara told him it acted as a quasi-bank in administering the deposits of religious institutes and ecclesiastical charities.9 That was enough for Spada, whose pedigree was sterling. His great-grandfather had been the private banker to a leading Black Noble, Prince di Civitella-Cesi Torlonia. Spada’s grandfather was a Bank of Italy director, and his father had been the chief of a foreign exchange agency that did business with the church. With his trademark charcoal gray double-breasted suits and high-waisted trousers, Spada was a familiar sight around the Vatican. He had become a favorite of senior prelates after he led the fight to fend off an unfriendly takeover of the IOR-controlled Banca Cattolica del Veneto.10 By the end of the war, he was the IOR’s Administrative Secretary, the highest ranking layman behind Nogara.11

  Luigi Mennini, the father of fourteen children, was a savvy private banker whom Nogara had also asked to work at the IOR.12 He had become Spada’s most trusted advisor.13 Raffaele Quadrani, who had spent a couple of years at banks in Paris and London, was another early hire by Nogara. Bernardino’s brother, Bartolomeo, the director of the Vatican Museum, had recommended him.14

  Geneva-based Credit Suisse banker Henri de Maillardoz was another of the first foreign bankers Nogara had trusted with church investments.15 The urbane and aloof Maillardoz had known Nogara since 1925.16 He was responsible for the decision to consolidate some of the church’s European gold reserves at his former employer Credit Suisse. When Nogara battled the Allies over their blacklisting of Sudameris, he dispatched Maillardoz to Washington in November 1942 to appeal to Treasury officials.17 By the end of the war, Pius had given him an honorary noble rank, Marquis, and he had become the Secretary to the Special Administration and a special consultant to Bernardino.18 Maillardoz was the banker whose visit to the Vatican in the early 1930s caused alarm for Cardinal Domenico Tardini. Tardini had feared that the mere presence of a Swiss banker presaged that Nogara was about to engage in prohibited financial speculation.19

  The battles over the permissible scope of Nogara’s work were now distant memories. There were few restraints on where to invest except any that the IOR might place on itself. Nogara and his team knew the Balkans and Eastern Europe were off-limits so long as Soviet puppet governments controlled them. Western Europe—cloaked under the American nuclear umbrella—was as safe as it had ever been. But they reached a consensus that the best investment was into the country they knew best—Italy. In light of the Christian Democrat victory, and the country’s firm alliance with America, they concluded it was a rare opportunity. Italy, without doubt, was in the same poor state as the rest of Europe, mired in recession, inflation, and unemployment. But the Vatican team was confident that the Marshall Plan’s massive influx of billions would fuel a reconstruction boom and kick-start the stagnant economy. Many good Italian companies were available at fire-sale prices, their stock prices having been battered.

  Nogara’s first significant postwar investments were in the construction industry, which he thought would be first to rebound since ravaged cities and demolished infrastructure needed rebuilding. In 1949, the church bought 15 percent of Società Generale Immobiliare (SGI), one of the country’s oldest construction and real estate holding companies (it would acquire a controlling share over several years).20 The IOR next took a stake in an ailing cement maker, Italcementi.21

  Widespread hunger coupled with agricultural disruptions had led to food shortages and dramatic spikes in the prices of basic commodities. The Vatican invested in the food processing and farming industries.22 Nogara became chairman of one of Italy’s largest agrarian societies and the church bought stakes in expansive communes and four dominant agricultural companies. The communists would later charge that the church had a monopoly control of fertilizer and had used it to exploit Italy’s farmers and reap outsized profits.23

  The IOR expanded beyond those sectors with investments in Italian blue-chip companies, including Italgas (natural gas), Società Finanziaria Telefonica (telecommunications), Finelettrica (electric utility), Finmeccanica (defense contractor), and Montecatini (chemicals).24 Nogara also scooped up four failing textile companies at bargain prices (Volpi, from his Swiss exile in 1947, had recommended the companies to Monsignor di Jorio as good
long-term prospects).25 Nogara merged the four companies into a new firm, SNIA Viscosa.26

  Confident that any recovery would include the financial sector, Nogara’s team went on a buying binge of Italian banks. By 1950 the IOR owned a share or had a majority interest in seventy-nine of the country’s banks, ranging from enormous holding companies like the Allied-backed Mediobanca to small regional credit unions.27 No other investor owned a more significant postwar share in Italian finance than the church. Some of Nogara’s investments, such as Italcementi, turned into additional equity in the financial sector as it formed its own holding company and acquired banks starting in the 1960s.

  But Nogara wanted more than investments.28 He also sought a say in how the companies were run. Sizable investments were conditioned on obtaining at least one seat on the board of directors. Enrico Galeazzi (later a Papal Count) was the Vatican’s chief architect, a close friend of Cardinal Spellman, and part of Pius XII’s kitchen cabinet. Nogara tapped Galeazzi to be one of the Vatican’s directors at SGI, the Bank of Rome, Credito Italiano, and insurance giant RAS. Marcantonio Pacelli, another Pius XII nephew, was on the board of many companies, including SGI. Giulio Pacelli, yet another nephew, was also on numerous boards, including Italgas and BCI bank. Carlo Presenti, president of two important banks, became the church’s director at Italcementi. And in return, Presenti picked Massimo Spada to be a director and vice president for his banks. Nogara asked to be a director on those companies he either considered challenging turnaround candidates or those with which he had long relationships, among them chemical giant Montecatini, hydroelectric conglomerate SIP, real estate consortium Generale Immobiliare, and the water pipeline supplier, Società Italiana per Condotte d’Acqua.29 Those placements on top corporate boards meant the Vatican played a historic role in commercial businesses that would have been unthinkable just a few decades earlier.