RENEE MONTAGNE, HOST:
For decades, the Catholic Church has been dogged by scandals involving money. The Vatican, a sovereign country, controls its own finances through the Vatican Bank. That bank developed into a cross between the Federal Reserve and an offshore bank. And in the new history "God's Bankers," Gerald Posner writes its roots go back to the mid-19th century when the church found itself desperate to bring in cash.
GERALD POSNER: They had 15,000 square miles of what was central Italy with thousands of subjects, and they levied taxes, and they paid for this lavish lifestyle with 700 servants and a big and a growing bureaucracy around them. And then in 1870, Italy's nationalists had a revolution. They throw the pope out. They get rid of the papal states, and the Vatican goes from being an empire - an earthly empire - to a little postage-stamp size of property called Vatican City.
MONTAGNE: By World War II, Posner says, the church created the Vatican Bank in order to hide from the U.S. and Britain its financial dealings with the Nazi, something many would find shocking.
POSNER: I was surprised the extent to which the Vatican was deeply embedded with German companies in which they bundled together life insurance policies of Jewish refugees who had been sent to Auschwitz and other death camps. They escheated these policies early on, meaning they took the cash value of them, and later after the war, when the survivors - the children showed up or the grandchildren who said by the way, my parents are dead. They were sent from Budapest in 1944 to Auschwitz, and they died. These insurance companies would refuse to pay out, saying show us the death certificate, which they knew was impossible. They would keep the money. And I lay out sort of what I call the blood money that came into the church.
By the way, Renee, they were equal opportunity profiteers. It wasn't as though they did business with the Germans because they wanted the Germans to win. They did business with everyone because they called themselves neutral and decided that somebody would win at the end of the war, and they were going to keep the business connections open to everybody. And then when they saw the war was going against the Germans, they started to hide the connections. And after the war, they said, we didn't do anything wrong.
MONTAGNE: Is there a simple answer that you were able to arrive at, though, as to how much the church knew about the extermination of the Jews and others?
POSNER: The bank officials and those who ran the bank knew very little because in part, all they wanted to know was what was happening in terms of the war effort and what was happening in terms of business and profits. But on the church end, there's no doubt. They had churches - local churches - in all of the countries that were the ground zeros for the killing zones. The local priests who were not in favor of the slaughter still reported back to their bishops what was happening on the ground. That came in in daily reports, and they had unfortunately a very clear sense of what was happening early on. They were just frozen by indecision and fear. They were afraid that if they spoke out, the Nazis might in fact move against Catholics and Germany and even move against the pope and take him back to Germany as a prisoner. But that fear meant that they abdicated their moral position as the head of the world's largest religion, especially the time that they continue to make money with the people committing the murder.
MONTAGNE: Then, of course, it's quite well known that for decades, the Vatican has been motivated by anti-communism. Stalin also targeted priests. The church was very much behind the solidarity movement in Poland in the 1980s. How much of that played in to these connections?
POSNER: Oh, Renee, you're absolutely right. One of the reasons that the Vatican was frozen in fear against the Nazis and had made their alignment with the fascists in the first place was that they feared the Bolsheviks more. And when John Paul II came in - the first Polish pope, the first non-Italian pope in more than 450 years - and there's still a communist government in Poland, you're right. He formed an alliance with Ronald Reagan. The head of the CIA used to be going over regularly to the Vatican to give him briefings. I describe a new incident in this book in which an Italian intelligence agent, they take $3.5 million in gold ingots from a Swiss bank. They put it into the side panels in a false bottom on an SUV, and a priest drives it back in to Gdansk from Italy so that it can feed the resistance against the communists in Poland. So there was a real alliance between American intelligence, the right wingers and the Vatican on this meeting of minds against communism.
MONTAGNE: How much has the Vatican Bank operated like any other bank? Because people think of Swiss banks, offshore banks, how much more secret would the Vatican Bank be, and how similar was it to them?
POSNER: The thing about the Vatican Bank that makes it different in my view is that it's essentially an offshore bank in the middle of a foreign country, so that once that bank was formed, it meant that somebody sitting over in Italy who had a lot of money, all they had to do was find a priest or a cleric inside Vatican City to take their money in suitcases of cash across the street, just wait for the red light to green, walk it over on a cart, deposit it into the Vatican Bank and it no longer could be taxed. It no longer could be followed by Italian authorities. It couldn't be followed for a drug investigation.
So what does that result in? It results in the Vatican Bank being one of the top banks in the world for money laundering, a haven often for these business executives involved in scandals in Italy. And then just in the last decade, we learn that the Vatican Bank had an account for Andreotti, who was the seven-time prime minster of Italy, the most powerful postwar politician in Italian history. He had a secret bank account through which over $50 million passed at a certain time, most of which was doled out for political favors to friends. That's what the Vatican Bank had come to be, and it's what I call its cocaine cowboy days. The equivalent of that - you know, I live in Miami. The crazy period here was the 1980s, when the cocaine cowboys sort of ran the roost. The question is now whether the new sheriff has arrived in town. Is that sheriff Francis, and can he really bring them to heal or not?
MONTAGNE: Well, may I ask then. The new Pope Francis, he is a reformer, and that does include the Vatican Bank. What has he managed to do, and what are the hurdles?
POSNER: I've been impressed by him. He has changed the structures so that it won't have the ability to be at the center of those scandals and he's brought in some outsiders. They've closed hundreds of accounts that have been open that were tied to people that shouldn't have had them. They are abiding by the rules set by the Europeans for financial transparency because they used the euro. So it's a different era. What could upend it? He needs to be there long enough that these changes can't be reversed by a new pope who gets in and can be pushed around by the strong dominant bureaucrats.
MONTAGNE: Gerald Posner is the author of the new book "God's Bankers: A History Of Money And Power At The Vatican." Thank you so much for joining us.
POSNER: And thank you so much for having me, Renee.
MONTAGNE: This is NPR News.
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