John F. Pollard

The Tangled Skein: Unraveling the Finances of the Vatican
In “Money and the Rise of the Modern Papacy”, Pollard makes the case that the modern face of the papacy had been shaped by finance capitalism, i.e., the ‘internationalism of finance…whose country is where profit is’, in the words of Pope Pius XI. The fact the Vatican was able to confront its ambivalence regarding free enterprise was remarkable; the Santa Sede’s relative adroitness in transforming itself from a semifeudal, economically backward society into a global institution with near-absolute control of the Roman Catholic Church is nothing short of astonishing.

The book covers a century of papal history, a century during which the Holy See saw its political sovereignty over the Papal States taken away by centrifugal forces propelled by nationalism and anticlericalism. It begins with the papacy of Pius IX, which was remarkable not only for its duration but also for its assumption of a neofeudal doctrine envisioned to oppose the rise of liberalism. Pius IX’s pontificate, which also marked the beginning of the so-called modern, more spiritually-focused papacy, is arguably the most turbulent since the establishment of the Chair of Peter. It witnessed the loss of temporal power, the fall of Rome, the ‘abdication’ of France as the eldest daughter of the Church, and the Kulturkampf. It also marked the beginnings of the internationalization of the Holy See’s source of funding.

Prior to 1850, the papacy for the most part derived its income from the Church, generated via sources such as fees for curial services rendered and ‘Peter’s Pence’, or offerings of the faithful, and from the Papal States themselves, which levied various taxes. With liberalism approaching its apogee, inevitably resulting in the loss of income from the Papal States, the papacy had to resort to various measures to stabilize its finances.

Under the supervision of Giacomo Antonelli, cardinal secretary of state from 1850 to 1876, the Holy See’s balance sheet was cleaned up, with numerous loans merged in 1857 into what can only be called a Vatican consol, and the papal budget had been balanced by 1859. However, the loss of the Papal States had the effect of demolishing this finely crafted balance. By 1870, the last vestiges of the Holy See’s temporal sovereignty over Papal Rome were swept away. The Vatican was on the edge of bankruptcy, with public debt amounting to 20 million lire, and annual expenditures of the papal court and the various church administrative organs amounting to 3.6 million lire. Thankfully, Antonelli was by and large a capable technocrat and financial manager: he apparently sought to diversify the Vatican’s fund placements, and he resisted investing Vatican funds on speculative ventures. By the time of Antonelli’s death in 1876, the Holy See was sufficiently emboldened to draw attention to its strengthening fiscal position by officially appointing Cardinal Simeoni, Antonelli’s successor, as an administrator of the property of the Holy See.

The death of Pius IX in 1878 brought with it new financial problems for the Vatican. With the ascension of a new pope to the Chair of Peter, contributions from the faithful in France, Germany, and Spain apparently shrank dramatically. However, the new pope, Leo XIII, had the good sense to appoint a professional investment manager in the person of Ernesto Pacelli. Cousin of Eugenio Pacelli, the future Pope Pius XII, Pacelli was instrumental in the further diversification of the composition and geographical distribution of the Vatican’s portfolio. During his stewardship of the papacy’s finances, the Holy See became a major shareholder of the Banco di Roma, one of the big four Italian banks at the time. As president of the Banco, Pacelli oversaw its overseas expansion, but also saw the bank’s ignominious fall from grace following the outbreak of the Great War. A spate of withdrawals devalued the bank’s viability to such an extent that the value of the Vatican’s equity interest in the Banco declined from 42.5 million lire to less than 15 million lire.

About the same time as Ernesto Pacelli’s entry into the Vatican financial scene, American Catholics started to make their presence felt in Rome. US economic dynamism meant that American Catholics were now able to assume an increasing proportion of the burden of financing the Vatican’s budgetary requirements. Although the Holy See was by and large ambivalent about the emergence of the US Catholic Church as an arbiter of Vatican affairs – as Leo XIII’s Testem Benevolentiae Nostrae adequately demonstrated – it apparently showed little hesitation in raising funds from the New World. Even church property in the United States could be effectively ‘securitized’ if required, as evidenced by a twenty-year, five-percent Vatican bond issue during the 1920s, which utilized church real estate holdings in Chicago as collateral.

Relative stability in the Vatican’s finances was achieved upon the signing of the Lateran Pacts in 1929, which normalized relations between the Holy See and Italy and established Vatican City as an independent state. The Conciliazione with the Italian government provided the Vatican with a sizeable financial settlement amounting to a cash payment of 750 million lire and 1,000 million in Italian government bonds.

To manage this endowment, Pope Pius XI established an agency, the Special Administration of the Holy See, and appointed Bernardino Nogara as director. According to Pollard, Nogara was but one of several Milanese, the so-called ‘wind from the north’, brought in by Pius XI to assume important positions in the Vatican. Nogara certainly was no stranger to the Vatican’s finances; as early as 1914, he was reported as having purchased bonds on behalf of Pope Benedict XV. Nogara’s appointment proved to be a fortuitous one, as the Wall Street crash in 1929 threatened to place the Holy See’s finances on an unstable footing. Under Nogara’s supervision, Vatican monies were used to build up a substantial gold reserve, and several holding companies were incorporated to acquire real estate in Switzerland, France, and the United Kingdom; some of these properties, Pollard relates, are still held by the Vatican to this day. Nogara was even alleged to have received official dispensation to invest Special Administration funds without being straitjacketed by religious and doctrinal considerations. The Holy See, according to Pollard, had interests in Italian munitions manufacturers such as Reggiane, Compagnia Nazionale Aeronautica, and Breda. It is unclear whether Nogara had a hand in the Vatican’s acquisition of equity stakes in these companies; in addition, the complete constitution of Nogara’s portfolio at any time during his directorship could not be established. What is clear is that, by 1948, Nogara’s stewardship of the Special Administration had become sufficiently fruitful to attract the attention of muckrakers; indeed, less than two decades after the Conciliazione, the Vatican had become ‘one the greatest financial trusts in the world’.

Pollard quotes his earlier works all too often; this tendency of his is evidently due to the dearth of both primary and secondary sources. The Vatican can be notoriously opaque especially when attempts to shed light on its financial health are made. Thankfully, the author has obtained access to Nogara’s diary, which recorded the conversations between Pius XI and his banker during the 1931-1939 period. One wonders whether other such primary sources will be unearthed that can either bolster or refute the assertions made in this book. Meanwhile, this exposition on the fact that the Holy See was able, with professional help and a generous settlement, to revitalize its balance sheet and modernize its approach to the market economy within a comparatively short timeframe, given its inherent aversion to laissez-faire capitalism, illuminates a significant portion of fin de siècle, pre-postmodern financial history, and Pollard should be congratulated for this magisterial account.… (altro)