Book Review: “God’s Bankers” by Gerald Posner

God’s Bankers by Gerald Posner

 This book is a serious (200 pages of end notes!) history of the Vatican Bank (called the Instituto per le Opere di Religione (IOR)), which has existed only since the 1920s. It reads like a thriller, although it gets awfully detailed and depressing. Over and over again, the IOR has been caught up in the same scandalous behavior. Over and over, they have reacted with denial and cover up and stonewalling. It’s shameful. And frankly, it gets old.

The Catholic Church has a long history, of course, and Posner sketches the role of finance and temporal power in the church, from the middle ages, through the coming of the modern, secular state, and the geopolitical disasters of the twentieth century. It was interesting to read the opening chapter after reading The Ugly Renaissance. In a way, this book brings that story up to today.

The current legal framework for the Vatican City state and its bank the IOR were established in the 1920s in the Lateran accords between the church and Mussolini. This accord stabilized the relationship between the church and the secular Italian Republic in which it is embedded and entwined.

This agreement led to the creation of the IOR, which functions somewhat like a central bank for the sovereign Vatican State. But it was not organized as a conventional bank, it theoretically is just a money manager for the church – and it is basically owned by the Pope.

Embedded in the ancient bureaucracy of the Vatican Curia, staffed by non-experts, and answering only to the Pope—what could possibly go wrong? Worse, the sovereignty of the Papal state means that the IOR is effective an “offshore” bank–situated in the middle of Rome.

Born in the time of depression, Fascism, and the Communist revolution, the bank was deeply involved in the Second World War. Situated inside the Axis, and harboring deep anti-Bolshevism as well as long standing strains anti-Semitism, the Vatican and its bank was far cozier with the Fascist and Nazi regimes than is comfortable to read today. The bank itself was linked to questionable activities, including money laundering and the transfer of wealth stolen from Holocaust victims.

Posner documents the role of the Vatican in funding anti-Communist forces during the Cold War. The Vatican bank worked with anti-Communist forces, including Italian political parties, and Catholic resistance behind the Iron Curtain. These efforts may be a bit less nauseating than aiding Nazi war crimes, but they do not seem to be completely consistent with what we might expect from a “charitable” organization.

Through all the years, in war, cold war, and peacetime, the IOR acted as an offshore tax haven and channel for Italian and other elites, aiding and abetting tax evasion, money laundering, financial crimes. Worse, these services have been of great use to corrupt politicians, mafia bosses, and swindlers—provided they were “good Catholics”, not to mention buddies of IOR insiders.

Throughout its first 80 years, the bank was plagued by poor leadership, incompetent and unconcerned with conventional banking ethics. At various times, the IOR operated dozens of shell corporations and hidden bank accounts in Switzerland, Bahamas, and elsewhere. Despite their total secrecy and utter denial, many of these arrangements have come to light in a series of gigantic scandals, with losses that surely must have been hundreds of millions of dollars (though the IOR has, until recently, had no meaningful bookkeeping, let along financial auditing).

After 9/11, pressure has grown for the Vatican to stop playing the role of offshore haven, and join the rest of the world by enforcing banking standards, including anti money laundering and other transparency rules. Under the threat of blacklisting, the last two Popes have taken steps to modernize the bank, introducing audits and oversight, and to cooperate with other countries. These efforts are finally succeeding, and we can hope that the Vatican will soon be a good example. And one looks forward to the church no longer losing hundreds of millions of dollars to scams and scandals.

Overall, this book was much more interesting than I expected, considering the topic. Posner does a pretty good job sorting out rumor and speculation (of which there is plenty) from documented fact. It cannot be denied that he has a clear opinion (that the IOR has been a scandalous embarrassment to the church), but he is scrupulous in providing extremely convincing evidence for the negative things he has to tell us.

Given the very important changes occurring in the Vatican’s financial branches, this book is a very useful source to help understand what is happening and why it is so important.

It is also true that reading this history gives perspective (and urgency) to the ongoing developments in cryptocurrency, which promise to recapitulate these painful episodes.  It seems to me that creating “offshore” digital finance, with even less accountability than the Vatican bank ever had is guaranteed to produce similar scandalous and costly result.

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1. Posner, Gerald, God’s Bankers: A History of Money and Power at the Vatican, New York, Simon & Schuster, 2015.

 

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