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

by Gerald Posner

  Church officials did not speak out against the November 1933 Nazi legislation that provided for the internment in concentration camps of the homeless, beggars, and the unemployed. Nor when the Third Reich enacted a law in June 1935 introducing compulsory abortions to prevent the passing of hereditary diseases. More silence ensued in September 1935 with the passage of two so-called Nuremberg Laws. The first, the Law for the Protection of German Blood and German Honor, criminalized sexual relations and marriage between Jews and Aryans. The second, the Reich Citizenship Law, stripped Jews of their citizenship.

  Germany was not the only Vatican concordat partner that gave the church discomfort with its policies. The same was true for Italy. In 1935 the Vatican had to choose between the moralities it preached and the hunt for profits that had become a part of Nogara’s investment strategy.

  On October 3, 100,000 Italian soldiers swept over the border from Italian Somaliland and invaded Ethiopia. There was no declaration of war. In less than two weeks, Italy’s troops had routed Emperor Haile Selassie’s half-million-man army, many primitively armed with spears, bows, or in some cases outdated nineteenth-century rifles. The Italians swept through the holy capital of Axum (sending a sacred obelisk back to Rome as a trophy for capturing the city).III

  The Ethiopian campaign was an essential part of Mussolini’s grand ambition to re-create an Italian empire that stretched without interruption from southern Europe through central and east Africa. Ethiopia—then Abyssinia—was a prime candidate for Il Duce’s expansionist policies. It was one of the few African nations not already a European colony. France and Britain had large empires and several other European countries boasted African colonies.54 Mineral-rich Ethiopia was a natural extension of Italy’s Eritrean colony to the northwest and Italian Somaliland on the east. And finally, Mussolini was in part avenging Italy’s defeat during the First Italian-Abyssinian War thirty-nine years earlier.

  The invasion was brutal. Although Italy had signed the 1925 Geneva Protocol governing the acceptable conduct of war, Mussolini’s troops ignored those rules. In artillery and aerial bombardments, they used between four and five hundred tons of prohibited mustard gas, terrorized civilians by firebombing the city of Harar, and even used the gas on Red Cross ambulances and camps.55

  The mostly ineffective League of Nations—the predecessor to the United Nations—condemned Italy as the aggressor, but member countries could not agree on what to do. Nogara monitored the League’s efforts since he hoped to derail any effort to pass sanctions that might damage Italy’s economy. The League moved so slowly it gave time to some of Nogara’s Italian friends to transfer their assets to Vatican holding companies. The Vatican would be untouched by anything the League did since the Holy See was an independent country not involved in the conflict.56 But all the worrying was unnecessary. The sanctions had no bite and Italy blithely ignored them.57

  The war caused little anxiety inside the Vatican. In fact, the church had no reason to take on Mussolini. Most Italians supported the invasion. Pius had himself blessed some of the troops as they left for the fighting.58 And the Pope made no attempt to dampen the clerical enthusiasm evident from church pulpits. He was even silent when Milan’s Cardinal Alfredo Ildefonso Schuster declared the war a crusade for Catholicism.59 Popular archbishops in Amalfi, Brindisi, and Sorrento rebuked the League of Nations as godless hypocrites.60 Mussolini bragged to Nazi officials, “Why they [the Vatican] even declared the Abyssinian war a Holy War!”61

  Britain and France were upset with Pius’s tacit support of the Italian campaign and his refusal to speak out either against the aggression or about the plight of civilians. And the same criticism extended to Secretary of State Pacelli, who maintained a strict diplomatic silence about the invasion. Some observers thought that the Pontiff’s reluctance to wield his moral authority was because Ethiopia was mostly Muslim and had few Catholics.

  But the Pope was motivated not so much by Ethiopian demographics as by what was best for business. The church had stakes in Breda, Reggiane, and Compagnia Nazionale Aeronautica, manufacturers of munitions and weapons.62 Nogara had made it clear to the Pontiff that the Vatican’s huge investments in Italian stocks and Mussolini’s state-issued bonds meant that the church’s interests were best served by a brief and successful campaign. With Nogara as middleman, the Vatican made a substantial wartime loan to the fascist government (it stayed secret for decades).63 In exchange, Mussolini gave the church “ecclesiastical dispensations” from special levies of corporate, real estate, and sales taxes that he imposed to raise money to fund the offensive.64

  Nogara was concerned about intensifying British and American opposition to the invasion. He briefed the Pope, as well as Raffaele Guariglia, chief of Italy’s Bureau of Ethiopian Affairs and a strong advocate of colonial expansion.65 The message from Nogara to both was the same: a prolonged conflict would burden Italy’s resources and budget, create widespread pessimism among ordinary Italians, and potentially lead to an economic downturn that might spur the growth of extremist political parties.66

  The Vatican shared Nogara’s concerns. Pius was delighted that the brutal combat ended on May 7, 1936, when Italy annexed the country and named the Italian King, Victor Emmanuel III, as Emperor. Mussolini merged the three contiguous colonies—Ethiopia, Eritrea, and Somaliland—into Italian East Africa. Two thousand five hundred Italian troops had been killed during the brief war. But an estimated 275,000 Ethiopians—soldiers and civilians—had been massacred. Reports of the bloodbath got lost in Italy’s jubilation over its conquest. Even the Pope joined leading Italian dignitaries in celebrating the war’s end and offering Mussolini his heartfelt congratulations.

  Exiled Ethiopian Emperor Haile Selassie gave a rousing speech in Geneva before the League of Nations the following month. He warned, “It is us today. It will be you tomorrow.” The League passed another ineffective condemnation. Mussolini, emboldened by his victory, had withdrawn Italy from the League of Nations weeks earlier.

  In the new colony, the fascists imposed anti-miscegenation laws, banning interracial marriage, cohabitation, and sexual relations. Residential segregation, in the formerly liberal country, was instituted and strictly enforced. The Vatican was silent.

  There was money to be made from the conquered colony. Mussolini announced a new agency—Regia Azienda Monopolio Banane (the Royal Banana Monopoly Business)—to control the lucrative banana trade from all its African colonies. The agency doled out exclusive concessions to forty-eight businessmen, all of them ranking fascists or handpicked by the Vatican.67,IV

  When Ethiopian insurgents failed in a 1937 assassination attempt on the colony’s military commander, Mussolini ordered mass executions as punishment. An estimated thirty thousand Ethiopians, including half of the younger educated class, were killed. Again, there was no public protest from Pius or any ranking cleric. In the British Foreign Office, a flurry of cables between officials reflected the now widespread Western view that the “Church has proved that it is purely Italian and far from ‘Catholic’ ” and that “the Church is in Mussolini’s pocket.”69

  • • •

  In 1937, Nogara accelerated the pace of the church’s investments beyond Europe.70 He traveled to America and stopped in the wealthy dioceses, including New York, Chicago, Washington, Philadelphia, and Cleveland. He met influential businessmen in each city. In New York, he spent much of his time with Giovanni Fummi and his fellow investment bankers at the House of Morgan.71 Relying on their advice, he put $3.5 million into the stocks of manufacturing companies, some electrical utilities, and U.S. Treasury bonds.72 Under Nogara’s cautious guidance, the Vatican now had an economic toehold in the New World.

  Nogara’s decision to diversify further was prompted by his concern over Hitler’s increasingly confrontational rhetoric about Germany’s claim to the Sudetenland, a portion of northern and western Czechoslovakia with mostly German-speaking residents. The Czech military, worried that Hitler might forcibly reclaim it, had be
gun building fortifications and moving troops to the border.

  Nogara was not the only one inside the Vatican who thought that Germany was ratcheting up tensions. The Nazis were also flagrantly violating the Reichskonkordat. As part of a coordinated effort by the Third Reich to diminish the church’s moral sway over ordinary Germans, the Nazis had begun holding public “morality trials” at which priests and nuns were prosecuted for concocted financial corruptions or sexual crimes.73 Catholic weeklies were subjected to ever stricter censorship.74 Nazis even spread the rumor that the Pope’s grandmother was a “Dutch Jewess.”75 Pius wanted to confront the Nazis, but Pacelli counseled moderation. Drafts of an encyclical were passed around to senior prelates and its language was tempered during an intense internal debate.76 The compromise was Pius’s encyclical Mit brenndender Sorge (With Burning Sorrow).77 By the obtuse standards of encyclicals, it included some remarkably direct language, such as the Pope’s condemnation of how the Nazis had repeatedly broken the treaty. In other instances it more indirectly chastised the Third Reich for encouraging a growing worship of the German state to the exclusion of religion.78 Pius distanced the church from the “so-called myth of blood and race.”79 Jews were not mentioned, although the encyclical obliquely offered “consolation and strength” to those who had converted to Catholicism.80

  Third Reich officials took little satisfaction that the encyclical did not mention the persecution of Jews or condemn Germany’s institutionalized anti-Semitism. They were instead furious with its overall theme that cast the church as indispensable as the state.81 The German companies that had printed it were shuttered and their employees jailed. The Foreign Office rebuked ranking German bishops for having read it from their pulpits.82 Some Nazi officials urged annulling the Reichskonkordat.83 But Hitler wanted to keep the agreement in place. Although he did not mind upsetting the church, he did not intend to move against it with the full power of the state until after the war.84 Moreover, notes from Germany’s ambassador to the Vatican, Diego von Bergen, reveal that in a meeting with Cardinal Pacelli, after the encyclical was released, Pacelli offered appeasement. He was solicitous, expressing his own sympathy for the plight of the German people. Pacelli even proposed meeting Field Marshal Göring if it would help temper any Third Reich indignation.85 Göring responded by accelerating the pace of the morality trials intended to humiliate German priests and nuns.86

  By the following year (1938), the Pope was uneasy about the militant anti-Semitism in both the Third Reich and fascist Italy.87 In a turnabout, he even suggested that the Sacred Congregation for Seminaries and Universities find Italian theology professors who might challenge the Nazi racial pseudoscience.88

  When the Führer visited Rome in May on a state visit, he did not stop by the Vatican. Pius went to Castel Gandolfo, the Papal summer residence. Both sides claimed they snubbed the other but there was little doubt that neither tried very hard to set up a meeting.89

  In July, the Pope directed his frustration to Mussolini. Pius was furious when Il Duce issued his Manifesto of Race, signed by a hodgepodge of fascist academics. It concluded that Italians were a “pure Aryan race” and that “Jews do not belong to the Italian race.”90 Pius told his aides that the manifesto and the subsequent race laws were “contrary to Catholic doctrine.”91 But as was the Pope’s style, the Vatican said nothing publicly. Only in a private audience with the British Minister to the Vatican, Sir D’Arcy Godolphin Osborne, did Pius share his frank fear that Europe’s new fascists had replaced communism as the church’s most dangerous enemy.92

  A couple of months later, at an audience with Belgian pilgrims, Pius turned teary-eyed after the visitors presented him with a gift of an ancient missal. The Pontiff flipped the pages to a section about Abraham. “We recognize that everyone has the right to self-defense and may take the necessary means for protecting legitimate interests,” he said. “But anti-Semitism is inadmissible. Spiritually, we are all Semites.”93

  Pius had reached his breaking point. Only a few aides knew that in late June he had summoned John LaFarge, an American Jesuit, to Castel Gandolfo. The Pontiff asked LaFarge to draft an encyclical addressing anti-Semitism and racism. It signaled a momentous shift in the Vatican’s policy of silent observance. The choice of LaFarge meant Pius was serious. As an editor of the Jesuit magazine America, LaFarge had a well-deserved reputation as one of the strongest editorial voices against Southern segregation. The previous year, LaFarge had published a book, Interracial Justice as a Principle of Order, which was a well-received broadside against American racism.94 LaFarge, sworn to secrecy, picked two fellow Jesuits to help him, both of whom had collaborated on previous encyclicals.95 They worked steadily for three months in Paris.

  The Third Reich had compromised the German church with double agents and informants, even obtaining a source—likely a German bishop—who provided inside information at the highest level.96 He warned the Nazis that Pius was at long last focusing on an encyclical that would assault the Germans for their war on the Jews.

  That September, LaFarge submitted a draft titled Humani Generis Unitas (The Unity of the Human Race). As required by church protocol, the trio turned in versions in English, Latin, French, and German, to Father Wladimir Ledochowski, the patrician Polish Father General of the Jesuits (a man called the “black pope,” after the color of his vestment and the power he wielded; American intelligence secretly concluded he was “a tireless supporter of Fascist political movements in every country including Italy”).97 Ledochowski passed it in turn for trimming to Father Enrico Rosa, editor of the Jesuit journal La Civiltà Cattolica. That was a seemingly odd choice for what Pius intended to be a groundbreaking encyclical. La Civiltà Cattolica had a storied history of virulent anti-Semitism. Father Rosa himself had written about Jews having “hidden power,” and charged they worked in partnership with Freemasons to “persecute the Catholic Church.”98

  The eighty-one-year-old Pius was in poor health. Riddled with diabetes, heart disease, and ulcerated legs, he had been declining for a couple of years.99 Still, Ledochowski and Rosa did not seem in any rush. The three Jesuits who drafted Humani Generis Unitas feared that their Father General might be “bent on sabotaging the encyclical” by delaying it.100 Ledochowski would have recognized that it ventured far beyond the normal church boundaries for intervention and discourse. And the Father General of the Jesuits was a close friend of Cardinal Pacelli. The two had worked together on previous encyclicals. Both knew that as Secretary of State, Pacelli would be on any shortlist to replace Pius. Would such a bold proclamation hamper Pacelli if he became the next Pope? Ledochowski had no doubt that Humani Generis Unitas was far too audacious for the more cautious Pacelli. He also knew that some senior clerics were irked that the Pope had tapped an unproven American cleric to be the lead author on such a critical subject.

  Events outside the Vatican should have given impetus to the encyclical. The same month that LaFarge submitted the first draft, Mussolini copied the Nazi race laws for Italy. The statutes purged Jews from the civil service, barred Jewish children from public schools, and gave all foreign Jews six months to leave the country.101 Pius was particularly incensed that the law banned marriages between Italians of the “Aryan race” and anyone “belonging to another race.” Father Pietro Tacchi Venturi had lobbied Mussolini in vain, contending it infringed on the rights of the church as set forth in the Lateran Pacts to be the final arbiter of all marriages.102

  But Italy’s race laws did not hasten the review of the encyclical. The Jesuit hierarchy was still passing around the draft on November 9, 1938—Kristallnacht, the Night of Broken Glass—when Nazis attacked Jews throughout Germany, killing dozens and destroying thousands of businesses and synagogues. Although Kristallnacht was condemned worldwide, the Vatican stayed silent.103 Several German bishops spoke out through sermons, but it was to incite further animus. They talked about the “murderous hatred” that Jews had toward Jesus.104 The provost of Berlin’s St. Hedwig’s cathedral, Bernhard L
ichtenberg, was one of the few who condemned the frenzy of violence. The Nazis made an example of his public dissent, sentencing him to two years in prison (he later died while being transferred to Dachau).105

  The start of 1939 marked a further deterioration in Pius’s health. He was well enough, however, on January 13, to welcome the British Prime Minister, Neville Chamberlain, for a state visit.106 During a formal luncheon packed with dignitaries, a frail Pius told Chamberlain that he prayed daily for “the many million Catholics in Germany, whose most grievous tribulations we follow and we share each day.” The Prime Minister reminded Pius that the abuses in Germany affected far more than just Catholics and that England “deplored the sufferings inflicted” on Protestants and Jews as well.107 Pius did not answer.

  A few weeks after Chamberlain’s visit, in early February, the Pope fell seriously ill. He had prepared a condemnation of fascism—a condensed version of his encyclical—that he wanted to personally deliver on February 11, the tenth anniversary of the signing of the Lateran Pacts. But he was bedridden. Although a team of doctors and his closest clerics attended to him, he died of a heart attack on February 10.108,V

  No one can say with certainty whether Humani Generis Unitas got to Pius before he died. After his death, Secretary of State Pacelli ensured that all drafts of the encyclical as well as all personal papers on Pius’s desk were sealed in the Vatican’s Secret Archives.110 No one who worked on the encyclical spoke about it again and the memory of it was soon lost in the great turmoil of World War II. It remained mostly forgotten until 1972, when the National Catholic Reporter related the story in a front-page article.111 By that time, the English and French drafts were missing. A German draft was tracked to the personal papers of one of the priests who had assisted LaFarge, but the Jesuits refused to release it. After much prodding the Vatican admitted it had the Latin draft—which some believe was the original prepared for Pius’s signature—but the church denied historians access. A former Jesuit finally passed along a French version on microfilm that had been entrusted to him by LaFarge.112