Pius’s replacement, Perugia’s Cardinal Vincenzo Gioacchino Pecci, took the name Leo XIII. The sixty-eight-year-old Leo had none of Pius’s irascible and often volatile charisma. Even his longtime advisors considered him utterly uninspiring. Some insiders speculated that Leo prevailed on the conclave’s third ballot because he was the antithesis of his hot-tempered predecessor. Others thought he was a stopgap choice since he was reportedly in poor health and unlikely to be Pope long. Leo himself averred when elected that he was too old and feeble to handle the pressures of the Papacy.1
His reputation as a cardinal was a moderately conservative traditionalist. Leo had been born into an upper-middle-class family with some claim to nobility. He gave conflicting signals early on about whether he shared Pius’s taste for grandiose pomp. On the one hand, he was the first Pope to deem the traditional Papal apartment, adjacent to the throne room, too grand. He slept instead in a cavernous but spartan ground-floor room.2 But he also insisted that all visitors, including secular officials, kneel throughout any audience. Even top clerics were forbidden from sitting when addressing him.3
Leo was not long Pope before he learned that Pius had bequeathed to the Vatican about 30 million lire (the Popes from wealthy families often left the church their personal fortunes).4 It consisted of some gold, bank deposits, and unfortunately many uncollectible IOUs. As a result, Pius’s bequest did not make a dent in the church’s ravaged finances: Leo had inherited a 45 million lire deficit. Although Peter’s Pence had paid many operating expenses for a decade, nothing had been done to trim costs or reduce the staggering debt.5 And even more startling was that the mess seemed the fault of the unassailable late Secretary of State and chief of the Treasury, Giacomo Antonelli.6 He had passed away two years before Pius. It was only now that Leo learned of the grim consequences of the unfettered autonomy Cardinal Antonelli had wielded. Antonelli had accumulated great personal wealth while the Vatican’s assets plunged. He had ennobled his middle-class family. His four brothers had been made Papal Counts. One, Luigi, was the administrator of the Pontifical Railroads. Gregorio attended to church affairs outside the Vatican. And his eldest brother, Filippo, made a sizable fortune after he was nominated as a governor of the reorganized state-owned Banca Romana, the capital’s first savings bank.7 Antonelli had directed many of the sixty families of the Black Nobles—aristocratic Catholics who stayed loyal to the Pope when Italian troops seized Rome in 1870—to his brother’s bank.8 With Antonelli dead, Italian aristocrats and businessmen disclosed that he had rebuffed their pleas to invest Peter’s Pence in conservative ventures.9 Instead, he had deployed a network of Papal nuncios to sell precious collectibles donated by the faithful and smuggled the money out of Italy.10 His final will left the bulk of his estate—623,341 gold francs—to his brothers and nephews. Some gems were bequeathed to the Vatican museum, and as for the Pope, Antonelli left him only his own desk crucifix.11 The coup de grâce came when a young countess, Loreta Lambertini, stepped forward and claimed she was the cardinal’s illegitimate daughter and was entitled to a share of the property, palaces, and gold he had amassed.12
Leo felt compelled to entertain bold measures to strengthen the church’s anemic balance sheet. It was not long before he approved the church’s first ever, albeit limited, interest-bearing loans. The Pope soon learned that simply changing the rules did not guarantee success. His unsophisticated clerical advisors—without any financial training—did not insist on collateral for the first round of loans they issued. Instead they based their decisions solely on the name of the penurious aristocrat borrowing the money. In the first year of Leo’s reign more than a million lire in loans were written off as worthless debts.13
The bad results prompted the Pope to immerse himself in the basics of lending. He insisted that, going forward, he review each loan. And he reserved final approval for all real estate deals, soliciting Peter’s Pence, and raising cash from pilgrimages. Leo’s advisors considered his micromanagement unnecessary and his incessant meddling time-consuming. But his fear they were incompetent kept him from giving them more authority. Leo also worried about thievery. He kept much of the church’s spare cash, jewelry, and gold in large trunks stacked in his enormous bedroom.14
The Pope flirted with buying a small newspaper network dedicated to battling Freemasonry.15 But before the deal closed, the Catholic bank and financiers who had pitched the proposal went bust. That convinced him that instead of putting the church’s money at risk in a business venture, it was safer in real estate. Starting in the 1880s, he ordered that most of Peter’s Pence be invested through silent partnerships into Roman property. Leo caught the early stages of a massive speculative building boom.16 The spiraling property prices brought tremendous profits. Many Black Nobles became rich just by investing their own money into the same projects the church chose.17 A handful of those men used their wealth to fund the start-up Banco di Roma (Bank of Rome).18 They then convinced the risk-averse Pontiff to make a sizable investment in the bank. The Vatican also followed the bank’s lead in buying shares in Rome’s trolley system as well as a controlling stake of a British-owned company that supplied water to the capital.19 Subsequently, when Italian aristocrats took loans from the church, they often provided their shares in the Bank of Rome as collateral, further binding the church and the bank.
Leo turned out to be more successful at stabilizing the church’s finances than he was at quelling the deteriorating political turmoil between the church and Italy. A succession of left-wing, anticlerical administrations passed laws hostile to the Vatican, exacerbating Leo’s mistrust of secular government. One statute abolished an obligation that Italian farmers pay the Vatican a tithe. Another authorized the confiscation of some church assets. The tension between church and state grew so fierce that Leo decided to abandon Rome and govern the church in exile from France. But just as Italian officials had been warned eight years earlier when the cardinals considered moving the conclave from Rome, informants tipped them off about Leo’s plans. Italy gave the Pope an ultimatum: if he left he could never return. Leo and his advisors stayed put. The episode caused great concern inside the Papal Court that secular spies had penetrated it. So Leo consolidated authority in an ever-smaller group of long-standing clerical aides.20
The decision to stay in Rome meant the Pope was there to witness firsthand the great property crash of 1887. The Bank of Rome, in which the Vatican was a major investor, suffered huge losses. The church itself was badly damaged, losing about a third of its capital in less than a year.21 Leo disclaimed any responsibility for the debacle. Monsignor Enrico Folchi, who held a senior position in the Vatican’s finances for eleven years, got blamed. The Pontiff unceremoniously dismissed him. Many inside the Papal Court, however, felt as though Folchi was a convenient scapegoat.
Folchi’s replacement was Monsignor (later Cardinal) Mario Mocenni, a cleric with a reputation as a fiscal conservative.22 Soon after taking office he indicated that he might be more willing than his predecessors to experiment with modern financial techniques: “If money had a religion, it would be Jewish, but fortunately it doesn’t have one, as a result of which it can be venerated by everybody.”23 Mocenni sent some of the church’s gold and cash to the Rothschilds for safekeeping in Paris, the first time they were again involved with the Vatican since Pius IX had unceremoniously cut them off in 1860.24
Monsignor Mocenni was soon overshadowed by a layman, Ernesto Pacelli.I. Pacelli had become the president of the Bank of Rome in the aftermath of the real estate bust. His sage and conservative stewardship stopped the bank’s hemorrhaging and led quickly to a profitable resurgence. As the property crash played out, Pacelli and Leo had met regularly and developed a good friendship. By 1891, Leo had overcome enough of his anxiety about possible government spies to allow Pacelli to become his most trusted lay confidant. Pacelli was wise to the Machiavellian politics of the Papal Court. He assiduously doled out favors—ranging from generous Bank of Rome loans to prestigious directorships in private companies—to dozens in the Pope’s entourage. As the bank’s president, Pacelli also counted as friends many senior Italian government ministers. That allowed him the opportunity to act as an unofficial mediator between the Vatican and the often belligerent Italian state. Pacelli managed to persuade Italy’s officials to refrain from passing more punitive laws against the church while convincing Leo to dial back his antigovernment rhetoric and threats of excommunication.
Most European governments wanted some assurance that Leo would distance himself from the reactionary tone set by his predecessor’s Syllabus. They were tired of the standoff between church and state. During the early years of his Papacy Leo had taken small but encouraging steps that raised the expectations of reformers. He reopened the Vatican’s abandoned observatory and appointed an astronomer, not a priest, to run it. With a single decree he eliminated the eunuchs who for centuries had sung in the Sistine Chapel.25 And he surprised academics and historians by opening some of the Vatican archives, even to non-Catholics.26
Those small reforms were soon forgotten when Leo reaffirmed Pius’s ban on Catholics participating in Italian elections. Pacelli had failed to convince Leo that the ban was counterproductive since it sacrificed any influence the church might have in the new Italy. Allowing Catholics to vote, the Pope feared, would implicitly acknowledge the legitimacy of the secular government. Leo demanded, as had Pius, nothing short of a full restoration of the Papal States. And he naively thought he could convince Germany, Austria, and France to support his bid. Pacelli, who had far more real-world experience than the cloistered Leo, told him that was unrealistic. That did not dissuade the Pope, who tried escalating the restoration of the Papal States into a pressing international issue. Leo tried putting what by then was called the “Roman Question” on the agenda at a conference of Western countries in The Hague. After ten months of aggressive lobbying, the Vatican could not even get an invitation.
Pacelli cited the diplomatic missteps to argue that the church’s strength was not in secular diplomacy but instead in the power and independence of its finances. He urged the Pontiff to be more open-minded about free enterprise. The Pope initially seemed resistant when he condemned unrestrained capitalism in several encyclicals. But Pacelli influenced Leo’s most famous edict, Rerum Novarum (On the New Things), a not very subtle effort to stem the surge of socialism and militant Marxism. In that encyclical—for the first time—although the church condemned capitalism’s exploitation of workers, it backed the right to a decent wage, better working conditions, and even trade unions. (Rerum earned Leo the nickname “the worker’s Pope.”)27
Pacelli also asked the Pontiff to make some modest investments in banks, construction firms, and utility companies. He argued that it did not constitute capitalist behavior since those were essential industries that allowed average Catholics to live comfortably. Whether the Pope believed that or simply needed a credible justification for saying yes, he agreed.28 By the start of the twentieth century, the Vatican had gone so far as to open forty-four small Catholic banks throughout Italy, all dedicated to providing Catholic workers a trusted place in which to deposit their earnings. Those church-owned banks even offered a few limited loans to the faithful.29 And in keeping with his encyclical trumpeting workers’ rights, Leo opened the first of what would become a national network of social and economic cooperatives to help Italy’s poorest workers. There were soon Catholic-sponsored peasant leagues, workers’ unions, and food cooperatives.30
Those tentative steps toward embracing modern financial practices made Leo stand out from the regressive isolation of his predecessor. But in the final years of his Papacy, Leo reversed course and became increasingly intolerant, destroying whatever goodwill he had earned. Over a dark eighteen-month stretch he reaffirmed Syllabus, spoke out against the separation of church and state, condemned freedom of the press and religious tolerance, and reiterated the medieval philosophy of Thomas Aquinas that only those who accepted Catholicism could be productive.31 He rebuffed all appeals to reverse the Papal ban on Catholics serving in government.32
Leo even questioned whether there was any intrinsic value in democracy. He bitterly denounced so-called Americanism, the U.S.-based movement to modernize Catholicism.33 In just over a century, the number of Catholics in America had soared from thirty thousand to more than six million, largely because of a surge in Italian and Irish immigrants. There was great promise for the church in the New World. But Leo and many Roman clerics opposed pluralism. America’s separation of church and state, combined with its embrace of personal liberty and unfettered individual capitalism, rankled the Vatican. It was heresy, concluded Leo, to allow any secular state to develop without the integral involvement of the church at every stage.34 The best form of government, concluded the Pope, was a benevolent monarchy (which conveniently included a Papal empire).35
By the end of his Papacy, Leo was every bit as reactionary as Pius.
The “frail” Leo, elected in part because some cardinals considered him a stopgap Pontiff who would have a short reign, died in 1903 at the age of ninety-three. During his quarter century as Pope, he had outlived many of the cardinals who had voted for him. Inside the Vatican, there was almost a palpable relief at Leo’s passing. He seemed, even to those who liked him, too old and out of touch. The church was just a few years into a new century. And as the cardinals began arriving in Rome to elect a new Pope, there was widespread consensus that the next Pontiff should be different. The problem was that no one could agree on which quality was most important. That promised a wide-open conclave.
I. Ernesto’s cousin Eugenio joined the priesthood. He rose to become the Vatican’s Undersecretary of State, then in 1920 the Papal Nuncio to Germany, before being elevated to Cardinal Secretary of State in 1930. In 1939, Eugenio Pacelli was elected Pope Pius XII.