VATICAN REFORMS AND THE CHURCH IN THE U.S.

Rev. J. Bryan Hehir, Professor of the Practice of Religion and Public Life at the Harvard Kennedy School, and Secretary for Health Care and Social Services, Archdiocese of Boston Elizabeth McCaul, Partner, Promontory Financial Group, LLC

KERRY ROBINSON Executive Director, The Leadership Roundtable

It is my great pleasure to introduce two experts in their fields who are prepared to give us some insights into a topic on everyone’s minds: Pope Francis and Vatican reform. Father Hehir is a founding trustee of the Leadership Roundtable, a close personal advisor to Cardinal Séan O’Malley, and an expert on how the Catholic Church operates. Elizabeth McCaul is a partnerin-charge of Promontory Financial Group where she provides a broad range of financial and regulatory advisory services to clients in the U.S. and Europe, including assistance with matters related to safety and soundness, risk management, corporate governance and capital markets. Among Promontory’s prestigious clients is the Vatican Bank, in which Elizabeth is playing a leading role.

REV. BRYAN HEHIR

I’ve been given nine minutes to summarize Pope Francis. What I can give you in that space are snapshots meant to help you evaluate him over the long-term.

First snapshot: what are the sources that move him? We already know he’s a Jesuit and a Latin-American bishop. Those are deep, powerful influences in his mind. When he analyzes the world in his Letter “Joy of the Gospel,” he doesn’t say, “I’m going to analyze the world.” He says, “We need to discern what’s happening in the world.” Classic Jesuit language. He’s a bishop who lived through the Dirty War in Argentina. And if you lived through the Dirty War, you’re not going to be surprised by Iraq and Syria and other hot spots around the world. And he’s a bishop of the Second Vatican Council. He’s reviving collegiality, the local Church, and the collaboration of popes, bishops, laypeople and religious.

Second snapshot: the way he manages symbolism and substance. He’s a man of instinctive symbolic action. We’ve got to ask, What is the substance behind the symbolism? Where he lives, what he drives, how he dresses. All of those, in a sense, are symbolic. All of those have transformed the image of what a Pope is in the minds of people.

Everyone knows that a key question for any executive is where you spend your time and how you plan your day. In the case of Pope Francis, he spent time his first three months at Lampedusa, the refugee island in northern Africa, and at the Jesuit Refugee Center in Rome. He went to Assisi to do a walk-through of the clinic where children with multiple physical and psychological problems are treated. He stopped and visited 100 children there -- one by one. It was symbolic and substantive.

Where does he go on trips? Brazil was arranged ahead of time. He’s going to Korea, Sri Lanka, the Middle East, and Albania. This is a man who says the fundamental problem today is that we have an economy of exclusion, or a world of exclusion. That is to say, some people don’t count as one. And in the world of international relations, clearly, not everybody counts as one. So he chooses to go to places that oftentimes don’t count, not even as half of one. Albania as a centerpiece of international politics? Nobody’s talked about that. His choices are symbolic and substantive. So you kiss the Western Wall. Other Popes have done that, I think. But kiss the wall that divides the Palestinians and the Israelis and don’t tell anybody ahead of time you’re going to do it? These are symbolic actions with substantive consequences.

Next, a long term snapshot: justice and mercy. Theologians have asked for centuries, How do you have a God that’s all-merciful and all-just. Pope Francis talks about mercy in the Church and justice in the world. That’s his combination. He asked, “What should the Church be like?” and responded, “The Church should be a house of mercy.” And that confessions, for example, shouldn’t be a torture chamber, as he put it. Mercy in the Church, justice in the world. ‘No’ to an economy of exclusion, ‘no’ to the marginalization of some people over others. Want to run that through the IMF and the global economy and budgetary planning? You have to do those things. He hasn’t, though he’ll have to do some of them (or at least get some help doing them). But the point is justice, structure and fairness in a world marked by enormous inequality -- politically, economically, legally.

Finally, in a way that intersects with what the Leadership Roundtable has developed, I believe what he’s really trying to do is to build a practical ecclesiology. Ecclesiology is the study of the discipline, the nature and the function of the Church. He’s trying to build a practical model of the Church, and so he uses language about the Church that no other Pope has ever used. The Church as a “field hospital,” for example, that in a conflicted world we ought to be like a field hospital. The Church ought to be a house of mercy again. The Church ought to have its eye at every level -- national, global, on what he calls the existential peripheries.

Existential peripheries? What he really means is where suffering goes on. We need to have our eye on the edge of the circle of light, where the vulnerable live and suffering occurs – and not just because they are poor, but because they are humans and need support and sustenance in different ways. To the Pope, that is symbolically significant, and he is determined to be substantively empowered. He proclaims that those who live by hope of the Kingdom of God are meant to make history, to generate history. In other words, he wants a Church that lives in the world and generates history in a way that calls attention to what it means to believe in God.

Elizabeth Mccaul

I’m a banker and a regulator by training. I spent 10 years at Goldman Sachs, then became a banking regulator, serving for sixand-a-half years as Superintendent of Banks of New York. Now I’m a fixer of banks. I started as a banker at a time when being a banker was a noble thing. We were facilitators to the financial markets that would allow hospitals, power plants and roads to be built, and people to buy a house and enjoy their lives. Unfortunately, it’s gotten far off-track.

Against that backdrop, the work that’s taking place under the direction (in a substantive way) of the Holy Father is extraordinary because it’s meant to change that culture, to return finance to being the kind of service -- even respected service -- it once was.

“The extraordinary thing the Holy Father is now doing –is recognizing that this risk culture needs to end.”

The Vatican Bank has had a series of terrible setbacks largely because there hasn’t been a structured place to transcend a culture of secrecy. It’s a bank that operated in a culture of obedience which, in a way, was not appropriate -- comparable to a priest telling you to follow his instructions without allowing any questions or independent controls. The extraordinary thing the Holy Father is now doing – in the wake of the global financial crisis – is recognizing that this risk culture needs to end. That something needs to be built. We’re seeing laws and regulations all around the world that mention the word “culture.” So part of the work we’ve been doing hinges very closely on building controls that ensure transparency. And that means looking at every single account, getting references in order to make sure they’re appropriate, doing investigations and forensics, and reporting to the proper authorities.

All of that is just a backdrop for what the Holy Father intends to achieve -- which is allowing financing to move to any place on earth where it needs to be to ensure money is being spent on the poor. You have to have a way to get it there, a way that’s compliant with international law and regulations. And to that end, risk culture is being cited, along with the responsibility to challenge and oppose management decisions. In plain language, the Holy Father is saying that transparency and honesty in finance are essential. And to me, seeing this discussion take place at the highest levels of the Church and in furtherance of the Church’s mission to the world is simply amazing.

Bankers and regulators are now feeling an urgent need to look to a higher authority, to make decisions about leading in the right direction and putting the right internal controls and processes in place. So if you leave this room with one takeaway today, I hope it’s that what’s happening in Vatican is very real. I wouldn’t continue to do the work I’m doing if I didn’t believe it was up to international standards. We have had 25 people on site plus 10 people staffing the Pontifical Commission working six days a week, sometimes 18 hours a day, going through thousands and thousands of accounts, making sure that the right accounts are in the bank, that they’re being used by the appropriate people, and that they’re being spent in the proper way. We’ve been building risk-management functions with direct internal controls and direct reporting to a board of lay directors embedded in but independent of ecclesiastical structures.

The other piece we’re doing is working with the Pontifical Commission to develop a new economic and financial architecture. The Holy Father put in place the Pontifical Commission for Reference on the Organization of the Economic- Administrative Structure of the Holy See (COSEA) with a

“ In plain language, the Holy Father is saying that transparency and honesty in finance are essential. ” group of international experts from around the world, and we’re serving as an advisor to help build a central bank and an appropriate governing structure to ensure separation of responsibilities for spending and budgeting money, and creating transparency around where the money is coming from and what it’s being used for. What I never lose sight is that we’re putting in place the strongest possible controls, meeting international best practices, and exceeding regulatory expectations.