There was outrage in certain quarters when a report in the Financial Times on October 8 said that a Vatican investment portfolio had purchased structured notes that included default swap exposure to Hertz, the car rental firm that filed for bankruptcy in May.
The Pope gave a speech on the same day that could be taken as criticism of the deal, which was among many unorthodox investments made under the supervision of a cardinal who has since been stripped of his duties.
“Financial speculation fundamentally aimed at quick profit continues to wreak havoc,” Pope Francis told anti-money laundering experts from the Council of Europe who happened to be visiting the Vatican on the day the FT report was published, in one of the many odd twists in the story so far.
Observers were quick to point out that the Vatican had attacked the derivatives industry in 2018 in a document approved by the Pope.
That bulletin characterized over-the-counter trading as an “ethical void” and took particular aim at the “economic cannibalism” that can result from buying credit protection in the hope of engineering a default that will make a swap pay off.
Bemused derivatives markets participants mostly shrugged off the 2018 criticism, though Chris Giancarlo, an observant Catholic who chaired the US Commodity Futures Trading Commission at the time, took the trouble to write a lengthy rebuttal.
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