Insight: Pope to review Vatican bureaucracy, scandal-ridden bank

By Philip Pullella

VATICAN CITY (Reuters) - Pope Francis, who has said he wants the Catholic Church to be a model of austerity and honesty, could restructure or even close the Vatican's scandal-ridden bank as part of a broad review of its troubled bureaucracy, Vatican sources say.

Francis, who inherited a Church mired in scandals over priests' sexual abuse of children and the leak of confidential documents alleging corruption and infighting in the Vatican's central administration, is mulling his options as he sets the tone for a reformed and humbler Holy See.

One of the tests of his papacy will be what he does about the bank which has regularly damaged the Vatican's image over three decades and faces growing calls for reform.

Last year a European anti-money laundering body found that the bank - formally called the Institute for Works of Religion and known by the Italian acronym IOR - had failed to meet some of its standards on fighting financial crimes.

"Certainly if the pope wants to, he can close the IOR," said a senior Vatican official, a prelate who had years of experience of directly dealing with the bank. The future of the IOR was one of main issues Francis would have to confront now that the whirlwind of his surprise election was slowing, he said.

Any significant reforms of the IOR would not come for some time and would probably be made after changes at the Secretariat of State, the central Church department which was at the center of a "Vatileaks" scandal that rocked the Holy See last year.

These changes would include the replacement of its head, Cardinal Tarciscio Bertone, who is number two in the Vatican hierarchy and has widely been blamed for failing to prevent the many mishaps and infighting in Church government during the eight-year pontificate of Pope Benedict.

"It will take time (to change the bank)," said another Vatican official who is not a prelate. Both officials spoke on condition of anonymity.

The second official believed it was more likely that the bank, which manages money for the Vatican, international Catholic religious institutions and orders of priests and nuns, would undergo "serious restructuring" rather than being closed.

"But I would not exclude anything, including closing it down the line. Francis is doing surprising things every day," he said.

Both officials said the new pope might, as a first step, set up a committee to advise him on possible changes to the Vatican's financial structure.

The first sign of change would be a new secretary of state. "It's not a question of if but when Bertone leaves," the senior prelate said. "It remains to be seen who the pope chooses as new secretary of state."

CRISIS IN THE CURIA

The basic failings of the Curia, as the Vatican's central administration is known, were aired, sometimes passionately, at closed-door meetings of cardinals before they retired into the conclave that elected Francis on March 13.

"The Curia did not come out smelling like a rose from those meetings," the senior prelate said, adding that many cardinals had demanded explanations of the scandals and information on how the bank is run and whether it should exist at all.

"The IOR is not an essential part of the ministry of the Holy Father as a successor of St. Peter," Cardinal John Onaiyekan of Nigeria told an Italian television station before the election of Francis. "The IOR is not fundamental, it is not sacramental, it is not part of (Church) dogma."

Anger at the Italian prelates who mostly run the Curia was one of the reasons that the cardinals chose the first non-European pope for 1,300 years at the conclave and quashed the chances of one of the frontrunners, Milan Archbishop Angelo Scola.

The next secretary of state, the senior source said, would have to instill a new style of "collaboration and service" among offices of the Curia, whose image was badly stained by the "Vatileaks" scandal.

Before he resigned, Benedict left a secret report for Francis on the scandal, in which sensitive documents alleging corruption and conflict over the bank's administration were stolen from the pope's desk and leaked by his butler.

The butler, Paolo Gabriele, was arrested and sentenced by a Vatican court to 18 months in prison last year but Benedict pardoned him and he was freed just before Christmas.

Bertone has been directly linked to the IOR's recent troubles. He was the chief promoter of Ettore Gotti Tedeschi, an Italian who headed the bank until last May when its board unceremoniously ousted him.

Gotti Tedeschi said at the time he was fired because he wanted the bank to be more transparent but board members said it was because he had neglected basic management responsibilities and alienated staff.

In 2010, when Gotti Tedeschi was still at the helm of the bank, Rome magistrates investigating money laundering froze 23 million euros ($33 million) the IOR held in an Italian bank.

The Vatican said the bank was merely transferring funds between its own accounts in Italy and Germany. The money was released in June 2011 but the investigation is continuing.

In February, the Vatican named a German lawyer, Ernst von Freyberg as new IOR president. But the appointment, made two weeks before Pope Benedict resigned, was clouded by Freyberg's past business links to a military shipbuilder.

At the time of appointment, the Vatican said Freyberg would contribute to the IOR's modernization and transparency in its attempts to meet international standards.

BAD IMAGE

"The Vatican Bank or IOR, is not unique. They are not the worst (bank), but certainly there are very serious problems that need to be addressed," said E.J. Fagan, advocacy coordinator at Global Financial Integrity, an organization that seeks to curtail illicit money transfers.

"Pope Francis has very clearly stated that he wants to fight poverty. Money laundering of illicit financial flows is a major driver of global poverty and the Vatican should set a clear example," he told Reuters.

The Vatican has been trying to shed its image as a suspect financial center since 1982 when Roberto Calvi, an Italian known as "God's Banker" because of his links to the Holy See, was found hanged under London's Blackfriars Bridge.

Moneyval, a monitoring committee of the 47-nation Council of Europe, said last July that the Vatican had failed to meet all its standards on fighting illicit cash flows, tax evasion and other financial crimes.

A report by Moneyval gave the Vatican an overall pass grade but failing grades on 7 of 16 "key and core" aspects of its financial dealings. It found major failings in the running of the bank, while acknowledging that the IOR was making changes to meet transparency requirements.

Five months before the Moneyval report, JP Morgan Chase closed the IOR's account with the Milan branch of the U.S. banking giant because of concerns about insufficient transparency.

Italian media have reported that the bank, which currently answers to a commission of cardinals and enjoys great autonomy, could be placed under the control of another Vatican department, increasing the oversight called for in the Moneyval report.

Famiglia Cristiana, Italy's leading Catholic weekly, called for the IOR funds to be administered by an independent "ethical bank" external to the Vatican.

"Total transparency would assure the faithful, who are continuing to offer generously, that the money they give to the Church, after the part used to guarantee the good running of the Church itself, would be destined primarily for the world's poor," the highly influential magazine said.

John Allen, author of several books on the Vatican and correspondent for the National Catholic Reporter, said there was talk among cardinals at the pre-conclave meetings "that the Vatican does not need its own bank, and getting rid of it would eliminate a perennial source of speculation and conspiracy theories".

Much of the estimated $7 billion managed by the bank, which was set up in 1942, belongs not to the Vatican but to religious orders and dioceses, who use it to transfer funds around the world.

Another option for the bank's future would be to scale it down so it manages only funds needed to keep the Vatican running, drastically reducing the number of outside accounts and making it less vulnerable to possible abuse.

"We could just say to the Jesuits, the Dominicans, the Franciscans: 'Sirs, you will have to take your business elsewhere'," the senior prelate said.

However, part of bank's profits have helped the Holy See balance its budget in the past, making up for deficits running into tens of millions of dollars.

This means that if the bank were to be phased out or closed, other sources of income would have to be found to fill the gap, the senior prelate said.

The Holy See would probably be careful, however, before relinquishing too much financial autonomy to outsiders so as to maintain its flexibility in emergency situations.

For example, before the fall of the Berlin Wall in 1989, the bank was able to move money to countries in the former Soviet bloc to keep Catholic Churches alive there in the face of communist repression.

(Additional reporting by Lisa Jucca in Milan; editing by Barry Moody and David Stamp)

View the original article here

Insight: Silent or supportive, conservatives give gay marriage momentum

By Peter Henderson

SAN FRANCISCO (Reuters) - On a frosty December night last year, about two dozen guests slipped into the Alta Club, a century-old private retreat a block away from the temple of the Church of Jesus Christ of Latter-day Saints that dominates Salt Lake City.

Two men, who didn't know each other, were the reason for the dinner: church lobbyist Bill Evans and gay rights leader Rick Jacobs. Evans was a point man for the church's successful effort to pass California's gay marriage ban, known as Prop 8, in 2008. Jacobs, leader of Courage Campaign, produced a 2008 commercial against the ban showing Mormon missionaries ransacking the home of a lesbian couple.

Politics was not on the agenda - just getting to know each other. "The two hit it off," said host Greg Prince, a medical researcher and church member who had come to know both men. He noted that less than a month before the dinner, the church had launched a website with a major change in its view of gays: the site said homosexuality was not a choice.

"There has been a shift of some tectonic plate somewhere," Prince said.

Shifting attitudes among some conservatives and many businesses is altering the landscape around gay marriage, long considered a uniquely liberal and political issue, at one of its most crucial junctures - its review by the U.S. Supreme Court.

On Tuesday and Wednesday, the court's nine justices will hear arguments on the constitutionality of Prop 8 and the Defense of Marriage Act, which excludes gay couples from federal benefits.

Some jurists look to societal changes when interpreting the law, and scholars speculate that Justice Anthony Kennedy, the possible swing vote in the divided court, will be pondering increased public support for gay marriage.

A Reuters/Ipsos poll released last week found 63 percent of Americans supported gay marriage or civil unions.

While the Mormon Church has backed "traditional marriage" in Supreme Court briefs, it has been silent in recent ballot battles and has not promoted fundraising as it has in the past.

Republicans like Senator Rob Portman of Ohio are supporting gay marriage and publicly conflicting with party leaders, such as House of Representatives Speaker John Boehner. Portman this month said he had switched position on the issue after his son told him he was gay.

Corporations, including Goldman Sachs, whose chief executive, Lloyd Blankfein, has campaigned in support of gay marriage, have joined the battle, arguing in briefs to the court that federal policy of not allowing gay marriage is bad for business.

The issue is far from settled, however. Gay marriage opponents have been written off as dinosaurs before, including in California, and most states ban same-sex weddings. But the momentum has been moving towards the proponents of gay marriage.

MORMON MONEY, NO MORE

Money has played a huge part in the pivot, both in terms of the financing of campaigns in favor of gay marriage and the funding of opposition groups.

When the New York State Senate voted to approve gay marriage in 2011, four Republicans joined Democrats. Republicans led by hedge fund manager Paul Singer, whose son is gay, gave the four financial and moral support, and in the 2012 national race, Singer led a political action committee that spent more than $2 million to help pro-gay marriage Republicans.

"You have billionaires telling Republicans 'Vote our way and you'll receive more money than you've ever seen,'" said Brian Brown, president of the National Organization for Marriage, the leader of the movement to stop gay marriage. "That was new."

Pro-gay marriage groups have routed their opponents financially, outraising them three-to-one in November 2012 ballot races that legalized same-sex marriage in three more states, bringing the total to nine states and the District of Columbia.

The single biggest fundraising change between 2008 and 2012 was the disappearance from the political arena of the mightiest foe of gay marriage - the Mormon Church.

While the church has petitioned the Supreme Court in favor of Prop 8, it has focused its public messages about gays on personal issues of respect and love rather than politics.

In the four November 2012 votes - Maine, Maryland, Washington and Minnesota - the top ballot committees raised about $30 million for gay marriage and $10 million against it. The $20 million difference between the two campaigns last year is close to several estimates of what the Mormon Church and its supporters gave to California's Prop 8 in 2008.

More than 800 Utahns gave $2.7 million to support Prop 8 in 2008, state campaign finance records show. In 2012, a total of 16 Utahns gave $1,264 to the main ballot committees against gay marriage.

"The Mormon Church left as a major funder," concluded Chad Griffin, president of the Human Rights Campaign (HRC), the biggest gay rights group.

Frank Schubert, who ran the 2008 and 2012 anti-gay-marriage campaigns, downplayed the Church hierarchy's silence last year. "Not having a direct statement encouraging people to get involved in the campaign naturally would result in fewer people getting involved in the campaigns, but there were fewer Mormons in these states to begin with, and there was never any expectation that they would be involved."

California Mormon Brooke Crosland, 27, gave $1,000 in 2008 for Prop 8 and made campaign phone calls, but she stayed out of politics in 2012. She described a personal search for understanding, which she saw reflected in the church. "I feel like the ideal for a child is a father and a mother, but I also feel under the law we should have equal rights," she said.

Screenwriter Dustin Lance Black, whose portrait of gay rights pioneer Harvey Milk won an Academy Award, was approached for informal talks by Mormon officials after he narrated a documentary critical of the church called "8: The Mormon Proposition." Church officials were surprised to learn that he, a young, gay man, deeply wanted a family. "That was this big 'ah ha' moment," he said.

But Black said the initial invitation came only after the church was pilloried in public. "They didn't contact me after making 'Milk'. They contacted me after making '8: The Mormon Proposition'," said Black, who was raised a Mormon. He since has introduced HRC leader Griffin to church officials, at the December dinner and a concert following, while continuing talks.

Church spokesman Michael Purdy said its hospitality did not signal a change in position. "Being committed to marriage between a man and a woman does not mean that we do not love and care for all of God's children. Having conversations with gay rights leaders, speaking about compassion and respect for all, and inviting people to attend a concert do not equal pulling back from supporting traditional marriage due to negative publicity during Prop 8," he wrote by email.

Meanwhile, gay marriage fans and foes agree that same-sex-union proponents have improved their fundraising. Ted Olson, President George W. Bush's Solicitor General, made it ok for conservatives to support gay marriage when he agreed to take the Prop 8 case, said Margaret Hoover, a pro-gay-marriage Republican activist.

When former Republican Party Chairman Ken Mehlman in 2010 came out as gay, it was critical mass. "Nightingales don't sing unless they hear another nightingale singing. As soon they hear one, another one sings, and another one sings," said Hoover.

Dozens of Republican leaders, including former California candidate for governor Meg Whitman and former presidential candidate Jon Huntsman, have signed a brief to the Supreme Court in favor of gay marriage.

Some 278 businesses, including Goldman Sachs and hotelier Marriott International, whose chairman and major stockholder is Mormon, have signed a similar brief opposing the Defense of Marriage Act. (Thomson Reuters, the parent of Reuters News, is part of that group.)

UNEXPECTED CONVERTS

The person credited by all sides with cementing the victory in California for the gay marriage ban was a little schoolgirl who told her mother she had just been taught, "I can marry a princess!" The girl was in a commercial for Prop 8, and for years Evan Wolfson, president of Freedom to Marry, has been asked whether he could beat the "Princess" ad.

Wolfson, a fundraising and strategy leader for most recent ballot campaigns in favor of gay marriage, said the answer was chiefly to change his own side's message, rather than chase the opposition. The pro-gay-marriage campaign, which in 2008 had largely focused on appealing to voters to give gays rights because it said they deserved them, took a more personal tone, he said, of affirming the idea of equal rights and respecting loving couples.

That strategy had some unexpected converts.

David Blankenhorn, founder of the family-focused Institute for American Values think tank, was the prime witness in 2010 in the opening round of the federal trial of Prop. 8. Blankenhorn struck up unlikely friendships with gays while debating the issue in public, and he was sitting at his desk one day last year, when one called and told him to go to a website with a strident, anti-gay article.

"He said, 'Are you sure that this is the side you are on?'" Blankenhorn recalled. He put down the phone, and in that moment realized he had already changed his mind.

"I have a kind of intellectual reason for shifting from one foot to the other foot," he said "But I really, honestly think that it was through just personal interactions... if you want to stick with your position, don't get to know people who disagree with you."

Gay marriage foe Brown says he is not worried by polls that show gay marriage support snowballing. It's all about how you ask the question, he said, and a majority of voters do not want to redefine marriage. His side has always been behind in the money battle, he added, but has had some banner successes.

Politicians can see the danger of switching sides, he said. Of the four New York State Senate Republicans who voted for same-sex marriage, only one returned to office, despite financial backing from sources as diverse as the Service Employees International Union (SEIU) union, Wall Street Republicans, and libertarian David Koch.

Back in California, Rick Jacobs, the Courage Campaign chief, thinks Prop 8 was the best thing that ever happened to his movement. People sat up and started paying attention when liberal California overturned its own state Supreme Court and took away the right to marry, he said, and the court fight has kept the issue alive.

"It not only galvanized a lot of people who didn't really care about it before that - gay people - but it also galvanized straight people," he said. "People said, 'wait a minute, we don't like voting on people's rights.'"

The night in Salt Lake City left little doubt things had changed since 2008. After the dinner, the gay rights leaders all headed over to the Mormon Tabernacle Choir's Christmas spectacular. It was the hottest ticket in town and, as guests of the church, they had VIP seats.

(Editing by Mary Milliken,; Martin Howell and Sandra Maler)

View the original article here

Insight: Community colleges' cash crunch threatens Obama's retraining plan

PALATINE, Illinois (Reuters) - Some schools rally around a football team. Harper College has rallied around a number.

When President Barack Obama called for 5 million more community-college graduates by the end of the decade to boost U.S. competitiveness, this commuter school 30 miles northwest of Chicago figured out it would need to produce 10,604 additional graduates to do its part.

It won't be able to count on much government help.

Even as Harper and many of the nation's 1,200 other two-year community colleges try to deliver on Obama's vision of a revitalized manufacturing sector and a better-skilled work force, support from the federal and state governments is eroding.

"I've been in this business for 42 years. I've never seen anything like this - the pressure on the business model, the pressure on the whole institution of higher education," Harper College President Ken Ender said in an interview.

The problem is especially acute in Obama's home state of Illinois, where decades of mismanagement have led to a fiscal crisis that is squeezing state spending on education.

State funding covered 5.8 percent of Harper's budget last year - a record low and down from 13.3 percent a decade ago. Next year is likely to be worse, Ender says.

It reflects a trend in Illinois and across the nation that threatens to make education less affordable to millions of students at two-year colleges, which can provide a start for those working toward a four-year bachelor's degree or enable older workers to learn the skills needed for new careers.

Since he took office in 2009, Obama has lavished attention on two-year schools; last year he visited 10 community college campuses. Last month, he flew to North Carolina after his State of the Union speech to Congress to highlight a manufacturer that was working with a local school to train workers.

The attention hasn't translated into more financial support.

Obama's efforts to expand spending on education, job training and other elements of what he has termed an "innovation agenda" have fallen flat as Republicans have pushed for spending cuts to rein in trillion-dollar budget deficits.

Deficit-reduction efforts, including the across-the-board "sequester" cuts that kicked in on Friday, have fallen largely on the discretionary part of the federal budget that funds these areas, rather than the health programs that are projected to drive up the nation's debt in the decades to come.

Obama won $2 billion for community-college training programs when his Democrats controlled Congress in 2009, but last year's $8 billion proposal went nowhere.

He has had more success expanding the Pell grants that help nearly half of all community-college students pay tuition. But budget pressures have led to cutbacks in that program as well.

Meanwhile, state and local governments have slashed their higher-education spending during recession-induced budget crises. As a result, students have been forced to pay more for their education.

According to the American Institutes for Research, the average annual community-college tuition rose by 41 percent, to $3,269, from 2000 to 2010. The average subsidy per student received by community colleges fell by 24 percent during that period, to $6,223 per year.

Public funding for four-year public colleges has ebbed as well, but the trend has been most pronounced at the community-college level, the nonprofit group found.

As tuition has climbed, students have taken on more debt, and there are signs that many may not be able to keep up. Student debt has nearly tripled since 2004 and loan delinquency rates have been climbing, the Federal Reserve of New York says.

Businesses that consider community colleges to be an essential source of skilled workers view the trend with alarm.

"We need to continue to have government funding for these vocational schools," Natalie Schilling, vice president of human resources at aluminum giant Alcoa Inc, said during a recent panel discussion in Washington.

Like other manufacturers, Alcoa relies on community colleges to replace its aging work force and produce students who can operate the computer-controlled machines that are increasingly common in U.S. factories.

"We can't do it alone - it's got to be a shared responsibility among the public and private sector," Schilling said.

NEW FINANCIAL REALITY

In Illinois, the state's fiscal crisis has put its pension fund $98 billion in the red and dropped its bond rating to one of the lowest among U.S. states.

Since fiscal 2008, pension costs have grown from 8 percent to 20 percent of state revenue, according to the State Budget Crisis Task Force, an independent research group co-chaired by Paul Volcker, a former chairman of the U.S. Federal Reserve. State spending on the government-run Medicaid health program for the poor and disabled has doubled since 2000.

Meanwhile, state spending on higher education in Illinois has dropped by an inflation-adjusted average of 3.3 percent per year over the past 10 years.

Community colleges in less affluent areas have been hit especially hard in a pattern that could undermine some of Obama's efforts to help the nation's poor work their way into the middle class.

The president of Southeastern Illinois College in rural Harrisburg worries that continued tuition increases could drive students away as state contributions shrink from 45 percent of the college's budget to 35 percent in the next several years.

"At some point, depending on your demographic and your tuition charge, you're going to push students off the cliff," Jonah Rice said. "We're doing the best we can, but it's tough when the rubber band is stretched."

Nestled in Chicago's high-cost suburbs, Harper College has been somewhat shielded from the state's fiscal crisis because it can rely on local property taxes for about half of its operating costs. Schools in areas where property values are low, like Southeastern, are more exposed.

Budget woes, however, have not stopped Harper from forging ahead on its goal to boost graduation rates, which have jumped in the past two years.

Education groups point to Harper as a model for how to train a generation of tech-savvy manufacturing workers, and Republican presidential candidate Mitt Romney praised its manufacturing program during a campaign stop last year.

"To say we can't do things because there's no money is frankly unacceptable," Ender said. "There is no money. So that means we're not ever going to do anything?"

Harper has set up an outreach program with local high schools to try to reduce the number of incoming Harper students who need to take remedial math and reading courses.

Guidance counselors work with students to keep them on track toward their goals, whether that is a welding certificate or a transfer to a four-year college.

'WHEN IS THIS GOING TO STOP?'

Harper also has set up a paid internship program with local manufacturers that allows students to earn money while they learn - an important consideration for many.

"When I found out it was affordable, I jumped in. Every other type of training I've been looking at has not been affordable," said Peter McManus, 47, who is interning at a nearby packaging plant as part of the school's advanced-manufacturing program.

Like many others at Harper, McManus doesn't fit the mold of a traditional college student.

Seeking a career change after his job as a technical theater director was eliminated, McManus learned about Harper's manufacturing program through his teenage son. When he's not in class, McManus works at Transparent Container Company Inc. as he pursues a degree in automation.

"I grew up a mechanic's son and a tinkerer. To me, this is just another lab to tinker in," he said as he gazed at Transparent's $500,000 machines that stamp out plastic packaging.

Harper has gotten some recent government help: The school won a $13 million grant from the U.S. Labor Department last fall to expand its manufacturing internship to other community colleges in the region.

Nevertheless, Harper has been forced to raise tuition rates steadily as state funding has receded. Full-time students will pay $3,735 in the next academic year, an inflation-adjusted increase of 16 percent since the 2008 school year.

The college aims to keep tuition increases in line with inflation, and Ender says the school remains affordable for most.

Students who live with their parents should be able to cover tuition by working full-time in the summer and part-time during the school year, while less affluent students can apply for Pell grants to cover tuition, he says.

Still, 25 percent of students who drop out of Harper do so for financial reasons, said Maria Moten, the school's enrollment dean. Student leaders say they're worried that further tuition hikes will squeeze out more students.

"Most people at community colleges are working full-time jobs and coming to school. They're paying rent; some are paying for children," said Scott Leitzow, a member of the school's student senate. "When is this going to stop? I don't think it ever will."

(Editing by David Lindsey and Paul Simao)

View the original article here