IN 1982, Banco Ambrosiano, then Italy's largest private bank, collapsed with estimated debts of $1.3 billion. Ambrosiano had come close to collapsing in May 1981 when the bank's president, Roberto Calvi, was convicted of illegally exporting billions of lire and was sentenced to four years' imprisonment.

Calvi was bailed-out pending an appeal after spending a short time in jail. When it was revealed that Calvi was a member of the P2 masonic lodge, press speculation further undermined confidence in Ambrosiano.

The Vatican, which owned a large number of shares in Ambrosiano, took the unprecedented step of issuing letters reassuring creditors that the Vatican would assume the bank's liabilities. However, the letters did not halt the official investigation of Ambrosiano's affairs. In June 1982, the Italian Treasury ...

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