Can You Bank on Italy?

A top regulator's favoritism finally scandalizes even the most rigged economy in Europe

The call came just after midnight, and Gianpiero Fiorani knew immediately that the news was good. Antonio Fazio, Italy's central bank chief, was on the line to say he had just signed off on the bid by Banca Popolare Italiana (BPI) to take over another northern bank, Antonveneta. What neither man knew was that authorities probing BPI chief Fiorani's role in the attempted takeover were listening in. "Ah, Tonino, I'm moved," he said, addressing Fazio by an affectionate nickname, adding that he had "goose bumps."

The near cinematic display of favoritism--the top bank regulator chumming it up with someone he is...

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