Too Corrupt to Fail? Who owns the Kabul Bank

[maddezmom]

September 1, 2010
Too Corrupt to Fail?
Posted by Amy Davidson

Who owns Kabul Bank? And where has its money gone? Last night, after Obama had finished his speech about how we were sort of almost done in Iraq but still had a lot of lives to lose and money to spend in Afghanistan (see Anderson, Osnos, and Packer for more on that) the Washington Post put a story on its Web site about how the Afghan Central Bank was moving to replace the management of Kabul Bank. This is the bank that handles the payroll for Afghan soldiers and schoolteachers. From the Post:


¬snip¬

U.S. officials have long worried that Kabul Bank, because of its size and unorthodox practices, could trigger financial mayhem, a prospect that would leave Afghan security forces without pay, threaten unrest by angry—and often armed—depositors and undermine President Obama’s Afghan strategy.


Our war in Afghanistan may be compromised by a bank? And, again, whose bank—who are the major shareholders involved in “venomous feuding?” The Post includes a helpful chart; they all seem to have ties to Karzai, his election campaign, and his cabinet. One is his brother, Mahmoud Karzai. He is in a better position to come out of this well than the depositors who were heading to the bank to get their money out this morning; there is a fair amount of confusion at the moment about who’s in control, what the central bank’s role will be, and, most of all, where all the money has gone. (Some seems to have funded an airline owned by the chairman of the bank.) Are American taxpayers going to end up bailing this bank out, because it’s so entwined with the Karzai government that it’s considered crucial to the war effort? Is there such a thing as a bank that’s too corrupt to fail?

The Wall Street Journal, in a follow-up, described “a massive portfolio of off-the-books loans by the bank’s chairman to himself and to other politically connected Afghans.” It has also, according to the Journal, used hawala, a less-than-regulated money-exchange system, “to clandestinely transfer almost $1 billion out of Afghanistan in the past few years.” It was mixed up with New Ansari, a firm that, as the Journal put it, “allegedly helped Afghan politicians, drug barons and even the Taliban move billions of dollars out of the country.” (Karzai recently intervened to get one of his aides, who was accused of taking a bribe to stop an investigation of Al Ansari, out of jail.) The Times said that Kabul Bank and its chairman, Sherkhan Farnood, were “at the heart of the political and economic nexus that sustains—and is sustained by—the government of President Hamid Karzai” and “provided millions to Mr. Karzai’s campaign.” Then there are its business dealings:





Read more http://www.newyorker.com/online/blogs/closeread/2010/09/too-corrupt-to-fail.html#ixzz0yMNjZ0XV