Blairzai, Londonistan & Run on Largest Afghan Bank

♠ Posted by Emmanuel in at 9/06/2010 12:09:00 AM
Ah, the bank run--your quintessential Anglo-Saxon imagery for the new millennium. It should be plenty obvious by now that the best way to run your country into the ground is to Be Just Like America. Today, I will talk about two countries that, in their inimitable ways, have fallen under hard times for doing so. Let me first begin with the poodle of America, Tony Blair [yip-yip]. To me and many Britons, he is a reprehensible character who heaped a lot of misery unto Britain by following Bush 43 blindly (and obediently) into parts of the world where its history has been chequered, to say the least. It has literally been reliving a nightmare thanks to this twosome. Why on Earth would one expect Bush 43 to succeed where the might of the British Empire failed? It boggles the mind.

In his new autobiography which I most definitely will not buy unlike that of his infinitely more colourful and non-po-faced New Labour contemporary Lord Mandelson (who typical American yokels are largely unaware of but that's another story), Blair talks a lot about these matters. Below are some excerpts taken from his book on the matter of Afghanistan. Make of it what you will:
What is the nature of the threat? It does not derive from something we have done; there was no sense in which the West sought a confrontation. This is essential to the argument. The attacks of Sept. 11 came to most of our citizens as a shock that was utterly unforeseen. Countries like America and Britain were not singling out Muslims for unfair treatment; and insofar as Muslims were caught up in generalized racism towards those of a different race or color, such attitudes were on the way out, not the way in.

The extremism we fear is a strain within Islam. It is wholly contrary to the proper teaching of Islam, but it can't be denied that its practitioners act with reference to their religion. I feel we too often shy away from this assertion, as if it stigmatizes all Muslims. But if it is true—and it is—it has to be faced, not just because it is true, but because otherwise we don't analyze the problem or attain the solution properly. If it is a strain within Islam, the answer lies, in part at the very least, also within Islam. The eradication of that strain can be affected by what we outside Islam do; but it can only be actually eliminated by those within Islam.

Here is where the root of the problem lies. The extremists are small in number, but their narrative—which sees Islam as the victim of a scornful West externally, and an insufficiently religious leadership internally—has a far bigger hold. Indeed, such is the hold that much of the current political leadership feels impelled to go along with this narrative for fear of losing support.

This is a situation with practical consequences. Iraq and Afghanistan are seen as the West's battles. With a few notable distinctions, this is not perceived as a struggle for the heart and soul of Islam. Yet the outcome is surely vastly determinative of such a struggle.
As I see it, the problem with Blair's analysis is that he too earnestly buys into the neconservative version of the freedom 'n' growth shtick plied by America since time immemorial. During the cold war, the United States supported tyrants the world over who claimed to be avowed foes of communism. It was an easy ploy for financial support when America actually had some money to pass around. Nowadays, the labels affixed to the parties involved are somewhat different but the game remains the same. Instead of "fighting communism," opportunists the world over have happily taken money from Uncle Sam in the name of "fighting terrorism." And instead of getting America's money, they now get money America borrows from somebody else.

Hence, we have another cautionary tale today. Instead of following America's example of developing financial WMD alike the British, the Afghans have more earnestly copied the Yankee example of coziness among political and business elites. Like cold warriors before him propped up by America, Hamid Karzai has managed to parrot the freedom 'n' growth line while placing cronies in high places. One of them just happened to be his brother, who in turn found a place at Afghanistan's largest bank. Due to--how do I describe them--irregularities at Kabul Bank, regular folks are fleeing more quickly than you can say "Northern Rock" or "AIG":
Afghans continued pulling money from their country's largest bank Saturday as Afghan central bank officials, aided by American experts, explored ways to stabilize the ailing lender with deep ties to President Hamid Karzai's administration, weighing the possibility of an Afghan-financed bailout.

Averting the failure of Kabul Bank has become a top priority for U.S. and Afghan officials, who fear the possible political and economic crisis that could result. Even with the bank still solvent, U.S. officials are concerned that its woes, brought on by allegations of corruption and insider dealing, are going to further setback faltering Western efforts to restore confidence in President Karzai's administration, a pillar of the allied strategy for beating back the Taliban.

Hours after dozens of branches of Kabul Bank closed following the first business day since the Islamic weekend, there was no word from Afghanistan's central bank or the lender's management on how much money had been withdrawn Saturday. Senior Afghan officials and one of the bank's major shareholders said the pace of withdrawals had slowed Saturday, compared with the rush to pull out money late last week. Finance Minister Omar Zakhilwal said the Afghan government Saturday transferred $100 million dollars to the bank to cover salaries for about 250,000 soldiers, police and teachers, who are paid through accounts at the lender.

Another senior Afghan official said the central bank was working with U.S. experts, Kabul Bank's management and its major shareholders on plans to aid the lender should it falter. The official said an "intervention" by the Afghan government was "a possibility." He declined to elaborate but did say Kabul Bank hadn't yet run out of cash. The U.S. says it will not finance a rescue of Kabul Bank. "No U.S. taxpayer funds will be used to support Kabul Bank," said a spokeswoman for the U.S. Treasury, Marti Adams.[Read: covert financial support is likelier to be used if need be.]

But some U.S. officials say the fragile state of Afghanistan's finances—-it collected less than $1 billion in revenue last year is dependent on donor nations for most of its annual budget—-could result in U.S. and other donor funds indirectly assisting an Afghan government bailout the bank. Pay for Afghan soldiers and police, for example, comes from the U.S. and is funneled through the Afghan government.

Scenes at many branches of Kabul Bank in the Afghan capital—long lines at the entrances giving way to packed lobbies inside—suggested that the run on the bank didn't subside Saturday. At some locations, people waited for hours only to be told that the branch had run out cash, a situation that may have kept withdrawals down Saturday. The problem appeared particularly acute for those holding accounts in U.S. dollars as opposed to afghanis, the local currency...

Kabul Bank's woes first became public late Tuesday, when word leaked out that Afghanistan's central bank had forced out the lender's chairman and chief executive—-its two biggest shareholders—-amid allegations they made hundreds of millions of dollars in sometimes clandestine loans to themselves and Afghan government insiders.

Kabul Bank's former chairman, Sherkhan Farnood, used bank money to buy more than $150 million in properties in Dubai in his and his wife's name. Large loans were given to powerful Afghans, including brothers of President Karzai and First Vice President Muhammad Fahim. U.S. officials say the bank used one of Afghanistan's traditional hawala money transfer outfits to move hundreds of millions of dollars out of the country in an apparent attempt to avoid detection, though it is not clear what the money was then used for.

Afghan and U.S. officials say the problems at the bank came to light because of an intensifying feud between its major shareholders, especially Mr. Farnood, and Khalilullah Fruzi, the former chief executive. On Wednesday and Thursday, panicked depositors withdrew almost $180 million, more than a third of the $500 million the bank had on hand before the onset of the crisis. The bank was closed on Friday, the Muslim day of rest, and reopened Saturday.
And then we get to la famiglia Karzai:
Mahmud Karzai, the president's brother and third-largest shareholder with a 7% stake, says the lender's assets are roughly equal to the $1.3 billion in deposits it held before last week. He said the situation was stabilizing and shareholders were to meet with central bank officials on Sunday. It isn't clear if Kabul Bank's assets—-mostly loans and property—-are easily recoverable. If the pace of withdrawals hasn't slowed, the bank could run out of cash in the next few days, despite its relatively large cash reserves.

U.S. officials fear that even the hint of failure at Kabul Bank, the largest of Afghanistan's 10 private banks, could prove dangerously destabilizing. More than a quarter of a million soldiers, police and teachers are paid their salaries through the bank, and the Afghan government keeps many of its accounts there.

A U.S. military officer said the allied mission to train Afghan soldiers and police was trying to come up with alternate ways to pay the Afghan security forces if electronically transferring the funds through the bank ceased to be an option...More broadly, U.S. and Western officials are concerned the crisis will further set back their faltering efforts to restore confidence in President Karzai's administration, a pillar of the allied strategy for beating back the Taliban.

Already, many Afghans view the crisis at the bank as just the latest sign of officially sanctioned corruption. "The president and his brothers and their friends were playing around with all our money," said Daoud Afzal, 30 years old, who owns a construction company. He said he had $100,000—his life savings—deposited at Kabul Bank but didn't know if he would get it back. "No one can trust this government," he said.

To keep negative sentiments from spreading, U.S. and other Western officials say they are pressing the Afghan government to quickly start investigating the allegations of corruption and financial impropriety that led to the management shake-up.

Afghan officials say they will take whatever steps are necessary to restore confidence, although they have so far avoided public talk of an investigation. "From our side, we have to be very careful how we handle this so we don't add to the confusion and chaos," said Mr. Zakhilwal, the finance minister. He blamed the run on Kabul Bank on "alarmist" foreign media reports, a common refrain from Afghan officials in recent days...

The Afghan government says it will guarantee all of Kabul Bank's deposits. President Karzai said Thursday that his administration could use Afghanistan's hard currency reserves of about $4.8 billion to protect depositors. But it isn't clear how readily available that money is and whether the government has the legal authority to use it to secure the accounts of private citizens.
Here's the question for you, Tony Blair: In the final analysis, was Karzai really a significant improvement over the Taliban? Some people just drank too much of Bush's Kool Aid.