Felix Salmon

When bankers are more dangerous than warlords

By Felix Salmon
September 2, 2010

Amy Davidson has a good round-up of the tragic bank run at Kabul Bank, which is threatening not only the largest and most important bank in Afghanistan but also what remains of that country’s shattered political economy. But you can pretty much learn everything you need to know from reading two sentences from the excellent WaPo report:

Speaking Wednesday from his villa in Dubai, which was paid for by Kabul Bank, Mahmoud Karzai, the president’s brother, said cash withdrawals from the bank were a “little bit more than usual” but did not threaten to cause a meltdown. A full-scale run on Kabul Bank, he added, “would be a major disaster.”

Yes, the president’s brother is a part owner of the bank, and he’s living in Dubai, in a villa paid for by the bank — which, incidentally, handles the payroll for Afghan soldiers and schoolteachers — and really, what could possibly go wrong?

As the FCIC revisits the Lehman Brothers failure for the umpteenth time, the U.S. is faced with yet another decision about whether or not to bail out a bank whose failure could have enormous systemic consequences. Is there any precedent for one country bailing out another country’s bank? Would the money come from Treasury or from the Pentagon? And how on earth would such an action play in the midterm elections?

It’s all extremely fraught, but the conclusion to the WaPo story pretty much sums it up, I think.

One senior Afghan official, who spoke on the condition of anonymity, said that he had hoped for the best but that “the worst is happening.”

America is certainly finding the military strategy in Afghanistan hard going. But could it be that the country will finally be undone by it bankers?

5 comments so far | RSS Comments RSS

It it possible that we would pay to bail out this Afghan bank?

Tim Geithner is an idiot, with no real world awareness, but surely even he would not allow this.

Obama’s presidency has been ruined by the single decision to employ Geithner and Summers. What a shame.

Posted by MarkWolfinger | Report as abusive

Could it be that the US will finally be undone by its bankers and awol president?

Posted by walt9316 | Report as abusive

I don’t see any great problem here. Palette up a few billion dollars, ship it over to Afghanistan, and turn it over to… someone, without getting a receipt. It worked fine in Iraq, didn’t it?

Posted by KenInIL | Report as abusive

This is a really crappy situation, but there is literally no choice but to bail them out. Just as there was literally no choice but to help the Pakistani flood refuges.

We need all the goodwill we can get in a war zone. Whether we will be thanked for it is a different situation. But whether we will be blamed for its failure is a foregone conclusion.

Unlike our bailout of U.S. banks, this one is really necessary–and cheaper than military spending.

And as to bailing out another country’s banks, look no farther than AIG and bailing out European banks by honoring worthless derivatives.

Posted by TaxLawyer | Report as abusive

I think that the government will believe that it would be a good idea, but won’t do it, simply because of political suicide. What politician would bail out yet another bank that doesn’t take part in the US economy?

The main problem is that even if we were to bail them out the Afghans probably wouldn’t be that grateful anyway. Taxpayers would be furious, thinking that their money was ‘wasted’ on something that had seemingly no effect on the effort and their trust.

Yet if we don’t we will inevitably get blamed for its loss, like TaxLawyer said. I’m guessing a loss in Afghanistan might be inevitable if more lose-lose situations like this keep cropping up.

Posted by CPie | Report as abusive

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