Exporting Bailouts

The "Americanization" of Afghanistan was clearly more successful than previously thought.   

Kabul Bank Bailout? Mahmoud Karzai, President's Brother, Calls For U.S. To Shore Up Bank

AP / Huffington Post

Sept. 2, 2010

Hamid Karzai's older brother wants the U.S. to guarantee deposits at Afghanistan's largest bank to stop a developing bank run fueled by fears of fraud.

Mahmoud Karzai, Kabul Bank's third-biggest shareholder, told The Washington Post that "America should do something":

Action by the United States, said Mahmoud Karzai, would prevent a run on Kabul Bank and protect other banks, too. He said Kabul Bank is "stable and has money" but cannot withstand a stampede by panicked depositors. "If the Treasury Department will guarantee that everyone will get their money, maybe that will work," said Karzai, who holds 7 percent of the bank's shares, making him the third-biggest shareholder. Karzai, who spends most of his time in Dubai - where he lives in a waterfront villa paid for by Kabul Bank - rushed to Kabul on Wednesday to join efforts to salvage the bank.

Larger than usual crowds gathered to withdraw funds from Afghanistan's largest bank Wednesday and Thursday after two top executives resigned amid allegations of mismanagement and unorthodox real estate loans. But Afghan Finance Minister Omar Zakhilwal said that fears about the stability of Kabul Bank had not sparked a "crisis" at Kabul Bank.

"We are 100 percent sure that Kabul Bank is safe," Zakhilwal said. "I, as finance minister, am giving you my guarantee that your money is safe - if it's one Afghani, one dollar, one euro, up to millions. ... Kabul Bank is not in danger." Zakhilwal said every penny of customers' deposits would be guaranteed.

Afghan television stations broadcast remarks Wednesday night from the central bank governor, Abdul Qadir Fitrat, who insisted that Kabul Bank was solvent and had enough liquidity to meet demands. On Thursday, the Afghanistan Banks Association issued a statement of support for the bank, and Zakhilwal sought to reassure customers that their deposits were safe.

"The government of Afghanistan guarantees that every penny that they have deposited will be paid back to them if they request it," he said. "But what we are requesting of the Afghan people is not to rush because rush is not good for them, and it's not good for the banking system. We guarantee the money."

Your money's all there. We promise. Just don't try to take any of it out.