Saturday, September 4, 2010
The New York Times on Saturday reports a deal between the U.S. and Afghanistan to bailout Afghanistan’s largest bank, Kabul Bank, after frantic depositors mobbed the bank for a third day to make withdrawals.
Particulars of the deal are contradictory at best.
Anticipating a backlash from Americans outraged over news the U.S. is bailing out a foreign bank, Jenni LeCompte, a Treasury Department spokeswoman said no U.S funds were involved in the bailout.
But the plan calls for an injection of cash into the beleaguered Kabul Bank meant to slow the run on the bank by customers who have withdrawn more than $200 million in the past few days amid fears of a wider economic collapse.
The Treasury Department claims to be only advising the Afghan government on how to manage the crisis — even sending a team of experts to Kabul. But it remains unclear what the source is for the infusion of cash into the Afghan financial system.
If we learn the funds used to bailout Afghanistan come from the American taxpayer, the Obama administration could find itself facing an unprecedented constitutional crisis.