Spot the banana republic:
- Nation #1 spends and issues tens of trillions in taxpayer funds and debt, crushing the growth potential of future generations, just to bail out a banking sector full to the brim with criminal “riggers” (as today’s settlements once again prove), where bubble mania was so pervasive not a single bank would have survived absent a global central bank bailout, and where bank executives wouldn’t bend over for anything less than a million.
- Nation #2 just sentenced two senior officials of a bank that collapsed under (a measly by New Normal standards) $1 billion in debt to 15 years in prison each for embezzlement and fraud.
Nation #1 is, of course, the US (or any other western nation). Nation #2 is Afghanistan.
Which one is the banana republic again?
AP reports that the scandal in 2010 shook confidence in Afghanistan’s tiny banking sector, and the loss accounted for around 5 percent of the country’s economy, making it the biggest banking collapse in history. By comparison, just the derivative book of JPMorgan alone is 4 times the size of US GDP.
Like in the US, the government had no choice but to bail out the bank and brought in receivers who, officials say, have traced most of the missing funds.
The scandal struck at the heart of the Kabul political establishment, involving relatives of the former president Hamid Karzai and one of his deputies, Marshall Mohammad Qasim Fahim.
President Ashraf Ghani has put the case at the center of his anti-corruption campaign, and within days of taking office in September ordered it resolved within 45 days.
So banker justice does exist? And this is how non-banana republics deal with a runaway criminal financial sector, which dangles the threat of systemic collapse any time the regulators, at least those who don’t hope to get a job on Wall Street next, come sniffing:
The Kabul Bank’s former chairman Sherkhan Farnood and former chief executive officer Khalillulah Ferozi were sentenced live on television, after a two-day appeal against earlier sentences of five years in prison. They have already served more than four years of the original sentence.
A panel of five judges at the Kabul Appeals Court also fined Farnood more than $237 million.
The court also ordered the assets of Mahmood Karzai and Hasin Fahim, brothers respectively of the former president and deputy president, along with 17 other defendants, frozen until their debts are repaid.
“If there is any delay in returning all the outstanding debt, they will be dealt with by the courts,” the judgment said.
The bank was one of the country’s flagship institutions and until its collapse had been responsible for paying salaries of government employees, army and police across the country.
It was split into two, with the offshoot, the New Kabul Bank now responsible for the salary payments, and holding around $400 million in customer deposits, officials said.
Curious for more? Read “The Great Afghan Bank Heist.”
And while Afghanistan’s banking sector is now well on the road to recovery and doesn’t need endless central bank bailouts (unlike the US, Europe or Japan) the nation does remain a banana republic but for other reasons: namely, US forces refuse to leave. Why? One look at the chart below should explain it.
Why Afghanistan remains an incubator – under constant US supervision – for the heroin trade, read “7.6 Billion Reasons Why The US ‘War On Drugs’ In Afghanistan Failed”