A bailout for the Kabul Bank? No way

The run on the Kabul Bank is remarkable for the fact that it took this long to happen. But all it needed was a spark to set off a fire that brought down years of worries about corruption and insider dealing.

You do have to feel for the people waiting line, wondering about their life savings. This isn't like IndyMac, where you sensed that the FDIC would somehow step in.

What's interesting here is that many of the locals are calling for the bank to be bailed out by the U.S. So far, U.S. officials say that won't happen. Taxpayers here at home likely will not stand for it, even though it might easily be folded into the current bailout, which has generated far better returns that anticipated.

Some locals are suggesting that the U.S. has an obligation to bail it out. It's true that the U.S. helped set up the Afghan banking system after the Taliban was ousted. Unfortunately, it did not take long for "toothless oversight by the country's central bank" to allow "well-connected business interests to abuse the system," notes Time.

"Everyone knew a year ago--even before that--that Kabul Bank was going to crash," one local executive told Time. Some argue that the bank was merely following Western banking traditions (especially recently). In the end, however, I doubt we'll see a direct bailout. 

For more:
- here's a Time article
- here's a Deal Journal item

Related Articles:
Feinberg may force banks to give money back to government
Fannie Mae asks for more bailout funds
Small banks still suffering, as big banks mend
Does the success of bank bailouts make failure again likely?

Post a comment