Interestingly, although I’ve been following and blogging about Hamid Karzai’s corrupt ways and ties, for years now, little did I realize how fast it could possibly topple his government…

On Tuesday, the WaPoo reported about this sudden Bank seizure…

Afghan authorities take over biggest bank to avoid meltdown

…Afghanistan’s Central Bank has taken control of Kabul Bank, a politically potent financial institution partly owned by President Hamid Karzai’s brother, and ordered its chairman to hand over $160 million worth of luxury villas and other property purchased in Dubai for well-connected insiders, according to Afghan bankers and officials. The Central Bank’s intervention aims to shore up Afghanistan’s largest private bank, whose faltering finances threatened to wreak both economic and political havoc. Kabul Bank handles salary payments for Afghan soldiers, police and teachers, and has taken in more than $1 billion in deposits from ordinary Afghans. U.S. officials have long worried that trouble at Kabul Bank could trigger financial mayhem, a prospect that would leave Afghan security forces without pay, threaten unrest by angry – and often armed – depositors, and gravely undermine President Obama’s entire Afghan strategy

Which subsequently sparked a run on the Kabul Bank on Wednesday and Thursday…

Run on Afghan bank’s deposits reported

NBC News: Large investor confirms funds were used to buy Dubai villas

…About $155 million in deposits have been withdrawn from Afghanistan’s largest bank in just the last two days, spurring fresh concerns among U.S. and Afghan officials that a financial panic could spread through the country and derail the U.S. war effort, according to bank insiders and U.S. officials.

Mahmood Karzai, the brother of Afghanistan’s president and one of the principal shareholders in the troubled Kabul Bank, told NBC News in a telephone interview that panicky depositors withdrew $70 million from the bank on Thursday. This is on top of an estimated $85 million taken out on Wednesday, he said.

Which prompted Hamid Karzai to respond on Thursday…

Karzai: Afghan govt will back Kabul Bank

…Afghan President Hamid Karzai reassured nervous customers at the troubled Kabul Bank on Thursday, saying every penny of their deposits would be guaranteed by the government.

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.

"The Kabul Bank is safe," Karzai said in a news conference with visiting U.S. Defense Secretary Robert Gates.

Afghan Finance Minister Omar Zakhilwal echoed that message, saying that fears about the stability of Kabul Bank had not sparked a "crisis" at Kabul Bank.

Even Petraeus had to chime in…

Petraeus backs Karzai over corruption

…Speaking to the media at his base in Camp Eggers, near Kabul, Gen Petraeus acknowledged, however, that concerns over sleaze were hindering a counter-insurgency drive in Kandahar and that Nato’s showpiece push in Marjah district faced tough obstacles.

Gen Petraeus described Mr Karzai as “very forthright about corruption” and said the Afghan president’s chief concern was one the US shared: Taliban safe havens in Pakistan.

He was speaking on the day that Robert Gates, US defence secretary, arrived in Kabul for talks with Mr Karzai. The Afghan president had intervened to release Mohammad Zia Salehi, one of his national security advisers, who was arrested in July over claims that he accepted a car in return for favours.

Mr Karzai’s move was widely seen as weakening two US anti-corruption bodies involved in the arrest – the Major Crimes Task Force and the Sensitive Investigative Unit. The Afghan president subsequently ordered a review of their conduct.

Gen Petraeus said: “There clearly was some friction, if you will, over the arrest of the individual who was in the palace. I think frankly those issues, perceptions, have been resolved.”

The Guardian wasn’t so charitable as the rest of the Lame Stream Media was and named names…

Afghan officials resist clean-up of Kabul Bank as scandal engulfs elite

President Hamid Karzai’s brother calls for US to guarantee deposits amid fears collapse would threaten police and army salaries

…The central bank on Tuesday ordered that the chairman and chief executive of Kabul Bank, who are both large shareholders in the bank, should step down from their positions and a government official be appointed to manage the bank.

But western officials with intimate knowledge of the financial drama said the US treasury wanted to see much stronger action. That would include bringing the bank into line with international norms…

Such independence would risk bringing to light allegations that members of the country’s business and political elite have, for years, apparently got away with using deposits of thousands of ordinary Afghans to fund lavish lifestyles. The bank’s funds are said to have been used to invest in loss-making enterprises and, allegedly, the re-election campaign of President Karzai.

In the words of one foreign official, the US treasury is anxious to "rip the lid" off the cowboy capitalism that has been allowed to flourish at Kabul Bank. [...]

"But there are lots of assets off the books. The hunch is that shareholders would like to continue to use bank assets how they want, rather than bring it into line with international best practice."

Naturally, the corrupt fired parties blamed everybody else…

Ex-executives say their dismissals triggered run on Kabul Bank

…The two ousted executives of Afghanistan’s largest bank have blamed a hasty management purge for a run on the embattled institution this week.

President Hamid Karzai ordered the dismissal of the managers at Kabul Bank this week after concerns about questionable loans that shareholders had approved for themselves, including some to fund the purchase of high-end real estate in Dubai, in the United Arab Emirates.

Why not, though…? A mere week ago, Karzai was saying…

Kabul blames most corruption on Western allies

…Afghanistan said Monday blame for most of the corruption plaguing the impoverished country lies with its Western backers who dole out "illegitimate" contracts that have created an "economic mafia".

Afghanistan, one of the most corrupt countries in the world, is under intense pressure from its foreign backers to end endemic graft.

Presidential spokesman Waheed Omer said Afghanistan’s foreign allies were responsible for the vast bulk of corruption in the country, which is mired in extreme poverty despite receiving tens of billions of dollars in Western aid over the past decade.

"Our international partners provided the ground for some people in Afghanistan to become unbelievably rich. Some people (have) become an economic mafia in Afghanistan," he said.

Even Bloomberg reported it… Karzai Says Corrupt Firms Undermine Afghan War (Correct)

Sadly, there’s kernels of truth to Hamid’s charges…

Billion Dollar Audit Missed by Pentagon Watchdog
Military auditors failed to complete an audit of the business systems of an Ohio- based company – Mission Essential Personnel – even though it had billed for one billion dollars worth of work largely in Afghanistan over the last four years.

…In September 2007 the U.S. Intelligence and Security Command (INSCOM) awarded Mission Essential Personnel (MEP) a five-year-contract worth up to 414 million dollars to provide 1,691 translators in Afghanistan. MEP was a start-up company created by three men, including Chad Monnin, a U.S. Army Special Forces reservist who was injured in a parachute accident. Procurement rules give preference to companies owned by injured veterans, even if they have no prior experience.

When the Obama administration decided to expand the war in Afghanistan last year, MEP quickly hit the ceiling of what it could bill. On May 10, INSCOM gave MEP a 679 million dollar extension without bothering to put it up for competitive bid. MEP will also get a share of the Intelligence Support Services Omnibus III contract, a five-year contract, with a ceiling of 492 million dollars, announced on Aug. 10, 2010.

The only two other contractors that have held multi-billion dollar contracts to supply translators to soldiers and diplomats in the Global War on Terror – L- 3/Titan and Global Linguist Services – have both been investigated for alleged overcharging, suggesting that this type of work falls in the high risk category of government spending.

Yet the Defence Contract Audit Agency (DCAA) failed to conduct a full business systems audit for MEP.

The CS Monitor truly puts it all into its proper context…

Kabul Bank run may pose more immediate threat than Afghan Taliban

The Kabul Bank is a bedrock for a stable Afghan society. Its collapse could spell disaster for the country already battling a resurgent Afghan Taliban.

…The fallout from Kabul Bank’s problems could extend beyond the economy. The Post reported Thursday that "an unchecked run on Kabul Bank, which could spread alarm to other banks, would jeopardize not only depositors’ savings but President Obama’s Afghan strategy, which is built around efforts to rally the public against the Taliban."

American officials, security analysts, and Afghan businessmen also see it as a security threat. The US hopes a growing Afghan economy will lift living standards, undercut support for the Taliban, and increase confidence in Mr. Karzai. And the Kabul bank particularly plays a central role: it houses $1.3 billion in deposits from ordinary citizens, and also handles payments for teachers, soldiers, and police – the bedrock of a stable Afghan society.

Once again, I ask ya; what are we fighting, and dying, for…?

*gah*