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10-28-2011, 04:00 AM

Helicopter Geithner’s NY Fed $40 Billion Iraq Money Drop

Reader 1SK sent me a story which I felt I had to call to the attention of Naked Capitalism readers. It strikes me as devious public relations ploy, in which an episode that sounds at best poorly executed and at worst a scandal is reframed by focusing on an account of alleged exceptional individual performance that also provides an unverifiable answer to a key question in an ongoing investigation.

The incident in question is the air shipping of a claimed $40 billion in cold hard cash airlifted from the New York Fed to Iraq from 2003 to 2008. This operation took place largely if not entirely on Tim Geithner’s watch, since he was president of the New York Fed from October 2003 to November 2008. So while the US has never had a Helicopter Ben, Iraq had a Helicopter Geithner.

As you will read in due course, CNBC has found a supposedly knowledgable individual who says the amount transported, but we don’t have and are pretty much guaranteed never to get an official tally. The New York Fed has made excuses for its failure to cooperate with the inspector general for Iraq reconstruction. From a June CNBC report:

The New York Fed will not reveal details, the inspector general said, because the money initially came from an account at the Fed that was held on behalf of the people of Iraq and financed by cash from the Oil-for-Food program. Without authorization from the account holder, the Iraqi government itself, the inspector general’s office was told it can’t receive information about the account.

The problem is that critics of the Iraqi government believe highly placed officials there are among the people who may have made off with the money in the first place.

And some think that will make it highly unlikely the Iraqis will sign off on revealing the total dollar amount.

“My frustration is not with the New York Fed, it is with the Iraqis,” said Stuart Bowen Jr., the Special Inspector General for Iraq reconstruction (SIGIR). “They haven’t been sufficiently responsive.”…

Determining the total amount of money that has gone missing — and who was responsible for losing it — is much more than an academic question. Some Iraqi government officials have threatened to sue the United States over the missing money, arguing that the government had a fiduciary obligation to apply appropriate financial controls, and is therefore liable for any losses.

The reason I have trouble swaLLowing this story is it would not be hard for the right signals to be sent from the US officialdom to the Iraqi government to ignore this request, giving the New York Fed a badly needed out. Let’s face it, if some Iraqi government officials are upset and want an accounting of the funds, why has there been no authorization to release the information to the inspector general? Clearly, the requests are being sent to parties guaranteed to put them in the circular file.

http://www.nakedcapitalism.com/2011/10/helicopter-geithners-ny-fed-40-billion-iraq-money-drop.html