Obama Administration: No Plans for Afghan Bank Bailout

Afghan soldiers chat in front of the main office of Kabul Bank in Kabul, Afghanistan Sept. 1. (AP Photo)

Obama administration officials rejected a call Friday for the U.S. Treasury Department to bail out the troubled Kabul Bank in Afghanistan, as nervous customers withdrew millions following a shakeup in the bank's management.

With depositors making a run on cash, Afghan President Hamid Karzai's brother said in a newspaper interview that the United States should intervene and possibly guarantee the Kabul Bank investments.

But White House spokesman Tommy Vietor said that while the U.S. government is advising Afghan officials on how to work through the panic, an Afghanistan bank rescue package is not in the works.

"While we are providing technical assistance to the Afghan government, we are taking no steps to bail out Kabul Bank," he said in an e-mail. "We support the Afghan Central Bank's efforts to uphold international standards on transparency and its decisive action in response to reports of fraud at the Kabul Bank."

A Treasury official also said no steps were being taken to "recapitalize" the bank. The Treasury Department has close to 20 staff members in Afghanistan, with a "small team of experts" working on stabilizing the situation with Kabul Bank, according to the official.

The panic started after two top bank executives resigned amid allegations of mismanagement. Customers flocked to withdraw money on Wednesday and Thursday.

Karzai's brother Mahmoud, who owns a slice of the bank, said in a phone interview with The Washington Post that "America should do something."

He suggested that, "if the Treasury Department will guarantee that everyone will get their money, maybe that will work." According to The Washington Post, deposits with the bank exceeded $1 billion.

But President Karzai the same day, in a news conference with U.S. Defense Secretary Robert Gates, said the Afghan government will guarantee the deposits.

"The Kabul Bank is safe," Karzai said.

Afghan Finance Minister Omar Zakhilwal also said, "Kabul Bank is not in danger."

The Finance Ministry issued a statement assuring government employees that they would continue to be able to deposit and withdraw their salaries at Kabul Bank. The statement added that the replacement of top executives would improve management and services and was "part of the life cycle of a business."

The bank's woes also tie into the web of corruption and personal connections that has soured many Afghans on their government.

Gen. David Petraeus, top commander of U.S. and NATO forces in Afghanistan, was asked about Kabul Bank's problems at a roundtable discussion with reporters on Thursday.

"I'm not really the guy in the financial sector here in Afghanistan but financial issues can have security issues and therefore we keep an eye on them," Petraeus said. "In this case our assessment is that the governor of the central bank has taken prudent measures. He has announced what it is that he has been doing to reassure depositors ... Our sense is that he and the minister of finance have taken a very prudent course."

The Associated Press contributed to this report.