U.S. Judge Extends Order Barring Bank Transfer of Cash to Panama

A federal judge on Monday extended for 10 days a temporary restraining order barring two New York banks from transferring more than $50 million to cash-strapped Panama.

But U.S. District Judge Lloyd MacMahon reserved decision on a motion for an injunction that would bar U.S. banks permanently from transferring funds to Panama.

Last Wednesday, supporters of deposed President Eric A. Delvalle won a court order in New York barring four U.S. banks from transferring cash to the regime of strongman Manuel A. Noriega.

The legal maneuvers forced all Panamanian banks to shut down last Friday under government order. The order effectively halted a run on the banks by depositors but has forced the country’s businesses and industry to operate on a cash-only basis. The U.S. dollar is legal tender in Panama.

Kenneth Handal, a lawyer representing Delvalle, told the court that two of the four defendant banks have agreed to stop sending cash to Panama.

Republic National Bank of New York put about $10 million of Panamanian funds in escrow in a Federal Reserve account in New York, he said, while Irving Trust agreed to withhold all Panama-destined funds except for small amounts earmarked for private commercial activity.

Marine Midland and Bankers Trust are the banks affected by the restraining order.