Iraqi Banks Struggle to Get Back on Their Feet

The crowd surged forward, pressing against the locked front door of the bank, raising hands to clutch at a metal window grille and shout out desperate pleas to the few employees inside.

“I have no money! I have to feed my children!” called out Houla Abdul Jaber, 52, waving her bank passbook with its columns of transactions neatly inked in. “Please, please, you must give me a little of what is in my account!”

Hamid Zgair, a ragged laborer who looked far older than his 31 years, pulled out a wad of new 10,000-dinar notes, which should be worth about $5 each. But many of those in circulation are being shunned by merchants as stolen or possibly counterfeit.

“They are worthless -- no one will accept them,” he said. “And the bank will not change them to other notes for me. I am their customer and they should help me, but they will not.”

Banks have been reopening all over Baghdad after having barricaded their premises -- if they could -- during the wave of destruction and plunder that swept the capital after it fell to U.S. forces. But many have little to offer customers other than promises.

Hafed Arubeyeh, manager of this office of Rafidain Bank in a poor southeastern district of the city, said his branch had not been looted. But he has not received authorization or instruction from his superiors on how to disburse funds to customers.

“Maybe they can get some of their money next week,” he said. “Inshallah.” God willing.

Despite displays of disorder and uncertainty like the one outside Arubeyeh’s bank, what may be most remarkable about the Iraqi economy is that it is functioning at all -- at least on the street level.

With the Central Bank burned and looted, the Iraqi dinar is no longer backed by national reserves. The Finance Ministry tower is gutted and soot-stained, its three-story portrait of Saddam Hussein left half-charred. The downtown head offices of the two main state-run commercial banks -- Rafidain and Rashid -- were looted, along with hundreds of their branches.

But the dinar, with all of its denominations bearing Hussein’s image, is still being used to buy goods, settle debts, make loans.

“In a situation like this, there just has to be a general agreement that a currency has value. People are presuming that at some point it will be changed, one piece of paper for another,” said Joe Saba, Middle East country manager for the World Bank. “But in an urban environment, in particular, that has to be the working assumption in order for people to pay for things.”

Because the main bill in circulation is the 250-dinar note -- worth about 12 cents -- people use stacks and bundles of bills to make purchases. A can of soda costs a thin sheaf of notes; a few pounds of meat runs to a pile several inches thick. Big-ticket items -- a sheep, for example, priced at the equivalent of $50 -- would require a bagful of cash.

No one has yet made a reckoning of the cash that has gone missing from banks and national reserves, or how much might have been spirited out of the country by Hussein and his inner circle. But early indications are that it is an enormous amount. More than $700 million in U.S. currency, believed to have been appropriated by Hussein and associates and stashed away for safekeeping, has been found in the capital.

Even at individual bank branches, managers are hard-pressed to estimate their losses because files were burned and computers stolen in the spree of looting.

“I could guess, but it would only be a guess,” said Ibtisam Mohammed, deputy manager of a Rashid branch wrecked by looters. “We are only at work because we were told to come to the office. There is nothing here, no way to even begin working.”

In her branch, the acrid smell of smoke still hangs over the shattered tellers’ windows. Sheaves of half-burned paper litter the floor, along with debris from the ceiling: Looters even yanked down the light fixtures.

“A lot of customers shout at us or cry. They are so, so worried about their savings. I tell them it will be all right, but I’m not sure it will,” Mohammed said. “And all of us who worked here had money in this bank too.”

Economists in the fledgling U.S. administration of retired Army Lt. Gen. Jay Garner are consulting with Iraqi bureaucrats to try to get at least a rudimentary banking system up and running and quell the rising panic over lost savings.

The vacuum is being filled -- at least for the moment -- by private banks, which accounted for only a small share of the industry in Iraq before the war but now have assumed new importance. Some were better able to preserve their assets because of well-organized security.

“The looters came three times, a dozen or so each time, and armed, but we fought them off,” said Ahmed Abud Hussein, head of security at the private Middle Eastern Bank, cradling his Kalashnikov rifle. “We showed them they couldn’t just take the money, like at other banks.”

U.S. soldiers now stand guard outside the main financial institutions -- the Central Bank, large bank branches, bank headquarters -- but they arrived after the worst of the looting was over.

U.S. dollars are increasingly coming into circulation, particularly in the capital. Economists predict a multi-currency economy will take hold in the coming months, with Jordanian dinars, Syrian pounds, Kuwaiti dinars and euros all in use pending the introduction of a new Iraqi currency.

The Iraqi dinar’s recent fluctuations have been a barometer of the nation’s fortunes. Since combat ended, the currency has strengthened, now trading at about 2,000 to the dollar. Economists say that points to a basic confidence that things will get better.

For Iraqis buffeted by years of financial hardship, however, the latest economic storm is difficult to bear.

“I am a doctor, and once I had a good life,” said Walid Fulqa, part of an angry crowd outside a Rafidain branch. He had just tried fruitlessly to withdraw money from his savings account.

Tears suddenly welled in his eyes.

“Money is only a small part of it,” he said. “But it represents something -- social order and lawfulness and some kind of certainty. We need that here in this country. We need that very badly.”