John Taylor: The Iraq Currency Plan Was a Big Success

John Taylor says the plan to ship U.S. currency into Iraq after the fall of Saddam Hussein was a big success:

Billions Over Baghdad, by John B. Taylor, Commentary, NY Times: Earlier this month, the House Committee on Oversight and Government Reform held a hearing that criticized the decision to ship American currency into Iraq just after Saddam Hussein’s government fell. As the committee’s chairman, Henry Waxman of California, put it .., “Who in their right mind would send 360 tons of cash into a war zone?” His criticism attracted wide attention, feeding antiwar sentiment and even providing material for comedians. But a careful investigation ... paints a far different picture.

The currency that was shipped into Iraq in the days after the fall of Saddam Hussein’s government was part of a successful financial operation that had been carefully planned months before the invasion. Its aims were to prevent a financial collapse in Iraq, put the financial system on a firm footing and pave the way for a new Iraqi currency. ...

The plan ... had two stages ... designed to work for Iraq’s cash economy, in which checks or electronic funds transfers were virtually unknown and shipments of tons of cash were commonplace.

In the first stage, the United States would pay Iraqi government employees and pensioners in American dollars. These were obtained from Saddam Hussein’s accounts in American banks, which ... amounted to about $1.7 billion. Since the dollar is a strong and reliable currency, paying in dollars would create financial stability until a new Iraqi governing body was established... The second stage of the plan was to print a new Iraqi currency for which Iraqis could exchange their old dinars.

The final details of the plan were reviewed in the White House Situation Room by President Bush and the National Security Council on March 12, 2003. I attended that meeting. Treasury Secretary John Snow opened the presentation with a series of slides. ... [A] slide indicated that we could ship $100 million in small denominations to Baghdad on one week’s notice. President Bush approved the plan...

To carry out the first stage of the plan, President Bush issued an executive order on March 20, 2003, instructing United States banks to relinquish Mr. Hussein’s frozen dollars. From that money, 237.3 tons in $1, $5, $10 and $20 bills were sent to Iraq. During April, United States Treasury officials in Baghdad worked with the military and the Iraqi Finance Ministry officials ... to make sure the right people were paid. The Iraqis supplied extensive documentation of each recipient of a pension or paycheck. ...

On April 29, Jay Garner ... reported to Washington that the payments had lifted the mood of people in Baghdad during those first few confusing days. Even more important, a collapse of the financial system was avoided.

This success paved the way for the second stage of the plan. In only a few months, 27 planeloads (in 747 jumbo jets) of new Iraqi currency were flown into Iraq from seven printing plants around the world. Armed convoys delivered the currency to 240 sites around the country. From there, it was distributed to 25 million Iraqis in exchange for their old dinars, which were then dyed, collected into trucks, shipped to incinerators and burned or simply buried.

The new currency proved to be very popular. It provided a sound underpinning for the financial system and remains strong, appreciating against the dollar even in the past few months. Hence, the second part of the currency plan was also a success...

One of the most successful and carefully planned operations of the war has been held up in this hearing for criticism and even ridicule. As these facts show, praise rather than ridicule is appropriate: praise for the brave experts in the United States Treasury who went to Iraq in April 2003 and established a working Finance Ministry and central bank, praise for the Iraqis in the Finance Ministry who carefully preserved payment records in the face of looting..., and yes, even praise for planning and follow-through back in the United States.