Under the very appropriate headline Could This Possibly Be True?, David Farber forwards this story that seems like pure tin-foil. And yet.
Of the $18.4 billion that Congess appropriated 16 months ago for postwar reconstruction in Iraq, only $3.6 billion has been spent to date. There has been much head-scratching over this uncharacteristic failure of the Pentagon to spend money promptly.
A recently unearthed portion of a Defense Department memo sheds some light on the issue, suggesting that more than $14 billion earmarked for reconstruction was actually invested on Wall Street. The memo's author and date are unknown. This portion of the apparently classified document — marked “page 3” — was mistakenly sent to Mid-America Seed Savers, a nonprofit organization in Lawrence, Kansas whose members had filed a Freedom of Information Act request for documents related to the Army's alleged distribution of genetically engineered wheat seed to farmers in Iraq. The memo fragment is reproduced here in full:
[page heading] Reconstruction fund enhancement – p. 3
[…] that among these, the scenario with greatest potential was investment in a medium-risk portfolio of U.S.-based securities. To accomplish this without incurring excessive and unwarranted scrutiny, the Secretary issued a classified order creating the Office of Special Brokerage Services (OSBS), to which management of the reconstruction funds was assigned. The OSBS, quietly through third parties, purchased approximately $5 billion in stock in February, 2004. Another $9.2 billion was invested the following month. As of December 31, 2004, the fund had shown a net growth of approximately -1.7%.
The negative growth observed to date should not be cause for gloom. This is a long-term investment of behalf of the Iraqi people. According to OSBS projections, the fund's assets will achieve a value of $38.9 billion by a decade from now, assuming vigorous growth in the US economy.
It is important to compare that figure with the almost-certain undesirable outcome of spending the money directly on infrastructure enhancement. The past two years' experience shows that new public works run a significant risk of damage or even instantaneous 100% depreciation due to hostile and friendly combat activities. And, as the CJCS [Chairman of Joint Chiefs of Staff General Richard Myers] has noted, insurgencies typically last 7 to 12 years. If invested on the ground in Iraq today, the reconstruction funds might well be worth precisely zero to the Iraqi people a decade from now.
Prudent investment, on the other hand, can help Iraq rebuild while becoming an ownership society. The OSBS has assigned portions of the fund's assets to individual citizens, based on voting rolls from the January election. Although he or she is not yet aware of it, each and every Iraqi voter now owns a Personal Reconstruction Account (PRA) that will continue to grow in value, safely, until violence in Iraq subsides and normal economic activity can resume. At that point, Iraqi citizens will be able to draw on their PRAs as needed, putting that money to work in their economy and stimulating private-sector solutions to the problem of reconstruction.
PRAs will provide Iraqis with what they desire most: freedom of choice. Under this plan, money will go directly into the pockets of the Iraqi people, for whose benefit Congress intended it. Furthermore, the use of voting records to allocate PRAs will ensure that impetus for rebuilding the country will come from those who have demonstrated a commitment to the democratic process — not from Muslim extremists or Baathist dead-enders.
The question of whether to inform American or Iraqi citizens of OSBS activities and plans is a difficult one. Taking into consideration current political realities, it is probably best not [… end of page]