With assault rifles and acetylene torches, bands of robbers have left Iraq's banking system in tatters, creating one of the biggest hurdles to the country's reconstruction.
Baghdad's financial district is a wreck of blown-out vaults, burned-out buildings and blocks of broken glass. Smoldering at the center of the chaos is the Iraqi Central Bank, where all nine floors have collapsed into a hollow shell.
The US-led Office of Reconstruction calls the situation dire, with one official conceding "there is little or no banking in place, no money flow."
Rejuvenating the lifeblood of commerce is a high priority. Near the top of the list is rebuilding a central bank that can back a new national currency, shell out loans, set interest rates and manage the billions of dollars of debt.
"Without a central bank, there can be no banking system," said Rafael Jabba, director of economic activities for the US Agency for International Development in Iraq. "That's why we're arranging alternative forms of credit when the banks aren't up and running."
As part of the reconstruction plan, USAID will be rolling out micro-loans of between US$100 and US$250,000 to individual entrepreneurs and small to medium-sized businesses, Jabba said. He hopes the loans will start flowing within 45 days.
Jabba's team plans to visit the southern city of Basra in coming days to seek partnerships with local lenders. But a similar survey of Umm Qasr, the first major Iraqi city with restored power and water, proved disappointing. All four of its banks had shut down.
A few US Treasury officials are already in the region working to reboot banking. Peter McPherson, a former deputy US treasury secretary was appointed just last week to serve as the US government's liaison on financial matters related to the rebuilding of Iraq.
Decades ago, Iraq's financial system was considered one of the region's most modern; its pool of well-educated technocrats even helped other Middle Eastern countries, such as Jordan, establish their own central banks.
But the system was run to the ground by Saddam Hussein, who treated the Central Bank as his own private account.
According to Salah al-Sheikhly, a former Central Bank governor who has lived in exile since the 1980s, the Central Bank had been in ``chaos'' for years, stripped by Saddam of its power to independently regulate exchange rates and interest rates.
``In reality, Saddam and his sons control the printing presses and they are just manufacturing more money,'' he was quoted as saying in a US State Department publication last year.
The US Treasury now wants to develop a plan that unwinds the tightly controlled, nationalized financial system and transforms it into to a free-market economy.
There are a few private banks in Iraq and four state-run lenders dominate the system, Jabba said.
Preferential loans were given to Saddam's Baath Party loyalists. The Iraqi dinar was so weak that people preferred to store wealth in US dollars. Few ordinary Iraqis trusted bank vaults.
Over the weekend, US Marines, some in tanks, were guarding nine still-intact bank vaults in Baghdad that contained an estimated US$1 billion in gold and jewelry deposited there by the city's wealthy before the war.
One vault was in the Central Bank, which had caught fire before the looting. By some accounts, it holds some of Iraq's most precious items: ancient gold artifacts that were taken from the National Museum. It may also contain documents about Iraq's debt and possibly records of the regime's secret deposits or accounts.
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