JP Morgan Chase & Co has been selected to operate a bank the US is creating in Iraq to manage billions of dollars to finance imports and exports.
JP Morgan, the second-largest US bank by assets, will lead a group that includes 13 banks representing 13 countries to run the bank for three years, said Peter McPherson, the top US economic adviser in Iraq.
"Iraq will become important to these banks," McPherson told reporters in Washington in a conference call from Baghdad.
"These banks were making a view on the future of Iraq," McPherson said.
Operating the Trade Bank of Iraq will give banks access to the financial system of Iraq, the world's second-largest holder of oil res-erves, where foreign bank companies haven't operated since a policy of nationalization in the 1950s and 1960s.
The announcement came on the same day as a car bomb killed a top Iraqi cleric and at least 82 others, underscoring the danger of having a presence in the country in the wake of the war.
The trade bank initially will serve as an intermediary between Iraqi government agencies making purchases of equipment and supplies from companies based outside the country, he said.
As private enterprise becomes more important, Iraqi companies also will use the bank to support trade.
An Iraqi, most likely from a government ministry, will be selected to run the bank.
"We expect an Iraqi to be the chief executive officer and most of the employees will be Iraqi," McPherson said. JP Morgan will train bank employees.
58 banks bid
The bank will start off with US$5 million in cash and a US$95 million line of credit from a fund controlling Iraqi oil revenue operated under the auspices of the UN, McPherson said. Final details of the contract are being negotiated with a signing anticipated next month.
A total of 58 banks expressed interest for a contract that will yield "a very few million dollars" in fees to the winning consortium, McPherson said. The JP Morgan group was chosen because it was judged to be able to run a "high quality, cost efficient" operation, he said.
"We are pleased that the Coalition Provisional Authority has selected the JP Morgan consortium to help establish and operate the trade bank in Iraq," said Joseph Evangelisti, a JP Morgan spokesman. "This is a critically important assignment."
An analysis of Federal Election Commission data compiled by the Center for Responsive Politics shows that JP Morgan Chase gave US$105,705 to US President George W. Bush's campaign in 2000, making him the fourth-biggest recipient of Chase political contributions since 1990.
Bush contributions
The contributions came either in the form of direct donations from individuals who work at Chase or through the bank's political action committee, the study shows. The Center for Responsive Politics is a nonpartisan group that studies the effects of campaign contributions on public policy decisions.
In May, US Treasury Secretary John Snow said he called on JP Morgan chairman William Harrison and other former business associates for support on the Bush administration's proposed US$726 billion tax cut. Citigroup Inc chairman Sanford Weill, whose bank led a group that did not win the Iraq trade bank contract, also was contacted by Snow.
In 2001, Harrison and Weill were among Wall Street executives meeting with President in the aftermath of the Sept. 11 terrorist attacks.
Along with JP Morgan, other members of the winning bank group are Australia and New Zealand Banking Group, Standard Chartered PLC, National Bank of Kuwait SAK, Bank Millennium SA, Bank of Tokyo-Mitsubishi Ltd, San Paolo IMI SpA, Royal Bank of Canada, Credit Lyonnais, Caja de Ahorros y Pensiones de Barcelona, Standard Bank Group Ltd, Akbank TAS and Banco Comercial Portugues SA.
Other bidders
Wachovia Corp, Bank One Corp, Bank of America Corp and ABN Amro Bank NV also bidded for the contract.
At least one member of the group has recent experience with Iraqi banking. Credit Lyonnais, France's sixth-largest bank, maintained relations with Saddam Hussein's bankers after the 1991 Gulf War, partly in hopes of profiting if it became legal to do business in Iraq again, bank executives have said.
Iraq's biggest bank, state-owned Rafidain Bank, owns 3.23 percent of Union de Banques Arabes et Francaises, which is 44 percent owned by Credit Lyonnais and run by the Credit Lyonnais executives.
The US is trying to rehabilitate Iraq's economy and financial system, which have been devastated by three wars in as many decades and almost 13 years of UN economic sanctions that ended in May.
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