CHAPTER 2

Financial Reconstruction in Iraq

Discussions about possible plans for the financial reconstruction in Iraq began internally in late 2002 with a specific plan approved in early 2003. The six speeches in this section trace out—in real time—the progress on actually implementing that plan. The first item—testimony before the Senate Foreign Relation Committee with Senator Lugar as Chair—took place after the plan had been approved by President Bush and after the initial phase of paying Iraqis in U.S. dollars, but before the actual start up of the currency exchange. (The actual start up date had not yet been determined or authorized by Paul Bremer, the head of the Coalition Provisional Authority—CPA). The testimony reviews the progress on paying Iraqis in dollars and several other issues, and it previews how the plan for the new currency would work. One week after that June 4 testimony I traveled to Iraq to visit personally with our financial experts and to make sure that the currency exchange began as soon as possible. Ambassador Bremer agreed, seeing the advantages of expediting the exchange, and he gave the final go-ahead during my visit with the start up date to begin on October 15. That gave us about four months to print and deliver the new currency to Iraq, which eventually took twenty-seven 747 planeloads.

The second item—testimony before the Senate Banking Subcommittee on international issues with Senator Hagel as Chair —reviewed more tactical details on how the currency exchange would take place, since by then it had been approved and detailed plans were underway. However, because the actual exchange had still not begun, I could still only preview our plan. The same was true of the third speech given before a commercial banking group; it describes the situation in the banking sector in more detail.

The last three speeches in this section were given after the Iraqi currency exchange had been completed. The February 11 Senate testimony—again before Senator Hagel’s committee—was a real pleasure for me to give because I could testify to the amazing success story that had just been a “plan on paper” in my previous appearance before that committee. The fifth item is a one page statement I issued one year after the currency exchange was over. And finally, just after the successful election in January 2005, I went to Iraq (this would be my third visit) to meet with our team and with the Iraqi economic officials. On this visit I gave a short press statement about the progress being made not only on the currency but in several other financial areas, including the stability of the dinar, the operations of the central bank, and the international agreement to reduce Iraq’s debt by 80 percent.

1. Reconstruction in Iraq: Economic and Financial Issues, Senate Foreign Relations Committee, June 4, 2003

2. Financial Reconstruction in Iraq: Strategy and Tactics, Subcommittee on International Trade and Finance of the Senate Banking, Housing, and Urban Affairs Committee, September 16, 2003

3. Reconstruction of Iraq's Banking Sector, Renaissance Mayflower Hotel, Washington, D.C. October 10. 2003

4. Financial Reconstruction in Iraq, Subcommittee on International Trade and Finance of the Senate Banking, Housing, and Urban Affairs Committee, February 11, 2004

5. Remarks on the Occasion of the One-Year Anniversary of the Iraqi Currency Exchange, October 22, 2004

6. Press Statement on Visit to Iraq to Discuss Progress on Monetary and Financial Issues, Baghdad, Iraq, February 8, 2005