By Bridget Johnson - 09/05/10 05:28 PM EDT
Washington sought to tamp down speculation that the U.S. would help bailed out the troubled Kabul Bank, while media reported Sunday that the Afghan financial institution had stabilized after a weeklong run on the bank.
The Associated Press reported that the governor of the country's central bank said that Kabul Bank was on sound footing, while opposition leader and former presidential candidate Abdullah Abdullah called a Sunday press conference in which criticized oversight and said he had heard the central bank had already given Kabul Bank $200 million. The central bank denied that allegation but said considerations over whether to help Kabul Bank were still under way.
Washington quickly responded to speculation that the U.S. would be involved in a bailout.
"This is an Afghan issue. They are taking immediate steps to ensure the stability of Kabulbank and to protect the financial assets of the Afghan people," Deputy Treasury Secretary Neal S. Wolin said in a statement.
"While we are providing technical assistance to the Afghan government, no American taxpayer funds will be used to support Kabulbank."
The New York Times reported Saturday that the Afghan Central Bank had pulled in $300 million that had been held in the U.S. Federal Reserve to guarantee the bank's liquidity.
The panic of mass customer withdrawals began when the Central Bank ousted Kabul Bank's CEO and chairman for lending hundreds of millions of dollars to allies of President Hamid Karzai and making risky real-estate investments in Dubai.
Karzai has said his government will guarantee customers' deposits.