Reporters at the State Department's daily briefings were very impatient with the bobbing and weaving of spokespersons Mark Toner on Tuesday and Elizabeth Trudeau on Wednesday when they were questioned about $1.31 billion in payments out of the U.S. Treasury's Judgement Fund listed as having occurred on January 19, two days after several hostages were freed. It was also the first banking business day of that week.
If these journalists, who can't be expected to know everything about banking system mechanics, had better help — or any help — back at their main DC offices, the world might know more about these transactions than the Obama administration has thus far been willing to admit.
It's reasonable to believe, based on information reported below which any financial journalist also should have been able to find, that Iran wanted the payments immediately, and wanted them structured to ensure that the funds involved could be readily converted to cash and/or sent to unidentified recipients.
State has admitted that the $1.31 billion represents the interest portion of a $1.7 billion settlement the Obama administration has said it negotiated with Iran relating to funds the Iranian government paid in advance for military hardware in the late-1970s before the Islamic coup which overthrew the Shah of Iran. The first $400 million was paid in pallets of cash which arrived in Iran on the same day as the hostages' release.
CNN reported on August 4 that "Iranian negotiators involved in the prisoner exchange said they wanted the ($400 million in) cash to coincide with the release of the Americans to prove a deliverable for the exchange even as they argued against the characterization of it as a ransom payment." In other words, the money was delivered to ensure the release of hostages. Clear-headed people recognize that as "ransom," and Iranian TV surely saw it that way.
Wednesday, Trudeau finally admitted that the $1.31 billion sent did relate to the Iranian settlement.
But what of its structuring, seen here after a search of Treasury's Judgement Fund transactions, as 13 payments of $99,999,999.99 each plus an additional payment of $10,390,236.28? Here's how State's Trudeau brushed off a reporter on Wednesday when questioned about the mechanics of the payment (bolds are mine throughout this post):
QUESTION: The staggering of the payments such that each would be just under $100 million – that was kind of odd, was it not?
MS TRUDEAU: I can’t speak to that, James. I really can’t. I’m sorry.
QUESTION: But you’re not denying that that was the case?
MS TRUDEAU: I just don’t have enough knowledge that I can actually adequately answer your question.
That Ms. Trudeau doesn't "have enough knowledge" is quite believable, given her generally dismal performance as State spokesperson. But because it had to submit a payment request to the Judgement Fund, someone in the State Department almost certainly does have enough knowledge. Otherwise, it's hard to see how the payments could have been processed in the manner they were.
Following yesterday's briefing, Associated Press reported Bradley Klapper reported the following:
... There was no explanation for the Treasury Department keeping the individual transactions under $100 million.
Briefing reporters last week, a senior U.S. official involved in the negotiations said the interest payments were made to Iran in a "fairly above-board way," using a foreign central bank. But the official, who wasn't authorized to be quoted by name and demanded anonymity, wouldn't say if the interest was delivered to Iran in physical cash, as with the $400 million principal, or via a more regular banking mechanism.
The reference to a "foreign central bank" by the "senior U.S. official" Klapper quoted appears to be a classic case of misdirection. That's because the default reason for the 13 payments of one penny less than $100 million has to be that any amount larger than that would not have been processed by the U.S. central bank, aka the Federal Reserve, as a "cash item."
Section 3.0 of the Fed's Operating Circular No. 3 relates to "Items We Do Not Handle as Cash Items" (emphasis: "Not"). That section includes the following dollar threshold:
We reserve the right to charge back an item if in our discretion we judge that circumstances require that it should not be handled as a cash item. We reserve the right to return an item payable by, at or through a bank that has been reported closed. We do not handle an item in the amount of $100,000,000 or more, and we reserve the right to return items in amounts of less than $100,000,000 that in our judgment are intended to avoid the $100,000,000 limit. The Reserve Bank may reject a purported electronic item and reverse any provisional credit that may have been given for it.
Thus, the payments, all but one kept just under $100 million, were from all appearances deliberately structured to ensure that the Fed would treat them as "cash items." Additionally, the supposedly "independent" Fed failed to reject the payments, even though they clearly were "intended to avoid" the $100 million limit.
The sub-$100 million size of these 14 payments enabled them all to be processed as "cash items." Thus, it appears that the Fed could have sent the funds after processing to the unnamed "foreign central bank" the AP's source mentioned as immediately disbursable "cash items." If Iran has a sufficiently friendly relationship with a financial institution in that same country, it's not at all hard to imagine that the "cash items" the Fed transferred to that foreign central bank could then have been partially or fully withdrawn as cold, hard cash in any foreign currency denominations desired and/or immediately wired in various amounts to, say, any number of terrorists or jihadist outfits.
Thus, it appears that the full story of the ransom the Obama administration refuses to call a ransom went as follows:
- Iran insisted that it would not free the hostages unless $400 million in cash arrived simultaneously, enabling its government to get a valuable photo-op to flex its muscles in front of its oppressed people and Islamic jihadists around the world.
- The Iranians further insisted that the $1.31 billion remainder be sent as "cash items" to a foreign central bank of their choosing, the identity of which would be kept anonymous.
- The Iranians further insisted that no one be allowed to inquire as to how it ended up using the money.
- The Iranians were immediately free to spread the money around wherever they pleased.
There may be other salient and yet to be identified factors at work here, but there seems to be little point in Obama administration defenders trying to deny that guaranteed expeditious delivery of the $1.31 billion was also a necessary element of obtaining the hostages' release, i.e., it was also ransom.
Additionally, as I noted earlier, if the State Department's beat reporters had gotten some help from other journalists with more experience covering the financial sector, America might know more about the inconvenient (for the Obama administration) items I have found and others that are out there. But the guess here is that informing the American people is not these news organizations' highest priority.
Certainly, as seen in this video segment from yesterday's briefing, the State Department doesn't feel it has any obligation to explain itself to U.S. taxpayers:
QUESTION: Just a quick one on this.
MS TRUDEAU: Okay.
QUESTION: ... you are saying about the confidential – you are respecting the confidentiality of the other nation. What --
MS TRUDEAU: Of international partners. (Plural? The AP's source referred to one "foreign central bank." — Ed.)
QUESTION: Yeah, but what about the people – that money has been paid from the U.S. taxpayers. And as a U.S. taxpayer, am I not supposed to know where the money is going, how it is going? Is that not worth giving it to the U.S. citizens?
MS TRUDEAU: I think you know, as the President spoke on January 18th, as the Secretary made clear, the resolution of the Hague settlement was in fact in the best interest of the U.S. taxpayer. In terms of the mechanics of this, what is made public, I can’t speak to from this podium.
In other words, taxpayers, State's evasive answer to the question really means "no."
Cross-posted at BizzyBlog.com.