The plan to use Moammar Gadhafi’s frozen assets to fund the Libyan rebels faces legal obstacles according to this weekend’s Wall Street Journal story “Obstacles Loom on Path To Funding Libyans.” This reminds me of the plan to use Saddam Hussein’s frozen assets to fund payments to the Iraqi people in 2003. The plan was developed before the military invasion and was part of an overall plan for financial stability. I was Under Secretary of Treasury with responsibility for the plan. Legal obstacles arose then too, and we had to develop legal procedures to deal with them.
Treasury lawyers determined early on that the President of the United States could legally issue an executive order calling on U.S. banks to vest Hussein’s frozen funds with the Treasury, which would then transfer them to the Iraqis. But an obstacle was the risk of law suits from Saddam’s victims, who could make claims on the funds, prevent their transfer, and thus threaten the financial stability plan. To deal with this risk, we recommended that the executive order contain an exception for such victims—but only if they had already made claims—and that the order state that using the frozen funds for the Iraqi people was in the interest of the United States.
There are differences today—Saddam Hussein’s funds were frozen years before during the first Gulf war, but the legal procedures remain relevant. To overcome such obstacles, President Obama would have to say something like “I determine that using the funds to assist the Libyan rebels is in the interest of the United States.”