FP: John B. Taylor, welcome to Frontpage Interview.

Taylor: I really appreciate the invitation. Thank you.

FP: What inspired you to write this book?

Taylor: When I returned to California from Washington in the summer of 2005 and began telling students, faculty, and many others about what went on inside the U.S Treasury after 9/11, I found that they were amazed. They were amazed to hear that so much happened, from freezing terrorists’ blood money to shipping tons of newly-printed currency into Iraq.  They were even more amazed that so much went right, from stopping more terrorist attacks to creating financial stability in Iraq.  And they were amazed by the heroic acts of the global financial warriors who made it all happen.  Some people, of course, showed a great deal of skepticism along with their amazement, which is not surprising given the cavalcade of negative books like Imperial Life in the Emerald City, State of Denial, or Fiasco that have been written about this period in U.S. history.  So I wrote the book to tell these amazing stories to more people and to document the key events in detail so historians could learn the truth and future policy officials could learn the lessons.  I figured I was in a pretty unique position to tell these stories because I not only attended the meetings where the President made the decisions, I also went to the places around the globe where my teams carried out the decisions. 

FP: Tell us a bit about the success on the financial front in the war on terror. How come we don’t hear about it?

Taylor: The financial front is very big. It includes freezing terrorist assets and implementing diplomatic strategies to persuade other countries to join us in the freezes.  It includes tracing money through the global financial system to gain intelligence about terrorist networks.  It includes setting up new financial systems in war torn-areas like Afghanistan, Iraq, and Liberia. It includes stopping the spread of financial crises that can destroy economies and thereby breed terrorism.  It is a third pillar in U.S. foreign policy, along with defense and diplomacy. Within the executive branch, you can think of the Departments of State, Defense, and Treasury as having primary responsibilities for each of these three pillars, and obviously the Treasury gets the financial front.

There are several reasons why you don’t hear more about it. First, it is largely a good news story, and bad news tends to crowd out good news. Unfortunately this is the reality, and even if there were no bias in news reporting it would be a serious impediment to getting these stories out.  Second, news reporters who cover foreign policy or defense issues are frequently unfamiliar with the financial issues. They tend to downplay them; this is understandable because financial issues have never played such a big role in U.S foreign policy, and this takes getting used to. Third, people guess that financial issues are uninteresting to read about and tend to tune out.  So in writing this book I tried to buck all three communication barriers by telling unusual but true stories about fascinating people who played an essential role in the fight against terror.

FP: There is a widely-held assumption that the U.S. didn’t engage in any planning for a post-Saddam Iraq. It’s a false assumption isn’t it?

Taylor: Yes, it is most certainly a false assumption. I can speak mainly about the financial area, and that is what I document in my book. For example, we began developing a financial plan for post-Saddam Iraq in the late summer and fall of 2002, months before the invasion. At that time we were, of course, hoping that Saddam Hussein would abide by the U.N. resolutions and that there would be no war. But it would be irresponsible not to plan.  Our goal was to prevent a financial collapse if Saddam’s government fell, and to lay the foundations for a new financial system and a new currency.  We started by getting the best financial intelligence we could.  We wrote and debated options papers. We decided on a two-part plan that began by paying Iraqis in dollars and ended with a new currency—a new dinar to replace the Saddam dinar which had Saddam’s face on it.  We chose people to go to Baghdad and implement the plan if there was an invasion. The plan was vetted by the National Security Council and approved by President Bush.  In the end the plan was carried out with precession. Twenty-seven plane loads of currency were printed in seven different printing plants around the world and flown into Baghdad where millions of Iraqis eagerly received them in exchange for their old Saddam dinars. Financial stability was restored and to this day the new Iraqi dinar remains a strong and stable currency. I believe the advance planning was a main reason for the success.

FP: Can you talk a bit about the unique vantage point that you had and have to write about the financial front in the terror war?

Taylor: I ran Treasury’s international division, which was at the center of the action.  You can think of this position as a financial analogue to a combatant commander on the military side—the job held by General Tommy Franks during the start of the Iraq war. I reported to the Secretary of the Treasury much like he reported to the Secretary of Defense. I attended NSC meeting with President Bush, presented plans, and reported on progress. I also went to the countries in which we were operating.  So it wasn’t just meetings in the White House, it was also the adventures on the ground that makes the vantage point unique. No one else on the finance front had this top-to-bottom perspective.  In addition, I think you could say that this is a unique period in U.S history.

FP: Can you paint a few portraits for us of some global financial warriors?

Taylor: The global financial warriors include the 350 people who worked for me in the U.S. Treasury, not only at the Treasury building but also at the World Bank, the IMF, and in 50 different countries in the world.  Brave people like David Nummy, who I sent to Baghdad in the days immediately after Saddam fell to stand up a central bank and finance ministry. Can you imagine how difficult it was to establish contact with Iraqi finance officials in those early days just after Saddam fell when the central bank and the finance ministry were largely destroyed by the looting?  David had previous experience working in the former Soviet Union just after it fell—he is a tough, dedicated, experienced professional. Another is Larry Seale who went to Kabul to prepare the first budget of the Karsai government. He did it on his laptop computer.  Larry later went to Liberia to do the same thing after the tyrant, Charles Taylor, was thrown out. There was a poster as you went through the main entry to the Treasury. It is one of those posters with Uncle Sam pointing at you. It says “We are at War…Are you Doing all you can?” That sums up the attitude that prevailed for these people. But there are many other financial warriors at other finance ministries and central banks around the world. People like the Ashraf Ghani, the finance minister of Afghanistan, who I call the Alexander Hamilton of his country, because he had to round up revenues from unruly governors (warlords) from the provinces of Iraq, much like Alexander Hamilton did in our country.  Another remarkably brave and dedicated person is the central bank governor of Iraq, Sinan Shabibi, who I worked with closely to get monetary policy operating and to obtain a large debt reduction for his country.

FP: So what are some weapons on the financial front that you would recommend the U.S. to use in the terror war as it ensues?

Taylor: I would mention two things. First we should make use of a powerful new source of financial intelligence—the SWIFT system—to obtain information about terrorists. As I describe in my book, SWIFT is a messaging system that has information about international financial transactions. Although details of the system were leaked and published in major newspapers like the New York Times last summer, it remains useful to the United States and our allies.  Second, we should expand and tighten the financial sanctions in order to combat nuclear proliferation in places like Iran and North Korea.  These new financial weapons have already been responsible for getting North Korea to agree to shut down its Yongbyon nuclear plant and to allow inspectors in, though they have still not followed through with the agreement. 

FP: Are you optimistic or pessimistic that the West can prevail against radical Islam?

Taylor:  I am convinced that this global war on terror will be a long war.  There are lessons from what has gone right and what has gone wrong so far.  From my perspective on the financial front, having a clear sense of the mission with dedicated teams of people resolved to carrying out the mission is essential for success. If we apply such lessons learned in the future, if America keeps its resolve, then we will prevail. So yes I am optimistic. But we need to maintain our effort and our resolve.  Doing so is more and more difficult as the memories of 9/11 recede further into the past. I hope the stories in my book contribute to the effort. 

FP: John B. Taylor, thank you for joining Frontpage Interview.

Taylor: I enjoyed this interview. Thanks for your questions and your interest.

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