The Cable

Meet your next Deputy Secretary of State: Thomas Nides

On Wednesday, just one day before Deputy Secretary of State Jack Lew was confirmed as director of the White House Office of Management and Budget, the Senate Foreign Relations Committee sat down with his incoming replacement, Thomas Nides.

Nides is currently the chief operating officer of Morgan Stanley, and previously worked as chief administrative officer of Credit Suisse First Boston, chief executive officer of public relations firm Burson-Marsteller, and senior vice president of Fannie Mae. He has also served in various government posts, including as chief of staff to U.S. Trade Representative Mickey Kantor, executive assistant to House Speaker Tom Foley, and assistant to House Majority Whip Tony Coelho.

"This is a job that Tom's been nominated for that will require managing a large, complex and sometimes unwieldy bureaucracy," said Sen. Joseph Lieberman (I-CT), who introduced Nides at his nomination hearing. "It is an assignment that I know he's uniquely qualified for based on firsthand experience with Tom's ability to manage another large, complex and unwieldy bureaucracy, namely my 2000 vice presidential campaign."

Nides began his remarks by praising Lew. "I come here today against the advice of a friend who warned me that it is never wise to follow a legend," he said.

Nides will be a key actor in implementing the State Department's first ever Quadrennial Diplomacy and Development Review, whenever it gets finished, and he promised to make "the effort to elevate civilian power ... a core element of our foreign policy.". But he's admitted that this effort "remains a work in progress."

His second priority, if confirmed, will be to streamline operations between State, USAID, and other government agencies. He warned that the tough fiscal environment might require State to find ways to trim spending after increasing budgets and expanding hiring over the last two years.

"We need to build a budget that aligns scarce resources with our highest priorities and finds efficiencies across bureaus and agencies working in the same areas," Nides said. "I will help the secretary make the strongest argument for the resources that State and USAID need. But I will also continue my predecessor's efforts to drive hard choices and cease lower-priority programs and activities that cannot be justified in this economic and fiscal climate."

Senate Foreign Relations Committee chairman John Kerry (D-MA) warned Nides that his job in fighting for State Department money was going to be a difficult one.

"You are going to have the primary responsibility for shepherding and defending the president's fiscal year 2012 international affairs budget request, and it's pretty obvious that we face an increasingly uncertain complicated budget environment, particularly when it comes to foreign affairs," Kerry said.

The committee also heard the testimony of three other State Department nominees, Suzan Johnson Cook to serve as ambassador-at-large for international religious freedom, William Brownfield to be assistant secretary for international narcotics and law enforcement affairs, and Paige Alexander, the administration's nominee to be USAID assistant administrator for Europe and Eurasia.


The Cable

37 embassies in Washington face banking crisis

The State Department confirmed that it is engaged in an intensive effort to assist over three dozen embassies in Washington who are all facing the possible closing of their U.S. bank accounts due to a growing movement by several major banks to drop embassies from their rolls.

The embassy of Angola in Washington was the first foreign embassy to have all of its U.S. bank accounts closed against its will. Bank of America closed all five of its accounts Nov. 9, after warning the Angolans of the decision through an unsigned letter only a week before with no explanation whatsoever, according to an Angolan diplomat speaking with The Cable. The State Department is working furiously to resolve the issue -- but if it doesn't succeed, the Angolan government is considering taking action against U.S. diplomats and businesses in Angola in retribution.

The Angolans have been imploring the State Department to help them sort through the problem, and as of Nov. 9 can no longer conduct regular embassy business, such as paying bills and salaries. They even cancelled their planned Nov. 16 event celebrating the 35th anniversary of their country's independence. The State and Treasury Departments have been trying to help, but have taken the position that the U.S. government has no ability to force American banks to do business with the Angolan government.

"It's not just an Africa issue, it's an issue with missions from around the world," said a State Department official, speaking to The Cable on background. "We're aware that some banks are looking to reduce their involvement with this type of business… But the U.S. government does not control U.S. banks. We cannot require them to maintain accounts with any client." 

The official said that up to 37 embassies in Washington could soon face a similar situation, as various banks are moving to get rid of their accounts. Seventeen of those embassies represent countries in Africa. The official declined to identify the names of the other foreign embassies affected or the names of other U.S. banks moving to drop embassy business.

The Angolans, frustrated and running out of options, are considering reciprocity measures, such as closing the bank accounts of the U.S. embassy in Angola, refusing to receive the credentials of incoming U.S. Ambassador Christopher McMullen, or closing the banks accounts of U.S. companies in Angola, such as Chevron, Exxon, BP, and Boeing, according to a source in the American business community with interests in Angola and who is closely monitoring the crisis.

"We don't know why it is happening," the Angolan diplomat said. "In the context of the Vienna Convention, we hope the American administration is going to take measures for us to operate here. The administration says that Angola is a strategic partner to the U.S., so we would like at least to be treated as a strategic partner… A diplomatic mission cannot operate anywhere without a bank account."

Article 25 of the Vienna Convention of 1961 on Diplomatic Relations states, "The receiving State shall accord full facilities for the performance of the functions of the mission."

Why are the banks running away from embassy business? According to the State Department official, several banks, including Bank of America, are calculating that the effort spent making sure government accounts are not being abused for money laundering purposes, sometimes with suspected links to terrorism, is becoming too complicated and costly to justify keeping the accounts.

"Some banks feel it's just not worth their time anymore, it's a cost of business they don't want to deal with," the State Department official said.

Assistant Secretary of State for African Affairs Johnnie Carson has had several conversations with Angolan officials about the matter and briefed Secretary of State Hillary Clinton on the crisis last week. Deputy Assistant Secretary of Treasury Daniel Glaser met with Angolan Ambassador Josefina Diakité twice before she was called back to the Angolan capital of Luanda for consultations on Nov. 16.

"The Department of State seriously regrets the inconveniences -- in some cases, very serious inconveniences -- that African embassies and others have been subjected to as a result of actions by a number of American commercial banks," Carson said in an interview Nov. 15.

The official acknowledged that the discussion of the issue inside the State Department "reaches all the way to the top," and said he was hopeful that a new bank had been found to handle the funds of the Angolan embassy, although nothing was final.

The Angolans are certainly hoping the State Department can come to their rescue. "Both countries are interested in having bilateral relations. I hope that the two governments can solve the problem," the Angolan diplomat said.

Bank of America's decision to close the Angolan embassy's accounts came only three months after their accounts with another bank, HSBC USA, were dropped as well. Our sources say the action is partly related to a February report issued by the Senate Permanent Committee on Investigations, led by Sen. Carl Levin (D-MI), which cited Angola "for an ongoing corruption problem, weak anti-money laundering (AML) controls, and a cash-intensive banking system."

Bank of America spokesman Jefferson George told The Cable, "Due to confidentiality, we can't comment on specific client relationships. In general, Bank of America Merrill Lynch is actively committed to providing banking services for the diplomatic community. This includes countries in Africa, where we have a number of clients."