White House welcomesÂ Shariah finance specialist
Obama selects (yet another Muslim) expertÂ in Islamic transactions as fellow
Muslim POTUS Hussein Obama, Cairo speech: “I am committed to working with American Muslims to ensure that they can fulfill zakat …” Â (more on this @ bottom of the page)
The Obama administration has announced its appointment of 13 White House fellows â€“ and the first person featured on its short list is a Muslim attorney who specializes in Shariah-compliant transactions.
“This year’s White House fellows are comprised of some of the best and brightest leaders in our country,” Michelle Obama said in the June 22 announcement. “I applaud their unyielding commitment to public service and dedication to serving their community.”
White House fellows spend a year as full-time, paid assistants to senior White House staff, the vice president, Cabinet secretaries and senior administration officials.
Samar Ali of Waverly, Tenn., (pictured) is the first name appearing onÂ the White House list. She is an associate with the law firm Hogan Lovells â€“ aÂ firm that claims to have advised on more than 200 Islamic finance transactions with an aggregate deal value in excess of $40 billion.
According to Ali’s biography posted on the White House website, “She is responsible for counseling clients on mergers & acquisitions, cross-border transactions, Shari’a compliant transactions, project finance, and international business matters. During her time with Hogan Lovells, she has been a founding member of the firm’s Abu Dhabi office.”
Hogan Lovells listsÂ Ali’s experience “advising a Middle Eastern university in the potential establishment of a Foreign Aid Conventional and Shari’ah Compliant Student Loan Program and advising a Middle Eastern client in relation to a U.S. government subcontract matter.”
“Our team members are at the forefront of developments in the Islamic finance industry,” Hogan Lovells boasts. “We help set standards for the sector. We have also advised on numerous first-of-their-kind transactions, such as the first convertible Sukuk, the first equity-linked Sukuk, the first Sharia-compliant securitization, the first international Sukuk al-mudaraba and Sukuk al-musharaka, the first Sukuk buy-back, and the first Multilateral Investment Guarantee Agency (MIGA) guaranteed Islamic project financing.”
Ali also clerked for Judge Gilbert S. Merritt of the U.S. Court of Appeals for the Sixth Circuit and Judge Edwin Cameron, now of the Constitutional Court of South Africa.
Promoting Islam and Shariah
The White House notes that Ali also led the YMCA Israeli-Palestinian Modern Voices for Progress Program and is a founding member of the first U.S. Delegation to the World Islamic Economic Forum. Ali was listed as aÂ member of the British delegation to the World Islamic Economic Forum in 2009 and as aU.S. delegate in 2010.
Shariah Finance Watch blog noted, “[I]t was at the World Islamic Economic Forum where key leaders declared Shariah finance to be “dawa” (missionary) activity to promote Islam and Shariah.”
In fact, the president of Indonesia, H. Susilo Bambang Yudhoyono, delivered a March 2, 2009,Â keynote address to Islamic leaders at the World Islamic Economic Forum in Jakarta during which he called for Islamic banks to do “missionary work in the Western world.”
“Islamic banking should now be able to take a leadership position in the banking world,” he said. “Islamic banks have been much less affected by the financial meltdown than the conventional banks â€“ for the obvious reason that Shariah banks do not indulge in investing in toxic assets and in leveraged funds. They are geared to supporting the real economy.”
He added, “Islamic bankers should therefore do some missionary work in the Western world to promote the concept of Shariah banking, for which many in the West are more than ready now.”
‘We didn’t consider terrorists to be Muslims’
Ali received her law degree from Vanderbilt Law School and served as the first Arab-Muslim student body president at Vanderbilt. She has interned for the Islamic International Arab Bank in Amman, Jordan.
According to Vanderbilt Law School, Ali’s mother immigrated to the U.S. from Syria, and her father is Palestinian. He left the West Bank town of Ramallah at age 17.
America.gov reported that Ali said her parents taught her to “never forget where we came from and to never forget where we are now.”
“I will always be Arab and I will always be American and I will always be Muslim,” she said.
Ali spoke out at a campus memorial service days after the Sept. 11 terrorist attacks.
“In my opinion,” she told the Washington File, “Al-Qaida is trying to ruin Islam’s reputation and we are simply not going to let them win this fight. If someone has a political agenda, they need to call it what it is, and not disguise it in the name of a religion or use the religion to achieve their political goals. This is simply unacceptable.”
While she said she grieved the loss of thousands of American lives, Ali told the File she grew concerned about whether Americans would assume that she, as a Muslim and Arab-American, approved of those attacks.
“Thus, I was worried that many of my fellow citizens, would not realize that just because my friends and I are Muslims and Arabs, did not mean that we were part of or even agreed with the terrorists who caused September 11,” she said. “We didn’t even consider the terrorists to be Muslims. I was worried that people would confuse Islam with Osama Bin Ladin and his agenda, that they would confuse his agenda as the agenda of all believers in Islam.”
Shariah already is moving into some elements of American society, with aÂ lawsuit pending over U.S. government involvement in a financial institution that accommodates Shariah requirements in its business operations.
WND also reported in November 2008 that the Treasury Department sponsored and promoted a conference titled “Islamic Finance 101.”
Islamic finance is a system of banking consistent with the principles of Shariah, or Islamic law. It is becoming increasingly popular, having reached $800 billion by mid-2007 and growing at more than 15 percent each year. Wall Street now features an Islamic mutual fund and an Islamic index. However, critics claim anti-American terrorists are often financially supported through U.S. investments â€“ creating a system by which the nation funds its own enemy.
In his July 2008 essay, “Financial Jihad: What Americans Need to Know,” Vice President Christopher Holton of theÂ Center for Security Policy wrote, “America is losing the financial war on terror because Wall Street is embracing a subversive enemy ideology on one hand and providing corporate life support to state sponsors of terrorism on the other hand.”
Holton referred to Islamic finance, or “Shariah-Compliant Finance” as a “modern-day Trojan horse” infiltrating the U.S. He said it poses a threat to the U.S. because it seeks to legitimize Shariah â€“ a man-made medieval doctrine that regulates every aspect of life for Muslims â€“ and could ultimately change American life and laws.
Some advocates claim Islamic finance is socially responsible because it bans investors from funding companies that sell or promote products such as alcohol, tobacco, pornography, gambling and even pork.
However, many Islamic financial institutions also require industry participants to adhere to tenets of Shariah law. According to Nasser Suleiman’s “Corporate Governance in Islamic Banking, “First and foremost, an Islamic organization must serve God. It must develop a distinctive corporate culture, the main purpose of which is to create a collective morality and spirituality which, when combined with the production of goods and services, sustains growth and the advancement of the Islamic way of life.”
Three nations that rule 100 percent by Shariah law â€“ Iran, Saudi Arabia and Sudan â€“ hold some of the most horrific human rights records in the world, Holton said.
“This strongly suggests that Americans should strenuously resist anything associated with Shariah.”
Tenets of Shariah
In his essay, “Islamic Finance or Financing Islamism,” Alex Alexiev outlined the following tenets of Shariah taken from “The Reliance of the Traveler: The Classic Manual of Sacred Law”:
- A woman is eligible for only half of the inheritance of a man
- A virgin may be married against her will by her father or grandfather
- A woman may not leave the house without her husband’s permission
- A Muslim man may marry four women, including Christians and Jews; a Muslim woman can only marry a Muslim
- Beating an insubordinate wife is permissible
- Female sexual mutilation is obligatory
- Adultery [or the perception of adultery] is punished by death by stoning
- Offensive, military jihad against non-Muslims is a religious obligation
- Apostasy from Islam is punishable by death without trial
- Lying to infidels in time of jihad is permissible
Alexiev wrote that many Islamic financial institutions claim Shariah-Compliant Finance “derives its Islamic character from the strict observance of the ostensible Quranic prohibition of lending at interest, the imperative of almsgiving (zakat), avoidance of excessive uncertainty (gharar) and certain practices and products considered unlawful (haram) to Muslims …” However, he said, “[E]ven a casual examination of the reality of Islamic finance today reveals it to be a bogus concept practiced by deceptive ploys and disingenuous means by practitioners that are or should be aware of that, but remain predictably silent.”
Shariah finance institutions have funded militant Islamism for more than 30 years. Alexiev cited Islamic Development Bank’s hundreds of millions of dollars in contributions to Hamas in support of suicide bombing. Bank Al-Taqwa and other banks and charities run by Saudi billionaires have funded al-Qaida activities.
Additionally, Shariah law mandates that Muslims donate 2.5 percent of their annual incomes to charities â€“ including jihadists. When 400 banks regularly contribute to such charities, potential financial sums can be virtually limitless.
If Western banks endorse Shariah, they will “end up becoming what Lenin called useful idiots or worse to the Islamists,” Alexiev wrote. “And it is a very thin line between that and outright complicity in the Islamist agenda.”
Zakat is used to finance terrorism
Contrary to Obama’s (and ISNA’s) claim, however, there are no rules making it “harder for Muslims to fulfill their religious obligation.” What rules are in place are laws prohibiting material support to terrorist groups. As we recently witnessed inÂ the Holy Land Foundation (HLF) trial,Â zakat is used to finance terrorism. HLF â€“ considered the largest Muslim charity group in the U.S. â€“ sent at least $12.4 million to the MB-linked Hamas. In fact, Shari’ah Law mandates that a portion ofÂ zakat goes towards financingÂ jihad.
Yousef al-Qaradawi, the spiritual leader of MB, wrote in 1999 that “Declaring holy war to save … Muslim lands is an Islamic duty, and fighting for such purposes in those occupied territories is the Way of Allah for whichÂ zakat must be spent.” As of this April, 27 Islamic charity groups â€“ including the three largest in the U.S. â€“ had either been indicted or designated as sponsors of terrorism by the Treasury Department. Obama’s promise may have pleased MB, but opening the door for American dollars to financeÂ jihad is abhorrent.
A Caliphate of Toxic Assets
When a pro-terrorist organization announces its intention to launch a financialÂ jihad against the West, it is well worth learning their methods — especially when they promote a religious pseudo-financial scheme through largely unregulated practices purported to be safer than the conventional. But ultimately, the new assets are constructed with as little, and perhaps considerably less, transparency than the last wave of toxic assets that hit the economy, with catastrophic results.
The Muslim organization Hizb Ut Tahrir capitalizes on Muslim Brotherhood founder Hassan al-Banna’s 20th century derivative,encouraging followers to build a parallel financial structure. Al-Banna envisioned the resultantÂ Shari’a-compliant finance as a “back door” into Western financial markets and institutions through which to supplant liberty and prosperity with Islam. Muslim clerics including MB spiritual leader Yusuf al-Qaradawi promoteÂ Shari’a finance as generally safer than Western investments, adiversification method to steady personal assets — and a stable economic system that should replace capitalism. Call it “financialreplacement theology,” if you wish.
In July, Hizb Ut Tahrir plans to launch its U.S. arm with a huge Chicago “Khalifah conference” heralding the coming Caliphate and global Islamic supremacism. After 9/11, Germany and Sweden outlawed Hizb Ut Tahrir. In July 2005, Pakistan’s then-president Pervez Musharaf warned Britain not to tolerate its continued U.K. presence. But in the U.S., Hizb Ut Tahrir has proudly announced intentions to replace capitalism with Islam.
Founded five years into Jordan’s illegal occupation of East Jerusalem in 1953, Hizb Ut Tahrir labels itself “peaceful” but strategically objects to violence only for the time being. The group sympathizes with the Muslim Brotherhood, considers Europe’s democracies “a farce” — and deems the U.S., UK, and Israel works of “the devil” — and seeks to impose Islamic law (Shari’a) worldwide.
Major banks from Citigroup, HSBC, Chase, Bank of America and Lloyds TSB — probably unaware of the etymology of Islamic finance — established subsidiaries offeringÂ Shari’a-compliant products. Mutual funds at Principal Financial Group, UBS, Amana Funds and SEI Investments, among others, followed suit. Especially late last year as the devastating toll of sub-prime mortgage lending mounted, clients were assured that Islamic banking — in many respects a dangerous financial fad — was much safer than other banks and investment houses.
Yet bad economic news has not escaped the supposedly secure Islamic investing sector. Islamic securities can also (like all other asset classes) go into default, moreover. Holders of East Cameron Partners LP’s “safe,” asset-backed Islamic bonds (sukuk) now line up before a Louisiana bankruptcy judge with all the other hapless creditors of the Texas-based Easter Cameron Oil and Gas Co. that filed for Chapter 11 reorganization last October.
The East Cameron default was no one-time Islamic finance anomaly, either. In May, Kuwait’s Investment Dar Co. — 50 percent owner of the Aston Martin Lagonda luxury car manufacturer — defaulted on a $100 millionÂ sukuk. And in June Saad Group Islamic bonds traded at a quarter of their “face” value — that is, the the roughly $650 billion price at which issued by Saudi billionaire Maan al-Sanea’s company. The Saad Trading Contracting & Financial Services subsidiary, like East Cameron, went into financial restructuring, aka bankruptcy, after the Saudi Central bank froze the al-Sanea family accounts.
As I’ve often previously warned, events now show thatÂ Shari’a banking may prove more susceptible to market dislocations than other financial sectors.
Islamic bonds employ “some of the most complex” Western structured finance tools ever created. They transform liquid, traceable cash flows from interest-bearing debt into illiquid assets — that cannot be easily unwound. In the 1980s, bond sponsors transformed trillions of dollars in cash flow claims on illiquid real assets into liquid, traceable mortgage-backed “pass-throughs” and “collateralized debt obligations” (CDOs).
The Muslim Brotherhood quickly re-branded the “special purpose entities” (SPEs) — that kind that, coincidentally, sank Enron — as Islamic “special-purpose vehicles (SPVs).” Shari’a banks use these vehicles to “restructure interest-bearing debt, collecting interest [as] rent or [a] price mark-up.” Issuers ofÂ sukuk al-ijara –Â Shari’a bonds like those now in default — sell hard assets to SPVs, which sell share certificates to fund their investment and in turn lease the purchased assets back to theÂ sukuk issuers, collecting the principal plus interest that they then pass to sukuk investors as “rent.” But now, sukuk issuers are defaulting on “rent,” implying that SPVs can’t sell or return property to issuers when theirÂ sukuks mature.
That means, in essence,Â Shari’a finance is a sham.Â “There is no such thing as interest free investment,” warns Columbia MBA Joy Brighton, echoing Rice University Islamic economics and finance chairman Mahmoud el-Gamal. “All Islamic finance today is interest based,” el-Gamal complained in theÂ Financial Times two years ago. Furthermore, Islamic finance features a few other unique “complexities,” namely:
- “Shari’a regulations can override commercial decisions.”
- Documentation is not standardized
- Inter-creditor agreements can be complex
As U.S. financial institutions crumble, rattling markets, Congress has focused on regulating the opaque, previously unregulated securities called credit default swaps that Brighton describes as guaranteed boxes of counter-party risks. “One party pays a premium, the second guarantees payment, and a third guarantees the guarantor.” AIG, for example, guaranteed payment on billions of dollars worth of sub-prime mortgage loans. “The credit default swap is the guarantee, and AIG bore the default risk burden in exchange for upfront fees on maybe trillions of dollars in loans.”
But credit default swaps are old news, Brighton says. “A new generation of toxic assets has not yet hit anyone’s radar.” While touted as such, Islamic securities aren’t immune to default. Many more Islamic issues are likely to succumb as the global economy worsens.
“Islamic banking is in the toxic derivatives genre,” says Brighton. Each counter-party agreement within its complex “boxes” of interwoven counter-party risks, is a contract for “payment” and “delivery/receipt of funds.” Issuers create derivatives when they “peel off and resell pieces” from individual securities containing multiple counter-party contracts. One default by a party to any of the interwoven contracts in a “box” can cause its whole structure to collapse.
Moreover, Islamic finance is doubly toxic. Many banking corporations have created Islamic subsidiaries, says Brighton — segregated oil wealth managed by “outside money managers” and Islamic radicals who don’t circulate money globally, but keep it “within the Islamic community, as a charity- and jihad-funding mechanism.” They’re just another economic time bomb that financiers have blindly bought.