Three for Chapter 11

by Alyssa A. Lappen
FrontPage Magazine | Dec. 15, 2008

As North America headed into the 2008 Winter Solstice, economists darkly predicted that U.S. unemployment would rise from a current 6.7 percent to 8.1 percent by December 2009. On average, 54 economists surveyed expected the nation to lose more than 160,000 “non-farm” jobs monthly by then. Even economists, notorious for making inaccurate predictions, clearly saw financial conditions spinning out of control, driven by subprime mortgages, failing banks â€“ and desperate U.S. automakers.

What to do? As automakers pushed for a $14 billion bailout, the latest Congressional proposal snagged on excessive labor costs. President Bush apparently succumbed to scare tactics claiming that a single car maker “shut down” could cost up to 3.3 million jobs. Last Friday, December 12, Bush proposed redirecting some of the Treasury Department’s $700 billion financial Troubled Asset Relief Program (TARP) to General Motors, Ford and Chrysler, calling it “irresponsible” to allow them to fail.

Not everyone agrees with climbing on the bailout bandwagon. “Let market forces play out,” advises associate dean at Dartmouth’s Tuck School of Business, Matthew J. Slaughter. “The way to solve that problem is not to lend more money to GM,” agrees investment activist William Ackman. New York Times business reporter Micheline Maynard reminds, “Bankruptcy does not mean liquidation.”

Filing for Chapter 11 bankruptcy may be complex, even messy, but reorganizing a company is not a prescription for failure. No industry ever walked from owing $100 billion to total shutdown in one step. Rather, reorganization offers troubled companies the best possible opportunity to reshape and rejuvenate themselves. Six major airlines—including United, Delta, Northwest, and Continental—all filed for Chapter 11 and emerged with real hopes for profit. Such large and small steel companies as National Steel, Bethlehem Steel, Wheeling-Pittsburgh, Kaiser, Bayou, Weirton Steel, and many others have leveraged Chapter 11 to emerge as stand-alone companies—or to sell a leaner version of themselves to competitors.

The same is possible for Detroit: If GM, Ford, and Chrysler went belly-up, George Mason University economics chairman Don Boudreaux forecasts, jobs would not evaporate in disproportionate numbers. Bankruptcy would not cause their factories, machines, markets, worker skills, contracts for raw materials—or even consumer demand—to “disappear.” Reorganization, Bourdreaux says, is the best way to discover demand—and if it is found wanting, auto industry productivity is usable elsewhere, he notes. A bailout would only waste that productivity, pouring it inefficiently into broken companies, impeding their recovery, and saddling taxpayers with huge subsidies. There are also other side effects. Unless big, unprofitable companies seek Chapter 11, he warns, eventually all U.S. companies will stream into Washington for their “special subsidy” and “blank check.”

For instance, auto parts manufacturers are hurting, too. Since October 2000, U.S. auto parts suppliers lost 323,000 jobs, 38 percent of their total. By the end of 2010, one forecaster expects up to 25 percent of auto parts suppliers to file for Chapter 11, and shave another 100,000 jobs from their payrolls. But no one stopped buying U.S. auto parts—and auto parts makers aren’t lining up in Washington for handouts. Yet.

There are a number of advantages to a timely reorganization for the auto industry. In Chapter 11, (not Chapter 7 liquidation), GM:

* Could reorganize and negotiate with creditors to settle its debts;
* Could compete with foreign car makers, which garnered more than 30 percent of the 7.8 million retail auto sales in 2006, up from 25 percent in 1985 (the year U.S. sales peaked at 11 million); and
* Could escrow funds to back GM warranties, reassuring consumers.

There are two other significant reasons to consider a bailout:

* GM stockholders have little to lose. Shares, which traded down to $1.70 in the last 12 months, even at their $3.94 close on December 12, have lost roughly 90 percent of their value since January; and
* Reorganization money is available from surpluses within General Motors itself. GMâ€™s pension for 400,000 retirees is overfunded by $18.8 billion, and its salaried workersâ€™ plan is overfunded by $500 million. A $500 million shortfall for hourly workers could perhaps be funded by other GM pension surpluses.

Despite the advantages, General Motors Corp. CEO Richard Wagoner says he’s loathe to frighten potential buyers with a Chapter 11 filing. Yet as Chrysler’s chance of filing bankruptcy has risen, so has its market share, from 8.7 percent in July to 11.5 percent in November.

Wagoner may be bluffing. It seems he has plans for the inevitable. According to the Wall Street Journal, GM hired bankruptcy maven Harvey Miller of Weil Gotshal & Manges, restructuring veteran Jay Alix, William Repko of Evercore Partners, Arthur Newman of Blackstone Group, and Martin Bienenstock at Dewey & LeBoeuf LLP. Miller worked on Lehman Brothers, Bethlehem Steel Corp., and Marvel Entertainment Group bankruptcies, while Bienenstock worked on Enron.

Even some auto workers are fed up enough to cry uncle. One GM line manager opposed a government bailout in his November 13 call to NPR’s OnPoint. Although edited out of the MP3 file posted online, the manager supported Chapter 11 filings. Another caller from Avon, Connecticut, quipped that auto manufacturers had raised a gun to Treasury Secretary Henry Paulson’s head and proven their poor financial management skills.

Detroit, dig in, and clean up your own mess. Taxpayers are tapped out.

Alyssa A. Lappen is a former Senior Fellow of the American Center for Democracy, former Senior Editor of Institutional Investor, Working Woman and Corporate Finance, and former Associate Editor of Forbes. Her website is www.AlyssaaLappen.org.

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Hugging Shari’a finance at the Fed

How tough is Obama’s new economic tough guy?

by Alyssa A. Lappen
Frontpage Magazine | Dec. 10, 2008

The first market day after President-elect Obama announced plans to appoint Federal Reserve Bank of New York president Timothy Geithner as Secretary of the U.S. Treasury, U.S. equities rose 6.5%. Pundits praised his experience handling crises and understanding of the troubled economy. But possibly, the market hoopla was premature, or even unwarranted. Some analysts seek his retirement.

As turmoil built, Geithner criticized Wall Street’s self-regulatory system, negative incentives and market forces, sought tighter supervision and berated insufficient “derivative securities” regulation and “credit-default” swaps allowing investors to “insure” against loses—only to fail. The Treasury Department’s former attache to the International Monetary Fund had overseen U.S. responses to the 1990s Mexican, Indonesian and Korean bailouts. But at the Fed, Geithner did not use regulatory powers to check abuses, or advocate for more regulation, impartial supervision or new laws. He even concluded that markets were improving—and after Bear Stearns’ collapse confessed, nobody “understands [the causes] yet.”

Worst of all, since Nov. 2003, Geithner let dangerous new Islamic and shari’a-based securities, markets and financial institutions gain business currency—despite the Fed’s role in U.S. monetary policy, currency distribution, government securities markets, legal supervision, regulatory enforcement, bank and capital markets investigation, foreign accounts and a payments mechanism handling over $4 trillion daily in funds and securities transfers. Not to mention Fed officials’ admitted lack of understanding.

On July 1, 2004, eight months after Geithner assumed command, the New York Fed hosted Asim Ghanfoor (sic), AG Group founder and managing director, to address its Seventh Annual Global Economic Forum on “ABCs of Islamic Financing” and Islam’s increasing global financial role. A month later, Senators Charles Grassley and John Kyl identified Ghafoor as a representative of Boston’s terror-funding Boston’s Care International, the Global Relief Foundation (GRF) and the Al Harimain Islamic Foundation, which the U.S. Treasury specially designated a terrorist organization in September 2004 and again in June 2008.

In fairness, the New York Fed began authorizing obscure shari’a banking institutions, structured shari’a issues, and opaque trading of the cottage industry’s myriad novel securities long before Geithner arrived. “Islamic bankers have been quite ingenious in developing financial transactions that suit their needs,” New York Fed first vice president Ernest T. Patrikis told an Islamic Finance conference in May 1996. “We bank supervisors, too, can be ingenious and will want to work with any of you should you decide that you want to engage in Islamic banking” in the U.S.

The dangers of Islamic finance should have been apparent. From 1996 on, all 12 Federal Reserve banks received, and were charged to enforce many Treasury Department Office of Foreign Assets Control circulars designating Islamic groups and banks as terrorist-financing institutions, organizations and individuals. In 1998, OFAC warned the Fed against transactions with Osama bin Laden and his affiliates, in 1999 froze Taliban assets, in 2002 reminded banks to check customers against known terrorist lists and in 2003 warned against trading with any unnamed counter-party.

Meanwhile, had the Fed only noticed, there were warning signs elsewhere too. In 1999, Saudi scholar Mohammad Nejatullah Siddiqi proposed at Harvard that banning interest would “cure the ills of contemporary finance,” “create a safer, saner financial world,” incorporate the “institution of waqf [Islamic trust]” in economics and create “morally inspired” behavior. In 2001, Siddiqi openly labeled shari’a finance a revolution-driver—an “universal endeavor” to replace “excesses of capitalism.”

Alarm bells should have gone off at a New York Fed event on Nov. 21, 2002, furthermore, where shari’a banking proponent Wafiq Fannoun described Islam [not only] as “Peace through submission to Allah (God),” however, “revelation-based [the Qur’an, Hadith] … complete way of life” — that is, a system of religious law proscribed by the U.S. Constitution from inclusion in secular legislation or regulatory systems. Equally at odds with Constitutional law and Western capitalism are other Islamic notions he described—namely that Allah is both creator and “owner” of all material things, and that “individuals” may not possess “natural resources important to society.” as “alternative financing for Muslims” and others recognizing individual ownership rights.

True enough, most of that happened before Geithner ran the New York Fed. But after Geithner took the helm in November 2003, the bank missed several still more critical red flags on Islamic banking.

First came Basel II Capital Accord, supposedly designed to strengthen the “regulatory capital framework” for big international banks. Authorities increasingly expected to trust banks to internally assess their own credit and operational risks. However, in July 2004 Switzerland’s Bank for International Settlements (BIS) reported, 53% of Middle Eastern bank supervisory staffs lacked the necessary training to meet Basel II’s December 2007 deadline. Middle Eastern banks originated and still predominate in Islamic banking. Nevertheless, by 2007, they still needed historical data to fashion reliable risk models but instead counted on “heavy” collateral and “exceptional” economic conditions to eliminate risks.

Islamic institutions had manufactured “special purpose entities” (SPEs)—renamed, “special-purpose vehicles (SPVs)”—such as coincidentally helped destroy Enron. These legal devices restructured “interest-bearing debt, collecting interest [as] rent or [a] price mark-up,” Rice University Islamic economics chairman Mahmoud el-Gamal warned in May 2007. “Interest-based” Islamic finance equaled “shari’a arbitrage,” concerned only “religious identity” and merely employed Western securitization methods to transform liquid, traceable cash flows from interest-bearing debt into illiquid, opaque assets.

Shari’a banking, though, had far fewer regulatory and accounting protections than sub-prime mortgages—and like “portfolio insurance” in 1987, mortgage-backed bonds in 1994, and sub-prime mortgages in 2008, could also cause huge market declines. Islamic banking purveyors admitted shari’a regulations could “override commercial decisions;” didn’t “standardize” documentation; and used complex “inter-creditor agreements” and “off-balance sheet financing.”

Even hosting hosting Islamic financier Asim Ghafoor, a representative to three terror-funding organizations, on July 1, 2004 apparently gave no one inside Geithner’s Fed reason to pause from its rush to further accommodate shari’a banking.

In March 2005, New York Fed general counsel Thomas C. Baxter Jr. asserted the Constitutional “wall of separation between church and state” Thomas Jefferson had described was “not absolute.” Chief Justice Warren Burger had in 1984 suggested that the Constitution “affirmatively mandates accommodation, not merely tolerance, of all religions,” Baxter told an Islamic financial industry “Legal Issues” seminar. “[S]ecular law should … accommodate differing religious practices,” he indicated, apparently even if that meant specially excepting Islamic banking from secular laws and regulations.

In April 2005, New York Fed executive vice president William Rutledge admitted that the bank was “in no position to take a stance on shari’a interpretation.” He also claimed the bank would hold Islamic finance to “the same high licensing and supervision standards” as conventional banks.

Despite the New York Fed’s role as a legal supervisor of Islamic banking, neither Rutledge nor Geithner noticed, however, that shari’a banking, a 20th century “tradition” invented by the Muslim Brotherhood, can’t be severed from Islamic law—statutes that Mohammed initiated, which caliphs, scholars and jurists developed over the last 1,400 years. They hold that shari’a grants Muslims (the ummah) supremacy over all others—along with all land and property to hold in trust for Allah. Thus as Fannoun effectively told the Fed in Nov. 2002, land or property, once conquered or acquired by Muslims (or for Allah), can’t generally revert to their original owners. Shari’a commands Muslims to wage jihad warfare until they subdue all “infidels” under universal Muslim rule, as Ibn Khaldun avowed in the Muqaddimah (trans., Franz Rosenthal, Princeton Univ. Press, 9th printing, 1989, p. 183).

Confiscating possessions from non-believers exacts “revenge,” wrote jurist Abul Hasan al Mawardi (d. 1058). Qur’an 57:2 argued, “To Him belongs all dominions of the heavens and earth.” Qur’an 59:7 echoed, “That which Allah giveth as spoil [war booty] unto his Messenger…,” Allah authorized 2nd Islamic Caliph, Umar Ibn Khattab, to confiscate property by force, fulfilling an Islamic trust, or ruling under Allah’s law. It was thereby just to take anything from nonbelievers, (The Laws of Islamic Governance, Taha Publishing, 1996, pp. 207-251) including all territories Islam ever controlled.

Apparently, Fed officials also neglected to investigate the alliances and beliefs of shari’a advisors and their affiliates in the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) standards agencies.

The shari’a-based Islamic Development Bank established the AAOIFI in 1990 to set Islamic finance standards. Its trustees include executives of Kuwait Finance House, Saudi Arabia’s Dallah al Baraka Group and al-Rajhi Banking & Investment Corporation—all implicated in al-Qaeda and other terror-funding—and Sudanese (and until recently Iranian) officials, both U.S. Treasury-sanctioned countries.

Former Malaysian Prime Minister Mohamed Mahathir in 2002 christened IFSB “a universal Islamic banking system” and “a jihad worth pursuing….” Its board members include the terror-funding Iranian, Sudanese and Syrian central banks and Palestinian Monetary Authority.

Yusuf Qaradawi, an U.S.-designated foreign terrorist barred entry since 1999 for example, supports wife-beating, suicide bombings, murder of American military forces and female suicide “martyr operations.” A large shareholder of Al Taqwa Bank, Qaradawi also chairs the recently designated terrorist-funding Union of Good “charity,” Qatar National Bank, its al-Islami subsidiary, Qatar Islamic Bank, and Qatar International Islamic Bank—and follows AAOIFI standards he helped create.

Similarly, Dow Jones Islamic Market Indexes (DJIM) shari’a board uses “stringent and published” methods to determine “compliance of index-eligible companies.” But its industry screens, financial ratios and biographies omit advisors’ affiliations or beliefs. Dow Jones Citigroup Sukuk Index (DJCSI’s shari’a board certifies Islamic asset-backed bonds if structures meet “AAOIFI standards” and shari’a principles, but don’t mention AAOIFI history or governance.

Until July 2008, shari’a banks, the Dow Jones Islamic Index board and an North American Islamic Trust (NAIT) fund also employed a 20-year veteran of Pakistan’s Shari’a Supreme Court, former judge Taqi Usmani, who taught at the Taliban spawning ground, Jamia Darul Uloom Karachi, headed the AAOIFI religious board, endorsed suicide bombing, and in 2007 advised U.K. Muslims to impose shari’a when their numbers suffice.

Shari’a finance advisor Muslim Brother Yusuf Talal DeLorenzo advised Pakistan’s tyrannical Zia ul-Haq from 1981 to 1984, and ran the Virginia Islamic Saudi Academy educational program cited in 2008 for using hateful Islamic texts. Trained at Karachi’s terror-espousing Jamia Al Alomia Al Islamia, he served the Muslim Brotherhood International Institute of Islamic Thought (IIIT) and from 1989, was secretary to the MB’s Fiqh Council of North America.

Perhaps Treasury Secretary-designate Geithner seriously meant to keep Rutledge’s promise to grant Islamic financiers no special favors. But allowing shari’a finance to exist at all is itself a special favor.

Moreover, on November 23, 2008 Geithner, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke agreed to add another $20 billion taxpayer-gilded bailout to Citibank’s previous $25 billion bailout—and offer $306 billion in new loans to cover Citi’s losses on soured real estate debts and securities.

Only three days earlier Citigroup uber-shareolder Prince Alwaleed bin Talal, a godfather of Islamic finance, had announced plans to up his stake in America’s largest (failing and “underpriced”) bank from 4% to 5%. On March 20, 2006, the Saudi Kingdom Holding Co. CEO was “honored for humanitarian contribution to Islam” at a “glittering gala to celebrate excellence in Islamic Finance” that also featured terror-financier and Dallah al-Baraka founder and president Saleh Abdullah Kamel.

No more appeals

EHRENFELD/LAPPEN

Palestine must pay terror victims

By Rachel Ehrenfeld and Alyssa A. Lappen
Washington Times | July 15, 2008

OP-ED:

The Palestinian Authority (PA) recently asked U.S. federal courts to reopen cases it lost after refusing to defend itself against terror-funding charges.

Judgments would come from U.S. and international aid, the PA argues.

In both cases, Palestinian terrorists murdered American citizens. In New York, Aharon Ellis’ widow sued the PA for the lethal 2002 shooting of her husband and the father of their six children, during an Al Aqsa Martyr Brigade attack of a Bat Mitzvah, in Israel. The court awarded Leslye Knox $193 million, including interest, but the PA refuses to pay.

A Rhode Island case centers on the June 1996 double murders of U.S. citizens Yaron Ungar and his pregnant wife Efrat, both 25. Three Palestinian terrorists shot them to death in Beit Shemesh, west of Jerusalem. The PA was ordered to pay their families $116 million, which the PA also refuses to do.

Neither award was “by default,” as the PA now argues. Several law firms represented the defendants in New York making hundreds of procedural motions and appealing twice, all while the PA refused to answer to the charges. However, they never denied their guilt.

In Rhode Island, the Palestinians’ law firms, including that of former U.S. Attorney General Ramsey Clark, claimed sovereign immunity. The court nixed that claim and in August 2005 , froze PA assets in the U.S., including over $1.3 billion in the Palestinian Investment Fund, and $30 million in the Palestinian Monetary Authority.

Meanwhile, the PA’s 2005 and 2006 appeals didn’t sway the U.S. State Department to intervene. The Supreme Court’s decision not to review that case renders the judgment “final and enforceable in United States courts,” said Secretary of State Condoleezza Rice, who proposed the PA explore “out of court solutions … to avoid enforcement actions” and financial hardship.

The PA’s desire to use the U.S. government to prevent the victims from collecting rightful and lawful awards was denied in March 2008. “The United States supports just compensation for victims of terrorism from those responsible for their losses,” said Deputy Assistant Attorney General, Carl Nichols, though he noted the “potentially significant impact that these cases may have on the financial and political viability of the defendants.” The PA seems to bank on that concern.

PA Prime Minister Salam Fayyad wants the cases reopened not to challenge its guilt. If PA funds were seized to satisfy outstanding judgments, Mr. Fayyad argues in U.S. federal courts, “Donors may hesitate to contribute funds to the Palestinians.” Further, Mr. Fayyad pleads PA poverty, [r]elying on five-year-old financial statements. He claims the PA has only $800 million, although he admits that this does not include PA pension funds or the Palestinian Investment Fund – not to mention $22 million paid annually to Suha Arafat since her husband’s 2004 death, or hidden PA assets probably up exponentially since they were estimated at $10 billion in 1993.

From 1994 to early 2007, the PA received between $14 billion and $20 billion from Europe and the United States, the Funding for Peace Coalition (FPC) reported to the British parliament.

Despite purported PA poverty and Fatah-Hamas disagreements, the PA announced on January 15, 2008 its intentions to give Hamas, a U.S.-designated terrorist organization since 1995, “40 percent” ($3.1 billion) of the $7.4 billion pledged in December 2007 by international donors. Evidently, the donors did not take this statement seriously, and from January to June 2008, gave the PA $920 million in direct budgetary aid.

Fifteen months ago, Fayyad told London’s Daily Telegraph: “No one can give donors the assurance” that funds reach designated destinations. “Where is all the transparency; It’s gone.” Controlling Palestinian finances, he concluded, “is virtually impossible.” World Bank and other reports document PA financial chaos and corruption, too. Yet, none of this has turned the donors money spigot off.

Clearly, the Palestinians are in no danger of losing funding from their international donors. Now, that a Fatah and Hamas power-sharing government is around the corner, the donors will surely go out of their way to reward the new government with even larger sums. The Palestinians, in a time-honored fashion, will use these donor’s funds against Israel and its citizens, as they have done since 1994.

As for Fayyad’s appeals, they are irrelevant in U.S. federal courts. The PA never denied its role in the murders, failed to defend itself, and lost in court fair and square, not “by default.” It’s time justice be done and the courts force the PA to pay every dime they owe the victims’ families.

Rachel Ehrenfeld is director of the American Center for Democracy. Alyssa A. Lappen is a senior fellow at the ACD.

Clean Production of Renewable Fuels through the Vaporization of Garbage

Ed Dodge

Cornell University – Johnson Graduate School of Management

Queens University School of Business

July 2008

References:
22: Alyssa A. Lappen and Jack Lauber, “Waste Not,” Times Union, Dec. 3, 2006.

Congress should outlaw shari’a finance

By Alyssa A. Lappen
Washington Examiner | June 2, 2008

A spate of conferences in the U.S. recently on Islamic banking — i.e. shari’a finance — signals a worrisome American blindness to the budding industry’s inherent dangers.

Among the perils of shari’a finance, according to a January analysis by Moody’s Investors Service are: A central role in investment decisions for shari’a scholars who are actually Islamic clerics; investors being forced to accept weak positions; short track records of major investors; multiple complex asset types; risky interest rates and new ventures; plus a lack of transparency combined with corporate management and risk control in the hosting Third World countries.

Like other financial rating agencies, Moody’s currently profits from assessing Islamic financial instruments.

But it missed the biggest risk of all—the ideological risks of shari’a, or Islamic law. Even Islamic banking promotions admit that the industry’s documentation is not standardized, its inter-creditor agreements can be complex and it frequently employs off-balance sheet financing.

Moreover, shari’a regulations override commercial decisions. Citibank, for example, launched Saudi American Bank (SAB) in Jeddah and its Riyadh branch in 1955 and 1966 respectively, apparently without considering business risks under shari’a. The Saudis abruptly seized SAB in 1980, denied Citi all future profits, and ordered the bank to train Saudi staffers. Why? Because under shari’a, the bank was judged insufficiently Muslim.

Secular laws alone don’t govern shari’a finance. Although a 20th century Muslim Brotherhood (MB) invention, it cannot be severed from the body of Islamic statutes that Mohammed initiated and caliphs, scholars and jurists developed over 1,400 years.

Shari’a also underlies Muslim Brotherhood economic reforms. Police discovered the group’s central plan, “Towards a Worldwide Strategy for Islamic Policy,” or “The Project” in the Lugano villa of MB chief financial officer Yusef Nada in November 2001.

Muslim Brotherhood spiritual leader Yusef Qaradawi based the 12-point handbook on shari’a interpretations of MB founder Hassan al-Banna, who in 1928 envisioned a caliphate (Islamic state) to impose shari’a law worldwide.

The Project orders Muslims to do “parallel work to control local power centers”—and create “special Islamic economic, social and other institutions” and “necessary economic institutions” to fund spreading fundamentalist Islam. Shari’a finance builds such “parallel” Islamic economic institutions.

Consider the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). Both write global shari’a finance regulations (fatwas).

AAOIFI members include the central banks of designated terrorist states Iran and Sudan—and the Saudi Dallah al Baraka Group, al-Rajhi Banking & Investment Corporation, Kuwait Finance House, all implicated in funding al Qaeda, according to former U.S. counter-terror official Richard Clarke in testimony before the National Commission on Terrorist Attacks upon the U.S.

IFSB members include the central banks of Iran, Sudan, Syria, and the terror-funding Palestinian Monetary Authority (PMA).

Worse, Shari’a laws grant the Islamic ummah (Muslim nation) supremacy over all others—along with all land and property, to hold in trust for Allah. Under shari’a, land or property conquered or acquired by Muslims cannot generally revert to its original owners.

Possessions confiscated from non-believers are “a way of exacting revenge,” writes 11th century jurist Abul Hasan al Mawardi whose Laws of Islamic Governance many Muslims still consider valid. In other words, classical Islamic jurisprudence and Qur’anic passages alike, reflect the thinking evidenced in the MB’s 20th century Project.

According to Al-Mawardi, Allah authorized Second Caliph Umar Ibn Khattab to confiscate property in three ways—by fulfilling a trust to Islam, by force, or by ruling under Allah’s law. Thus, it is “just” to take anything from nonbelievers.

Far from benefiting mankind, as Islamic banking proponents claim, shari’a advocates a supremacist ideology commanding Muslims to wage jihad war until they subdue all “infidels” and “unbelievers.” Muslims must “convert everybody to Islam either by persuasion or force” and “gain power over other nations,” writes 14th century Tunisian jurist Ibn Khaldun in “The Muqaddimah.”

And economic jihad fulfills the mandate of Qur’an 49:15: “Strive for the cause of Allah with your wealth and your lives,” reiterated in 61:10-11.

Congress should thoroughly investigate shari’a finance, declare it unconstitutional and therefore illegal.

Alyssa A. Lappen, a senior fellow at the American Center for Democracy, is a former senior editor of Institutional Investor, Working Woman and Corporate Finance. Her website is https://www.alyssaalappen.org.

Shari’a Financing and the Coming Ummah

“Chapter 28: Shari’a Financing and the Coming Ummah“
By Rachel Ehrenfeld and Alyssa A. Lappen

Shari’a finance is a new weapon in the arsenal of what might be termed fifth-generation warfare (5GW). The perpetrators include both states and organizations, advancing a global totalitarian ideology disguised as a religion. The end goal is to impose that ideology worldwide, making the Islamic “nation,” or ummah, supreme.

Excerpted from: Armed Groups: Studies in National Security, Counterterrorism, and Counterinsurgency; Edited by Jeffrey Norwitz; U.S. Naval War College, June 2008.