NEW YORK (CNN/Money) - Seventeen of the world's biggest financial institutions have been told by the Treasury Department to hand over $1.7 billion in frozen Iraqi assets that the U.S. government wants to use to rebuild Iraq.
Treasury Department spokesman Tony Fratto said the banks have until early next week to transfer the funds into an account being set up at the Federal Reserve Bank of New York.
On Thursday President Bush signed an order to take possession of the Iraqi government assets that were frozen in 1990 before the Persian Gulf War.
"The president felt that there will certainly be a need to put that money to work for the Iraqi people," Fratto said.
In addition to the $1.7 billion said to be held within the U.S. at banks including Citigroup, J.P. Morgan Chase, Bank of New York and Banc One, the government is requesting other countries freeze an estimated $600 million held abroad.
The money frozen in 1990 was mostly funds from the Iraqi central bank and may contain some of the personal funds of Saddam Hussein, said Fratto. The accounts have been earning interest over the last decade, but Fratto could not say how much.
A March 20 letter from Treasury Department Secretary John Snow to William J. McDonough, the president of the Federal Reserve Bank of the New York, asked for the creation of an account to hold the seized assets.
A spokesperson for the Federal Reserve Bank of New York could not immediately say if any of the banks have transferred the frozen funds. Spokesmen for two banks, Bank of New York and Banc One, declined comment.
Click here for more on the business of war
The U.S. has threatened to retaliate against those who knowingly refuse to assist in identifying Iraqi assets, including personal assets of Hussein, his family, and other high-ranking Iraqis.
The Treasury Department says that financial institutions in other countries who are aware of non-governmental Iraqi assets but refuse to freeze those assets, could ultimately be stopped from doing business in, or having accounts in the U.S.
A senior Treasury official said there is believed to be at least $6 billion worldwide and possibly twice that amount in "corrupted funds" -- including money from "smuggled oil" -- that may be traceable.
A congressional source briefed on the administration's plans said there are other Iraqi assets scattered worldwide, and there is concern that France, Russia, Germany and other nations that are owed money by Iraq will want to use those assets to repay the debts.
The announcement from Treasury Secretary Snow came after Bush issued an executive order confiscating "non-diplomatic Iraqi government assets in the United States" and authorizing the Treasury Department to "marshal the assets and to use the funds for the welfare of the Iraqi people."
Thursday's order was the president's first use of such power under the U.S. Patriot Act, enacted in the wake of the Sept. 11 attacks.
In a statement, Bush said he had "determined that such use would be in the interest of and for the benefit of the United States."
Other banks said by the Treasury Department to be holding frozen Iraqi assets include UBS, FRBNY, Gulf International Bank, Banca Nazionale del Lavoro, Bank of America, Wachovia, Arab Banking Corporation, National Bank of Egypt, Societe General, Deutsche Bank, HSBC, Commercial Bank of Kuwait and American Express Bank.
Beginning Friday, they have three business days to transfer the assets, according to the Treasury Department, which declined to break down the amounts of funds held by each bank.
Bush's order says the names of the accounts include the Government of Iraq, the Central Bank of Iraq, Rafidain Bank, Rasheed Bank and the State Organization for Marketing.
The government cast this week's financial assault as a step toward rebuilding an economy choked by a decade of sanctions.
"Before Saddam, Iraq really was an engine of economic activity in the Mid East," Treasury spokesman Fratto said.