Could frozen Libyan assets pay for the war?

libya_b2bomber.top.jpgAir Force B-2 stealth bombers like this one participated in Operation Odyssey Dawn. By Charles Riley, staff reporter


NEW YORK (CNNMoney) -- In late February, President Obama issued an executive order that froze Libyan government assets worth at least $30 billion.

One month later, the U.S. is engaged in a conflict that will wind up costing billions. And budgets are obviously tight. So could the government use some of that Libyan money to pay for the war?

Some on Capitol Hill think so. Rep. Brad Sherman, a California Democrat, said Thursday that assets seized from Libya and Gadhafi should be used immediately to pay for the war effort.

But not so fast. The U.S. didn't really "seize" Libyan assets. Instead, the executive order issued by Obama froze the funds in their current accounts.

"Title - or ownership - of those assets remain with Gadhafi, his sons, or the government of Libya," said Hal Eren, a D.C.-based attorney who spent eight years at the U.S. Treasury Department's Office of Foreign Assets Control.

"In order to use those assets [to pay for the war], the government would have to have the consent of the owner," Eren said. "Which is probably unlikely given the circumstances."

So for now at least, these assets are just sitting in U.S. banks, earning interest.

"Treasury hits a button and everything is frozen," according to Erich Ferrari, the founder of Ferrari Legal, a firm that specializes in trade sanctions.

Not much is publicly known about the make-up of Libyan assets in the U.S. A secret diplomatic cable released by WikiLeaks suggests that Libyan officials had spread around $32 billion in assets to different U.S. banks in $300-$500 million chunks.

"It's a pain in the neck for banks," Ferrari said. "You have blocked accounts just sitting there."

And really, that's what Obama wants. The idea is that if Gadhafi falls, the next government will take control of the assets.

"We will safeguard the more than $33 billion that was frozen from the Gadhafi regime so that it's available to rebuild Libya," Obama said on Monday. "After all, the money doesn't belong to Gadhafi or to us - it belongs to the Libyan people. And we'll make sure they receive it."

Rep. Brad Sherman thinks otherwise, and wrote a letter to Obama on Wednesday urging him to fully exhaust the frozen funds before passing on costs to the taxpayer.

Before that could happen, the government would have to actually seize the assets - a process called vesting. And that's not likely to happen.

"That would take a law being passed that is not on the books now," Ferrari said.

And it wouldn't be a popular move.

"There would be a great deal of uproar from the international community," he added. "If we started doing that we would be hearing from a lot of people." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.01%4.03%
15 yr fixed3.12%2.97%
5/1 ARM3.11%2.99%
30 yr refi4.04%4.09%
15 yr refi3.15%3.05%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,804.80 26.65 0.15%
Nasdaq 4,765.38 16.98 0.36%
S&P 500 2,070.65 9.42 0.46%
Treasuries 2.18 -0.03 -1.27%
Data as of 2:00pm ET
Company Price Change % Change
Bank of America Corp... 17.62 0.09 0.51%
Apple Inc 111.78 -0.87 -0.77%
General Electric Co 25.62 0.48 1.91%
Intel Corp 36.37 -0.65 -1.76%
Microsoft Corp 47.66 0.14 0.29%
Data as of Dec 19

Sections

New York Magazine reporter Jessica Pressler, who has been caught up in controversy this past week, will not be moving on to a new job at Bloomberg News. More

Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More

Forums in dark corners of the web sell the kinds of hacks that befell Sony. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

The income of the top 1% jumped significantly in 2012, far outpacing inflation. Not only did this group make a larger share of the country's income, their share of total taxes also jumped from 35% to 38%. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.