Of Stocks & Bombs

Another positive story of a citizen soldier in Iraq from the Sept. 29 issue of *Fortune Magazine:

*subscriber content ~ full article below

Stocks & Bombs
Behind the struggle to open the Baghdad Stock Exchange.
FORTUNE
Monday, September 15, 2003
By Jeremy Kahn

In the run-up to war, business at the Baghdad Stock Exchange was brisk. Three mornings a week traders gathered at a dingy, concrete building to buy and sell shares in 120 publicly traded Iraqi companies, from the Palestine Hotel to the Bank of Baghdad. It wasn't modern: Cordoned off behind an iron gate, traders squinted through opera glasses to make out prices posted manually on a white board, and price fluctuations were limited by law to no more than 5% per session. But between $120,000 and $140,000 changed hands on the exchange each trading day, and over its 12-year history, total capitalization grew from $20 million to $137 million.

Since the arrival of U.S. troops in Baghdad, however, the market has been closed. The family that founded and ran the exchange fled the city. The building that housed it was looted and occupied by squatters. U.S. advisors in Iraq have been more focused on paying government salaries and rebuilding the country's banking system than on reopening the stock exchange. Meanwhile, Iraqi shareholders, desperate for cash, are becoming agitated. A black market in some company shares has sprung up, and the U.S. has had to shut down an unauthorized attempt to create a new stock exchange.

Since the arrival of U.S. troops in Baghdad, however, the market has been closed. The family that founded and ran the exchange fled the city. The building that housed it was looted and occupied by squatters. U.S. advisors in Iraq have been more focused on paying government salaries and rebuilding the country's banking system than on reopening the stock exchange. Meanwhile, Iraqi shareholders, desperate for cash, are becoming agitated. A black market in some company shares has sprung up, and the U.S. has had to shut down an unauthorized attempt to create a new stock exchange.

U.S. officials don't want the Baghdad Stock Exchange to reopen until they can be sure it will serve as a showcase for Iraq's new economy; they want to see a thoroughly transparent computerized market that will encourage investors not just from Iraq, but from around the world, to buy into the country's future. Beyond finding the exchange new digs, that means revamping Iraq's securities laws, creating a government body to regulate trading, and auditing the books of Iraq's public companies and brokerage firms.

Responsibility for resurrecting the exchange has fallen largely to Tom Wirges, 37, a colorful Army reservist from Virginia. Wirges is just a specialist, a rank barely above private. But because of his background—he's a Navy veteran who became a stockbroker, a bank security expert at Brink's, then joined the Army after Sept. 11—he's been performing duties normally reserved for more senior officers. Wirges's unit, the 354th Civil Affairs Brigade, arrived in Baghdad shortly after the city fell to U.S. troops, and he was soon assigned to assess the physical condition of Iraq's private banks. He organized the first Iraqi bankers' association and is now helping stockbrokers form the Iraqi Association of Securities Dealers.

Wirges says he thinks he has found a new building for the exchange in central Baghdad. Now he's waiting for Iraq's public companies and brokerage firms to be audited. Publicly traded companies, which used to publish only annual reports, have been asked to submit quarterly financial statements, while brokers who want to maintain their seats on the exchange must undergo training and take new qualifying examinations. Meanwhile, Wirges is working on the mechanics of the exchange's new trading system and trying to form an Iraqi Securities Commission. "We will have the BSE up and running by the first of the year, if not before," Wirges says. He pauses, then adds the word "Inshala"—Arabic for "God willing."