The Afghan government is preparing to bailout the Kabul Bank after reports of a run on the bank. Worried depositors lined up to withdraw their deposits on Friday, leading to a shortage of money at the institution. The Kabul Bank is the country’s largest bank, so obviously its collapse would have widespread implications both in terms of domestic stability and the coalition’s fight against the Taliban.

The United States Treasury Department is also involved in the bailout deal, though it’s not clear whether American tax dollars will be used to prop-up the bank. The White House claims that no American money will be involved in the bailout but, frankly, the administration has lost credibility when it comes to bailouts of any kind. Few would be surprised if we were to learn months from now that American tax dollars were actually involved contrary to administration claims.

How big is the run? The New York Times says depositors have withdrawn more than $200 million over the past few days. That’s a significant chunk of change for a country with a total gross domestic product (GDP) of about $12 billion. Depositors don’t appear to be assuaged by news of a potential bailout. They continue to form lines or outright push their way into bank lobbies in pursuit of securing their deposits.

Now, as for what sparked this mess, it was a revelation of mismanagement and corruption. Yeah, I know, what a shocker in Afghanistan. The NYT:

The panic began last week when the Central Bank ousted the chairman and the chief executive officer of Kabul Bank, after discovering that the bank had acted recklessly, lending tens of millions of dollars to allies of President Hamid Karzai and pouring money into risky real estate investments in Dubai.

The Afghan government has already withdrawn $300 million in reserve funds from the Federal Reserve Bank of New York. An American team has been dispatched to the country to help deal with the problem.

This is one area where the United States federal government has it right. Americans feel secure in their deposits because the Federal Deposit Insurance Corporation — actually an independent agency created by Congress — guarantees each deposit up to $250,000.

Afghanistan should consider a similar institution moving forward.