The demise of the dollar
In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading
By Robert Fisk
Tuesday, 6 October 2009
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars.
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars.
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
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The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."
This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.
The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.
Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.
China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.
Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.
Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.
The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."
Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.
The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.
"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.
Sean O'Grady: China will overtake America, the only question is when
Tuesday, 6 October 2009
Few things would be more powerfully symbolic of the shift in the balance of global economic power than to have oil traded in the Chinese renminbi rather than the American dollar.
True, no one is going to price a barrel of West Texas Intermediate Crude in renminbi tomorrow. But you can see how that could change. Oil is traded in dollars for economic reasons – not sentimental ones. The oil business pretty much started in the US (vividly portrayed in the film There Will be Blood), the giant oil companies are still mostly American, and the US has long been the world's largest consumer, importer and one of the largest producers of oil. The presidency of George W Bush offered ample evidence of the intimate connections between politics and oil. And the dollar is easily the most traded currency in the world. As such, it makes sense to trade oil in dollars.
Yet the financial tectonic plates are shifting – fast. Yesterday the president of the World Bank, Robert Zoellick, articulated what must be weighing on the minds of many Western policy-makers. A legacy of the current crisis "may be a recognition of changed economic power relations". In other words, the recession has accelerated the rise of China. The brutal truth is that for most of the next decade China's economy will grow by more than 10 per cent a year; America's by less than 2 per cent. China will soon be the world's largest economy, and largest creditor nation, a position enjoyed by a pre-eminent America in the 1950s. China will also be the largest consumer of oil, which will help push trading in it and other commodities towards a "basket" of currencies.
Now America is the world's greatest debtor, she can no longer sustain her role as protector of the world's only reserve currency in the long term. The humbling of Wall Street was proof that the American system was not invincible. Suddenly, a G20 embracing China, India and the other emerging powers is the only forum that matters. China has helped bail out our banks. Spats with the Americans and Europeans are set to grow more bitter. Yesterday the head of the IMF, Dominique Strauss-Kahn and the president of the European Central Bank, Jean-Claude Trichet, resumed their attack on the value of the yuan. Next will come an increasing US resentment at the vast debts built up with China, and, in turn, Chinese nervousness about their long-term worth.
And that is the paradox. China holds approaching $3 trillion in dollar assets, so she cannot afford to see the dollar collapse. Longer term, China does want to become less reliant on the dollar as a place to keep its savings. America needs China to buy her Treasury bills; and China needs America to buy her exports. They are like two drunken giants leaning on each other. Yet a sobering reckoning of some sorts seems inevitable; and it is difficult to see how both can be winners.
Leading article: The end of the dollar spells the rise of a new order
This radical proposal is a reflection of a changing economic world
Tuesday, 6 October 2009
Last autumn's global financial crisis set off an economic earthquake. And we are still feeling the tremors. The latest sign of the ground shifting beneath our feet is our report today of plans by Gulf states, China, Russia, France and Japan to end their practice of conducting oil deals in US dollars, switching instead to a diverse basket of currencies.
It is not hard to see the motivation for oil exporters to move away from the dollar. The value of the US currency has fallen sharply since last year's meltdown. And fears are growing, in the light of a spiralling US government deficit, that a further depreciation is likely. They do not want to sell their wares in return for a currency with an uncertain future.
It is also easy to see why China would like a world trading system that is underpinned by other currencies as well as the dollar. For the past decade Beijing has been recycling the proceeds of its giant national trade surplus into purchases of US government bonds and other dollar-denominated assets. China too stands to make a significant loss if the value of the dollar falls. For China, however, the timing is much more sensitive. Beijing needs to reduce its dollar holdings, but if it does so too quickly it will bring about the very devaluation it fears. This explains why Chinese officials appear to want this transition to take place gradually over the next decade.
But the significance of this development goes much further. Since the end of the Second World War the dollar has been the bedrock of world trade. The pre-eminence of the American currency flowed naturally from the economic dominance of the US. Virtually everyone traded with America so it made sense to use their currency.
But the US is not the dominant power that it once was. The financial crisis has left it hobbled with significant government and household debts and sharply reduced prospects for growth. Developing nations such as China, Brazil and India, on the other hand, have weathered the economic storm significantly better. So while this latest proposal is born of financial calculation, it is also a reflection of a new economic world order.
We should not be sentimental for the dollar. It makes economic sense for world trade to be conducted in a variety of currencies. Relying on one only has the advantage of clarity, but it also creates instability if the economy that underpins it faces uncertain prospects.
Yet we need to understand that exchange rate volatility is a symptom, rather than a cause, of what truly ails the world economy. The biggest driver of global economic instability in recent years has been the determination of China to boost its export sector at all costs. Beijing's persistently large trade surpluses and manipulation to prevent its own currency from appreciating have effectively forced Western nations into running persistently large trade deficits. It was this pressure that blew up various asset bubbles that burst with such disastrous effect last year.
A gradual move away from the dollar makes sense. But without a commitment from world governments – both in the rich and developing world – to reduce these destabilising global trade imbalances we will enter an uncertain new era; and one that could yet make us pine for the days of the dominant greenback.
Tuesday, October 6, 2009
Monday, October 5, 2009
A wealthy, insular Syrian Jewish enclave in Brooklyn reels after rabbis' arrests
OCTOBER 3, 2009
A Community, Shaken
A wealthy, insular Syrian Jewish enclave in Brooklyn reels after rabbis' arrests
By LUCETTE LAGNADO
Brooklyn, N.Y.
When Morris Setton was a young man here, he and his brother Joshua went door to door selling bags of pita bread to the crush of Jewish immigrants from Syria and Egypt.
It proved to be an excellent business venture. The brothers, Jews of Syrian descent who emigrated from Cairo in the late 1950s with $5 in their pockets, found a community along the elegant Brooklyn boulevard of Ocean Parkway that disdained American white bread and was homesick for the tastes and scents of the Middle East—the spices, flaky pastries, black olives, rose water, cheeses and nuts the immigrants were used to savoring, and which were missing from their new lives.
Brooklyn's Syrian Jewish Community
Morris Setton, co-owner of Setton International Foods .
Fifty years later, Mr. Setton, 68, is America's King of Pistachios. He is the co-owner of a vast enterprise, Setton Farms, that has a large warehouse in Long Island and farms and processing plants in California. He can live anywhere, but has remained planted in the corner of Brooklyn where he started, at the heart of what he calls "The Community"—a little-known enclave of more than 75,000 Jews from Syria and other Arab lands, many of whom have prospered in America while sustaining strong ties to the cultural traditions of homelands that today are inhospitable to Jews.
That community has been reeling since the July arrests of three of its major rabbis on charges of money-laundering, following a sting using a federal government informant. Among those caught in the dragnet was Saul Kassin, the 88-year-old Chief Rabbi, a revered figure to Sephardic Jews for decades. Rabbi Kassin and two other rabbis—Eliahu Ben Haim and Edmund Nahum—are alleged to have laundered a total of more than $1.7 million, according to the U.S. Attorney's office for the district of New Jersey. The funds allegedly were laundered through charities and religious institutions they controlled in Brooklyn and Deal, N.J., the seaside resort where many Syrian Jews summer. Rabbi Kassin, through his lawyer, emphatically denied the allegations, as did Rabbi Nahum and his lawyer. Rabbi Ben Haim's lawyer, Lawrence Lustberg, said he was reviewing the evidence in the case and declined to comment further for this story.
The corruption case involved a government informant who purported, among other cover stories, to be dealing in fake Prada and Gucci handbags and wore a wire for the Federal Bureau of Investigation. He allegedly recorded the three rabbis agreeing to help him launder funds through their charities and take a percentage, according to a federal complaint. To the dismay and shock of the community, the informant was widely reported to be Solomon Dwek, one of their own, the son of another major local rabbi. Mr. Dwek's lawyer did not return repeated calls seeking comment.
Acting U.S. Attorney Ralph Marra Jr. compared the rabbis to "crime bosses" and accused them of using "entities set up to do good works" to launder millions. To defend the frail Chief Rabbi, his family reached out to Gerald Shargel, the prominent Manhattan criminal lawyer who represented the late Mafia don John Gotti and Sammy "the Bull" Gravano, as well as white-collar criminals such as Marc Dreier.
The arrests have shone a harsh light on a group that has resisted assimilation even as its members achieved wealth and success in America. A community that was always intensely private and closed now views outsiders with suspicion that borders on paranoia.
I grew up in The Community, albeit on the poor side—in Bensonhurst, the rather modest area where Sephardic Jews lived before they left for much swankier digs on Ocean Parkway and in Deal. My father was born in Aleppo, Syria; I was born in Cairo. Two years ago, I published a memoir about my father and the community. When I was a little girl new to America, my world revolved around my family and my small Sephardic temple. Rabbi Kassin was one of my Hebrew school teachers; another was Rabbi Baruch Ben Haim, the father of Rabbi Eliahu Ben Haim, Once, in class, I asked Rabbi Kassin why the Messiah couldn't be a woman. "Because he can't," he replied tersely.
The arrests spotlighted a world of tremendous wealth, one that had prospered since I left for college in the 1970s. A roster of some of the Syrian Jewish community's most successful members includes the Nakash brothers, who founded Jordache Enterprises, and the Gindi family, who started Century 21, the popular department-store chain in New York. Duane Reade, the drugstore chain, was founded by the Cohen brothers, who grew up in the Syrian community in Brooklyn. One of the community's top guns is Joseph Cayre, chairman of Midtown Equities, who is one of the leaseholders of the World Trade Center site and an owner of Barneys department store buildings in New York, Chicago and Los Angeles. Also from the community is Joe Sitt, chairman of Thor Equities, which owns the Palmer House Hilton in Chicago and several acres of Coney Island.
"I suspect there's more wealth on Ocean Parkway than there is in Beverly Hills," says Steve Solarz, the area's former congressman.
The community's ornate mansions aren't concealed behind hedgerows or gates as they are in the Hamptons—the wealth is on display for everyone to see. Along Ocean Parkway, houses are sometimes built right up to the lot lines. In Deal, there are Mediterranean-style villas with sweeping vistas of the ocean and stately Victorian homes with porches and Hollywood-style swimming pools.
Deal's social season is a swirl of engagement parties, bar mitzvahs, circumcision ceremonies and get-togethers at the Deal Casino, a club with a massive swimming pool and private beach. Weddings are elaborate affairs, some with 1,000 guests or more, held at Magen David of West Deal, the largest and most elegant synagogue.
Constant charity events are also a part of the social scene. Fund-raisers and raffles and auctions raise money for an array of causes: infertile couples, cancer-stricken children, impoverished adult cancer victims, religious schools, even brides too poor to afford a wedding trousseau. Tithing, or giving at least 10% of one's wealth to charity and your synagogue, is the practice.
There are also pockets of poverty. The community has been hit hard by the economic downturn, and many of its members in retail have seen business evaporate.
Rabbis were traditionally entrusted to see that money given for charity reached the needy. Wealthy community members who are fond of Rabbi Kassin say that he constantly approached people to help this needy person or that.
In the U.S. Attorney's complaint, Rabbi Kassin is alleged to have laundered more than $200,000 from the informant through his charity, while his nephew, Rabbi Ben Haim, is alleged to have laundered some $1.5 million; Rabbi Nahum is alleged to have laundered $185,000.
Mr. Shargel says the charges are baseless. "Rabbi Kassin did not launder money and never intended to violate any law—he was doing charitable work," he says, adding, "Rabbi Kassin didn't know from Prada and he didn't know from Gucci."
Any money collected "was for the people, and it was written down, and it was in the book, check by check," says Rabbi Nahum. He remains in his position at his synagogue. "At no time did Rabbi Nahum receive any personal gain related to these transactions and all monies received went to the charities," says his attorney, Justin Walder.
The community is home to several modern philanthropic institutions with lay boards, but a more antiquated system, where charitable funds are controlled by individual rabbis, has persisted. Rabbi Elie Abadie of the Edmond J. Safra synagogue in Manhattan says that the community also maintained "a mom and pop shop" style of philanthropy, not always subject to "oversight or checks and balances," which made its charities more vulnerable to allegations of improprieties. David G. Greenfield of the Sephardic Community Federation says there will now be a focus on "transparency," lay boards and "accountability."
Behind the scenes, there are deep divisions in this tightly knit community. Some are so shaken by the allegations that for the first time they say they are questioning their faith in the rabbis and calling for a thorough house-cleaning. Others—particularly more conservative, ultra-observant members of the community—are rallying around the rabbis and believe them to be innocent victims.
The division reflects a broader and more long-running split that's visible on the streets of Brooklyn and Deal. On Norwood Avenue, Deal's main shopping street, some Syrian-Jewish women wear wigs and long skirts—traditional religious garb that stands out in a community where many men and women pride themselves on dressing at the height of fashion.
Nostalgia for the Middle East suffuses the Sephardic community, and focuses on the ancient Syrian city of Aleppo. Aleppo produced legions of influential rabbinical scholars, and the community had strict customs about how to live, how to pray, how and when and whom to marry. It was also a city on a major trading route, which meant that Syrian Jews worked and interacted with Muslims and other groups, says Rabbi Abadie.
"On the one hand, the community was close-knit, and on the other it was worldly. They did not see a contradiction between their religion and close-knit family relationships with being cosmopolitan," he says.
That ability to function in the larger world served Syrian Jews wherever they settled. Many were adept, aggressive businessmen, their skills honed in at the Aleppo souk, and those talents have also been handed down through the generations.
The community has tried to hold onto to the traditions of Aleppo, or "Halab," as they call it, using its Arabic moniker. Even third- and fourth-generation Syrian Jews in Brooklyn pepper their conversations with Arabic expressions that hearken back to a country most never really knew. "Hazeet," they'll say of a man who has suffered a misfortune, "poor fellow." An inappropriate act is "eyb," or shameful.
From selling pita bread in the early 1960s, Mr. Setton and his brother by 1967 had earned enough to open the first Middle Eastern grocery on Kings Highway, a shopping strip located by Ocean Parkway. Setton Oriental Foods carried string cheese the brothers made by hand, dried fruit, spices and all kinds of nuts, from roasted hazelnuts and watermelon seeds to almonds and pistachios.
"When you had guests, you always gave them some pistachios, it was what you offered first," Mr. Setton recalls.
Now, Mr. Setton's lone shop has given way to multiple groceries that compete to sell Oriental specialties. Many of the shopkeepers speak Arabic, and old-fashioned bargaining is advisable.
Large families crowd restaurants like David's, a popular eatery that serves Middle Eastern cuisine—lentil soup pungent with cumin, skewers of ground beef called kufta kebab, bowls of savory okra stew—all prepared in keeping with strict Jewish dietary laws. A small bakery, Mansoura's, features trays of honey-drenched baklava.
"The Syrian food in Brooklyn is better than the Syrian food in Damascus," says Mr. Solarz, the ex-congressman, who has sampled both.
Nearby, on Ocean Parkway, synagogues are filled morning and evening with worshippers who pray and chant hymns in the ancient melodies and cadences of Syria and Egypt. Attendance is booming.
"You walk around and you will hear Arabic," Mr. Setton says on a tour of his old pita route. He can rattle off the names of who lives in every house—his old customers—though most are gone, the homes occupied by their children or young families. His own children live within a block or two of his home. His store, now called Chalouh International Foods, is today run by a Syrian Jew who emigrated from Damascus in the 1990s. A stone to guard against the evil eye, called a "shabah," is a brisk seller at $2.
On a Friday morning in August, long lines formed at the kosher food stores lining Deal's Norwood Avenue. Piled high on the tables of Kings Highway Glatt were packages of kibbe, the delicious little meatballs stewed in sour cherries or mushrooms that are the staple of Syrian cuisine and the centerpiece of the Friday-night sabbath meal. There was yebrak—grape leaves stuffed with rice and meat—and artichokes medias—artichoke hearts stuffed with ground meat and covered with sauce.
Older generations of Syrian women made these dishes from scratch, but these days, women line up to scoop up multiple ready-made packages of these delicacies. Some this summer were dressed for the beach, in pants or shorts and revealing halter tops. Others were in long skirts and long-sleeved blouses, their hair covered with a wig or a hat.
Come Friday, every woman in the community is busy making kibbe hamda, an aromatic dish that involves preparing a lemony broth, then adding garlic, mint and other spices, then throwing in vegetables and the meatballs.
"On Fridays you can drive down the streets of Deal or Brooklyn and know that every house has that kibbe hamda cooking," says Poopa Dweck (no relation to Solomon Dwek), a resident of Deal and author of the cookbook "Aromas of Aleppo." "You feel it—you smell it—the mint and the garlic and the kibbe that is boiling and everyone telling everyone not to be late."
Write to Lucette Lagnado at lucette.lagnado@wsj.com
A Community, Shaken
A wealthy, insular Syrian Jewish enclave in Brooklyn reels after rabbis' arrests
By LUCETTE LAGNADO
Brooklyn, N.Y.
When Morris Setton was a young man here, he and his brother Joshua went door to door selling bags of pita bread to the crush of Jewish immigrants from Syria and Egypt.
It proved to be an excellent business venture. The brothers, Jews of Syrian descent who emigrated from Cairo in the late 1950s with $5 in their pockets, found a community along the elegant Brooklyn boulevard of Ocean Parkway that disdained American white bread and was homesick for the tastes and scents of the Middle East—the spices, flaky pastries, black olives, rose water, cheeses and nuts the immigrants were used to savoring, and which were missing from their new lives.
Brooklyn's Syrian Jewish Community
Morris Setton, co-owner of Setton International Foods .
Fifty years later, Mr. Setton, 68, is America's King of Pistachios. He is the co-owner of a vast enterprise, Setton Farms, that has a large warehouse in Long Island and farms and processing plants in California. He can live anywhere, but has remained planted in the corner of Brooklyn where he started, at the heart of what he calls "The Community"—a little-known enclave of more than 75,000 Jews from Syria and other Arab lands, many of whom have prospered in America while sustaining strong ties to the cultural traditions of homelands that today are inhospitable to Jews.
That community has been reeling since the July arrests of three of its major rabbis on charges of money-laundering, following a sting using a federal government informant. Among those caught in the dragnet was Saul Kassin, the 88-year-old Chief Rabbi, a revered figure to Sephardic Jews for decades. Rabbi Kassin and two other rabbis—Eliahu Ben Haim and Edmund Nahum—are alleged to have laundered a total of more than $1.7 million, according to the U.S. Attorney's office for the district of New Jersey. The funds allegedly were laundered through charities and religious institutions they controlled in Brooklyn and Deal, N.J., the seaside resort where many Syrian Jews summer. Rabbi Kassin, through his lawyer, emphatically denied the allegations, as did Rabbi Nahum and his lawyer. Rabbi Ben Haim's lawyer, Lawrence Lustberg, said he was reviewing the evidence in the case and declined to comment further for this story.
The corruption case involved a government informant who purported, among other cover stories, to be dealing in fake Prada and Gucci handbags and wore a wire for the Federal Bureau of Investigation. He allegedly recorded the three rabbis agreeing to help him launder funds through their charities and take a percentage, according to a federal complaint. To the dismay and shock of the community, the informant was widely reported to be Solomon Dwek, one of their own, the son of another major local rabbi. Mr. Dwek's lawyer did not return repeated calls seeking comment.
Acting U.S. Attorney Ralph Marra Jr. compared the rabbis to "crime bosses" and accused them of using "entities set up to do good works" to launder millions. To defend the frail Chief Rabbi, his family reached out to Gerald Shargel, the prominent Manhattan criminal lawyer who represented the late Mafia don John Gotti and Sammy "the Bull" Gravano, as well as white-collar criminals such as Marc Dreier.
The arrests have shone a harsh light on a group that has resisted assimilation even as its members achieved wealth and success in America. A community that was always intensely private and closed now views outsiders with suspicion that borders on paranoia.
I grew up in The Community, albeit on the poor side—in Bensonhurst, the rather modest area where Sephardic Jews lived before they left for much swankier digs on Ocean Parkway and in Deal. My father was born in Aleppo, Syria; I was born in Cairo. Two years ago, I published a memoir about my father and the community. When I was a little girl new to America, my world revolved around my family and my small Sephardic temple. Rabbi Kassin was one of my Hebrew school teachers; another was Rabbi Baruch Ben Haim, the father of Rabbi Eliahu Ben Haim, Once, in class, I asked Rabbi Kassin why the Messiah couldn't be a woman. "Because he can't," he replied tersely.
The arrests spotlighted a world of tremendous wealth, one that had prospered since I left for college in the 1970s. A roster of some of the Syrian Jewish community's most successful members includes the Nakash brothers, who founded Jordache Enterprises, and the Gindi family, who started Century 21, the popular department-store chain in New York. Duane Reade, the drugstore chain, was founded by the Cohen brothers, who grew up in the Syrian community in Brooklyn. One of the community's top guns is Joseph Cayre, chairman of Midtown Equities, who is one of the leaseholders of the World Trade Center site and an owner of Barneys department store buildings in New York, Chicago and Los Angeles. Also from the community is Joe Sitt, chairman of Thor Equities, which owns the Palmer House Hilton in Chicago and several acres of Coney Island.
"I suspect there's more wealth on Ocean Parkway than there is in Beverly Hills," says Steve Solarz, the area's former congressman.
The community's ornate mansions aren't concealed behind hedgerows or gates as they are in the Hamptons—the wealth is on display for everyone to see. Along Ocean Parkway, houses are sometimes built right up to the lot lines. In Deal, there are Mediterranean-style villas with sweeping vistas of the ocean and stately Victorian homes with porches and Hollywood-style swimming pools.
Deal's social season is a swirl of engagement parties, bar mitzvahs, circumcision ceremonies and get-togethers at the Deal Casino, a club with a massive swimming pool and private beach. Weddings are elaborate affairs, some with 1,000 guests or more, held at Magen David of West Deal, the largest and most elegant synagogue.
Constant charity events are also a part of the social scene. Fund-raisers and raffles and auctions raise money for an array of causes: infertile couples, cancer-stricken children, impoverished adult cancer victims, religious schools, even brides too poor to afford a wedding trousseau. Tithing, or giving at least 10% of one's wealth to charity and your synagogue, is the practice.
There are also pockets of poverty. The community has been hit hard by the economic downturn, and many of its members in retail have seen business evaporate.
Rabbis were traditionally entrusted to see that money given for charity reached the needy. Wealthy community members who are fond of Rabbi Kassin say that he constantly approached people to help this needy person or that.
In the U.S. Attorney's complaint, Rabbi Kassin is alleged to have laundered more than $200,000 from the informant through his charity, while his nephew, Rabbi Ben Haim, is alleged to have laundered some $1.5 million; Rabbi Nahum is alleged to have laundered $185,000.
Mr. Shargel says the charges are baseless. "Rabbi Kassin did not launder money and never intended to violate any law—he was doing charitable work," he says, adding, "Rabbi Kassin didn't know from Prada and he didn't know from Gucci."
Any money collected "was for the people, and it was written down, and it was in the book, check by check," says Rabbi Nahum. He remains in his position at his synagogue. "At no time did Rabbi Nahum receive any personal gain related to these transactions and all monies received went to the charities," says his attorney, Justin Walder.
The community is home to several modern philanthropic institutions with lay boards, but a more antiquated system, where charitable funds are controlled by individual rabbis, has persisted. Rabbi Elie Abadie of the Edmond J. Safra synagogue in Manhattan says that the community also maintained "a mom and pop shop" style of philanthropy, not always subject to "oversight or checks and balances," which made its charities more vulnerable to allegations of improprieties. David G. Greenfield of the Sephardic Community Federation says there will now be a focus on "transparency," lay boards and "accountability."
Behind the scenes, there are deep divisions in this tightly knit community. Some are so shaken by the allegations that for the first time they say they are questioning their faith in the rabbis and calling for a thorough house-cleaning. Others—particularly more conservative, ultra-observant members of the community—are rallying around the rabbis and believe them to be innocent victims.
The division reflects a broader and more long-running split that's visible on the streets of Brooklyn and Deal. On Norwood Avenue, Deal's main shopping street, some Syrian-Jewish women wear wigs and long skirts—traditional religious garb that stands out in a community where many men and women pride themselves on dressing at the height of fashion.
Nostalgia for the Middle East suffuses the Sephardic community, and focuses on the ancient Syrian city of Aleppo. Aleppo produced legions of influential rabbinical scholars, and the community had strict customs about how to live, how to pray, how and when and whom to marry. It was also a city on a major trading route, which meant that Syrian Jews worked and interacted with Muslims and other groups, says Rabbi Abadie.
"On the one hand, the community was close-knit, and on the other it was worldly. They did not see a contradiction between their religion and close-knit family relationships with being cosmopolitan," he says.
That ability to function in the larger world served Syrian Jews wherever they settled. Many were adept, aggressive businessmen, their skills honed in at the Aleppo souk, and those talents have also been handed down through the generations.
The community has tried to hold onto to the traditions of Aleppo, or "Halab," as they call it, using its Arabic moniker. Even third- and fourth-generation Syrian Jews in Brooklyn pepper their conversations with Arabic expressions that hearken back to a country most never really knew. "Hazeet," they'll say of a man who has suffered a misfortune, "poor fellow." An inappropriate act is "eyb," or shameful.
From selling pita bread in the early 1960s, Mr. Setton and his brother by 1967 had earned enough to open the first Middle Eastern grocery on Kings Highway, a shopping strip located by Ocean Parkway. Setton Oriental Foods carried string cheese the brothers made by hand, dried fruit, spices and all kinds of nuts, from roasted hazelnuts and watermelon seeds to almonds and pistachios.
"When you had guests, you always gave them some pistachios, it was what you offered first," Mr. Setton recalls.
Now, Mr. Setton's lone shop has given way to multiple groceries that compete to sell Oriental specialties. Many of the shopkeepers speak Arabic, and old-fashioned bargaining is advisable.
Large families crowd restaurants like David's, a popular eatery that serves Middle Eastern cuisine—lentil soup pungent with cumin, skewers of ground beef called kufta kebab, bowls of savory okra stew—all prepared in keeping with strict Jewish dietary laws. A small bakery, Mansoura's, features trays of honey-drenched baklava.
"The Syrian food in Brooklyn is better than the Syrian food in Damascus," says Mr. Solarz, the ex-congressman, who has sampled both.
Nearby, on Ocean Parkway, synagogues are filled morning and evening with worshippers who pray and chant hymns in the ancient melodies and cadences of Syria and Egypt. Attendance is booming.
"You walk around and you will hear Arabic," Mr. Setton says on a tour of his old pita route. He can rattle off the names of who lives in every house—his old customers—though most are gone, the homes occupied by their children or young families. His own children live within a block or two of his home. His store, now called Chalouh International Foods, is today run by a Syrian Jew who emigrated from Damascus in the 1990s. A stone to guard against the evil eye, called a "shabah," is a brisk seller at $2.
On a Friday morning in August, long lines formed at the kosher food stores lining Deal's Norwood Avenue. Piled high on the tables of Kings Highway Glatt were packages of kibbe, the delicious little meatballs stewed in sour cherries or mushrooms that are the staple of Syrian cuisine and the centerpiece of the Friday-night sabbath meal. There was yebrak—grape leaves stuffed with rice and meat—and artichokes medias—artichoke hearts stuffed with ground meat and covered with sauce.
Older generations of Syrian women made these dishes from scratch, but these days, women line up to scoop up multiple ready-made packages of these delicacies. Some this summer were dressed for the beach, in pants or shorts and revealing halter tops. Others were in long skirts and long-sleeved blouses, their hair covered with a wig or a hat.
Come Friday, every woman in the community is busy making kibbe hamda, an aromatic dish that involves preparing a lemony broth, then adding garlic, mint and other spices, then throwing in vegetables and the meatballs.
"On Fridays you can drive down the streets of Deal or Brooklyn and know that every house has that kibbe hamda cooking," says Poopa Dweck (no relation to Solomon Dwek), a resident of Deal and author of the cookbook "Aromas of Aleppo." "You feel it—you smell it—the mint and the garlic and the kibbe that is boiling and everyone telling everyone not to be late."
Write to Lucette Lagnado at lucette.lagnado@wsj.com
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