Five months after Manuel Noriega was removed from power in 1990, Congress and the Bush administration appropriated $420 million in foreign aid for Panama. But a quarter of the money, dispensed by the Agency for International Development, apparently went to Panamanian banks to repay American loans, provide middle-class Panamanians with mortgages and benefit a few large corporations. "Crazy as it sounds," says Sen. Patrick Leahy (D., Vt.), "we let Panama use our aid to pay its debts to us so we can say, 'See, they paid their bills,' and then send them more money."

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