The White House just announced that President Bush intends to veto a major defense policy bill, citing concerns over language that it claims could endanger Iraqi assets held in U.S. banks.

In a written statement just released, White House deputy press secretary Scott Stanzel says the measure “would significantly amend current law (the Foreign Sovereign Immunities Act) in ways that would imperil Iraqi assets held in the United States, including reconstruction and central bank funds.”

A provision in the measure “would permit plaintiffs’ lawyers immediately to freeze Iraqi funds and would expose Iraq to massive liability in lawsuits concerning the misdeeds of the Saddam Hussein regime. The new democratic government of Iraq, during this crucial period of reconstruction, cannot afford to have its funds entangled in such lawsuits in the United States. Once in place, the restrictions on Iraq’s funds that could result from the bill could take months to lift, and thus Section 1083 cannot become law even for a short period of time,” Stanzel says in the statement.

Among many provisions, the bill includes a half-percentage-point bump in military pay, on top of a 3% boost already set to go into effect Jan. 1. “As soon as possible upon Congress’s return in January, the Administration will work with Congress to enact the NDAA adjusted in a manner that protects Iraqi funds in the United States and that ensures that the additional pay raise for our troops is retroactive to January 1,” Stanzel says in the statement.

Update at 12:29 p.m. ET: Democrats are saying this is the first time they’ve heard of any administration objections. “The administration should have raised its objections earlier, when this issue could have been addressed without a veto,” Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., said in a joint statement. “The American people will have every right to be disappointed if the president vetoes this legislation, needlessly delaying implementation of the troops’ pay raise, the Wounded Warriors Act and other critical measures.”