Argentina vs. the vulture funds

Politics and religion
1

Nobody brought this up yet, but there has been this long-standing controversy where an American hedge fund, run by Paul Singer, a well-connected financier, has bought outstanding bonds put out by countries which had since defaulted, then settled with most of their initial investors for pennies on the dollar. This guy’s tactic is to then sue the ass off of those countries for full payment, playing the victim even though he stands nothing to lose in the matter in comparison to the initial investors.

You will remember, he was the one who tried to get hold of an Argentinian warship while it was in Ghana. The matter was settled after Argentina complained to the International Tribunal for the Law of the Sea, which left Singer fuming about how such an organization could exist to foil his dastardly plans. Since then, he’s sued the Argentinian government in a U.S. court, where the bonds were initially negotiated. The judge found in his favour, against the Argentinian government, and has since had Argentina’s accounts in the country frozen until full repayment was made first to the vulture funds, then to its other bond holders. Argentina refused and defaulted, then appealed to the International Court of Justice (which refused to hear the case unless the US government agreed, which it refused to do.)

How do you know you’ve hit sleazefuck territory in this? We hit that long ago when the U.S. government did nothing to prevent the sleazefuck financier and an American court from dictating the policy of a foreign government. But you know you’ve hit sleazefuck bottom when the U.S. judge who made the ruling now threatens to hold the Argentinian Government in contempt of court over its statement that it did not default.

2

I saw this on the John Oliver show. While this guy sounds like a douche…Argentina did default on the bonds, right? I don’t understand the outrage.

3

You wanted Capitalism Vettie, don’t whine now.

4

Simple, Argentina invites Singer to the country for talks, and whilst on the way to the resort where the talks are being held, chuck him out a helicopter 5,000 ft over the Atlantic. I hear the Argies have experience in this method of political negotiations.

edit: that fucking judge too.

5

Actually, Argentina did not ‘default’. They negotiated with creditors to avoid default – default being a legal term which actually has no meaning in an international law context. Singer did not engage in the negotiation, did not object, and then after the negotiation allowed Argentina to restore economic stability, Singer said 'fuck you, losers, and demanded the full repayment on debt that other creditors had foregone in order help Argentina become a viable economy again so that Singer could now sue them when he couldn’t before the restructuring that he did not participate in so that he could let everyone else take the fall.

If someone walk up and shot his brains out, I’d throw that guy a party. And then, I’d finally get to meet Joe Stiglitz.

6

Or maybe, after Argentina, he should try to move on to some old outstanding Imperial Russian bonds which were repudiated by the Bolsheviks and which Yeltsin agreed to pay only pennies on the dollar for in 1996. Singer’s then free to tell Putin all about it – but he shouldn’t be surprised from that moment on if he finds that his drink tastes funny one day.

7

Why is this guy the “sleazefuck” and not the irresponsible Argentine govt that ran up all this debt and refused to pay it back? Seems to me the outrage is misplaced.

8

For the same reason humanity has known Shylock to be a sleazefuck:

GRATIANO

Not on thy sole, but on thy soul, harsh Jew,
Thou makest thy knife keen; but no metal can,
No, not the hangman's axe, bear half the keenness
Of thy sharp envy. Can no prayers pierce thee?

SHYLOCK

No, none that thou hast wit enough to make.

GRATIANO

O, be thou damn'd, inexecrable dog!
And for thy life let justice be accused.
Thou almost makest me waver in my faith
To hold opinion with Pythagoras,
That souls of animals infuse themselves
Into the trunks of men: thy currish spirit
Govern'd a wolf, who, hang'd for human slaughter,
Even from the gallows did his fell soul fleet,
And, whilst thou lay'st in thy unhallow'd dam,
Infused itself in thee; for thy desires
Are wolvish, bloody, starved and ravenous.

SHYLOCK

Till thou canst rail the seal from off my bond,
Thou but offend'st thy lungs to speak so loud:
Repair thy wit, good youth, or it will fall
To cureless ruin. I stand here for law.

In The Merchant of Venice, his debtor is let off the hook of the whole “pound of flesh” affair because while the law gives Shylock the right to collect it, it didn’t give him the right to collect any blood or any other substance as his due.

Shylock in a US court gets all he wants, because U-S-A, U-S-A, U-S-A, American exceptionalism, and plenty of guns. If Argentina had to default to pay him, then it stands to evidence that it was, unlike whatever Singer might have been saying, not in a position to pay it. It’s also that Singer never risked losing any of his own money if Argentina didn’t pay in full, since he was not an original buyer of Argentinian bonds; he took advantage of the people who did lose money to buy the outstanding bonds from them – in other words, he’s already preying upon the weak and the victims of the Argentinian settlement to make himself more money. He’s a looter on a battlefield.

Furthermore, there have been clear indications that it’s always risky to lend money to states, because they have the power to rewrite the rules (see Philip IV and the Knights Templar). At the same time, states have purposes that should place them above the tentacles of the rapacious. When you try to get your hands on a commissioned navy ship when it’s on a goodwill tour in a foreign port where you think you can get it impounded, you are affecting the capacity of a state to defend itself in armed conflict. (Okay, okay, here it was a masted vessel only used for goodwill tour and cadet training, but it is commissioned.) It’s even worse when you get to complain about international law blocking you from carrying out your master scheme, which does fit in, all too perfectly, with the “WE MAKE THE RULES HERE, FUCK THE UN” worldview of US foreign policy. Want to know which Western countries (EU + NA) did not ratify the United Nations Convention on the Law of the Sea? Liechtenstein, for reasons we can imagine, and the United States.

No wonder that at the same time Singer is pissing money into slush funds for Republicans.

9

USA? No, Capitalism.

(Also, neither San Marino or Andorra have signed either. Yes, all three of the micro-states are landlocked. Yea yea.)

10

To some extent, I’d agree. But there’s no capitalism like American capitalism, where politicians can be bought, the judicial process openly skewed along ideological lines, and where you can impose the outcome abroad through gunboat diplomacy. If Argentina wanted to get back at Singer, the man who collapsed the economy of an entire country and once negatively affected its capacity to defend itself, it has no legal means to do so. Were he somehow to take his vacation in Buenos Aires and arrested on some pretext, his powerful friends in Washington would be there to wave the “release him OR ELSE” card. Ye Olde British in tow, undoubtedly.

It’s sad but predictable to read comments on stories about that and find that 90% fall for the “Argentina should pay its debts” argument (because not surprisingly most coverage has been in the financial press). If he tried that on Russia, though, my guess is that he wouldn’t last long, and you wouldn’t see me weeping.

11

You haven’t been looking at the UK recently.

Or for that matter China. Or Russia. (Cronyism is VERY capitalist!)

12

Oh, I’m not denying that these are. And certainly there’s been a relapse into Dickensianism (minus the industrial base) since you let Peggy Bootstrap run the country. It was like watching a bad film (and during trans-Atlantic dealings, with bad actors).

But the Americas, by way of the Monroe Doctrine, have always been more or less the exclusive preserve of the US (they certainly treat it as such).

13

Yea…no. You really haven’t been following along here about how bad the UK government is.

Thatcher, for all she was nasty, had principles.
The current lot? “Gimmie”.

Example; Thatcher forced millions of people onto the disabled rolls to lower unemployment. This lot? Forcing really sick people OFF the disabled rolls in the middle of a downwards wage/productivity death spiral.

And giving billions to their cronies companies for “back to work” schemes (with a lower result rate that leaving people to jobsearch on their own!), while at the same time closing Remploy’s factories and service division (i.e. CCTV watching), which employed badly disabled people, AND pumping up workfare schemes which actively replace jobs (several of those schemes were ruled illegal. They passed a retrospective law denying compensation, which has just been struck down in the courts…and which they’re trying to appeal…), and…

(I can really go on all day. But I won’t)

14

The other thing with British politics is that it’s ossified in place, a problem similar to that of the US, but with a different mortar. Now that New Labour has decidedly become Old Tory, and that the Lib-Dems have lost their soul in a Tory minority government, what else is there on the economic left? Not even the UKIP, it would seem, since it’s just another proto-libertarian party.

15

When Argentina issued the bonds in question, its government agreed to be bound by US law and US courts in relation to those bonds as an assurance that they wouldn’t do exactly what they did—force bondholders to take a haircut or get nothing at all—because Argentine bonds were sufficiently worthless as a result of Argentine fiscal policy that they couldn’t issue bonds at anything approaching reasonable rates without such assurances.

So yeah, Argentina is at fault here, and the usual anti-capitalist nattering from the usual suspects is altogether off-base. At least Vetarnias writes interesting reminders of why I left BF, though.

16

…

See, for once, I have to completely agree with you.
That’s exactly the problem we face.

Fishbreath - There’s a difference between claiming your own bonds should be paid and actively blocking the payment of other debt.

17

No, there is a difference between paying off your debts and paying off some of your creditors while deliberately shafting others. Argentina wrote the covenants on the bonds. Argentina chose to subject those bonds to US law so that people would buy them. People bought them for precisely those reasons. Now those guarantees have bitten them in the ass because a US judge ruled they don’t have the right to selectively screw creditors. Thanks to that idiotic screw-the-creditor thinking that has persisted for generations Argentina is the biggest economic failure of the last century. Maybe someday they will finally learn the lesson that running up debt then defaulting is not a strategy for growth, but thanks to the prevalence of anti-capitalist idiots in that part of the world, I doubt they will.

18

It’s nothing to do with them. They’re objecting, and bringing things to court. Fine, so they get to wait precisely because they’re objecting to the offer. This does not mean they get to apply tortious interference to other bonds which are nothing do with the case!

It’s like saying that if you can’t pay for a car loan because you lose your job, you should be banned from paying your rent!

The reality is that in the end, they’re going to get less because of this, and every other creditor is going to be out for them.

19

If you subject your bonds to US law in order to make them more favorable, then you’re obligated to obey US law when they come due.

This guy’s obviously preying upon Argentina, but the fault for the whole situation lies squarely on Argentina itself.

20

Pretty much. If you want to maintain control, don’t give up said control.