Saturday, June 28, 2014

Argentina and the vulture funds after the Friday round

Nixon-appointed zombie federal Judge Thomas Griega ruled Argentina's payments to the accounts for its payments due Monday on renegotiated debt can't be paid to the bondholders. But he didn't embargo/freeze the funds.

Thomas Griesa, Nixon-appointed federal judge who's trying to force Argentina into default

Argentina's move caught the Nixon zombie judge by surprise. He suggested to the Bank of New York, which holds the payment funds, that they return the money to Argentina. But when Argentina deposited the payment amounts due June 30, they were making a bond payment under the terms of the debt restructuring arrangements that cover some 92% of the debt defaulted in 2002. So Argentina is saying, forget it, we made the payment we were legally required to make under the terms of the debt agreements, so the money isn't even ours any more. The Nixon zombie judge said that the payment of $1B or so that Argentina made was illegal.

Página/12 reports in Griesa les obstruyó el cobro a los bonistas 28.06.2014 calls it an "audaz jugada que desorientó al propio Griesa, quien se abstuvo de ordenar un embargo de estos fondos y de declarar al país en desacato" ("audacious play that disoriented Griesa himself, who refrained from ordering an embargo of these funds and from declaring the country in contempt.")

The vulture funds at Friday's hearing before the Nixon zombie judge were demanding that Argentina be held in contempt of court, because the Nixon zombie judge's ruling that the Roberts Supreme Court allowed to go into effect by declining to hear Argentina's appeal requires Argentina to pay the vulture funds before paying the holders of the restructured debt. From Página/12:

El juez distrital sólo se limitó a aconsejar al BoNY devolverle los fondos al país, un terreno inexplorado en materia de pago de deuda. Según la interpretación que realizan en Economía, los fondos depositados en el BoNY ya pertenecen a los bonistas y no al Estado argentino. “La Argentina ya pagó”, resaltan cerca del ministro de Economía, Axel Kicillof. “En una insólita e inédita decisión, el juez Griesa pretendió anular el pago ya realizado por la Argentina en cumplimiento de los prospectos, los contratos con sus acreedores de la reestructuración y de la ley argentina”, señaló Economía a través de un comunicado. El país tiene un mes más para negociar una solución antes que se declare default técnico en caso de que no se liberen los fondos.

[The district judge [Griesa] simply limited himself to recommending to BoNY that they return the {deposited} funds to the country, a terrain unexplored in matters of debt payment. According to the interpretation made by the Ministry of Economics, the funds deposited in BoNY belong to the creditors and not to the State of Argentina. "Argentina has already paid," responded someone close to the Economics Minister, Axel Kicillof. "It is an insolent and unprecedented decision. Judge Griesa is attempting to annul the payment already made by Argentina in compliance with the prospects, the contracts with its creditors of the restructuring and with Argentine law," the Economics Ministry pointed out in a communication. The country has an additional month to negotiate a solution before it is declared in technical default in the case that the funds aren't freed up.]
I wonder what this Nixon zombie judge was really thinking. It sounds like he doesn't really try to hide his sympathy for the vulture funds. (Sebastián Premici, Toga de juez, pero con pico y plumaje de buitre Página/12 20.06.2014)

Did he think Argentina would just back down? Did he think a President like Cristina Fernández would just roll over and play dead for this ruling and let Argentina be tossed back into default after all that's been accomplished since the 2001 financial crisis? Is he even aware of what a radical decision he made and the Roberts Court allowed to go into effect?

It seems to me that Cristina and Axel Kicillof have done a good job of wrong-footing the Nixon zombie judge, putting him in the position of being the one who forces Argentina into technical default.

The negotiations with the vulture funds are complicated by the fact that all the creditors on the restructured debt have the right until the end of this year to claim the same repayment terms negotiated voluntarily for any of the holdouts. If an agreement is reached with the vulture funds that the Nixon zombie judge accepts, Argentina could argue that the agreement was anything but voluntary because the Nixon zombie judge was hold the gun of default to their heads.

Here is a report from TV Pública argentina on Friday's action, Visión 7 - Griesa impide el cobro a bonistas 27.06.2014:

Jorge Alemán looks at the idea of La globalización como golpe de Estado financiero (Globalization as a financial coup d'etat) Página/12 27.06.2014:

... el golpe financiero en el siglo XXI es un golpe que se ha realizado con la complicidad de los Estados dominantes y sus aparatos jurídicos, todos ellos pertenecientes a lo que llamamos la “racionalidad” neoliberal.

[... the financial coup of the 21st century is a coup realized with the complicity of the dominant states and its juridical apparatuses, all them them belonging to what we call the neoliberal 'rationality'.]
Here we have a case of market rationality that pits the interests of the vulture funds against those of the holders of restructured debt and against the interest of the current world system of sovereign debt. For the vulture funds, the "rationality" of the market drives them to do something that damages a lot of other people, including other wealthy investors.

What the Nixon zombie judge has for an excuse, I don't know.

The liberal Zeit Online runs a critical article by Alexandra Endres on Cristina, Die Geier kreisen über Argentinien 27.06.2014. She does an okay job of describing the debt standoff with the vulture funds. But she scolds Cristina's government for heresies against neoliberal dogma, like the nationalizing (via purchase of a majority of shares) of the gas company YPF, which had previously been majority-owned by the Spanish company Repsol. Endres invokes the endless whine of conservatives against governments they don't like: uncertainty about government decisions, a criticism that functions something like a magic incantation in the neoliberal vooabulary.

And, of course, the poor agricultural oligarchs are suffering because the mean gubment expects them to pay taxes. The horror, the horror.

And they have capital controls, another horrible heresy. Is there no end of Argentina's sins?

Plus, that awful woman Cristina has dared to put conditions on German imports! Who does she think she is, Angela Merkel?!!

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