Monday, September 15, 2014

Argentina and the vultures #GrieFault #GriesaFault

Argentina's fight with the vulture funds and their poodle, the Nixon zombie judge Thomas Griesa, continues.

The fight has provided opportunities for the paper Página/12 to do some imaginative representations of it. For instance, August 22, featuring the Nixon zombie judge:

August 30, stressing the global dimensions of the Nixon zombie judge's mischief:

The country took a big step this past week by passing a law allowing themselves to bypass American jurisdiction on the payments to the renegotiated bondholders (CFK signs Sovereign Debt bill: We can pay, we want to pay, we will pay Buenos Aires Herald 09/11/2014):

President Cristina Fernández de Kirchner has passed into law the Sovereign Debt bill, which changes the payment location of Argentine bondholders and was approved by Congress earlier this morning.

After the announcement made by Economy Minister Axel Kicillof of the “Now 12” initiative, a new government plan aiming to boost local consumption levels, Fernández de Kirchner assured that with the new bill “Argentina wants to pay, can pay and will pay all the contracted debts,” in a clear reference to the judicial dispute with the holdouts and the consequent adverse ruling by US Federal Judge Thomas Griesa.

“This law assures the payment for 92,4 percent of bondholders which in addition contemplates the interest for those investors who did not took part of the two previous debt swap processes,” the head of state explained. [my emphasis]
Cristina addressed the debt situation in a public statement, 11 de SEP. Lanzamiento del Programa "Ahora 12". Cristina Fernández Casa Rosada 11.09.2014 (40 min.):

And Argentina just received a new loan commitment from the staunchly neoliberal World Bank, demonstrating once again the the vulture funds' attempted bandit move in conjunction with Nixon zombie Judge Thomas Griesa is not endangering Argentina's national credit-worthiness as such. (Charlie Devereux, World Bank to Lend Argentina Up to $1.2 Billion Through 2018 Bloomberg News 09/09/2014; New WBG Strategy to Support Poverty Reduction & Inclusive Growth in Argentina World Bank 11/09/2014)

The World Bank press release just linked includes this quote from Argentine Economics Minister Axel Kiciloff, who has been a very prominent figure in the fight against the vulture funds:

In the past 10 years, Argentina has gone through an historical process of development based on employment and production. We are aware that industrial revitalization is the only way for Argentina to achieve sustained and socially inclusive growth. The Government has supported public policies that resulted in this growth process. International financing associated to employment creation, infrastructure development and supporting the needs of vulnerable sectors is a tool to achieve inclusive growth.
And, the UN General Assembly voted to set up a global legal framework for sovereign debt restructuring, an initiative of the Group of 77+China (Kicillof says UN debt restructuring resolution 'historic,' telling vulture funds 'no more' Buenos Aires Herald 09/10/2014). Only 11 nations voted in opposition. Including the US, with our Nobel Peace Prize President.

Cristina addresses that development in 09 de SEP. Cristina Fernández promulgó Ley de Moratoria Previsional. Cadena Nacional Casa Rosada 09.09.2014:

Página/12 came up with an image for that, too (14.09.2014), showing the vulture funds "without a place in the world":

It's a #GrieFault that's going on, not a genuine default. And Argentina is arranging a course around their scam.

Even the International Capital Market Association (ICMA) is calling for new international rules to present nasty characters like the vulture funds and their Nixon zombie judge accomplice from doing what they're trying to do to Argentina. (ICMA publishes revised collective action clauses (CACs) and a new standard pari passu clause to
facilitate future sovereign debt restructuring

Leland Goss, ICMA’s General Counsel said: "The potential adverse fallout globally from the default and restructuring of Argentina’s debt demonstrates the importance of having clear, unambiguous contract terms for sovereign bonds. In‐depth consultations with our members and other interested public and private sector representatives have led to the development of enhanced legal technology that will  make more orderly and efficient sovereign debt restructurings achievable in the future".
See also, Cambian reglas de reestructuraciones para evitar un nuevo caso como el de Argentina La Economía Online 29.08.2014. The ICMA has provided details of their proposals if you want to geek out on them: STANDARD COLLECTIVE ACTION AND PARI PASSU CLAUSES FOR THE TERMS AND CONDITIONS OF SOVEREIGN NOTES (Aug 2014).

David Dayen, who has an impressive gift for explaining complex financial issues in a generally accessible way without dumbing them down writes about Argentina's fight in Why Argentina’s Crazy Debt Gambit Could Make Sense Fiscal Times 08/22/2014. He compares Argentina's current approach as a kind of "Calvinball," changing the rules as the game is played:

The thing is, Argentina is kind of allowed to play Calvinball; it’s a side benefit of being a country. By definition, sovereign nations get to make up their own laws and even alter them on a whim. If they don’t want to obey the dictates laid down by other countries or international norms, there’s only so much the international community can do about it.

Which is why expecting U.S. courts to unilaterally delineate Argentina’s payment schedules was predictably impossible. They should have never inserted themselves in the first place into what is little more than a hedge fund’s moneymaking scheme. And Argentina’s response, however unorthodox and bizarre, might even help the U.S. economy, in a cock-eyed way.
Daniel Ozarow describes the stakes for the global financial system in Let's end this madness in the global debt system Aljazeera America 08/25/2014:

The [Nixon zombie judge's] decision has also set a legal precedent: Now that investment funds know that they can successfully appeal to the courts to claim millions of dollars in profits on their original outlay, any incentive they once had to restructure the value of their bonds following debt defaults has now been removed.

This will not only drain the already depleted treasuries of indebted nations, it will also create far-reaching instability in the global financial system, as the IMF has warned. However, the damage caused by a lack of regulation of speculation is not a concern for only poorer nations. Indeed, vulture fund activity has recently intensified closer to home with Aurelius' investment in the UK's Cooperative Bank having forced it to abandon its mutual structure in 2013, and Elliot Management's CEO Paul Singer squeezing huge payments from the Greek government during the eurozone crisis by threatening to create a mass default of banks across Europe.
Ellen Brown talks in some detail about some of the long-range implications of the vulture funds' play in the Argentina conflict in Colonization by Bankruptcy: The High-stakes Chess Match for Argentina Web of Debt 08/25/2014:

Argentina is playing hardball with the vulture funds, which have been trying to force it into an involuntary bankruptcy. The vultures are demanding what amounts to a 600% return on bonds bought for pennies on the dollar, defeating a 2005 settlement in which 92% of creditors agreed to accept a 70% haircut on their bonds. A US court has backed the vulture funds; but last week, Argentina sidestepped its jurisdiction by transferring the trustee for payment from Bank of New York Mellon to its own central bank. That play, if approved by the Argentine Congress, will allow the country to continue making payments under its 2005 settlement, avoiding default on the majority of its bonds.

Argentina is already foreclosed from international capital markets, so it doesn’t have much to lose by thwarting the US court system. Similar bold moves by Ecuador and Iceland have left those countries in substantially better shape than Greece, which went along with the agendas of the international financiers.
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