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How hedge funds held Argentina for ransom

Saturday, April 2nd 2016 - 07:04 UTC
Full article 33 comments

By Martin Guzman and Joseph E. Stiglitz (*) - Perhaps the most complex trial in history between a sovereign nation, Argentina, and its bondholders — including a group of United States-based hedge funds — officially came to an end yesterday (March 31) when the Argentine Senate ratified a settlement. Read full article

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  • LukeDig

    This reminds me of some country who made its fortune with piracy, raiding, slavery (world leaders at slavery too!), opium trading, colonial imperialism, and economic bullying and cheating, to the present without interruption.

    It seems the yankees, true bigots like their ancestors never mixing with the aboriginals except to kill ´em, also carry the same talent in their blood.

    Apr 02nd, 2016 - 01:48 pm - Link - Report abuse 0
  • Marti Llazo

    Stiglitz (who worked for CFK but violated Colombia's ethics rules in failing to report it), Guzman, and Kicillof should be rated as the Three Stooges.

    As usual they are whingeing about nothing. The solution to their imaginary problem was solved years ago with the recognition that Collective Action Clauses should be (and now are) used consistently in sovereign debt matters. CACs have been available and used for this sort of debt for more than 100 years. You just have to be smart enough to include them when selling debt. That's a level of intelligence that escapes Stiglitz and his crybaby friends.

    Argentina and Argentina alone is responsible for its debt problems. It was counseled to include Collective Action Clauses in the bond sales that led to the defaulted debt that has now become very expensive to deal with. And Argentina elected not to include CACs in that debt. Under the prevailing law, they could not make CACs retroactive, an effect that Argentina tried to gain by saying that if 93 percent agreed to a cram-down, then everybody ought to. Nope.

    Stupid has its consequences. And stupid has its apologists, in the form of the corrupt Stiglitz.

    ----------

    “...including having an iconic Argentine ship seized in Ghana....”

    A: The ship was never seized. The article writer doesn't understand the meaning of seizure.

    -----------

    “...officially came to an end yesterday ....”

    A: Nope. It's not over yet. Nobody has been paid and it looks like the 14 April deadline for payment won't be met.

    Apr 02nd, 2016 - 01:50 pm - Link - Report abuse 0
  • Lucifer

    Argys think its racist and piracy to ask to be paid on time and in full for contracts.
    No wonder they'll always be considered 3rd world.

    Apr 02nd, 2016 - 02:10 pm - Link - Report abuse 0
  • Pontefractious

    @2 Marti Llazo - thank you for pouring some of the cold water of reality on this nonsense. Stiglitz is your typical armchair academic safely insulated from the world in his ivory tower. If you have been involved in lending to these countries (or probably even if you haven't) you would know that international banks are not charities. When they lend they expect to get their money back, with interest. No bank enters any transaction accepting that the amount of principal, the rate of interest or the term of the loan can be changed without its consent, still less when the borrower has a less than stellar track record in paying its debt. And the whole suggestion that US courts somehow unilaterally extended extraterritoriality is more nonsense. The parties to the loan agreements freely and voluntarily subjected themselves to US law and the New York law courts. Griesa merely ruled on the documentation accordingly. Stiglitz has not merely drunk the koolaid - he is the one who has been making it with the help of the loony Kirchners.

    Apr 02nd, 2016 - 03:34 pm - Link - Report abuse 0
  • Marti Llazo

    I think they're actually 4th world. At least that is what some of the neighbours in Río Gallegos have been saying.

    Of course, this is the Kirchner province. Massive unemployment, pickets halting traffic for hours, the provincial government bankrupt, can't make the new Turbio power plant work, CFK under investigation. But they manage to find the money for Stalinism a la Sudaca: they just unveiled another big public statue of Néstor. I think that is Néstor statue number eight.

    Apr 02nd, 2016 - 03:36 pm - Link - Report abuse 0
  • Lucifer

    5. The prosecution of the Ks is just beginning. Knocking off one minion at a time right up to the head of the K Mafia. They need to put them in the Eze jail in general population so they're raped day in and day out until they confess enough about CFK and her disgusting children to lock them up for good.

    Apr 02nd, 2016 - 03:40 pm - Link - Report abuse 0
  • Marti Llazo

    Speaking of corruption prosecution of the KK horde, news today of the citing and detention of former (Kirchnerist) transport secretary for his role in spending big money (national funds) to buy railroad rolling stock from Spain and Portugal that turned out to be complete junk. He was already convicted on three earlier counts and there are something like 20 outstanding charges.

    http://www.lanacion.com.ar/1885532-ricardo-jaime-no-he-cometido-ningun-delito

    http://www.lanacion.com.ar/1885532-ricardo-jaime-no-he-cometido-ningun-delito

    English article

    http://www.lanacion.com.ar/1885532-ricardo-jaime-no-he-cometido-ningun-delito

    Apr 02nd, 2016 - 04:11 pm - Link - Report abuse 0
  • ChrisR

    I thought they were referencing Stiglizt of 'Inglorious Basterds' fame, the film by Quentin Tarrontino.

    At least that Stiglizt knew what he was supposed to do: kill the Krauts and not kill the economy.

    I think all three need scalping by the members of the Basterds, especially The Jew Bear' thought to be a Gollum!

    It makes more sense than these three ever have.

    Apr 02nd, 2016 - 05:57 pm - Link - Report abuse 0
  • Pontefractious

    Llazo @ 5 - We used to say Argentina was a 3rd rate struggling to remain 3rd rate, but that was 45 years ago. I have no doubt things have changed and you are right

    Apr 02nd, 2016 - 06:12 pm - Link - Report abuse 0
  • Marti Llazo

    This guy has written a lot of good observations on the holdouts issues, though he's not always 100 correct, but he's a great deal wiser than Stiglitz. Hence his latest article, where he roundly trashes Stiglitz and Guzman.

    “Where Guzman And Stiglitz Go Wrong About Argentina And Bond Holdouts”

    http://www.forbes.com/sites/timworstall/2016/04/01/where-guzman-and-stiglitz-god-wrong-about-argentina-and-bond-holdouts/#cc454ae7b6ad

    Apr 02nd, 2016 - 10:04 pm - Link - Report abuse 0
  • LukeDig

    The problem with you english is that you do not understand the reality about law and justice, without justice law is useless, without justice a contract is null and void...
    You believe contracts are sanctified pieces of paper, so if you sign a piece of paper saying that if you don´t pay, your mothers will be enslaved in a whorehouse, and then, you have a nigh impossible problem, and it happens... You consider it to be fair? To be truly just to respect the letter of ANY contract no matter the consequences?

    We are talking about things discussed centuries ago, when people where enslaved for being indebted, and brutally treated or even killed and their sons sold as slaves.
    We are talking about banks who are taking 1000% times their investment as profit, an absurd amount of money, an unfair amount of money... That quantity of money means hunger, means poverty, means families destroyed, futures destroyed, and it can also mean the propagation of terrorism and drug traffic...

    Do you really english people believe this kind of dealings JUSTICE? Do you really believe, that if a country, any western country, was truly DEMOCRATIC, any sane people would accept such risk, such threat to their future and the future of their sons, to leave the money and the risk on the hands of some politicians?

    Again, I am here hoping that the english mind will understand what the words “humane” and “justice” mean. When there is no justice, laws are just a bad joke, a tool used by the powerful to oppress the weak.

    Apr 03rd, 2016 - 02:41 am - Link - Report abuse 0
  • bushpilot

    You don't understand.

    If you tell someone you are going to pay them back, you have to keep your word.

    If you loaned someone money, you would not want them to plead for “justice” and not give you back the money you gave them. You would want your money back.

    Apr 03rd, 2016 - 03:09 am - Link - Report abuse 0
  • Marti Llazo

    @11 the LukeDig approach to “justice” is that if Argentina doesn't feel like paying its debts according to what it agreed to, then it is somehow “democratic” (?) to avoid paying those debts. Likewise, an agreement from an argento is inherently of no value if that argento later decides that what he previously agreed to is going to be a bit of a bother. (Argentinischer Weltanschauung).

    This is evidently what is being taught in the argento schools. If it's inconvenient, it's therefore unjust, and you just can ignore it.

    This Lukedig sounds a lot like Ernesto Guevara, ¿no? Probably similarly justifies the murders of property-owning neighbours because, you know, laws are just a bad joke used by the neighbours to oppress the choripaneros.

    And we wonder why nobody in their right mind invests in Argentina, and why Argentina is correctly considered the worst place in Latin America to do business.

    Apr 03rd, 2016 - 03:52 am - Link - Report abuse 0
  • Lucifer

    11. Ridiculous latin drama.
    Stay in the 3rd world mentality and you'll always be poor and dumb

    Apr 03rd, 2016 - 11:41 am - Link - Report abuse 0
  • Pontefractious

    LukeDig @11
    All this stuff about “justice” is nonsense. Are you suggesting that the original contracts were unjust ? If so, have you put the people who signed them in prison and recovered the money ? I think not. And if times got difficult after they were signed and Argentina found it difficult to pay - there is an appropriate American phrase that applied - “Suck it up!”. The problem with third world governments is that their politicians don't have the balls to raise taxes but still want to spend the money to help them get re-elected (or send it to Switzerland or whatever). So they borrow from banks, knowing that when the banks demand payment the politicians will be long gone. The only absence of justice under such circumstances is the failure to make such politicians pay for their crimes. Banks have no control over how countries use the money they borrower and cannot be held responsible. All they can do is rely on the contract and demand repayment. If the country repays late - well, yes there is a price to be paid for that if if you don't like it, then reflect that perhaps it would have been better not to borrow the money.

    Apr 03rd, 2016 - 02:24 pm - Link - Report abuse 0
  • Lucifer

    I'd like to know who'd be dumb enough to sign a contract that put their mother into slavery it they defaulted.

    Regardless, they signed it.

    Plus can't Argy's read?
    They're not a mature Society.
    They're like wild teenagers that have not learned that actions have consequences.

    Apr 03rd, 2016 - 02:54 pm - Link - Report abuse 0
  • Marti Llazo

    Lukedig wants to talk about “justice” ? Cleaning his own bird cage might be a start.

    Looks like the first of the Kirchner cabinet is now behind bars.

    http://www.buenosairesherald.com/article/211848/ricardo-jaime-turns-himself-in-to-c%C3%B3rdoba-police

    http://www.buenosairesherald.com/article/211848/ricardo-jaime-turns-himself-in-to-c%C3%B3rdoba-police

    Apr 03rd, 2016 - 04:08 pm - Link - Report abuse 0
  • Enrique Massot

    Couldn't expect less from wide-eyed MP commenters To squeal in delight now that Paul Singer and friend are finally pocketing the rewards of their hard labour, to be paid by Argentina residents who had no part in the borrowing, re-borrowing, default et al.
    Of course, they are in sync with the “Joyful Revolutionary” who, while readily conceding defeat with the vultures, is driving out of work thousands of public--and private--sector employees.
    All, joyfully, on the wrong side of history.

    Apr 04th, 2016 - 05:47 am - Link - Report abuse 0
  • Lucifer

    18. How much money have you pocketed from the Canadian taxpayers over the last 40 years?

    You should be deported.

    Apr 04th, 2016 - 10:34 am - Link - Report abuse 0
  • Pontefractious

    @18
    Enrique you are unbelievable
    “to be paid by Argentina residents who had no part in the borrowing, re-borrowing, default et al.” So Argentine residents are unable to keep their governments under control - the governments go and borrow money they can't repay - and the banks are supposed to pay the price ? I heard Argentina has a drug problem - sounds like you are in the middle of it.
    Let's be clear - do you really think that Argentina the country should not have to repay its loans because the “residents” did not “have a part” in the process ? I think if we establish that principle, no more money would be lent in the international markets, and certainly not to Argentina.
    Governments act in representation of the people of the country. If you deny that principle then all governments are illegal. I'm not sure where that takes you but nowhere good. I recommend therefore that you abandon that line of reasoning.

    Apr 04th, 2016 - 12:45 pm - Link - Report abuse 0
  • Marti Llazo

    @18 “Argentina residents who had no part in the borrowing,...”

    So using that Argentine Logic, those Argentine residents likewise had no right to any of the infrastructure or territory of the country.

    I used to think that the North Koreans were silly, until I met the Argentines.

    Apr 04th, 2016 - 03:54 pm - Link - Report abuse 0
  • Enrique Massot

    Oh yeah, poor Paul Singer was losing his hard-earned money to those nasty Argentines. But hold it! Here come white knights Martillazo, Lucifer and Pontefractious to the rescue.
    In the meantime, Argentina president Mauricio Macri appears named in the Panama Papers as being “occasionally” director of a Bahamas-registered company--so “occasional” he forgot to disclose when he was head of the Buenos Aires government:

    “Macri — who as president has vowed to fight corruption — is listed, with his Italian tycoon father Francisco and brother Mariano, as a director of Fleg Trading Ltd., incorporated in the Bahamas in 1998 and dissolved in January 2009 — a financial connection Macri didn’t disclose on asset declarations when he was mayor of Buenos Aires. His spokesman said he didn’t list Fleg Trading Ltd. as an asset because he had no capital participation in the company. The company, used to participate in interests in Brazil, was related to the family business group. 'This is why Maricio Macri was occasionally its director,' he said, reiterating that Macri was not a shareholder.”

    http://fusion.net/story/287227/famous-presidents-shell-companies-trove/

    No doubt, Macri is another smart guy deserving the praise of the above-named white knights.

    Apr 04th, 2016 - 06:56 pm - Link - Report abuse 0
  • Marti Llazo

    You won't find Marti praising any argentos.

    Remember we are dealing with comparative levels of corruption.

    There is Normal Corruption.

    And then to a degree that is several orders of magnitude greater, we have Peronismo.

    Apr 04th, 2016 - 09:35 pm - Link - Report abuse 0
  • Enrique Massot

    #23 Marti Llazo
    Thank you for establishing clear categories of corruption.
    ”There is normal corruption (and then) we have Peronism.“
    Therefore, according to Marti, there is a ”Normal (good, or less bad) corruption“ and then the other one that's ”real bad,“ the Peronista one.
    This smells like a badly disguised attempt to absolve Macri for his suspicious appearance in the Panama Papers:
    ”Macri was among the tens of thousands of rich and powerful people named in the leak of four decades worth of documents from Mossack Fonseca, a law firm based in the tax haven of Panama which specializes in setting up offshore companies.”

    http://www.reuters.com/article/us-panama-tax-argentina-idUSKCN0X1202

    Come on Marti. Who are you trying to fool beside yourself?

    Apr 05th, 2016 - 06:33 am - Link - Report abuse 0
  • Bubba

    What part of sovereign is not understood by the trolls. If the P's and K's had not been so corrupt, the default would not have been as deep or as long to resolve.

    Apr 05th, 2016 - 09:31 am - Link - Report abuse 0
  • Pontefractious

    @24 Enrique
    Much as you hope and pray that Macri will come to a bad end (”Macri was among the tens of thousands of rich and powerful people named in the leak of four decades worth of documents from Mossack Fonseca, a law firm based in the tax haven of Panama which specializes in setting up offshore companies.”), it does appear likely that Mossack Fonseca actually did some business that was not linked to tax evasion, corruption etc. So far Macri's explanation holds water - unless they can show the existence of an account, transmission of funds or other clear evidence of wrongdoing, it's going to be hard to pin anything on him, however much of a fulfillment of your dreams that might be. So I would keep your celebrations at a low level for the time being.

    Apr 05th, 2016 - 12:23 pm - Link - Report abuse 0
  • Marti Llazo

    @24 There you go, Reekie, playing the insinuation game.

    The Argentine government has pointed to the applicable law which appears to indicate that Macri's position as a director who was not a shareholder does not even require reporting. Under the law.

    So, can Reekie indicate where the law has been broken? Nobody else can, either. Who are you trying to fool, Reekie?

    Apr 05th, 2016 - 01:12 pm - Link - Report abuse 0
  • chronic

    Stiglitz is the same braying jackass that advised congress several months prior to the Fannie Mae/Freddie Mac debacle that the likelihood of mortgage default on a massive scale was so unlikely that it was virtually impossible - a veritable black swan.

    And in his own egomaniacal fashion even signed his name attesting to the same.

    Thus he is discredited by his own actions.

    Why is there no accountability?

    Apr 05th, 2016 - 02:54 pm - Link - Report abuse 0
  • Marti Llazo

    More on Stiglitz and his corrupt connections with Argentina: Article:

    “ Then there’s Argentina. Stiglitz’s relationship with the corrupt Kirchner regime goes back a long way. He was a paid advisor to the late President Néstor Kirchner, who was in office from 2003 to 2007, and has played the same role for Kirchner’s wife and successor, Cristina Fernández de Kirchner. He’s traveled frequently to Buenos Aires to advise the Kirchners and been paid handsome sums to deliver lectures there. Argentina defaulted on its sovereign debt in 2001, and Stiglitz took its side, filing an amicus curiae brief when Argentina appealed a U.S. court ruling ordering it to pay creditors $1.3 billion.

    ” In 2012, he served as a paid consultant for the Kirchner regime in a case before the World Bank’s International Centre for Settlement of Investment Disputes. In the same year, he held a speech at the Casa Rosada in which he bashed the free market and praised Cristina Kirchner, head of a grotesquely kleptocratic government, for the wisdom of her economic policies; Cristina, for her part, sat there applauding Stiglitz.“

    Article: ” .... Stiglitz filed a friend of the court brief on behalf of Argentina’s bid to appeal an American lower court’s ruling that would force it to honor $1.3 billion in bonds on which it defaulted in 2001. Stiglitz did not disclose — nor has he disclosed in his public statements or writings about Argentina, where he has argued that the country had no choice but to default on his debt — that he served as a paid expert for Argentina in a 2012 case before the World Bank’s International Centre for Settlement of Investment Disputes. Over the years, he has also traveled regularly to Argentina to advise the now-deceased Argentinian president Nestor Kirchner as well as his wife, the country’s current president, Cristina Fernandez de Kirchner and delivered several paid lectures there. ...”

    (No accountability).

    Apr 05th, 2016 - 03:21 pm - Link - Report abuse 0
  • Pontefractious

    @28 I think in the case of Argentina and the issue of third world debt Siglitz had his own personal accountability. He was hired by the Argentine government to provide the “social justice” mumbo jumbo that the loony Kirchners used as propaganda to rouse the masses against the hedge fund vultures. Why he is continuing to spout this rubbish is unclear to me but I suppose there are a few people still around who are taken in by it. But as far as doing the job for the Kirchners is concerned I would say he did pretty well - the fact that the poor confused Enrique is still badly infected (though hopefully not infectious) is a monument to the effectiveness with which Siglitz spread the disease.

    Apr 05th, 2016 - 03:58 pm - Link - Report abuse 0
  • Marti Llazo

    Should not surprise anyone: Argentina won't meet the 14 April deadline for payment. They left way too many loose ends, bad decisions, and creditors without solutions.

    http://www.bloomberg.com/news/articles/2016-04-05/argentina-s-prat-gay-leaves-debt-deadline-decision-with-holdouts

    Apr 05th, 2016 - 08:23 pm - Link - Report abuse 0
  • Enrique Massot

    Interesting. Those who have already judged and convicted CFK for about any possible variety of corruption are disingenuously absolving Macri of any wrongdoing in the wake of the Panama Papers revelations.
    Reality is, most commenters here couldn't care less what befalls to Argentines--but joyfully cheerlead Paul Singer and Mauricio Macri as heralds of destruction of the country's incipient productive sector and middle class.
    However, do not cry victory too soon, because Argentines have seen it before, and nobody has succeeded for too long screwing them. The way he goes, Macri won't get old in his position. His politics are way too extreme, and the people will soon begin to compare the real effects of the current and previous regime. It has already started.

    Apr 06th, 2016 - 07:44 pm - Link - Report abuse 0
  • Marti Llazo

    So far as the Panama Papers events the Argentine government has so far cleared Macri of any crimes or even the need to report his being a titular head without holding any assets.

    That differs considerably from the money-laundering charges hanging over some of the Kirchnerist kids like Baez, and this is only the beginning. More than 20 KK are to be deposed this month on their various crimes. Including CFK. But as you say, don't celebrate until they're behind bars. As you indicated, it has already started.

    “..Argentines have seen it before, and nobody has succeeded for too long screwing them...”

    Nobody screws the Argentines as well as the Argentines screw the Argentines.

    Apr 06th, 2016 - 09:38 pm - Link - Report abuse 0

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