Judges, Vulture Capitalists Pick the Bones of Argentina

By Bill White —

America’s legal war with Argentina has continued to rage ever since an American judge, Thomas Griesa, ordered Argentina to either pay all of its creditors from its 2001 financial collapse or pay none—regardless of the law governing its debt obligations.

In June, Argentina deposited $539 million with the Bank of New York Mellon (BNY Mellon) to pay interest on its several classes of bonds governed by both United States and Argentine law. These bonds were issued both in settlement for Argentina’s defaulted debt and as new debt since Argentina emerged from effective bankruptcy 13 years ago.

In 2001, when Argentina, deeply indebted to world bankers and global speculators, became unable to make interest payments, it stopped all transfers to the global usurers and instead used its money for its own people. When it recovered it gave its creditors new, lower-priced debt in exchange for its old, unaffordable debt.

To build confidence, Argentina put its new debt under American and British law. But some creditors, including Elliot Management Corp, NML Capital Ltd. and Aurelius Capital Management LP refused to negotiate their debt, suing Argentina in U.S. courts. This year, the Supreme Court upheld Griesa’s ruling ordering Argentina to pay all of its creditors or none.

The trouble is, not all of the bonds are subject to U.S. law. Some are merely paid in euros from BNY Mellon. So while the judge can freeze payment on U.S. bonds, it is unclear from what source he derives authority to freeze payments on British bonds. And worse, he is threatening to hold Argentina in “contempt” if, to satisfy their creditors, Argentina restructures its debt with an Argentine bank to pay creditors under Argentine law.

The result has been more lawsuits, sanctions and threats. Argentina expelled BNY Mellon’s local affiliate and revoked its banking license this August. George Soros has sued in a British court to release money to British bondholders, while Griesa and the vulture-capitalists are threatening fire and brimstone.

The whole farce shows the arrogance and stupidity of international capitalism. Argentina should never have borrowed money at interest. A nationalist economic policy would have allowed foreign investment to enter Argentina only as equity investment, a restriction nations such as Hungary have now implemented, and would have run a trade surplus to keep capital flowing in and to maintain convertibility of the Argentine peso. Argentina should have stopped borrowing when it defaulted and not put its debt under foreign law. Now it is learning these lessons the hard way as it is forced to act from a disadvantaged position.

But America allowed bankers to build an international system that sucked wealth from workers and nations into the hands of the few, and in its arrogance claims its laws should have international scope.

One can only hope that Argentina nationalizes its debts so that they are governed by Argentine law and paid in Argentine currency, and then pays off those debts, never to borrow from the vultures again.