Argentina’s ‘Default’ Begs a Few Questions

Pay Up or Shut Up

(1) Not a single one of Argentina’s CDS has been payed out yet. Why not?

(2) What’s on ISDA’s mind that’s taking oh so long to collect insurance on something that (supposedly) has already ‘happened’?

Argentina’s supposed “default” was officially declared on June 30 and unequivocally reconfirmed a month later after a 30-day grace period.

Right ?  Wrong ?  Not sure?  It ‘depends’?  How so?

(3) Who else other than the absolutely maximum judiciary authorities within the legally-binding Argentine bond jurisdiction has any further say on this matter?

Because being in default “somewhat” is like being “somewhat” pregnant.

(4) What are the ECB, the IMF, the World Bank, the Fed, and the credit rating agencies so concerned about regarding the ill-born US jurisprudential aberration behind this supposed ’default’?

One answer is the putrid stickiness of judicial low ground protecting utterly suspicious Cayman Islands “plaintiffs” who never ever loaned a single cent to Argentina.

Another possibility is the unmanageable future impact upon the world’s USD $ 55 Trillion sovereign debt?  (Hint… for starters, think ‘PIIGS’…)

Business is Business

And friends will be friends, indeed.

Is modern Wall Street financial ‘science’ (or ’crony art’ rather ?) trying to invent a sustainable, judicially-supported ’business model’?

Can rogue creditors and rogue courts sport long-lasting business relationships at the expense of millions upon millions of people while laughing behind everybody’s back as they are at it?

Has Argentina really “defaulted”?

Yes?  Why ? How?

Because Argentina has already duly, fully and promptly paid 92.4% of its creditors and is simultaneously insisting gaucho hard in paying the remaining 7.6% exactly the same it has always payed everyone else for years. By any standard, and as semantics does matter (a lot, as proven below) common sense should consider this to be “equitable treatment“, wouldn’t you think so ? Shouldn’t the above be good enough for any bankruptcy ?  Because otherwise 99.99% creditor’s agreement would also mean default, right?

Skeptics please ask Detroit.  By the way, most laymen don’t know that sovereign defaults (such as Argentina’s) by definition are absolutely un-enforceable. Check it out.

Not So Fast

But by now you could snappishly question that these 92.4% Argentine creditors have not actually received their dollars from trustee New York Mellon Bank, have they?

Well, actually you are right on the ball there, and that’s why BoNY has been sued by many, including George Soros and Kyle Bass, while Argentina has dismissed its wrongful dis-service without further ado.

The reason is that judge Griesa (pushing 85 with visible health problems, and very fond of napping around any time of day) has established a rather ‘nuclear’ US foreign policy doctrine way above and beyond what the US Constitution has squarely defined… with no one (literally) willing to stop him dead on his tracks.

Not Congress, not SCOTUS… not even the US Solicitor General or the US Attorney General, whose job description includes “comity” powers (already applied in a relatively recent and very similar case) which can cut municipal New York City judge Griesa down to size with the stroke of a pen.

Please see Greg Palast’s Aug. 7 ”The Guardian” piece:

Please see my own July 23 “The Trial of the Century” piece.

So, in his merry own way (for lack of a better term) judge Thomas Poole Griesa has pro-actively developed what central banks consider to be one of their worst nightmares.

Floyd Norris, in his very recent New York Times article ’The Muddled Case of Argentine Bonds‘ accurately concludes that “… judge (Griesa) has a lot to think about. It would be better if he had done some of that thinking before he issued his order, or if the appeals court or the Supreme Court had forced him to do so…”

What, Me Think?

Fully octogenarian judge Griesa flatly ignores (or doesn’t remember) among other things that “pari passu” is a Latin term that means ‘equitable treatment’  not  ‘equal treatment’. They are NOT one and the same, of course. Accordingly, while defying the rightfull decision of 92.4% of Argentina’s creditors, judge Griesa is intentionally thwarting the world’s largest and most successfull sovereign debt restructuring ever.

Nobel Laureate Dr. Joseph Stiglitz very politely put it this way:

“…judge Griesa misinterpreted (Argentina’s) bond contract’s ‘pari passu’ clause, which aims to give equal footing to bondholders in line to be paid. The intent of ‘pari passu’ is that if there are two categories of bondholders who look exactly the same, you cannot treat one differently from the other. Judge Griesa stretched it to say that if you pay anything to the bonds that have been restructured you have to pay everything to the (vulture) funds.”

Rinse, Repeat

It’s very hard to accept that a supposedly most knowledgeable and fully vetted Doctor of Jurisprudence (‘Juris Doctor’) ignores basic Legal 101 definitions… unless his memory and/or understanding have been affected, something which has been noticed by different people directly familiar with his frequently contradictory and mis-informed decisions and/or reactions.

Very often, after getting an answer to any of his questions, judge Griesa may just look vertically down as if he were praying in silence.

In other instances he may smirk and stare back with frozen, unfocused eyeballs.

Many times he waits a few more seconds in silence (rarely mumbling something)… and then goes on to repeat the very same question he’s just asked with the exact same wording… rinse, repeat, over and over again… up to 7 (seven) consecutive times within a period of very few minutes… while people being asked compassionately keep rephrasing their very same answer while looking at each other’s faces in disbelief.

Corporate America automatically retires its best and brightest executives (no appeals or exceptions allowed) at age 65 for a reason.

Judiciary America should think along the same lines soon enough.

Otherwise, judges such as Dr. Griesa will continue to decide the fate of millions upon millions of people without having their mental capabilities and/or physical readiness to do so, day in day out, under enormous stress and very short time spans to absorb what often are most complex and intricate situations.

How About Chinese and German Judges?

As Hon. Griesa’s reasoning is often staringly incomplete, inapplicable, inconsistent, untimely and/or plain ackward, Dr. Stiglitz very rightfully adds with a Mona Lisa smile on his face:

“… (among other things) it is still not clear whether Judge Griesa’s ruling affects (…at this very late hour of the ‘post-default’ end game I dare to add…) not only American bonds, but also British and Japanese bonds. So the question is can one country act over the interest of others. What happens if a Japanese judge then says, ‘If you don’t pay us, you are in violation of Japanese law…”

So there you have Dr. T.P. Griesa at his very best extra-jurisdictional, transnational overreach, solemnly ignoring the very definition of a sovereign nation state (as per high school Civics 101) and thus ushering international financial markets into legal limbo to the tune of USD $ 55 Trillion.

True enough, Japanese judges would surely know far better than going for judge Griesa’s rogue judicial adventure.

But instead let’s just think of a very patriotic Chinese judge that dared to say (with a battle-hardened Russian Field Marshall standing right next to him):

“If you don’t pay us, you are in violation of Chinese law…”

Or, better yet, how about a German judge saying:

“If you don’t give us back our 1500 tons of BuBa gold which you supposedly have been keeping for us at Fort Knox for the past few decades (and which we have repeatedly requested in 2011-2012 and 2013 with only 5 tons delivered to us so far) you are in violation of German law…”

Enter Nevada judge Cam Ferenbach…

Join the Party

(a) There is no way to make this stuff up…

(b) Anybody for an ‘Anarchy in the Courtroom’  Hollywood super-production?

(c) I kid you not : there are other ‘judge Griesas” out there standing in line to help out vulture funds in their never-ending attempts (already more than 900 and counting…)(nine hundred !) to ‘discover’, ‘attach’, ‘recover’, embargo, or seize any asset directly or indirectly related to the Argentine Republic.

So now, thanks to Hon. Griesa’s rulings duly ignored (upheld) by SCOTUS, shamefully enough “… any US judge (whether Griesa or a like-minded colleague) could always discover some new aspect or mechanism, as Ferenbach has just done. Huge debts would thus be added to the current balance by merely signing off on a sentence — with full scope for reinterpretation and new turns of the screw…”

Can’t believe it?

Check out this Buenos Aires Herald editorial.

Furthermore, vulture funds are seeking Argentine asset information from U.S. energy companies that have or have had commercial ties with the government’s state-run oil producer including Exxon Mobil Corp., Chevron Corp., Apache Corp. and Dow Chemical Co.

“NML does not yet know what property Argentina has and where it is,” the documents filed at courts in Texas, Michigan and California say.

Please see

Extraterritorial Wikidollars?

Julian Assange has alleged that “… the United States is supporting holdout investors in their dispute… as a way of punishing the country for the memorandum of understanding signed with Iran to advance investigations into the AMIA Buenos Aires 1994 bombing… (while) also trying to set a precedent that would allow US businesses to embargo the assets of embattled foreign governments like Argentina’s.”

Work in Progress

In view of this unsustainable situation, an international convention for sovereign debt restructuring is badly and urgently needed.

Please see the very recent UN Resolution September 11, 2014, whereby the United Nations agreed to move ahead on a multilateral plan to handle bond restructurings.

And just for the sake of completeness and better understanding, you may also benefit from reading my own July 7 column regarding Argentina’s ” Trial of the Century“.

Argentina enjoys plenty of support from many distinguished and prominent personalities and world-reknown institutions, including R. Solow, D. Rodrick, K. Rogoff, P. Krugman, G. Brown, A. Gelpern, A. Krueger (IMF), Pope Francis, J. Sachs, J. Stiglitz, M. Hudson, G. Soros, K. Bass, N. Roubini, T. Samples, G. Palast, B. Garzón, A. Salbuchi, E. Brown, M. Weisbrot, the US Dept. of Treasury, The Brookings Institution, the IMF, M. Wolf (FT) plus many other op-eds and editorials published in the WSJ, NYTimes, The Economist, etc., etc.

Jorge Vilches is a former op-ed columnist for The Wall Street Journal. He can be reached at:

Jorge Vilches is a financial op-ed columnist based in Buenos Aires, Argentina. He can be reached at: