Tuesday, March 17, 2009

Argentina's Bonds

"Argentina reportedly intends to file for [SEC] approval to re-enter the US capital markets. The SEC should instead insist that Argentine securities bear a warning like cigarette packages: 'This issuer has a record of misrepresentation, debt defaults, and debt repudiation, and therefore may be dangerous to your financial health. Do not consume this issuer's bonds unless you have a platoon of lawyers and a Navy to back them up, and you're prepared to use both.' ... In 2001, Argentina defaulted on $81 billion in soverign bonds. ... Since Argentina had earlier agreed to waive soverign immunity and accept the jurisdiction and judgments of New York courts, more than 160 lawsuits were filed. But the governments of Nestor Kirchner and of his wife and successor, Christina Fernandez, have ignored numerous court judgments. Judge Thomas Griesa has repeateldy condemned their conduct, noting in 2005 that 'I have not heard one single word from the [Argentine] Republic except ways to avoid paying those judgments.' ... If the offering documents Argentina has submitted to the SEC in the past are any indication, its forthcoming filings will be replete with misleading or meaningless representations. ... And they will almost certaainly lack candid disclosure about that country's true financial condition--its $35 billion in outstanding but repudiated debt to foreign creditors, its cozy financial dealings with the Chavez regime in Venezuela, its grossly understated inflation rate, or its recent binge of expropriating assets within its reach to meet its mounting financial obligations", Robert Shapiro and Nancy Soderberg at the WSJ, 27 February 2009.

What the problem? Replace Saudi Arabia and China for Venezuela and what distinguishes US debt from Argentina's? Will the SEC say the Treasury should prepare disclosure documents showing its sorry history of defaults through inflation? Without your own military no judgments against a sovereign can be enforced. What did Theresa Ghiladucci recently propose with respect to assets held in 401(k) plans?

2 comments:

kuato said...

hello i.a.,

The IMF or usa big banks can lend them the $, because they get infinite amounts for free and there is nothing anyone can do to stop them.

Anonymous said...

I wonder how much US debt is really outstanding... between tri-party repo and fails and TAF and TALF and blip and blop...

Argentina is a minor global player ... it's hard for it to push London/NY bigbank around...

The US, on the other hand, suffers from being infiltrated by London/NY bigbank folk ...

I love how Bloomberg News has begun reporting on past Treasury connections of GS people...