Reuters blog archive
from Felix Salmon:
Argentina, as everybody knew it would, has gone to the Supreme Court to appeal the bad (and ignoble) ruling against the country by New York’s Second Circuit. The most likely final outcome, still, is that Argentina will default, for the reasons (but not with the timing) I gave last year. But, with this petition, Argentina now has three possible outs.
Call them sovereign immunity, pari passu, and the bondholders’ ransom. None of them is particularly likely to happen — but add them all together, and there’s still a glimmer of hope for Argentina.
1. Sovereign Immunity
The first one is, in a sense, the obvious one. Argentina has appealed the lower court ruling to the Supreme Court, and it is possible that the Supreme Court will accept the case, hear it, and find in favor of Argentina. (If that happens, the decision would come down some time between October 2014 and June 2015.)
The Supreme Court needs to rule on a matter of federal law, and Argentina has just such a matter: the Foreign Sovereign Immunities Act (FSIA). Sovereigns by their nature can’t be bound by US courts — and there’s federal legislation to that effect. Argentina has a long list of legal arguments surrounding FSIA, but at heart its case is simple: the judge in New York is trying to force Argentina to use its reserves to pay its holdout creditors. But the judge can’t legally do that, because Argentina’s reserves are immune assets. And if such assets can’t be attached directly, they can’t be requisitioned indirectly, either. As the petition says,
from Global Investing:
Felipe Larrain, Chile's finance minister is facing a new job come March when incoming center-left government of President-elect Michelle Bachelet takes over. An academic by profession, he intends to either make his way back into the cloistered lecture halls of a university, not necessarily in Chile, or work for some kind of international organization that is outside of the corporate or financial world.
Chile's economy, one of the best run in Latin America, with the highest investment grade credit rating in the region, is however experiencing a soggy point in its economic cycle. Inflation has picked up. There is continued weak economic output and domestic demand is cooling down. The central bank is holding its benchmark interest rate at 4.5 percent and suggests more stimulus is to come in the months ahead. The currency has depreciated but that's not a concern, Larrain said. He was more concerned when the peso was trading in the 430 per U.S. dollar range versus today's 3-1/2 year low of 545, an area he describes as providing equilibrium.
from Felix Salmon:
JP Morgan is the first big bank to suffer a quarterly loss on account of multi-billion-dollar legal bills. It is also the most profitable bank in America (or was, up until this morning). Which means there are three possibilities here: The profits and the fines share a common cause: the internal behavior which produces massive profits also -- eventually -- has a tendency to produce massive fines. The profits and the fines are unrelated: it's just unfortunate bad luck that such a well-run, profitable bank should come unstuck in this manner. The profits in some way caused the fines: regulators feel comfortable going after JP Morgan precisely because it has a fortress balance sheet and can easily pay the fines.
All three of these have a kernel of truth to them, I think. If you look at misbehavior like the Libor scandal or the London Whale debacle, the misconduct in question was clearly driven by traders looking to make as much money as possible. But all banks have traders looking to make as much money as possible, and most of the world's biggest banks have been sucked in to the Libor scandal, in one way or another. And if you look at classic trading blowups, they're pretty uncorrelated with profitability.
from Felix Salmon:
Back in February, when I made my prediction for how the Argentina endgame would play out, I got the date wrong. I did, however, get the substance right:
One likely scenario is that the appeals court will uphold Griesa’s decision at some point in April or May, forcing a big default in June. At that point, Argentina will probably launch an exchange offer under Argentine law, under which anybody holding currently-performing bonds would be able to swap them into bonds with substantially identical terms, just payable in Buenos Aires rather than New York. Given that Argentine-law bonds have been trading at tighter spreads then US-law bonds for some months now, one can assume that nearly all bondholders would jump at the opportunity to keep on getting their coupons.
from Felix Salmon:
It's the ruling we were all waiting -- and waiting, and waiting -- for: six months after hearing oral arguments, the Second Circuit has finally handed down its 25-page decision, finding in favor of Elliott Associates and against Argentina. On its face, the ruling is, as Mark Weidemaier puts it, a big loss for Argentina, and "a total win for NML", a/k/a Elliott Associates. The ruling was unanimous -- the rumored dissent never appeared -- and pulls no punches: there's no indication that this was a hard case to decide, or that the lower court's extremely aggressive rulings were anything other than entirely reasonable.
Still, there are some oddities here, starting with the fact that this decision took such a long time to appear. The ruling, written by judge Barrington Parker, is not exactly a model of pellucid clarity; rather, it's messy and scrappy and very narrowly argued. The real power of the lower court's ruling was not that he told Argentina that it needed to pay Elliott: the court has been making such rulings for years, and Argentina has happily ignored all of them. So the district court judge, Thomas Griesa, went nuclear, and roped in virtually the entire global payments system as well. So long as Argentina was in default to Elliott, said Griesa, he would prevent actors like Bank of New York and Clearstream from doing their job and making the payments they're contractually obliged to make to Argentina's bondholders. The entire force of Griesa's ruling, and the reason why this case is such a huge deal, is predicated on its ability to stop money from being lawfully transferred to bondholders after it has left Argentina and entered the payments system.
By John Foley
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The trial of Bo Xilai is a test of China’s political tolerance, not its rule of law. For foreign capitalists, the latter matters more. It’s almost unthinkable the ousted Chongqing party chief will receive anything other than a guilty verdict. Yet it’s still possible to hope that disputes over investment and contracts will be resolved in a more transparent way.
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At today’s CNBC Institutional Investor Delivering Alpha conference, Manhattan US District Attorney Preet Bharara warned the financial world that one day, his office might actually act against them. Bharara told CNBC’s Jim Cramer that “people should be afraid that bad acts they have committed in the past are going to catch up with them”.
from Felix Salmon:
There's a huge amount of legal firepower on display in lower Manhattan right now, all centered on a University of Chicago grad student named Fabrice Tourre. Arrayed against him, in this civil case, is the might of the SEC, which has tapped the head of its trial unit, Matthew Martens, to take a lead role. Tourre's own lawyers, who have been representing him for the past three years, include none other than Sean Coffey.
It's fair to assume that many, many millions of dollars are being spent on this trial. But what's much less clear is why. Tourre was a junior salesman, buried deep inside the Goldman Sachs CDO machine, and, almost exactly three years ago, Goldman Sachs paid $550 million to settle the charges against it. Why is the SEC, in 2013, still putting so much effort into chasing a single individual from Goldman Sachs? Certainly Tourre doesn't have the wherewithal to be able to make any significant difference to the amount of money the SEC will end up collecting in this case -- which means that this case is personal: the SEC wants to ban Tourre from the securities industry, and to possibly drive him into personal bankruptcy, as well, if they can extract a large enough fine.
from Felix Salmon:
Let me clear this up so that Donn Zaretsky can have no doubt. When I say that the Michigan attorney general is "absolutely right" that the art collection of the Detroit Institute of Arts cannot be sold to satisfy the city's financial obligations, I mean that he's right both legally and normatively.
Zaretsky is a longstanding critic of the laws and norms surrounding deaccessioning -- the term of art for when museums sell off parts of their collections. Earlier this month, he gained a high-profile convert in the person of Virginia Postrel, who made the case that DIA should sell its paintings "to satisfy Detroit’s creditors", just so long as the paintings remained in an American public museum somewhere. In the conversation which followed, Tyler Cowen had a certain amount of sympathy for Postrel while saying that such an action would essentially ratify the end of civilization in Detroit; he also worried that such an action might have a chilling effect on future art donations to museums. And Marion Maneker proposed that DIA should essentially become an art-lending library, making large sums of money from sending its masterpieces out on worldwide tours.
from India Insight:
(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters Corp.)
It’s been nearly five years since India banned smoking in public places, but you wouldn’t know it from talking to Sugandha. The jeans-clad woman in her twenties is standing at a subway entrance in New Delhi as a man smokes a cigarette a few steps away, indifferent to how the fumes annoy passersby.