When Argentina did its very creditor-unfriendly debt swap in 2005, a large number of bondholders held on to their defaulted paper rather than let the country buy it back for a pittance. The holdout strategy had after all paid enormous dividends in countries such as Peru, Brazil, Ecuador, and Uruguay. The stakes were much bigger in Argentina, of course, but a large number of aggressive creditors had no intention of letting Argentina off cheaply.
Kenneth Harney has got his hands on a fascinating new study from Experian and Oliver Wyman, which looks at the prevalence of strategic mortgage defaults, a/k/a “jingle mail” or “walking away”. Unsurprisingly, it’s financially sophisticated borrowers in non-recourse states like California who are doing this in droves: apparently there were 588,000 nationwide strategic defaults in 2008, more than double the total in 2007.
I’m going to be offline for most of today, spending it instead downtown installing pirate flags at the South Street Seaport. The opening is at 4pm tomorrow (yes, I know it’s Rosh Hashanah, but it’s also International Talk Like A Pirate Day) in Cannon’s Walk, which even the lifelong New Yorkers among you probably never knew existed. It would be wonderful to see you all there, but if you can’t make the opening then just pop down to the Seaport at any point over the next month. It’s not just for tourists! And I can assure you that the whole pirate project is going to look spectacular. Yaargh!