I can certainly understand the judge’s exasperation with Argentina. Nevertheless, this is no excuse for a federal judge to ignore the law.

Seems almost impossible to believe the Argentine government doesn’t have other assets subject to US jurisdiction, as you suggest. It is very possible that “The Felix Salmon Frame of Mind” infects policy-makers as well as our blog-leader – the US government may be intervening to protect the Argentines and their assets.

And why not? Policy-makers everywhere are of an exalted class, and citizens anywhere are of a lower order. None of us is “muppet” enough to believe otherwise, are we?

” Why does Mr. Salmon recognize that “[c]ertainly Argentina has no intention of paying . . . anything”, and yet not condemn such willful disdain for the essential bases on which capital markets operate?” (AOB)

Banker buddy, Mr. S has a “thing” for people and entities that borrow too much and want to welch on their debts – he loves them all. Matters not to him if they are irresponsible governments or fraudulent sub-prime scammers – as far as he’s concerned, only chumps who behave responsibly need pay their debts, and earn his and Wall Street’s derisive title – “muppet”.

As far as FS and the other Wise Guys are concerned, muppets deserve whatever they get from the like of them.

Can anyone name other sovereign indebtedness: i) with a strong pari passu provision; ii) that is not subject to collective action clauses; and iii) in which the issuer has in fact breached pari passu even by its own self-serving definition ? No, the reality is that Argentina is unique, and the upcoming appellate court decision will simply not have any significant bearing upon other sovereign restructurings.

In his perfunctory disparagement of a US federal judge who has been handing down landmark decisions since Mr. Salmon was still in short pants, Mr. Salmon regrettably serves as apologist for a regime that has distinguished itself through disregard for every norm of modern commerce and international relations – just ask the IMF, the WTO, ICSID, the Paris Club, the anti-money laundering Financial Action Task Force, thousands of Italian pensioners, institutional investors such as TIAA-CREF, companies that invested in good faith, etc. Elliott is hardly alone in challenging a G-20 country with ample liquidity and resources that seeks to wrongly walk away from its lawful payment obligations and US federal court judgments.

Throughout this piece Mr. Salmon adopts as his own the “masterful” arguments of Cleary Gottlieb, the preeminent advocates for defaulting sovereigns. Perhaps his views will change after he considers, as did Judge Griesa, the arguments of opposing counsel. In the meantime:

1) Argentina’s new bonds might indeed have “performed extremely well” since the discounted exchange, yet their value remains vastly below the face value of Argentina’s original obligation. Mr. Salmon is premature in calling this a “rare and public loss” for the “billionaire Republican activist Paul Singer” (surely Mr. Salmon means no aspersion by that . . .), who obviously retains confidence that Argentina can afford to pay its lawful obligations in full.

2) In 2003 Argentina argued that pari passu would be breached if it asserted a legal basis for discrimination among creditors. Two years later it did exactly that by enacting the “Lock Law”, as Olivares-Caminal, Gelpern and others have noted. It is hardly nefarious that a creditor would decline to assert pari passu in 2003 and yet do so now.

3) It is a profound distortion to characterize Judge Griesa’s orders as compelling “innocent bondholders of Argentina’s new debt” to “be paying off Elliott”. There is no such form of transfer within the orders, although Argentina has threatened the court that it might default on the new debt if Judge Griesa’s orders are upheld (despite having been found by the court to have sufficient means to honor all of its obligations).

4) The Deconstructionist notion that pari passu has no meaning runs counter to the logic and experience of those of us who have spent decades actually signing loan agreements. Perhaps the attorneys polled by Gulati have forgotten (or never knew), but involuntary subordination by a rogue sovereign is a clear and visceral concern to anyone who exercises lending authority.

If a country elects to borrow in the capital markets of New York, and cloak its loan agreements in the assurances of New York law and jurisdiction, shouldn’t it pay judgments of the US federal courts ? Why does Mr. Salmon recognize that “[c]ertainly Argentina has no intention of paying . . . anything”, and yet not condemn such willful disdain for the essential bases on which capital markets operate ?

In addition, the problem, as Felix also points out: Elliott might get another civil judgment, perhaps even based on an adverse pari passu ruling. How does that lead to a U.S. non-bankruptcy-court enforced clawback from third parties?

If I have a money judgment from a U.S. civil lawsuit against a foreign party, unless I can either attach that party’s assets in the U.S. or place the party into bankruptcy giving a U.S. court both de jure and de facto control of the party’s U.S. assets, that judgment is merely a piece of paper. Until their assets are under the auspices of a U.S. (bankruptcy) Court, they can pay anyone they please. Maybe not de jure, but de facto.

Does *Argentina* have assets in the U.S. that Elliot could attach? Perhaps not, or they would have by now. If Argentina pays creditors outside of the U.S., how does a U.S. civil judgment against sovereign Argentina lead to U.S. court supervision of Argentina’s actions outside of the U.S. (and perhaps legal under Argentinian law)? Is the long arm of U.S. law that long? Is the Fed going to enforce a private money judgment against Argentina by seizing inter-country central banking transactions? That would lead to international monetary chaos.

This is the part that is flat wrong, Mr. S –

“If I owe money to (many creditors), it’s up to me which of them I repay, and in which order. All those creditors might have legal recourse if I don’t pay them. But the landlord can’t claim the money I’m paying to my brother-in-law, nor vice-versa.” (Article)

The insolvent don’t get to pick-and-choose whom to pay like you seem think they do. And those favored by the debtor don’t always get to keep what they’ve temporarily received from him. We shall see.