Post date : 07.25.2014 12:48 pm
A dedicated reader of our blog has passed along a form letter to Members of Congress this is currently being circulated to potential signers in the economist community by Marc Weisbrot, co-director of the Center for Economic and Policy Research (CEPR).
In an email to an economist that was shared with this blog, Weisbrot declares:
“Robert Solow has already agreed to be an initial signer, and we hope that you will join him as another initial signer. We believe that your signature will encourage other respected economists to also add their support.”
We’ll get into the letter momentarily, but before we do, it’s worth reminding our readers that Weisbrot has been a perennial apologist for Argentina’s shabby treatment of courts and creditors. In 2011, he authored a report entitled, “The Argentine Success Story and its Implications” which examined the time period from 2002 – 2011.
Economists like Weisbrot and also Joseph Stiglitz often point to the economic growth that occurred in Argentina during this period without noting that this growth was largely driven by a global commodity boom that Argentina benefitted from, and that has proven to be unsustainable.
Stiglitz, a paid consultant to Argentina who also wrote an amicus brief on its behalf, is no doubt a target signer for this letter. Here’s a favorite Joe Stiglitz quote of ours: “Some drew the wrong lesson from the collapse of the Soviet system. The pendulum swung from a bit too much government to much too little.”
There’s nothing new or surprising in Weisbrot’s letter to Congress. It’s full of the same tired arguments from Argentina and its allies. So let’s revisit the facts of this case and what its implications truly are:
– The court’s ruling does not, as Weisbrot claims, hamper the ability of creditors and debtors to conclude an orderly restructuring in future sovereign debt crisis. Argentina waived sovereign immunity, agreed to be bound by New York law, and agreed to a pari passu provision in its bond contracts. Nobody forced it to agree to any of these provisions, but it did so voluntarily. Many bond contracts today have collective action clauses which address Weisbrot’s stated concern, but Argentina’s bonds did not.
– It’s simply not true that the plaintiffs bought bonds on the secondary market for cents on the dollar. 13 of the plaintiffs are par holders, and the largest plaintiffs bought bonds before and after the default. Doesn’t Weisbrot understand how the secondary market works?
– The court’s ruling, rather than posing a risk for New York’s status as the center of world finance is protecting New York’s reputation and status. Weisbrot’s letter completely ignores the fact that just days after the U.S. Supreme Court vindicated the lower courts’ jurisprudence in the Argentina bond cases, Ecuador raised $2 billion under New York law, leading Bloomberg News to call out Stiglitz by name and brand his concerns “overstated.” Here’s a question for Marc Weisbrot: Why would there be future bond issuances in New York if contracts became unenforceable?
– Weisbrot’s letter laughably asserts that Argentina has been willing to negotiate. Everybody knows this has never been true and remains untrue to this day. Instead of negotiating, Argentina has embarked on a global campaign to smear U.S. Courts, a federal judge and its creditors. Argentina and its lawyers use excuses like RUFO as an excuse not to negotiate. The simple facts are that Argentina’s creditors have offered to meet anytime, anywhere and without pre-conditions. Argentina refuses. Weisbrot’s ludicrous claim to the contrary should eviscerate any credibility he has on this subject.
Weisbrot’s letter concludes by urging Congress to “look for legislative solutions to prevent this court decision, or similar rulings, from causing unnecessary harm.” While vague in its wording, this is also naïve. We have a separation of powers in this country, which the Obama Administration noted to the OAS.
As noted by Roberta Jacobson, U.S. assistant secretary of state for western hemisphere affairs, while attending a meeting of the Organization of American States (OAS):
“Both sides of this dispute have said at different times they would be willing to negotiate, which we believe offers the parties the best path to a resolution…We are hopeful that Argentina will find a solution to this matter that resolves its issues with the bondholders and allows it to return to inclusive growth.”
For its part, members of Congress from both parties have repeatedly stated to Argentina that it should settle with creditors.
There’s still time for Argentina to do this…Just five more days until default.