by New Deal democrat
I wrote this on Sunday, so I get to stray from posting economic data, and editorialize....
As most readers of my blog are probably aware, there is contentious litigation in the Southern District of New York Federal Court between several "vulture" funds, and the country of Argentina. In a nutshell, when Argentina was forced to unwind its 1990s currency peg to the $US in 2001, it swapped old bonds for new bonds, but agreed to the jurisdiction of US courts in any litigation over the new bonds. Over 90% of the old bondholders eventually went along, but some bondholders sold their rights to "vulture" funds which insisted on being paid in full. In the ensuing US litigation, the US District Court in New York City agreed with the vulture funds.
The 83 year old senior judge handling the case, Judge Thomas Griesa, however, has gone well beyond making a legal ruling as to who owes whom how much. He has issued injunctions ordering banks anywhere in the world not to allow payments by Argentina on any debt unless it pays the vulture funds in full.
This egregious extra-territorial extension of claimed jurisdiction is bad enough, but if the following statement reported by Reuters on Thursday is true, then in my opinion Griesa has finally stepped way over the line separating Judicial resolution of litigation, and the foreign policy of the United States:
Griesa said proposed legislation announced on Tuesday by President Cristina Fernandez would violate orders he imposed favoring creditors who refused to accept restructured bonds following the country's 2002 default on $100 billion in debt. "It is illegal, and the court directs that it cannot be carried out," Griesa said at a hearing in New York.
I don't remember Judge Griesa being made the King of Argentina. Let's be clear here: the new law passed by Argentina may violate the terms of its bond swap, and it may violate the orders of Judge Griesa in the US. But for a US judge to claim that a law passed by another country is illegal, and may not be obeyed, is a breathtaking usurpation of executive authority, and an imperial arrogation of Sovereignty over a foreign country.
To understand how outrageous this is, swap out Argentina for a country with more power. Imagine a US judge ordering that a law enacted by China, or Russia, or the EU, is "illegal" and may not be obeyed. To say that the blowback against the US would be significant would be an understatement. The blunt truth is, the only reason Griesa can take this position is that Argentina doesn't have the military power to extract a price. Doesn't that sound like a decision that the Executive, not a low level judge, should be making?
I also don't buy that "Argentina" has made its bed, and now must sleep in it. A corporation, faced with a similar issue, could simply wind up operations and its shareholder start a new corporation from scratch. Countries can't do that. And Argentina in 2015 is literally a different population from Argentina in the 1990s or 2001. Demographically, its median age is 30, meaning an absolute majority of Argentinians were not of voting age in 2001, let along the 1990s, and about 15% of its population wasn't even born in 2001! So the coercion being inflicted by Judge Griesa falls largely upon individuals who cannot bear any moral responsibility for the decisions made by former governments.
Judge Griesa has done quite enough damage already. He has now vastly overstepped the proper authority of a US court, by effectively declaring himself the omnipotent Sovereign over another country. It is time for him to cease and desist, or to be made to cease and desist by the Obama Administration.