The New York Times ran a column by Floyd Norris on July 25 in its Business Section entitled “The Muddled Case of Argentine Bonds.” The significance of the article is that the author exposes that, lo and behold! Judge Griesa has issued a thoroughly incompetent ruling and the appeals court and the Supreme Court of the United States failed to check his incompetence.
Norris points out that Griesa has been a federal judge for 42 years and has been dealing with Argentina’s debt default for a decade. Nevertheless, he “failed to take into account just how complex the situation is. This week’s hearing made clear that he had not completely understood the bond transactions that he had been ruling on for years.”
Given that the New York Times is the newspaper of record in the most significant financial jurisdiction in America, this indictment of the judge for incompetence carries some weight and, as Lyndon LaRouche emphasized, indicates that some realize that the Wall Street policy which Griesa has attempted to enforce will not work.
Norris points out that what Griesa “seems not to have understood” is that some of the exchange bonds issued by Argentina were “denominated in United States dollars, some in Argentine pesos, some in euros and some in Japanese yen. Some of them were subject to New York law, others to Argentine, English or Japanese law.”
The order he issued earlier this year said that Argentina should not make interest payments on the exchange bonds and banks should not help it do so. The opinion explaining the order discussed only the dollar bonds issued under New York law, while ignoring the existence of other exchange bonds.
On June 27, he ruled that Citibank, which is the trustee for bonds issued under Argentine law, could process interest payments on those bonds. They were not covered by his order.
But then, this week in a court hearing, he initially defended this ruling, until the hedge funds pointed out that the Argentine exchange bonds accounted for nearly a quarter of all the exchange bonds.
He was then forced to admit that he did not realize that and reversed course, ruling that they should be treated as exchange bonds and that they should be included with the other exchange bonds in the Feb. 23 order. So now, Citibank cannot pay the interest on bonds issued under Argentine law and in Argentine pesos.
Norris quotes a law professor at Georgetown University, Anna Gelpern: “These questions are essential to the operation of this injunction. Up to half of the debt could be in or out, depending on how these questions are resolved. The fact we are confronting them, days before a payment default, is scary. For this to come out after this has gone through so much legal process, in the most sophisticated financial jurisdiction in America, has to be astounding.”
Norris ends the column: “As Wednesday approaches, the judge has a lot to think about. It would be better if he had done some of that thinking before he issued his order, or if the appeals court or the Supreme Court had forced him to do so.”