September 16, 2014
‘Griesa shows permeability to lobbies’
Nothing has changed much in the way of the leeway for hedge funds to roam free around the globe and buy distressed assets, International finance and tax haven expert Juan Hernández Vigueras told the Herald; indeed, the ruling against Argentina this week has ratified their legality within the current system, he adds. Hernández Vigueras, a Spaniard who wrote the book Los lobbies financieros; tentáculos del poder (Financial lobbies; tentacles of power), says there has been no progress on new regulation in the European Union since the global crisis of 2008.
Just how permeable is the United States’ Judiciary to lobbying by the financial sector?
When I read Judge Thomas Griesa’s District Court ruling, as a doctor in law, I was shocked by the highly political rather than judicial reasoning. Anglo-Saxon law is entirely different to ours, but this seems to indicate a high permeability to the financial lobby, which acts on regulatory agencies, the media and judges. I don’t think it’s at all farfetched to say they have an influence.
How representative is the Argentine case to the holdouts’ influence worldwide?
The global financial system dominates states with economic problems. The Argentine case struck me as a typical example of the behaviour of “vulture funds,” that is, high- risk transactions with purely speculative ends. They seek to maximize profits without investing in countries’ added-value in the slightest, and they are obviously extremely well-organized and funded to apply pressure and succeed that endeavour.
In terms of the jurisprudence set by the US Supreme Court’s decision, can states not simply issue bonds with clauses to prevent such conflicts, or not issue debt when in default?
In the European Union, Greece has pushed for a regulatory framework to support the issuance of such bonds, but since the G20 meeting of April, 2008, when leaders met to discuss the issue, there has been virtually no progress. Without the legislation, no-one buys sovereign bonds with these clauses. In 2008, the EU approved regulation on high- risk hedge funds, but the legislation was practically void of content.
How does this lobby operate in the EU?
It’s a very occult power. I include several pieces of evidence and documents on several cases in my book: Financial Lobbies, Tentacles of power. The European Commission is responsible for the translation of political agreements into legislation, which involves a significantly long process that includes expert committees, which are in turn comprised by bank representative, insurance firm delegates, etc. That’s how they dilute the content of laws so they are left flimsy.
An example of a clause would be setting a floor that compels all bondholders to accept restructuring their debt if the majority of creditors do so.
It seems simple, but the Argentina case shows you there is a political question at the core, as well as a financial one. The holdouts, with their political and financial power, were able to establish their own lobby, American Task Force Argentina (ATFA). They also have influence over the media, much of which over the last few years has run headlines on “Argentina entering default yet again,” as if it were happening on a yearly basis.
What influence does the ruling then have on the restructuring of European countries’ debt?
There has been no progress whatsoever with regulation, attempts have failed. Instead of having logical and appropriate banks buy bonds, any fund can still do so, even when a country is in default, so clearly this confirms there are still no limits on the actions of these groups in the current financial system.
Is there a negative perception of these hedge funds in Europe?
In Spain, people are saying we are exiting the financial crisis because foreign capital has returned to the country. What they don’t seem to realize is that these funds are operating according to the same precedent as the holdouts did in Argentina, buying distressed company shares at extremely low prices. The only difference is that this is private stock and not sovereign bonds.
What role is the media playing with regard to the matter in Spain?
The term “vulture funds” has only just come into use in recent years, with the advent of digital media. But for instance, around the world, much of the media say “Argentina calls them vultures,” when in actual fact, the term long predates the country’s struggle with holdouts. .@franma1990