A man walks next to his makeshift home in 2008 in Buenos Aires, Argentina. (CNS/Cezaro De Luca, EPA)
The U.S. Supreme Court’s decision yesterday not to hear an appeal from Argentina after being sued by a hedge fund for $1 billion has upset advocates for debt relief.
The inaction by the Supreme Court’s lets two lower federal court rulings stand and Argentina now must turn over information about its U.S. bank holdings to the hedge fund.
Catholic News Service recently reported on the case and the work of Jubilee USA to advocate for debt relief for poor countries.
Eric LeCompte, executive director of Jubilee USA, told CNS this morning that the case means it is open season on the assets of other heavily indebted poor countries.
“It has incredible impacts in terms of how the financial system operates, how poor countries have the ability to become middle income countries,” he said. “There are few winners and lots of losers.
“A small group of hedge funds, less than 100 engage in this predatory behavior, are the winners. The losers, it’s most of us. The U.S. government, the International Monetary Fund, legitimate Wall Street investors, who supported Argentina and any poor country that would qualify for debt relief are the losers,” LeCompte explained.
“It affects all of us because debt relief is brokered using U.S. taxpayer money. Essentially the ultimate money that these predatory hedge funds will collect is U.S. taxpayer money.”
Because the Supreme Court decided not to hear the case, LeCompte fears that the floodgates could open for other hedge funds to recover the assets of defaulting countries to the detriment of poor citizens. He identified Ivory Coast, Zambia and some Eastern European countries as “on the chopping block.”
The Argentine case dates to 2001 when it defaulted on its loan payments and subsequently was sued by the hedge fund firm NML Capital. The hedge fund won in both in U.S. District Court and in the U.S. Court of Appeals. Argentina had resisted the requests and appeal to the U.S. Supreme Court to hear the matter.
The court offered no comment on its decision to decline the case.
Debt relief advocates call companies like NML Capital “vulture funds” because they swoop in to buy up debt for pennies on the dollar and then sue for full repayment. Some of the claims result in huge profits for the funds.
The International Monetary Fund, Wall Street firms (Read More)