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Home Publications Blogs Beat the Press NYT Gets the Story of Argentina and the Vulture Funds Badly Wrong

NYT Gets the Story of Argentina and the Vulture Funds Badly Wrong

Wednesday, 30 July 2014 04:19

A NYT article on the possibility of a default by Argentina seriously misrepresented the issues involved and the origins of the term "vulture" in reference to the funds involved in a lawsuit against Argentina. The article implies that the funds had been bondholders at the time of Argentina's default in 2001 who refused to accept the terms that were offered to bondholders following the default:

"Through two restructurings, the government eventually struck a deal with a majority of its bond investors, who are now called exchange bondholders because they exchanged their bonds for ones that were worth as little as a fourth of the value of the original securities. The hedge funds, known as the holdouts, declined to participate in the restructurings. Instead, they are seeking $1.5 billion in repayment, including interest."

In fact, these funds bought up Argentine debt years after the default, paying a small fraction of its face value. Their intention was to use their political connections to get a favorable ruling from the courts, with the hope of being able to extract something close to the face value of the defaulted bonds from Argentina's government. This is exactly what "vulture funds" do. The term did not originate with Argentina, it dates back decades.


Comments (7)Add Comment
written by djb, July 30, 2014 6:11
so the old debt that the vulture funds bought out for pennies on the dollar was already written off as a loss and no doubt deducted from their American taxes

I suppose now if the vulture funds do collect then they will claim the income as occurring in some overseas tax haven and avoid paying any taxes in America even though it is an American judge with jurisdiction

written by JDM, July 30, 2014 9:37
The NYT is supposed to be some sort of news of record; a definitive source. This is their source of value as a news operation. How can they get this simple set of facts so wrong? It really does seem to be deliberately wrong instead of an error. It would almost be better if they were deliberately lying, because the alternative is massive incompetence.
written by djb, July 30, 2014 10:10
i meant the debt was written off by "the previous owners" of the debt from whom they bought the debt pennies on the dollar

i think if the debt is written off as a loss it should disappear, not become a "commodity"
Powerful vs. Voiceless
written by James, July 30, 2014 12:48
You once again helped the BTP followers recognize that the pwoerful bankers/investors will always drive their story on all media.

School teachers and workers will always get their facts mis-represented and inflated.

How much efforts for the NYT to type: "The current holdout gambled by buying defaulted/exchanged bonds on the cheap and now are whining about their bets might not pay off."

They should have bought insurance from AIG!

Not much but they will get slammed by the Chamber of Commerce.
Also: "The funds" are one guy: Paul E. Singer
written by ifthethunderdontgetya™³²®©, July 30, 2014 4:05
And here is his sourcewatch profile.


Surprise, he's a remorseless plutocrat.
UK Guardian has the story similarly wrong
written by fairleft, July 31, 2014 5:51
I commented there:

No, Ms. Moore, you're completely wrong:

In a silly form of financial rebellion, the nation refuses to pay the hedge funds $1.5bn in interest it owes on money it borrowed from them, way back in 2001.

The hedge funds were NOT part of the money lenders Argentina attempted to settle with in 2001. They bought up the 7% of the debt for pennies on the dollar and are now attempting, through a corrupt and politicized court ruling, to make a killing on their miniscule investment.

Not that you're alone. The New York Times got the story similarly wrong. Funny how both misinterpretations are slanted in favor of the hedge funds.

written by dax, July 31, 2014 7:17
Apparently Singer also bought Argentinian CDSs, so his maximizing strategy is to get Argentina to default and then to press for payment on the bonds. The first is presumably done, so he has already made a good pay day, and now he's off to work on the second, I imagine.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.