Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Wednesday, October 04, 2006

Argentina's 2001 Bond Swap

From Felix Salmon:

Roubini Global Economics (RGE) Monitor: Argentina's 2001 bond swap: Indictments hit: David Mulford, Ambassador Extraordinary and Plenipotentiary of the United States of America to India, not to mention persona non grata in Uruguay, has now been named by Argentine prosecutor Federicao Delgado as a potential defendent in a wide-ranging case against the architects of the disastrous $30 billion bond swap in June 2001. His potential co-defendents include hapless former president Fernando De la Rua, former Argentine Treasury officials Daniel Marx and Jorge Baldrich, and his old friend (and rumored partner in a joint bank account) Domingo Cavallo.

Judge Jorge Ballastero gets straight to the heart of the issue:

Through their action the state substituted one (debt) payment schedule for another in which, to secure financial relief of $12.84 billion through 2005, the repayments due by 2031 increased by more than $55 billion...."

The defendents have had their paltry assets from a lifetime of devoted public service frozen: a mere $10 million each for De la Rua and Cavallo, $8 million for Marx, and $3.2 million for Baldrich. Cavallo, Mulford, and the other strong defenders of the swap have never really been held to account for their actions: could their time finally have come?

It seemed to me at the time, I recall, a bad idea. Giving Argentina more cash now only put off the day of reckoning at which it would become clear whether the political system could handle the crisis or not, without (much) improving the odds. And the long-term costs seemed likely to be high.

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