THERE IS A SIMPLE ACTION THAT HE COULD TAKE TO STOP THIS CRISIS. THE TIME FOR EXECUTIVE ACTION IS NOW.
The structure of world debt renegotiations is in trouble, and executive action is needed from the president in this matter. Back in 2014 a small number of hedge funds drove the country Argentina into default. Yet the stakes here are even bigger than Argentina. The US State Department has warned that sovereign bailout agreements worldwide are threatened by the actions of these hedge funds.
In 2014, Argentina was ready to pay a majority of the creditors who owned their debt (specifically 93% of the creditors). This was achieved through a debt restructuring agreement in which a majority of the creditors agreed to take a haircut on their loans, in order to get some amount back. However, the other 7% of creditors refused to restructure the debt they owned, and even took Argentina to court with the demand that they pay the full amount of their debt. The holdouts won this battle, which meant that Argentina would have to pay the full amount of their debt to 100% of the creditors involved. This was not possible, so the country was forced into default, the creditors did not get their money back, and this was a lose-lose situation for all parties involved.
There is a very simple solution President Barack Obama could take to solve this crisis.
All Obama would need to do is invoke the long-established authority given to presidents under the US constitution's "Separation of Powers" clause. Under the principle known as "comity," Obama would simply need to inform US federal judge Thomas Griesa that Singer's suit interferes with the president's sole authority to conduct foreign policy. The case would be closed.
Even George W. Bush invoked this power against the very same hedge fund now threatening Argentina. Bush blocked Singer's seizure of Congo-Brazzaville's US property, despite the fact that the hedge fund chief is one of the largest, and most influential, contributors to Republican candidates.
If George W. Bush (a Republican) had the courage to stand against a man of his own party, then Obama should certainly be willing to step forward. This is necessary not only to save Argentina, but to save the structure of debt negotiation itself around the world.
With the ability to renegotiate debt world wide in jeopardy, we believe it is definitely necessary for the president to take executive action on this critical issue.
Fake austerity failed in Greece and will fail in Argentina. Without a realistic solution for debt negotiations, the entire structure of global finance is threatened.
RELATED READING
Global Debt Crisis 2015 (World Future Fund)
Argentina's President on Greek Referendum: ‘Outright Victory of Democracy and Dignity’ (Sputnik News, 7-6-15)
The president has bought time. She has not solved the economy’s problems (The Economist, 6-13-15)
How Barack Obama could end the Argentina debt crisis (The Guardian, 8-7-14)
Everything you need to know about Argentina’s weird default (The Washington Post, 8-3-14)
Argentina Finds Relentless Foe in Paul Singer’s Hedge Fund (Deal Book, 7-30-14)