no bail ins! (plagiaristic bastards)

Wed Apr 28 00:29:30 PDT 1999

Grrr! There doesn't seem to be anything in these proposals which wasn't available in the G10's proposals after the 94/5 Mexico crisis (available at I wrote large chunks of this document (in a previous incarnation at the Bank of England, and under my boss's name), and am "surprised" to notice that it isn't even footnoted in the IMF proposals.

Dallara and the IIF were complete pains in the bum back then too -- the idea is that sovereign eurobonds should contain the same clauses as normal corporate bonds, which allow for majority or supermajority voting in the event of bankruptcy. Thus allowing an orderly default and restructuring through normal channels, under English or New York law. Like having a world bankruptcy code, but not taking ten years+ to negotiate. But the IIF always whines this one tune of "moral hazard" (what the heck is "reverse moral hazard"?).

It's comforting to know that the IIF are a jumped-up pressure group with a very small thinktank attached. The last I heard, these proposals were gathering approval from ISMA, who are the only people who count.

dd (working for the Man these days, of course)


IMF members are expected to agree on the use of clauses which force bond holders to share the spoils of litigation with other creditors, and which give a majority the right to alter bond repayment terms. These measures are opposed by bankers and could lead to higher yields on emerging market debt. But the changes are likely to be accepted by the IMF in discussions this week and form a key element of the official response to the crisis.

Changes to bond contracts that would make it easier for sovereign governments to reschedule their debt, would create "reverse moral hazard", said IIF managing director Mr Charles Dallara as those governments would then have less incentive to introduce "difficult" but necessary economic policies. The IIF is also fighting off an IMF proposal which would require compulsory sovereign debt rescheduling, arguing that this would discourage capital flows.


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