Skip to Main Content
April 04, 2014
Brattle Economists Support Nobel Laureate Joseph Stiglitz in Drafting Amicus Brief on Behalf of Argentina in Bond Default Matter

Nobel prize winner and Brattle affiliate Joseph Stiglitz recently submitted an amicus brief with the Supreme Court to persuade it to review a Second Circuit decision requiring Argentina to pay its so-called “holdout” creditors in full. Brattle consultants Michael Cragg, Toby Brown, Lisa Cameron, and Daniel Gaynor provided pro bono assistance to Professor Stiglitz in the preparation of this brief.

The brief explains how the Second Circuit’s decision—if left standing by the Supreme Court—could upend global sovereign-debt markets, harm developing nations, and challenge New York’s position as a global financial capital. The Second Circuit decision grants holdout creditors who rejected Argentina’s debt restructuring far better terms than the vast majority of creditors who accepted the restructuring plan. Professor Stiglitz points out that no rational creditor would participate in a restructuring if the Second Circuit’ decision is allowed to stand; accepting partial payment initially is foolish when the law allows, even compels, full payment eventually.

By impeding orderly restructuring, the Second Circuit’s decision undermines sovereign debt markets and thereby harms developing countries. Moreover, if the Second Circuit’s decision is allowed to stand, borrowers would have a strong incentive to issue debt outside New York, where the requirements set forth by the Second Circuit do not apply.

A Financial Times article covering this news can be found here.