Vulture funds: what they do and key players

(c) Kevin Carter

Vulture funds buy up debts from countries in turmoil or war. Then, once they stabilise they (dubiously) demand it back. So, their function is to fuel war and slow recovery. Often buying up dubious debt cheaply from ex-USSR countries and suing the countries for the money. By definition it also includes debt not from countries, but the real problem is the very cheap purchase of sovereign debt, or debt owed by countries. Here’s how they work.

The argument goes, that they are necessary to ensure that those who owe money pay it back. The analogy to vultures is not completely fair. The scavaging birds provide a brutal yet cleansing function for the eco-system by sometimes attacking the weak and ill, getting rid of (soon-to-be) decomposing carcasses from the habitat. Vulture funds do this to countries, but there is a massive qualitative difference between organisms and nations. States do not die. Lots of humans may indirectly die as a result, but the state will remain. And debt incurred by insane and/or incompetent leaders without legitimacy remains. Making sure vulture funds do not get any money would be a good thing — risk assessment in sovereign lending would change: are we lending money to someone waging war or committing genocide and so risk losing all our money.

So who are the heartless villains behind the practice? The Guardian highlights Michael Sheehan, Peter Grossman and Paul Singer. Really bad people. Sheehan aptly likes to be called goldfinger after the James Bond Villain.

Despite anti-vulture fund legislation passed in the UK last year, a loophole remains in Jersey and a court will decide next month what happens. Speculators have made 1,000,000,000 USD from this despicable practice.

Get involved! Jubilee debt campaign in the UK, and Jubilee debt campaign in the US.

PS! This might be a somewhat dark portrayal of Africa, I just really, really, really dislike vulture funds. The people I’ve met and stories I’ve heard suggest a much more positive Africa.

4 Responses to “Vulture funds: what they do and key players”
  1. dscanning says:

    Very nice piece!! I have learnt some new stuff today – Thank you 🙂

  2. Chris says:

    Hey Lasse – can you explain how this is different from IMF/other institutional lending? Does the IMF simply refuse to lend to countries that are unstable/at war? What is the threshold of instability for IMF eligibility?
    The animal world is coming in for some heavy treatment – loan sharks and vulture funds!

  3. Yes, the poor animal world. And so unfair! Vultures and sharks are comparatively so much better for the world than vulture funds and loan sharks.

    Vulture funds are a bit like the collection agencies buying up debt on the cheap and spending a lot of energy reclaiming it back. (though careful here, to remember the qualitative differences between people and nations/states) Whereas most normal lending happens through bonds or otherwise and when there is a problem there may be a default, or at least a partial default.

    IMF does short term lending, as opposed to the WBG which does long term lending. Granted they both overlap a bit now, but anyway. IMF is most specifically geared towards problems with Balance of Payments ( and you are given conditionalities to from a very technical, supply-side economics address these issues — which is why the IMF is often very controversial.

    It’s *supposed* to help economically unstable countries in a very a-political manner to keep the global economy stable. So I think it accepts a high level of economically caused internal instability but not political — of course within popular understanding withing doxa. I cannot think of any loans given to aid war from the top of my head. Maybe indirectly to Pakistan, for helping empire in the fight against what is dubiously termed ‘terrorism’.

    OK, perhaps not a brilliant explanation, but hopefully slightly more clear?

Check out what others are saying...
  1. […] namelijk dat Henk en Ingrid het niet zo goed voorhebben met anderen. Neem bijvoorbeeld “Vulture funds“: fondsen die handig gebruik maken van de ellende in Afrika om flinke winsten te maken. De […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: