We’ve noticed the left-leaning media in the UK, as well as
some US news organisations and local sources, picking up on the “vulture funds”
story regarding the Dart group and Elliot Associates’ buyout of Greek debt.
According to a report in the New York Times earlier this
month, almost 90 per cent of the 436-million Euro payment recently made by
Greece’s government went to Dart Management, “a secretive investment fund based
in the Cayman Islands”.
Funds like the Dart group’s have a track record of buying
distressed bonds in bankrupt countries, particularly in Latin America. If they
do not get paid, they sue to recover that money.
“Vulture funds” practices may seem unsavoury to some, but it
could be argued they serve a purpose to the world economy – much like actual
vultures do in the Earth’s ecosystem.
They are also, quite frankly, risky investments as there is
no guarantee the investor will receive any payments from the distressed
country, even after a lengthy court process. They are, best-case scenario,
spending 60 cents on the dollar to make 40 cents.
However, we find it somewhat hypocritical, if not
outrageous, that these investment companies get blamed in certain sectors of
the public for the financial difficulties of the governments and peoples they
are alleged to “prey upon”.
No thought is ever given to whether these countries’ elected
or appointed representatives were fiscally responsible, whether they forced the
country to live beyond its means despite advice to the contrary, that they –
even now – reject the almost unavoidable course of austerity and responsible
management. No one made Greece or anyone agree to deal with Dart on their debt.
Greece’s government chose to pay the debt in full as well. It seems the
reaction to such public sector maladministration is typically, “oh well,
someone else screwed up, so what are we supposed to do”? The argument for
public sector fiscal responsibility is so rarely made; locally or internationally.
It seems in the view of some that money will keep growing off the CIMA tree and
if there’s a problem, just print more of it! We invite everyone to adopt a more
practical view; lest the “vultures” begin circling the Cayman Islands.