The Misnamed “Vulture Funds”

· Financial
Authors

The Setting to this Article

Partial History of the Term “Vulture Funds”

Birds of a Feather

The Undertaker Bird and the Pelicans

Lucky Animals!

Of Levellers and Equalizers

Conclusions

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The Setting to this Article

This is a partly translated, partially revised, version of an article I have put on line in what Spanish I manage. As my vocabulary in English is much more ample – which would be true even if English did not have the Guinness-accepted largest lexicon of any language, I can be a bit more creative here. 

Towards the end of July, 2014, on a somewhat controversial website, simultaneously pro-market and anarchist, an oxymoron to those who misconstrue the concept of άν + άρχία to the misbehaviour of misguided individuals; I saw two articles from seemingly opposite points of view about a potential Argentine default on loan payments. Sadly, there was but one opinion. As I write this, the Spanish version that I have put on line did not reflect that which I believe is one important point about investment – until these investment funds such as NML Capital came onto the scene, investment always suggested the possibility of a loss, as applicable to blue-chip as to penny stocks, to bonds and to debentures, and to the very banks of the City of London, even without the Crash of 1929. Now, the capitalists may think that my argument is for the birds, which is more or less what this article is about, – the birds, that is, – considering that ostensibly Argentina decided to name the most audacious of the funds, vultures. That was not original on its part, the term seems to come from staider Wall Street gentlemen who disapproved of the innovative ways of the upstarts. It is quite correct that they see such funds as metaphorically circling about a moribund victim; but my thesis is that the term, when used by or about countries defaulting, or about to do so, defames those countries more than it does the investors, and is therefore a misnomer. Alternate terms will be proposed, even tongue-in-cheek, for those who do not wish to use the more polite financial terms. Along the way, there is a little ornithology.

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A Little History of the Vulture Term

From what has been gleaned from the current Wikipedia article, the term “Vulture Fund” was found in footnotes to exist in the year 2008, when some members of the House of Representatives entered a bill, using the term in its short title. There is also an American NGO arguing against these investment funds at that time. A web site for independent authors has an article claiming a connection between Rudy Giuliani, Paul Singer, W. Bush, and A. Khashoggi back in 2007. (A Clinton connection is found in a more recent source, mentioned here only to emphasize that the support of such funds is bipartisan). The Economic Times of India used the term in 2006, while a law firm uses the term in a publication in 2005: the year of first publication of Wikipedia articles under the heading in question, including the simultaneously-existing variant term in German, “Heuschreckenfonds“, translatable as “locust funds”. It was possible to trace the term back earlier, in that there was a paperback by Stephen W. Frey with this as a title in 1999. A document from Africa, with input by a religious organization goes back to 1997. All this is proven by the links herein provided, subject to the continued existence of the articles and organizations involved. This is clear evidence that the term in no way originated with Argentina – in fact, we find a former vice-president of the World Bank using the term. It is therefore incorrect to use the term in quotation marks, at least one of this writer’s professors objected to this “apologetic” use of such punctuation – but some dissent may be noted on that question, too.

Moneda con ave rapáz

Bird of Prey with Locust to the Right.  Español: Ave de presa con langosta a la derecha. ((())Dios los cría, y ellos se juntan.”I, Sailko [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons” href=”http://commons.wikimedia.org/wiki/File%3AAkragas%2C_tetradracma%2C_410_ac._ca.JPG“>

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Birds of a Feather

The hold-outs to the original offer that Argentina made to investors have been flocking together at various venues to claim, as I have stated in the previous paragraph, something unheard of in financial circles – an iron-cald guarantee that nothing, absolutely nothing, can keep them from getting every cent on bonds which, if they were corporate, would now be wallpaper – purchasable at numismatic shops. Now, anyone who ever had a bank-note in his or her hands, which stated that it was payable in gold, or perhaps silver, or some alternate currency, can see that governments can in effect cancel their contracts to the holders of their money, and this was seen around 1981 when there was a crisis, and some U.S. functionary said that the U.S. debt to the world was no problem, because, forgive me if I’m wrong, but they could decide not to pay the foreign countries, So, the pretension to collect, and Judge Griesa’s ruling favourable to the same, has its logic, but lacks historical antecedents. Even the bonds of Tsarist Russia were paid – at first not at all – then, a few in part – and that amid a lot of controversy – this would seem a precursor for the Argentine situation.  Case law wants to advance into the 21st Century, understood; but I repeat my earlier contention, the word “vulture” insults the countries that these funds would prejudice. Hereunder follow the reasons, and an analysis of alternate terms, some equally bad, when the ramifications are considered.

1. Vultures principally eat carrion. Hence, if the investment funds are vultures, the country victimized is dead meat, to use a crude expression. This is quite the contrary to what President Fernández de Kircher claimed on the last day of July, that Argentina was a viable country. Although this was probably meant in the way that the rating agencies use the term, it may be understood otherwise, and the vast majority of her audience throughout the nation, cannot have understood it as being able to go on living, or to fulfill its destiny, something I believe to be true, by just comparing this land with many others, such as the Ukraine, which the United States has decided to favour over Russia. The bread-basket of Europe has become a basket-case supported by America, while the granary of the Americas is to be thrown to the dogs? Argentina has shown willingness to pay its debts, just in July there were 2 events which showed this – an arrangement with the Paris Club, and the necessary deposit in New York to pay bondholders whose claims were to be stymied by a decision of Judge Griesa.

As a Canadian, I am often offended by comments by Americans who refer to their northern neighbour by terms such as Canuckistan, but one thing is certain: all things being equal, including the level of social services in Argentina and Canada, Argentina should win out on terms of economies of scale, as it does not have to import any foodstuffs, and does not require such large expenditures on infrastructure such as highways, because of a larger population in a smaller region. Compare, if you will, the cost of transporting oil, gas, and grains, from the western provinces of Alberta, Saskatchewan, and Manitoba, to the East, with the vastly smaller costs incurred in shipping from the Argentine Pampas to the population centres. So, although Argentina is relatively poor, because it is still too agricultural, and its manufactures, for the most part, are not envied by other markets, at least in the cynical way that President Obama recently said in an interview with the British magazine, The Economist that Russia does not manufacture anything, ; there is, in the pampean nation, an essential “viability”, or vitality, – life, and it is therefore not carrion to be engorged by vultures. For living flesh, there are other beasts of land, air, and sea.

2. The condor is a symbol in Latin America akin to the eagle in other countries. It is celebrated in native music, it is found on the seal of Ecuador, and is the crest of the police of the Argentine province of Mendoza. A comic book bears a little condor, “Condorito”, as its hero. Therefore, to refer to the investment funds as vultures seems to go against the very grain of Latin-American integration and respect for indigenous culture, by individuals of a eurocentric mindset. At the same time, this vulture does occasionally eat living flesh, for which reason I would want to be doubly sure that this symbol is not confused with the raptors that this article condemns. It soars above them all. Only 9 other birds fly higher, 2 of which are other vultures, but no eagles.

3. In spite of the generally unappetizing diet of vultures, the bird does fulfill a useful function for a “green” planet, because its “delicacies” are then not available to create bad smells, nor to attract flies, rats, and disease. A report on the BBC of London about 12 years ago, informed that India was having a species of sanitary problem, precisely because of the lack of vultures.

4. A few decades ago, some Uruguayan football players suffered an airplane crash in the Andes. They survived by eating food which vultures would have eaten. Is anyone seriously insulting the survivors of that crash by comparing them to the the bird in question?

Now, it so happens that I was mistaken about vultures not being birds of prey, believing that the later must seize living animals. On the contrary, the definition of raptors has to do with their keen eye-sight and their talons. However, here we wish to make a distinction based on types of food. That vultures are relatives of eagles, hawks, and suchlike, is irrelevant. As much as the eagle is admired and therefore depicted on flags or seals of many countries of the world, from the United States of America to the United Mexican States, Germany, Russia, Egypt, Austria, Spain, Roumania, the Czech Republic, Poland, Albania Liechtenstein, Montenegro, and others, sometimes with two heads, or coupled with a lion, such as in the case of Armenia; the designers of such symbols must have been, as it were, enthralled by creatures of blood-lust.

And here’s the thing: the rapacious “birds” of whom one would speak in the Argentine case devour living flesh, and therefore, according to the preceding, it is not the vultures that are going after a “viable Argentina”, and definitely not the condors.

I don’t object to any country having a bird of prey as a symbol, but when the symbolism crosses over into its behaviour, reason for worry exists. Here is a scan of the back of an envelope from someone incorporated into the German Luftwaffe of the Second World War. Compare it to the eagle of the United States, both as shown an a 6 cent stamp, and in an interpretation of the Pax Americana [black-and-white illustration below]. You see the world at the feet of the American eagle, and an ugly symbol of hatred (deleted here) at the feet of the German version.

Para comparare con el símbolo en el escudo de los Estados Unidos.

Luftwaffe Eagles [political symbol removed]. Spanish: Calcomanias para cascos: Aguilas del Luftwaffe [parcial]

"10kMiles" by Artist's signature not legible; attributed to "Philadelphia Press" - 1898 cartoon "Ten Thousand Miles from Tip to Tip"Originally published in the 19th century.Scanned by Infrogmation via book "War in the Philippines" by Marshall Everet where it is attributed as being reprinted from the "Philadelphia Press". Uploaded by Infrogmation to en.wikipedia 2002-11-08 description page is/was here.. Licensed under Public domain via Wikimedia Commons. Aguila calva, entre otros nombres, "10 mil millas", por : [firma del artista no legible], supuestamente del "Philadelphia Press" - dibujo del 1898 con el título "10,000 milla desde un punto al otro" (Ten Thousand Miles from Tip to Tip), originalmente publicado en el siglo 19. Escaneo por Infrogmation vía el libro "War in the Philippines" por Marshall Everet, donde se dice que fue compiad del "Philadelphia" Press". Provista por Infrogmation al en.Wikipedia 2002-11-08. Licencia : en dominio público en los EE.UU., vía Wikimedia Commons. Vea el texto en inglés: http://commons.wikimedia.org/wiki/File:10kMiles.JPG

10kMiles” by Artist’s signature not legible; attributed to “Philadelphia Press” – 1898 cartoon “Ten Thousand Miles from Tip to Tip”Originally published in the 19th century.Scanned by Infrogmation via book “War in the Philippines” by Marshall Everet where it is attributed as being reprinted from the “Philadelphia Press”. Uploaded by Infrogmation to en.wikipedia 2002-11-08 description page is/was here.. Licensed under Public domain via Wikimedia Commons.
Aguila calva, entre otros nombres, “10 mil millas”, por : [firma del artista no legible], supuestamente del “Philadelphia Press” – dibujo del 1898 con el título “10,000 milla desde un punto al otro” (Ten Thousand Miles from Tip to Tip), originalmente publicado en el siglo 19. Escaneo por Infrogmation vía el libro “War in the Philippines” por Marshall Everet, donde se dice que fue compiad del “Philadelphia” Press”. Provista por Infrogmation al en.Wikipedia 2002-11-08. Licencia : en dominio público en los EE.UU., vía Wikimedia Commons. Vea el texto en inglés: http://commons.wikimedia.org/wiki/File:10kMiles.JPG

 

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The Undertaker Bird and the Pelicans

At this point, the reader is presented with a species of grotesque avian member, sometimes called the Undertaker Bird, because of its coat-like arrangement of feathers. More correctly, it is the marabou. It associates with the raptors. Mixing our metaphors, it is the black sheep of a family including storks and pelicans, who, if they were persons, would probably gladly cast it outside of their fold. It is a giant, standing up to 60 inches (5 feet, 135 cm.), on par with the size of the condor. What it undertakes, is the worst kind of flesh-eating: it waits for the vultures to break flesh into smaller pieces, and if need be, steals their food. To make matters worse, it is coprophagous. We could make an exaggerated scale, living-flesh eaters on one side, and the likes of the marabou on the other. That is to say, as bad as the diet of vultures may be, they don’t hold a candle to the Undertaker, but still, the real problem for indebted countries is that it is the hawks of the financial world that are out to get them. The relationship is symbiotic. They cannot allow the host-victim to die, as in a war, because they will always want to come back for more, regenerated flesh.

 

Marabu Leptoptilos Crumeniferus

The marabu – Undertaker bird – friend of vultures.  
http://pixabay.com/en/marabu-leptoptilos-crumeniferus-aves-359253/ : Licencia: Creative Commons Deed CC0 
El marabú – una cigüeña amigo de buitres

Dime con quién andas, y te diré quién eres

Thick as thieves – Dime con quién andas, y te diré quién eres: Marabú entre buitres: Información original en inglés: Vultures and Marabou Stork in Serengeti» por Kevin Walsh (kevinzim) from Oxford, England – vulture. Disponible bajo la licencia CC BY 2.0 vía Wikimedia Commons By Kevin Walsh (kevinzim) from Oxford, England (vulture) [CC-BY-2.0], via Wikimedia Commons

Backtracking from the idea of the hawks, consider the mouth of a hungry pelican. How much they look like money-bags! But the pelican, like its cousin the stork, appeal to the child in us. I have even heard sympathy expressed for the marabou, on the grounds that the word for that bird is pleasant sounding – perhaps “vulture” sounds to much like “butcher”, in a murderous way.

Boca del pelícano

Pelican mouth’s Great Capacity (see links in Reference section) Pelícano con boca distendida por comida.
Foto por fda54 en http://pixabay.com/en/pelican-bird-animal-nature-267597/, licencia: CC0 1.0

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Lucky Animals

Some animal names seem to be tailor-made as epithets for the vulture funds, but on closer analysis, may be discounted. “Snake” is unsatisfactory, because their is nothing really dishonest about them. Hyenas sounds like a good insult, but these, as snakes and wolves, seem to have been much maligned. “Lamprey” is too esoteric, leeches are too small, though they share the former’s blood-imbibing meal-time habit. “Shark” has already been applied to a different type of financial dealing. And, at the risk of being pedantic, we can compare the expression, “Guns don’t kill people, people do” to “Funds don’t circle like vultures, not even their managers”. The image reminds me more of a group of men surrounding a dangerous beast in order to kill it, before it kills them. Yet, countries in risk of default offer no danger to those who would surround them, the menace is the other way round.

Seagulls are known to steal food, and even to take chunks out of whales. In self defense, the giant could dive, though. Their is one bird, the Giant Petrel, which combines all the worst traits, without the talons, of raptors and the marabou, having as optional names such terms as “stinker” and “glutton”. Sometimes it goes for live meals, including penguins, so, it doesn’t take a bird of prey to snatch the weak. The following video shows the monstrous capability of this creature. NOT RECOMMENDED for penguin lovers and the young in general. Preferably, do not watch it in its entirety.

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Of Levellers and Equalizers/h2>

Let us leave the animal world now, and look at other forms of destruction. A Fund in Distressed Securities is like a wrecking ball – crude, but effective.

"Abrissbirne" by Stefan Kühn - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons.

Abrissbirne” by Stefan Kühn – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons.

One could finesse a bit, and if the term applied, use the term “Controlled Demolition Funds”.  Yet, that could imply to much (financial) engineering, so we have, once again from Argentina, the term, “financial missiles”.  The Argentine Fincance Minister, Axel Kiciloff, has even made the comparison to nuclear bombs.  If the comparison is correct, fallout can be expected in other countries. [link in Spanish]

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Conclusions

Argentina is not the victim of vultures, but of birds of prey of living flesh. The vulture is like the thief who takes parts from an abandoned car in the street, the hawk takes them while new, going as far as car-jacking. Or consider, if many years ago, a pupil wanted to share with his best friends, and not the fair-weather, abusive type, but a teacher, acting in a type of judicial capacity, forces the pupil to share with all equally. The investment funds seeking the higher return are the fair weather friends, no matter how correct they may be from a Darwinian and free market perspective.

In the previous example, it might be said that the pupil was discriminating against some of his companions. If that were so, there is the blatant discrimination of the United States in not having diplomatic relations with Cuba, although it did with Nazi Germany and the Soviets. Here, it looks that the barn-yard pecking order is at work. The cock of the walk wants to make its might felt.

Leaving the birds for a moment, there are other flesh-eating terrors, from the Ebola Virus, and wolves. The latter, however, have been rehabilitated into being a protected species. Doe, be gone! Woe-be-gone deer!

Back to the raptors, the term seems the most apt, because it does not specify any specific bird, while keeping a possible etymological relationship to the crime of violation. [Oxford gives it as probable, American Heritage Dictionary, more certainly].

My own guess would be that Judge Griesa is himself in someone’s claws. Be that because of his age, or other factors, according to a a classification of persons by age in a Latin text on the theology of Marriage, these run from infant on through to the decrepit. The latter word, in this case, implies no real mental incapacity, since there are, after all, child geniuses, and there are elderly people with sharp mental faculties, Jacques Barzun being a case in point, who began writing his opus magnus at 84 years of age, just a bit older than the magistrate at the moment of finding against Argentina. However, the younger group is prohibited from certain activities, such as drinking alcohol, or driving a car. Would the judge not prefer to avoid having aspersion cast upon himself, by living in a happy retirement, such as even bishops and cardinals do? Or is he being kept to parrot the pet phrases of his masters?

As for Mr. Singer, who is reputed to be a philanthropist, a word derived from Greek, meaning, “lover of humanity, it must, in the best cases, be a hard love that this gentleman practices towards the countries which make up a large part of the income of his funds. From the point of view of the controversial website mentioned at the beginning of this article, this might well be the case. Countries, as well as individuals, should learn to be financially responsible. Letting them get away with not paying there debts, could be construed as “sparing the rod” which spoils the child.

The present writer has thought this over, within his thinking, expressed in an article on this web-site on Ethical Libertarianism. He sincerely believes that it is possible for the investor to make his profit, perhaps a bit more slowly, while educating the profligate, without it resulting in a collective punishment for the people of a nation, yet respecting the immunities of politicians, even if they may be undeserving of the same. With regret, if the solution has any merit, it will not be provided as a tool for further despoliation of Latin America. If everyone has his price, then, the first requirement would be a truly operational free market economy in both the countries of the payer and the payee, without government oversight of the transaction. That won’t happen soon enough!

References

The following list, just seen August 13, puts the Pelican at #10, the Marabou at #1, and a similar, ugly relative as a plus:

Rogers, Tony. “10 Shockingly Creepy and Bloodthirsty Birds“. Listverse, 10.2.2013

And here, a non-Wikipedia list of 10 raptors, of which there are 6 eagles, 2 owls, and 2 vultures, with the Andean Condor mentioned en passant:

TYP. “Top 10 Formidable Birds of Prey“. Listverse, 21.4.2010.

———

Amazon. “The Vulture Fund” [by] Stephen W. Frey. June 1, 1999.
Argentinisches Tageblatt : Pleite durch “Geier”, [Pressestimmen], p. 4. and [Letter:], Karl Wolfgang Keymer, “Geier”, in “Leser Schreiben”,  p.9. 2. Aug.  2014
Arrizabalaga, M. “¡Viven! 40 años después de la tragedia de los Andes.” ABC.es Hemeroteca, Dec. 21, 2012.
Berlekamp, Hinnerk. “Argentiniens Chance”. Frankfurter Rundschau. 31 July,  2014.
Breslow, Stephanie.  “Distressed and Vulture Funds Structure and Formation.” , Schulte Roth & Zabel LLP, Spring,  2005.
‘Cristina Kirchner y su comparación con Gaza: “Esto también es violencia, son misiles financieros, que cuestan vidas”’. La Nación, 31 de julio de 2014.
‘Cristina:“Nos quieren tumbar porque volvimos a ser un país viable”’. Noticias de Mendoza, “Politica”, Aug. 1, 2014.
EFE. Correa dice se pagó 6,4 millones dólares para combatir la arremetida de Chevron. HolaCiudad!, Aug. 2, 2014.
EFE . ‘Ecuador pagó $6,4 millones a Mcsquared para combatir “arremetida” de Chevron, dijo Rafael Correa”’. El Universo, Aug. 2, 2014.
Ehringfeld, Klaus. ‘Voller Wut auf die „Geierfonds“, Frankfurter Rundschau, Wirtschaft, 31 de julio de 2014.
Financial Times. “No winners in “Griefault” debacle”. Buenos Aires Herald, Aug. 1, 2014. p. 5.
“Fitch anuncia Calificaciones de Viabilidad para instituciones financieras a nivel global”. FixScr, July 20, 2011.
Graef, Aileen. “Obama: ‘Russia doesn’t make anything’” UPI, Aug. 4 , 2014.
Grant, Matthew. “Breed Vultures to Save Them.” BBC News, Oct. 1, 2004.
Hallinan, Conn. “Clintonians Join Vulture Flock Over Argentina.” Truthdig, July 24, 2014.
Leipziger, Danny . “Fonds vautours contre pays pauvres”. Le Monde, 25.06.2007.
Leipziger, Danny. “Let’s Stop Vulture Funds from Preying on the Poor.” Danny Leipziger, 26 de junio, 2007.
Malajovich, María Antonia. “A Proteína de Célula Única” en Biotecnología 2011.
McMaken, Ryan. “Argentina Set to Default for 3rd Time in 28 Years”. Lew Rockwell Blog. July 31, 2014.
Mucha, Martín. “Comen barro para vivir” El Mundo, Suplemento : Crónica. Feb. 17, 2008.
Palmer, Jay. “The Debt-Bomb Threat“, Time, Jan. 10, 1983.
Rampton, Roberta;  “Obama: ‘Russia Doesn’t Make Anything‘”. Reuters. Aug. 3,  2014
Ryals, Tony. “California: Rudy Giuliani, Paul Singer, Vulture Funds Africa, W Bush, A Khashoggi.” Indymedia UK, 09.10.2007.
Sassen, Saskia. “A Short History of Vultures.” Foreign Policy, Aug. 3,  2014, 2014.
Sassen, Saskia. “The Hague is the Proper Venue“. [same as above]. Buenos Aires Herald, print edition, pp. 1, 4.
Singer, Peter. “Los derechos de monos y humanos”. El País, Archivo, Aug. 11,  2008.
Steinkraus, K. H.  “Production of microbial protein foods on edible substrates, food by-products, and ligno-cellulosic wastes” United Nations University Website, n.d.
Stiglitz, E. Jospeph, and Guzman, Martín. “The country’s Griesafault”. Buenos Aires Herald. 08.08.2014.
The president on dealing with Russia (The Economist interviews Barack Obama) 2. de agosto de 2014
U.S. Congress, “Stop Very Unscrupulous Loan Transfers from Underprivileged countries to Rich,
Exploitive Funds Act”, H.R. 6796, 110th Cong. (2008).  GovTrack.us
Vantomme, P. “Los instectos forestales comestible, una fuente de proteínas que se suele pasar por alto”. Unassylva 236, Vol. 61, 2010. Pp. 19-21.
Viability Ratings“, in “Other International Credit Ratings. Fitch Ratings. 2014.
Vikraman, Shaji & Mehta, Sangita. “Vulture funds go for the kill.”   Economic Times, Sept. 13, 2006.
Vulture Fund: Revision History“. Wikipedia.
Vulture Funds and Poor Country Debt: Recent Developments and Policy Responses.” Briefing Note Four. Jubilee USA Network, April, 2008.
“Vulture Funds and Debt Relief: The Immoral Tactics of Vulture Funds: The Case of Zambia”. Liberation Afrique,  February, 2007.
Westley, Christopher. “Default, Argentina!“. Ludwig von Mises Institute – Mises Economics Blog. July 30, 2014.
Wikipedia

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