Abstract

http://ssrn.com/abstract=1732650
 
 

Citations (1)



 


 



Sovereign Snake Oil


Anna Gelpern


Georgetown University Law Center

G. Mitu Gulati


Duke University - School of Law

December 30, 2010

Law and Contemporary Problems, Forthcoming
American University, WCL Research Paper No. 2011- 05

Abstract:     
Collective Action Clauses (CACs) are back at the forefront of financial crisis response, this time in Europe. In the absence of a sovereign bankruptcy regime, CACs help solve coordination problems in sovereign bonds by binding all bondholders to the terms of a debt restructuring approved by the majority. But unlike the last two campaigns to include CACs in foreign sovereign bonds in the 1990s and early 2000s, today’s initiative does not point to coordination problems. Most of the sovereign bonds at issue either already have CACs or include other features that make restructuring relatively straightforward. Much of the European debt problem stems from private sector debts, which can be restructured in bankruptcy. Moreover, standardized CACs on the model referenced in EU statements fit awkwardly in domestic law bonds, which account for the bulk of the EU sovereign debt problem. Why revive such an ill-fitting remedy? In this essay, we review the recent history of CAC initiatives to suggest that they serve as a convenient political diversion from the hard problems and painful solutions at the heart of a financial crisis. [This is a modified version of the editors' introduction to the LCP volume on the modern history of sovereign debt.]

Number of Pages in PDF File: 12

Keywords: Sovereign Debt, Financial Crisis, Collective Action Clauses, Europe

JEL Classification: F02, F33, F34, F36, G28, H63, K22, K23, K33

Accepted Paper Series





Download This Paper

Date posted: January 6, 2011 ; Last revised: February 7, 2011

Suggested Citation

Gelpern, Anna and Gulati, G. Mitu, Sovereign Snake Oil (December 30, 2010). Law and Contemporary Problems, Forthcoming; American University, WCL Research Paper No. 2011- 05. Available at SSRN: http://ssrn.com/abstract=1732650

Contact Information

Anna Gelpern (Contact Author)
Georgetown University Law Center ( email )
600 New Jersey Avenue, NW
Washington, DC 20001
United States
Gaurang Mitu Gulati
Duke University - School of Law ( email )
210 Science Drive
Box 90362
Durham, NC 27708
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,817
Downloads: 224
Download Rank: 80,762
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.312 seconds