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To: smolejv@gmx.net who wrote (12123)	12/26/2001 6:24:28 AM
From: elmatador	Respond to of 74559

Yes, DJ. When I used Enron and Argentina, I was along the same track I stepped in when I worte that old ideias have to be discarded etc. So I used both cases as an illustration of how today the system (Carranza2 is going to love this) digests its 'food' intakes. Jay, as I understand, took for where I left and said: "Wait a moment! Economic system -itself a creation of humans- may changed, but the humans are still the same they were in 1929: greedy etc etc. He also extends the case shedding light, not in the effects on the system, -my focus- but on what made, both cases to end as they did. Further, he advanced the case saying: These were not the last. There is more form where those came from. And they may be even bigger! Then to make his case more sharp, he rewinds his tape, goes back to the Asian meltdown and support his case with the conventional wisdom, fed by the hand of the WSJ. By saying that immutable humans (do greed, debt and the lack of confidence) and this is to be found at the roots of the Asian meltdown. The he goes to Japan and makes his case pof Japanese malaise too. And ends up asking Maurice to take on his posting. As you see we are making progress here -call me naive.

To: smolejv@gmx.net who wrote (12123)	12/26/2001 8:28:04 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Plan to Let Nations Declare Bankruptcy Gains By JOSEPH KAHN ASHINGTON, Dec. 24 — Argentina's chaotic political and financial collapse has given a strong push to a plan by the International Monetary Fund to allow nations to declare bankruptcy and seek legal protection from their creditors, much as people and companies can do, fund officials and private experts said. The governing board of the fund has given a preliminary nod to the plan, which was floated late last month by Anne Krueger, the No. 2 official. The fund is expected to prepare a formal proposal in time for a financial summit meeting in the spring, officials said today. The plan would fill what Ms. Krueger call a "gaping hole" in the international financial system. It would establish a formal bankruptcy process for nations that face severe financial difficulties, allowing them to stop paying debts while they negotiate with bankers and bondholders. "At the moment too many countries with insurmountable debt problems leave them too long, imposing unnecessarily heavy economic costs on themselves and on the international community that has to pick up the pieces," Ms. Krueger said. The proposal has won early support from the Bush administration, as well as financial leaders of Britain and Canada. But it would probably require the approval of Congress and legislatures of all the fund's 183 member nations because they would have to grant legal amnesty to nations that meet the fund's conditions for bankruptcy. The plan faces stiff opposition on Wall Street, where bankers and brokerage houses warn that investors will move their money out of developing countries rather than risk having funds impounded in an international bankruptcy proceeding. "This is a nuclear-bomb solution that could really backfire," said Charles H. Dallara, managing director of the Institute of International Finance, who represents many banks with loans in emerging markets. Some developing nations have also expressed unease that they might be forced into bankruptcy instead of being granted aid to help them ride out financial storms. Though the plan was broached before Argentina announced on Sunday that it would stop making payments on its $132 billion debt, the troubles there highlighted the urgency of finding a more orderly process for resolving financial disputes. Some experts believe that Argentina is a case study in how not to handle a debt crisis. It sought to slash government spending, freeze bank accounts and dip into state pension funds to raise money for debt payments during a deep recession — before riots brought down the government of President Fernando de la Rúa last week. Under the fund's proposal, Buenos Aires could have declared a time out, halting debt payments or other outflows while it sought to rebuild financial credibility. The I.M.F. has historically gone to great lengths to help nations stay solvent, often by providing large loans that they can use to stay current on debts or to shore up currencies. Such loans — including recent multibillion-dollar packages for Mexico, Thailand, Indonesia, South Korea Russia, Brazil, Turkey and Argentina — have drawn criticism because they are seen as expensive ways of rescuing countries that make bad policy decisions, as well as protecting investors who buy risky stocks and bonds. Major American, Japanese and European banks once accounted for most of the money invested in developing countries, and they often informally agreed to terms to settle disputes when countries ran into trouble. Today, there is more variety among bond investors, and many have been reluctant to accept anything less than full repayment. The I.M.F. proposal is modeled on Britain's bankruptcy laws. A nation could apply to the fund for the right to declare bankruptcy. If granted, that nation would negotiate a settlement with its creditors, and a majority of them could decide terms for the whole. The fund would also allow nations to impose temporary foreign-exchange controls to prevent a rapid outflow of private funds. Bush administration officials have signaled their support for a shift away from bailouts and toward a bankruptcy process. Treasury Secretary Paul H. O'Neill has not publicly commented on the proposal, but during a meeting of the fund's executive board, the United States approved developing the plan. The proposal was also welcomed by some international economics experts, including Jeffrey D. Sachs of Harvard, who proposed a similar idea more than a decade ago. But critics like Mr. Dallara said the plan was deeply flawed because the fund wants to cast itself as bankruptcy judge even though it is often the largest creditor and seeks to protect its own loan portfolio. The interests of private investors do not rank as high, he said. "How can the I.M.F. be a neutral judge when it is often the largest creditor?" he asked. "That would be thrown out in any court."