U.S. Asked to Oppose Vulture Funds at G-8 Meeting
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OneWorld.net note: Several members of Congress have called upon the U.S. Treasury Secretary to address the harmful impact of vulture funds -- private companies accused of debt profiteering at the expense of the world's poorest people -- at the upcoming G-8 summit.
• "Vulture funds identify countries that are on the brink of a major debt restructuring or debt relief deal and buy the debt from the creditors at a huge discount before it is restructured or relieved. Then the company sues the debtor for the original amount of the debt, often with interest and penalty fees added on top, making a tremendous profit," writes Africa Action, a U.S.-based organization promoting African development and rights. • Vulture funds have cost heavily indebted countries approximately $1 billion. • Debt creditors are urged to follow the lead of the Paris Club, an international credit group that sells debt claims only to creditors with verifiable debt relief plans.
House Financial Services Committee Leaders Call for U.S.-Led Action on Vulture Funds at G-8 Finance Ministers Meeting This Week in Osaka June 9, 2008 | WASHINGTON – Leading members of the House Financial Service Committee today expressed strong concern about the activities of so-called "vulture funds" in a letter to U.S. Treasury Secretary Henry Paulson Jr., and called on the Secretary to address the impact of vulture funds on impoverished countries when he joins his colleagues at the G-8 Finance Ministers meeting to be held later this week in Osaka, Japan on June 13 and 14. The letter was initiated by Representative Gwen Moore (D-Wisc.) and signed by Committee Chairman Barney Frank (D-Mass.) and senior member Representative Maxine Waters (D-Calif.). It urges Secretary Paulson to "seek agreement within the G-8 to adopt a broader strategy for addressing the problem." This would include seeking the commitment of countries that currently hold debt from impoverished countries not to sell the debt claims on to funds that refuse to participate in debt relief. Heavily Indebted Poor Countries (HIPC) are particularly vulnerable to vulture funds who purchase the defaulted debts of HIPC countries at much reduced prices and litigate against the debtor for inflated sums, making huge profits on the backs of the world's poorest citizens. As of late 2007, 11 of 24 Heavily Indebted Poor Countries (HIPCs) surveyed by the International Monetary Fund were facing litigation from 46 different commercial creditors. Of these, 25 creditors had received court judgments against HIPCs amounting to about $1 billion on original claims of $427 million. "The G-8 paved the way towards debt relief for the world's poorest countries through the Heavily Indebted Poor Countries initiative, and significant progress has been achieved to date," said Representative Gwen Moore (D-Wisc.) "Now, litigation by 'vulture funds' undermines that progress. The international community has an obligation to fulfill its commitment to debt relief and oppose the activities of those who stand in its way." The letter requests that the G-8 Finance Ministers urge more bilateral creditors to follow the lead of the Paris Club, a group of international sovereign creditors, in limiting vulture fund litigation. Last May, the Paris Club publicly committed not to on-sell any of their debt claims on HIPC countries to creditors who do not intend to provide debt relief under the HIPC initiative, safeguarding this debt from litigation by vulture creditors. Many non-Paris Club countries, however, continue to on-sell their debt claims from vulnerable countries. The members urge G-8 Finance Ministers to follow up commitments given at last year's G-8 to address the problem with concrete action. At the time, the G-8 Finance Ministers publicly stated that they "are concerned about the actions of some litigating creditors against Heavily Indebted Poor Countries," and "have agreed to work together to identify measures to tackle this problem, based on the work of the Paris Club."[1] In February 2008, the Ministers reaffirmed this commitment, saying that they had "reviewed actions to tackle aggressive litigation against Heavily Indebted Poor Countries (HIPCs)."[2] Secretary Paulson himself has stated in Congressional testimony that he "deplore(s) what the vulture funds are doing."[3] But little has been done to follow up these statements. Representative Moore and her colleagues point out impoverished tmade by the United States and others to reduce the debt burden of poor countries. "Successful litigation by these funds comes at the expense of economic benefits that poor countries are accruing under debt relief initiatives support by Congress and the Administration." "It's time for the G-8 to take clear and decisive action to stop vulture funds from clawing back the gains from debt cancellation," said Neil Watkins, National Coordinator of Jubilee USA Network, the U.S. arm of the global Jubilee movement for debt cancellation for impoverished nations. "This weekend in Osaka the G-8 must move beyond mere words into concrete action." ### [1] G7/8 Finance Ministers Meetings, Pre-Summit Statement by G8 Finance Ministers, Essen, May 19, 2007. [2] Statement of G8 Finance Ministers and Central Bank Governors, Tokyo, February 9, 2008. [3] The State of the International Financial System, U.S. House of Representative Committee on Financial Services, June 20, 2007. |
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