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Matt Levine

Levine on Wall Street: Contempt and Capture

Argentina's contempt, Bank of America's capital-accounting woes, Carmen Segarra's tapes, Allergan's plans, Lloyds's Libor firings, lattes, and bagels.

Argentina is in contempt of court.

U.S. District Judge Thomas Griesa has told Argentina that it can't pay interest on its bonds without first paying off holdout bondholders led by Elliott Management. Argentina disagrees, as is its right as a sovereign nation. Judge Griesa has also told a whole range of U.S. intermediaries that they can't help Argentina evade his order, and that is working out swimmingly for him, though poorly for those intermediaries, Argentina, its bondholders, and even really Elliott. Argentina isn't paying interest on its bonds -- not because it doesn't want to, but because the whole mechanical process of paying that interest is blocked by U.S. court order -- but it isn't paying off Elliott either. To try to get things moving, or just to have something to do, Elliott asked Judge Griesa to hold Argentina in contempt of court. Because Argentina has nothing but frequently and vehemently expressed contempt for Judge Griesa, he agreed. He has not yet specified a penalty for that contempt; Elliott wants a fine of $50,000 per day, but the problem with that fine is that Judge Griesa has no way of collecting it. If you have no power to enforce an order against a country, issuing an order finding that country in contempt is pointless. You have no power to enforce that one either! In like a month Judge Griesa will be finding Argentina in contempt for not paying its contempt fine. The contempt will be recursive. Eventually Judge Griesa will send in drones but that day seems pretty far off.