http://www.thenation.com/blog/154214/vulture-capitalist-funding-gopOver the weekend the New York Times profiled conservative hedge fund tycoon Paul Singer, who's generously bankrolled the GOP and is sometimes referred to as a Republican George Soros. The article spotlighted the $500,000 Singer contributed in April to the Republican Governors Association and his attempts to thwart meaningful regulation of Wall Street. Left unmentioned in the article was how Singer amassed his fortune, in part by capitalizing on the subprime housing crisis and exploiting the debt of impoverished African nations. During the presidential campaign, as part of a feature article on the "dirty money" behind Rudy Giuliani's campaign, I wrote a separate article about Singer's controversial involvement with so-called "vulture funds." Since Singer's in the news again, I'm reposting the relevant sections below. It's not surprising that someone like him is so committed to bankrolling today's GOP.
In the 1990s Singer's hedge fund pioneered a shadowy, lucrative and often ruthless form of investing whose practitioners earned the not-so-generous moniker "vulture funds." Vulture funds—or "sovereign debt investors," as they prefer to call themselves—buy old defaulted debts, usually from the poorest countries in the world, and then drag the debtors into court, seeking a settlement far above what the funds originally paid for the debt. These are debts that are usually forgiven when the countries are granted relief by wealthy nations like the United States and multilateral institutions like the World Bank. An official at the Bank likens vulture fund activities to giving up your seat on a bus for an old lady, only to see a young college jock swipe it.
Large hedge funds like Singer's Elliott Associates often operate in secret, through shell companies in tax shelters like the Cayman Islands. Since the end of 2005, more than a third of the countries receiving debt relief have been targeted by at least thirty-eight hedge funds, which have gotten judgments in excess of $1 billion. This reverse Robin Hood scheme has drawn criticism around the globe, including from Nelson Mandela and British Prime Minister Gordon Brown.
It all started in 1996, when Elliott paid $11 million for $20 million of debt, dating back to 1983, theoretically owed by the government of Peru. In 1989, then-US Treasury Secretary Nicholas Brady had urged rich countries to forgive the debts of poor ones in order to spur economic growth and global development. Instead of settling with Peru, as its 180 other creditors did, Elliott took the government to court. "Pay us in full or be sued," Singer threatened.
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