And the Money Kept Rolling in (And Out): Wall Street, the Imf, And the Bankrupting of Argentina: Wall Street, the IMF and the Bankrupting of Argentina

The hot-potato game over the presidency finally ended with the selection by Congress of Senator Eduardo Duhalde, the Peronists' candidate in the 1999 presidential election. Then came the long-expected but nonetheless seismic shift: At Duhalde's behest, Congress approved legislation on January 6, 2002, ending the convertibility system and fixing the

An oft-repeated joke about the IMF is that its initials stand for "It's Mostly Fiscal." The humor stems from the Fund's seeming obsession with bludgeoning countries into cutting spending or raising taxes, as if there were no economic problem that a lower budget deficit or (better yet) fatter surplus wouldn't cure.

Most disheartening of all is the evidence that the decision to make the August 2001 loan, and other measures that went sour, were driven by outsiders' agendas that did not dovetail with the interests of the Argentine people. The IMF's desire to skirt blame for the collapse consistently tilted its policymaking in the wrong direction, toward delaying

Why did this happen? Amid all the forces that were still pumping money into Argentina—the generally positive assessments of Wall Street analysts, the obligations of index-bound money managers to apportion much of their portfolios to Argentine bonds, the desire of European retail investors to diversify out of their own governments' low-yielding pape

It could happen here. Americans who give Argentina's story fair consideration and conclude otherwise are deluding themselves. The risks are much lower for the United States than they were for Argentina, but they are unacceptably high.

Bond transactions are not usually the stuff of great passion. But the megacanje, or megaswap, as this one would come to be known, ranks among the most infamous deals that Wall Street has ever peddled to a government—and with good reason: For CSFB and a half dozen other Wall Street firms, the megaswap would be a bonanza, earning them more than $90 m

Argentina was badly served by the global institutions on which it had come to depend. Nations experiencing reversals of the sort Argentina was undergoing in 2000–2001 should be able to count on the international community for well-designed support to break their falls; at the very least, rescue attempts are supposed to alleviate damage, not exacerb

Founded in 1944 at an international conference in New Hampshire, the IMF is like a giant credit union for countries. Its member nations contribute funds to a central kitty, and the money is lent out as needed to the members that are financially strapped. (In 2004, there were 184 member nations, and the kitty totaled about $157 billion.)

This analysis does not mean that cross-border flows of capital should be severely stifled, much less eliminated entirely. But within the category of foreign capital, some types pose greater risks than others, much as certain kinds of cholesterol are beneficial for the heart while others clog the arteries. In the "good cholesterol" capital