Vulture culture

Isn't capitalism wonderful?

So-called "vulture capitalists" are reported to be flocking to Madrid, looking to pick up "distressed assets" from beleaguered banks for as little as 20 cents on the Euro.  The term "vulture capitalists" is evocative enough, but in truth doesn't quite convey how this particular group of worthies makes its living.  In nature, carrion birds wait patiently for their victims to die before descending to eviscerate them.  In modern markets, by contrast, the vultures play an active part in killing the victim,  using techniques such as naked short selling, before pouncing on the corpse -- sorry, the "distressed assets".

At one level this looks quite acceptable, if a bit Darwinian.  One group of capitalists, the Spanish banks in the current example, have got themselves into trouble through a series of bad decisions, so now another group of capitalists, the vultures, turns up to grab choice assets at knockdown prices.  'Twas ever thus. The problem is, this is not just a bloodsport among consenting adults.  There's a whole lot of collateral damage along the way.  We're not just talking here about "distressed assets", a phrase that evokes visions of fainting virgins in a Restoration drama.  There are also distressed people whose lives,  fortunes and dreams are getting put through the shredder, and distressed nations facing lost years and even decades to get back to the living standards they so recently took for granted.

When the writedown of Greek debt was agreed a few months ago,  vulture capitalists who had snapped up  bonds at distressed prices refused to go along with the restructuring, gambling that the Greek government would not take the risk of a court action that could have torpedoed the whole deal.  They were right: Greece had no choice but to pay them out at full value.  In any other context that would be called blackmail,  but in the bond business, it's just canny investing.  The hundreds of millions that Greece paid to keep the vultures at bay could have been used to boost the economy or at least to keep the deficit in check. The fact that the Greek rescue package may now be on the brink of falling apart is at least in part due to the vultures -- and you can rest assured that they're circling again, waiting for their next feed.

Isn't capitalism wonderful?