Vulture Funds

“Vulture fund” companies buy up the debt of poor countries at cheap prices, and then demand payments much higher than the original amount of the debt, often taking poor countries to court when they cannot afford to repay. The goal is high returns at bargain prices. Some people have looked down upon hedge funds that operate like vulture funds, which have preyed on the cheap debt of struggling third world countries and forced these countries to pay it back. Vulture funds were first introduced by the billionaire Paul Singer, who in 1996 paid $11 million for discounted Peruvian debt and then threatened to bankrupt the country unless they paid him $58 million. In order to keep a good standing in international financial markets, Peru paid Singer and his New York-based investment fund, Elliot Associates, has since sued the Republic of Congo (Congo Brazzaville) for $400 million for a debt bought at $10 million. More interestingly, many vulture funds have strong Washington connections. DAI gives generous amounts of money to lobbyists in Washington—over $240,000 a year to the lobby firm Greenberg Traurig. Singer is one of the biggest donors to the Republican party, giving over $1.7 million since President Bush started his first presidential campaign.
But politicians are taking notice. Congressman John Conyers, the chair of the House Judiciary Committee, met with President Bush in February 2007 to ask for an end to vulture funds. The President, who committed the United States to the fight against global hunger and in support of debt relief, responded that he was unaware of the vulture fund issue and would assign staff to investigate. Can you beleive that?