Federal judge downplays freeze of funds deposited in the US by Argentina’s central bank

By David B. Caruso, AP
Thursday, January 14, 2010

Judge downplays freeze of Argentina bank funds

NEW YORK — An American judge who froze all property held in the U.S. by Argentina’s central bank said he didn’t intend for the order to halt routine financial transactions.

U.S. District Judge Thomas Griesa signed an order Monday putting a hold on the bank’s deposits at dozens of financial institutions in New York, saying some or maybe all of that money rightfully belongs to creditors owed billions of dollars by Argentina’s government.

But on Wednesday, he told lawyers in the case that he didn’t want to hinder foreign exchange transactions processed through the Federal Reserve Bank in New York.

He issued no written order, but said an earlier freeze on $105 million in central bank assets kept at the Federal Reserve was probably adequate and didn’t need to be strengthened, according to a transcript of the hearing, which occurred at a court in New York City.

Those funds have been frozen since 2005.

The amount of additional money that might be seized as a result of the judge’s order still isn’t clear because the lawyers have yet to tally how much the central bank has deposited in the U.S. The court has authorized the creditors to attach as much as $3.1 billion.

Judge Griesa issued the order at the request of two investment firms, EM Ltd. and NML Capital Ltd., which were among the creditors stung when Argentina defaulted on $95 billion in bonds in 2001.

EM and NML have been in court for years trying to recover some of that money. They have repeatedly accused Argentine officials of trying to dodge creditors by removing assets from the U.S.

Argentina’s government has argued that the central bank is an independent institution, not a state organ, and as such cannot be raided by the country’s creditors.

The attachment order comes amid a fight over whether the government of Argentina’s president, Cristina Fernandez, can tap central bank reserves to pay off national debt.

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