Document Type


Publication Date

Winter 2020


Sovereign debt, vulture funds, global finance, private wealth, sovereign bankruptcy


Banking and Finance Law


This Article argues that the norms and legal practices of global finance in the arenas of sovereign debt and private wealth have led to a significant market failure, in particular the over-supply of sovereign borrowing and a related misallocation of global capital away from its most productive uses. It suggests that this deficiency rests on two related elements: First, a separation of the risks and benefits of sovereign state control, which has resulted from a failure to properly and coherently define the lines between ‘public’ and ‘private’ across the international financial arenas of sovereign borrowing and private client banking. And, second, the self-interested and potentially internally conflicted actions of major global banks. I use the lens of ‘vulture fund’ asset collection efforts in sovereign debt to highlight this problematic outcome, and also ask whether such recovery efforts offer a potential ‘private’ correction for the market failure. Ultimately, I argue that the vulture fund strategy is insufficient as a corrective, resting on internal inconsistencies and giving rise to its own pathologies. More significant structural reforms and conceptual reconfigurations are necessary, which might capture the benefits of the funds’ efforts while minimizing their costs. The Article also tentatively raises deeper theoretical and historical questions about how the lines between public and private wealth have arisen in global finance and how they might be drawn going forward.