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===={{tag|ERISA netting}}====
====[[ERISA netting]]====
Famously, ERISA plans tend to be set '''not''' to [[Netting|net]], and for the unholiest of reasons, courtesy of the phantasmagorical imagination of some wise [[mediocre lawyer|counsel]] at a [[U.S. law firm]] which prudence counsels it would be wiser not to name<ref>Someone told me it was Cadwalader.</ref>, upon whom the whole market relies.
Famously, ERISA plans tend to be set '''not''' to [[Netting|net]], and for the unholiest of reasons, courtesy of the opinions committee of a leading [[U.S. law firm]] which prudence counsels it would be wiser not to name, but upon whom the whole market relies.


This gentleman’s opinion is predicated on the risk that a court would interpret the {{tag|ERISA}} act as requiring the US [[Bankruptcy Code]] ''as it stood in 1971'' to be applied to the insolvency of an {{tag|ERISA}} plan, rather than as it stands at the time of insolvency. The reason that’s a problem is that the “[[safe harbor]]s” for closing out swaps in the [[Bankruptcy Code]] were only enacted in the 1980s.
This firm cannot bring itself to rule out the risk that, when resolving an insolvent [[ERISA plan]], a court would interpret [[ERISA]] as incorporating the US [[Bankruptcy Code]] ''as it stood in 1971'' to the insolvency of the plan, rather than the Code ''as it stands at the time of insolvency''. That’s a problem, because the “[[safe harbor]]s” one relies upon for safely [[Close out|closing out]] swaps were only put into the [[Bankruptcy Code]] in the 1980s.<ref>Being WHEN SWAPS WERE INVENTED. See [[swap history]].</ref> So, no netting against [[ERISA plan]]s. Just in case.


Let me say that again:
Let me break that down:


*The [[Bankruptcy Code]], today, contains a [[safe harbor]] allowing you to close out an ISDAs without fearing for your [[netting]].  
*The [[Bankruptcy Code]], ''today'', contains a [[safe harbor]] allowing you to close out an {{isdama}} without fearing for your [[netting]], ''and has done for thirty odd years''.
*The [[ERISA]] legislation, today, allows you to rely on available [[safe harbor]]s set out in the [[Bankruptcy Code]].
*The [[ERISA]] legislation, ''today'', allows you to rely on available [[safe harbor]]s in the [[Bankruptcy Code]].
*Since the [[ERISA]] legislation was enacted in 1971, thought, the [[US attorney|''very wisest eagle of the legal eagles'']] thinks this might mean only the [[safe harbor]]s that were there in 1971 count, ''even if they don’t exist today'', and none of the [[safe harbor]]s that have been enacted since, even if they do, because when referring to the [[Bankruptcy Code]], [[ERISA]] doesn’t say “[[as amended from time to time]]”.
*Since [[ERISA]] was enacted in 1971, thought the [[US attorney|''very wisest eagle of the legal eagles'']], this might mean only the [[safe harbor]]s that were there in 1971 count, ''even if they don’t exist today'', and none of the [[safe harbor]]s that have been enacted since, ''even if they still do exist'', because when it refers to the [[Bankruptcy Code]], [[ERISA]] doesn’t say “[[as amended from time to time]]”.


Seriously. That’s it.
Seriously. That’s it.


It is a frankly fantastical fear: Not only is it impossible to be certain, at this remove, exactly how the US [[Bankruptcy Code]] stood in 1971 much less how it might have been interpreted in those days, but many of the institutions and concepts it relies on — including per chance, some old hippyish safe harbors from the 1960s — will have since been abolished or materially changed.  
It is a frankly fantastical fear: Not only is it hard to know, at this remove, what the US [[Bankruptcy Code]] ''said'' in 1971, much less how it might have been interpreted in those days, but many of the institutions and concepts it relies on may since have been abolished or materially changed. Who knows? perhaps some old [[safe harbor]]s from the 1960s might apply to swaps. But then again, since ''there [[Swap history|''weren’t'' any swaps before 1981]],'' it’s not exactly likely. It would be an imaginative legislator indeed who catered in 1971 for something no-one had even had the presence of mind to think up for another decade.  


Utterly, totally, stupid.
===== Originalism? =====
There is a school of thought in US constitutional law — “originalism” — that when construing a legal text one should extract the original understanding at its time of adoption, disregarding all subsequent changes in law, moral consensus or technology. This is popular with conservatives, the four Yorkshiremen, people who think they don’t make things like they used to, but who are in denial about how crappy things used to be, and indeed how impossible it is to know, over the years, what those who framed a text had in mind in the first place anyway. It is a, ostensibly, a device from ''preventing'' judicial activism in favour of express legislative and constitutional amendment, but is in its own way just as wilful an exercise in juicial imagination. Perhaps we should call it judicial passivism, or even judicial passive-''aggressivism''. It is also to assume that legislation — especially consitutional legislation — is easily amended. But the U.S. constitution has long since transcended mere legislation and as become some kind of sacred article of faith for the American people.  ''No-one'' is amending that. All that is left is creative interpretation of what it means to suit the current social climate.

Latest revision as of 13:30, 14 August 2024

ERISA netting

Famously, ERISA plans tend to be set not to net, and for the unholiest of reasons, courtesy of the opinions committee of a leading U.S. law firm which prudence counsels it would be wiser not to name, but upon whom the whole market relies.

This firm cannot bring itself to rule out the risk that, when resolving an insolvent ERISA plan, a court would interpret ERISA as incorporating the US Bankruptcy Code as it stood in 1971 to the insolvency of the plan, rather than the Code as it stands at the time of insolvency. That’s a problem, because the “safe harbors” one relies upon for safely closing out swaps were only put into the Bankruptcy Code in the 1980s.[1] So, no netting against ERISA plans. Just in case.

Let me break that down:

Seriously. That’s it.

It is a frankly fantastical fear: Not only is it hard to know, at this remove, what the US Bankruptcy Code said in 1971, much less how it might have been interpreted in those days, but many of the institutions and concepts it relies on may since have been abolished or materially changed. Who knows? perhaps some old safe harbors from the 1960s might apply to swaps. But then again, since there weren’t any swaps before 1981, it’s not exactly likely. It would be an imaginative legislator indeed who catered in 1971 for something no-one had even had the presence of mind to think up for another decade.

Originalism?

There is a school of thought in US constitutional law — “originalism” — that when construing a legal text one should extract the original understanding at its time of adoption, disregarding all subsequent changes in law, moral consensus or technology. This is popular with conservatives, the four Yorkshiremen, people who think they don’t make things like they used to, but who are in denial about how crappy things used to be, and indeed how impossible it is to know, over the years, what those who framed a text had in mind in the first place anyway. It is a, ostensibly, a device from preventing judicial activism in favour of express legislative and constitutional amendment, but is in its own way just as wilful an exercise in juicial imagination. Perhaps we should call it judicial passivism, or even judicial passive-aggressivism. It is also to assume that legislation — especially consitutional legislation — is easily amended. But the U.S. constitution has long since transcended mere legislation and as become some kind of sacred article of faith for the American people. No-one is amending that. All that is left is creative interpretation of what it means to suit the current social climate.

  1. Being WHEN SWAPS WERE INVENTED. See swap history.