Difference between revisions of "ERISA netting opinion"

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Revision as of 04:35, 10 October 2019

A box of resources about security and collateral

Legal security: MortgagePledgeLienBailment
Equitable security: Chargefixedfloating | ABWOS | Equitable lien
Credit risk mitigation: Title transfer | Guarantee | Letter of credit | Netting
Friends and relations: Rehypothecation | Equivalent
Documents: 1994 ISDA CSA (NY law) | 1995 ISDA CSA | 1995 ISDA CSD (English law)
Regulation: LPA 1925 | Financial Collateral Regulations | LPMPA 1994

There are many kinds of netting opinion, all of them wretched, but one you will not see is the ERISA netting opinion.

This is not because conceptually, reading (let alone writing) such a thing would exceed a single human’s capacity for prolixity, confusion and ennui — though surely it would — but because such a thing is a logical paradox that cannot exist in Euclid’s flawed space-time geometry.[1]

ERISA netting

Famously, ERISA plans tend to be set not to net, and for the unholiest of reasons, courtesy of the phantasmagorical imagination of some wise counsel at a U.S. law firm which prudence counsels it would be wiser not to name[2], upon whom the whole market relies.

This gentleman’s opinion is predicated on the risk that a court would interpret the ERISA act as requiring the US Bankruptcy Code as it stood in 1971 to be applied to the insolvency of an ERISA plan, rather than as it stands at the time of insolvency. The reason that’s a problem is that the “safe harbors” for closing out swaps in the Bankruptcy Code were only enacted in the 1980s.

Let me say that again:

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.

Utterly, totally, stupid.

See also


  1. Euclid as a partner of a U.S. law firm. Now there’s a thought.
  2. Definitely not Cadwalader, obviously.