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===={{tag|ERISA netting}}==== | ===={{tag|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 | Famously, ERISA plans tend to be set '''not''' to [[Netting|net]], and for the unholiest of reasons, courtesy of the phantasmagorical imagination of the opinions committee of a [[U.S. law firm]] which prudence counsels it would be wiser not to name<ref>Definitely not Cadwalader, obviously.</ref>, upon whom the whole market relies. | ||
This | This 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 [[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> | ||
Let me | Let me break that down: | ||
*The [[Bankruptcy Code]], today, contains a [[safe harbor]] allowing you to close out an | *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 set out 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 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]]”. | ||
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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 | It is a frankly fantastical fear: Not only is it impossible to be certain, at this remove, exactly 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 onmay since have been abolished or materially changed. Who knows? perhaps some old hippyish [[safe harbor]]s from the 1960s that might apply to swaps. But then again, it’s not that likely — and it is just as harsh to blame US legislators for not enacting [[Safe harbor|safe harbors]] for swaps before the 1980s, since ''there [[Swap history|''weren’t'' any swaps before 1983]]''. | ||