Key points are not available for this paper at this time.
Due to a dearth of data, nineteenth century lending to sovereign borrowers was a blind date. We argue this is the reason for collateral pledges found in contemporary lending covenants, which enabled not execution, but the production of reliable fiscal data. Lawyers injected collateral clauses in sovereign debt covenants to permit credible disclosure of hard-to-access tax data. The study foregrounds the importance of big law firms as financial intermediaries and information producers. It also contributes a new view on the role played by contracts in sovereign debt. “No underwriting firm can take precautions against the repudiation of a sovereign hypothecation.” —Thomas Baring, 1865
Flandreau et al. (Wed,) studied this question.