That solution, though, raised cries of protest from banks, bondholders and the U.S. Treasury Department. They argued that Griesa's solution unfairly penalized bondholders who weren't a party to the dispute. They also warned that, if copied in other cases, the solution of garnishing payments made through custodial banks could inject an element of uncertainty into an electronic funds transfer system vital to the world economy. Right now, money transfers on that system are virtually automatic.
How high are the stakes? The two groups of bondholders were represented in court Wednesday by Theodore Olson and David Boies, the same lawyers who represented George W. Bush and Al Gore in their Supreme Court showdown over the 2000 presidential election.
Boies, who represents the group of bondholders whose payments would be disrupted under Griesa's plan, said it was wrong for the court to halt those payments.
"You can't say to us, 'We are going to hold you hostage,'" Boies told the judges. "We are innocent parties here, Your Honor."
Olson, who represents Singer's NML Capital Ltd., dismissed the idea that the other bondholders were innocent victims or that the court was overstepping its bounds.
"The hostage holding is being done by Argentina," he said. He presented the issue simply: Argentina owes the money, it has the ability to pay, and it shouldn't be rewarded for its defiance. "Argentina would be vastly better off," he said, "if it started to pay its obligations."
If the court upholds Griesa's orders, it might set up a scenario where Argentina would either have to begin paying the holdouts or default on all of its restructured debts — a move that could create a new economic crisis.
Blackman said Argentina would probably opt to default anyway.
"You're going to make it worse," he warned the judges.
The appeals court isn't expected to issue a ruling for several months.