The degree of magnitude that the power of money now controls is a social problem. It moves like lightning at the behest of people all over the world. more and more it is gathered into fewer hands, vastly increasing the power of wealth to change, as their personal wish, vast tracts of the globe, in this case, Porto Rico. It's not odd that the masters of such expanded power feel they have the the rights of the gods. Compared to the rest of us, they do, and they can't help but feel "distinguished" by their hidden ability to move mountains, buy palaces, fill them as they will. And this is creating grave (perhaps permanent) changes for society which are usually unannounced, and jarring. Such unalloyed power can gave ruination to the world because it does not confer the wisdom to use it. Or even a the desire to be good. Perhaps the opposite.
3
There is no comparison between this and the belief that Wall Street Was bailed out. The Fed stopped a run on the banks, even the most solvent ones, but no bank can survive a run. They were given liquidity, which kept the credit system from freezing, which came very close. And all the money lent to the banks, and it was a loan has been paid back.
This is a move by the funds, and in particular the hedge funds who buy debt due to its high yield rate. Most of us can not invest in a hedge fund. It takes a minimum of $1millon in liquid assets, and usually more before you can buy in. The losers in this case will be multi millionaires, who will use the capital losses to offset any capital gins for the year they lose it in. Non of them will have to go to the poor house. This is the kind of greed you all accuse Wall Street of, and yes there are some Wall Street firms in it.
Porto Rico will have to default, then the courts will have to assign financial managers to keep the public utilities running, the police, the courts, the public records like Real Estate, the roads, and other public services you do not often think about. What happens if you stop the pensions being paid, you create a whole class of people without any money.
Notice a GOP governor tried to make it a tax haven tax haven. Now we can see how well that works. He did not start it but made it far worse, a good example of GOP economics.
This is a move by the funds, and in particular the hedge funds who buy debt due to its high yield rate. Most of us can not invest in a hedge fund. It takes a minimum of $1millon in liquid assets, and usually more before you can buy in. The losers in this case will be multi millionaires, who will use the capital losses to offset any capital gins for the year they lose it in. Non of them will have to go to the poor house. This is the kind of greed you all accuse Wall Street of, and yes there are some Wall Street firms in it.
Porto Rico will have to default, then the courts will have to assign financial managers to keep the public utilities running, the police, the courts, the public records like Real Estate, the roads, and other public services you do not often think about. What happens if you stop the pensions being paid, you create a whole class of people without any money.
Notice a GOP governor tried to make it a tax haven tax haven. Now we can see how well that works. He did not start it but made it far worse, a good example of GOP economics.
12
While PR bears some fault for poor planning this article fails to mention how much of PR's debt has been orchestrated by the US colonial domination of the island. Tax laws passed by Congress to stimulate investment in PR also allows those same corporations to leave with most of the money that they earn on the island. US shipping laws require all of PR's imports to be offloaded form foreign ships and placed on American flag vessels. While that's very profitable for American shippers, it adds 30% to the costs of every import. How many state economies could prosper under similar restraints?
The US took PR from Spain in 1898 and immediately introduced land giveaways to Americans for sugar cane plantations. Before long an island that had been food sufficient became a net importer of food while using most of its agricultural land for sugar exports from US owned plantations.
The tail of exploitation, often engineered by Congress is long and the list of legislation that would grant greater independence to PR is quite short. So for all those who argue for the hedge fund owners and against debt restructuring they should take a hard look at what neocolonialism really looks like. The present legacy of this debt crisis is that PR existed for the profits and exploitation of banks and wealthy plantation owners in the 19th century and while the players and methods have changed, the purpose in the 21st century has not.
The US took PR from Spain in 1898 and immediately introduced land giveaways to Americans for sugar cane plantations. Before long an island that had been food sufficient became a net importer of food while using most of its agricultural land for sugar exports from US owned plantations.
The tail of exploitation, often engineered by Congress is long and the list of legislation that would grant greater independence to PR is quite short. So for all those who argue for the hedge fund owners and against debt restructuring they should take a hard look at what neocolonialism really looks like. The present legacy of this debt crisis is that PR existed for the profits and exploitation of banks and wealthy plantation owners in the 19th century and while the players and methods have changed, the purpose in the 21st century has not.
20
Gentrification on a large scale. The poor will have no choice but to leave and large corporations will own the island in no time. Beautiful coastal villas will soon be available for the right price! Ahhh, American economics at its finest. Good luck explaining this at the pearly gates!
3
The game goes on. Greedy and inept politicians, greedy and crafty Wall Street investors, needy and passive citizens.. (Voting is a blame game in the territories. People keep hoping the federal slot machine will pay off one more time.)The US Virgin Islands are next. (The new VI governor got caught putting $6000 on the gov't credit card- $600 bed cover, $200 pillow covers- only weeks after the prior gov was arrested. (He was a bit too obvious by local corruption standards.) O yea, 1.4 billion in red for 2015. (Possibly a lot more.) The waste of federal $ by cronie hiring, a strong preference for denial, rejection of responsibility and refusal to change, resentment of any outside "interference" in a closed, secretive, dysfunctional... Well, what could go wrong? Thank you NYT. Excellent reporting. Now please follow up with the rest of the story. We can't wait til the tourism $ goes to Cuba to shine a light into the whole story... High murder rates, high AIDs rates, awash in drugs and guns... A painful but necessary look at the territories is long overdue.. Keep going!!!
4
PR should be granted unconditional Independence immediately and recognized by the President. Then let these funds negotiate with an independent nation. PR will have the benefit of no more citizens leaving for the US without authorization. The US should assist PR as needed, once the debt holders make a realistic settlement. Those in the US military at this time, should be granted citizenship. Once all of this is settled without transferring money from the poor to the rich, PR statehood should be granted unconditionally. Sorry if that's lobbying and a haircut, but if that's the game, everyone has to know the rules.
1
OK, then what happens on Day 2? Puerto Rico, the independent nation, has an economy in the toilet, is incapable of operating independently, has no army or sustaining industry, and needs to borrow billions just to get to next month.
Who's got the leverage now?
Who's got the leverage now?
1
Who cares about day2? This reckless action made a liberal feel good!
1
Many elected officials love to make Faustian bargains; it's what politicians do.
If they time things correctly, when the Devil comes to collect, someone else will be in office.
In Puerto Rico or in Illinois, as in Hamelin, sooner or later you have to pay the Piper his due.
If they time things correctly, when the Devil comes to collect, someone else will be in office.
In Puerto Rico or in Illinois, as in Hamelin, sooner or later you have to pay the Piper his due.
1
So Wall Street lobbied against bankruptcy, labeling it a "bailout," even though no taxpayer funds were being spent... and their replacement bill consists of bilions of taxpayer dollars being shoveled at them, personally, in the name of the debt they bought. That's typically called a "bailout."
Privatize the profits, socialize the debts. Wall Street loves socialism, at least half of it.
Privatize the profits, socialize the debts. Wall Street loves socialism, at least half of it.
8
Maybe an island name change would help the host government's PR campaign. Puerto Pobre?
1
As an attorney I would argue that passing new legislation allowing Puerto Rico to discharge these debts in bankruptcy is an ex post facto law that is prohibited by the U.S. Constitution. New legislation permitting Puerto Rico to discharge similar debts in bankruptcy could, at best, only work prospectively, i.e, regarding debts incurred after passage of that new law. I would also argue that since investors relied upon Puerto Rico's inability to discharge the debts in bankruptcy, and Puerto Rico used that fact to help secure the loans, these "contracts" may not be rewritten. You cannot fault the investors for using all legal tools available to them.
3
I'm wondering. If and when a TransPacific Partnership is passed, and we all can see how our environmental, civil rights, and other laws become meaningless, would Americans be able to claim that the TPP is like an "ex post facto law" prohibited by the Constitution?
In the United States and its territories, the constitutional prohibition against ex post facto laws only applies to criminal matters, which bankruptcy protection is not. A precedent first established by a SCOTUS ruling in 1798, Carter v Bull, and upheld in a long line of cases.
2
What would have ever possessed Puerto Rico to seek a bailout from hedge funds? Officials had to know that 1) they were barred from seeking bankruptcy protection from creditors and from restructuring their debt and 2) the agreement was usurious.
There was no way Puerto Rico had the kind of economic growth or tax base that would have enabled the territory to pay back the debt.
There was no way Puerto Rico had the kind of economic growth or tax base that would have enabled the territory to pay back the debt.
3
It's obvious you have no clue as to how the 20% return is calculated. Puerto Rico is not paying 20% interest on the bonds, not even close
2
20 percent return? You make a deal with the devil then expect forgiveness? This ain't Christmas Carol, you can't arrange a redemption, you're in so deep. So where exactly did the 3.5 billion end up? When and if the answer that maybe you'd get some sympathy? Or maybe not.
5
The bonds paid an 8 percent coupon and were sold at 93, meaning an 8.79% yield. The rest is tax effect.
1
Let's see, hedge funds poured money into a risky investment with the prospect of making 20% on their money. 40% of the residents live in poverty. The way out of poverty is education. The island will have to cut services (education among others) to have any hope of making payments.
Sounds like hedge fund billionaires want their money at any and all costs to Puerto Rico as a functioning society. But Puerto Rico has been a basket case for years and they still poured their money in. They apparently knew or should have known there was RISK involved but now think they can buy enough politicians to make sure they are exempt from risk.
I lost a decent chunk of retirement savings on an investment in Puerto Rico. I was told the government would never let it fail. I lost- not happy about it, but once again there was RISK. Unless conservatives have invented a new way to get blood out of a turnip (I know they'd like to) they're almost certainly going to have to take a loss.
We will have to listen to lots of shaming and blaming before that happens, rants about the evils of socialism. But the risks of putting money in were apparent.
Sounds like hedge fund billionaires want their money at any and all costs to Puerto Rico as a functioning society. But Puerto Rico has been a basket case for years and they still poured their money in. They apparently knew or should have known there was RISK involved but now think they can buy enough politicians to make sure they are exempt from risk.
I lost a decent chunk of retirement savings on an investment in Puerto Rico. I was told the government would never let it fail. I lost- not happy about it, but once again there was RISK. Unless conservatives have invented a new way to get blood out of a turnip (I know they'd like to) they're almost certainly going to have to take a loss.
We will have to listen to lots of shaming and blaming before that happens, rants about the evils of socialism. But the risks of putting money in were apparent.
11
Sounds like the socialists will go to any length to avoid paying the debts they freely incurred after running out of other people's money
3
Consider two vital facts: (1) the Constitution of Puerto Rico, approved by Voters and adopted more than 60 years ago, requires a balanced budget. (2) Voters in P.R. (as other Americans in their own states) have routinely voted against and removed corrupt administrations and voted-in administrations which promise reform -- note the simple fact that Voters have removed the governing party every 4 - 8 years since 1968. The VOTERS in P.R. have done their job.
Despite the VOTERS better desires and intentions, the POLITICIANS have deceived the Voters with false promises, skirted the Constitution to incur $70+ Billion in debt, legislated themselves high perks (including generous retirements, security details), and awarded their families, friends, and campaign donors with corrupt, highly-profitable contracts that span decades past the awarding politician's elected terms, and those same Politicians then arrange to pay their friend's contracts ahead of contracted debt. This is not unlike mainland U.S. voters voting for candidates that promise reducing the U.S. debt, while actually increasing the U.S. debt after they are elected.
None of the proposed solutions address this Puerto Rican reality, American reality, and Global reality. Instead, the solutions mentioned in this article only punish either (or both) (a) honest Voters, or (b) well-intentioned Bondholders. We need proposals that punish the perpetrators and reclaim the stolen funds.
Despite the VOTERS better desires and intentions, the POLITICIANS have deceived the Voters with false promises, skirted the Constitution to incur $70+ Billion in debt, legislated themselves high perks (including generous retirements, security details), and awarded their families, friends, and campaign donors with corrupt, highly-profitable contracts that span decades past the awarding politician's elected terms, and those same Politicians then arrange to pay their friend's contracts ahead of contracted debt. This is not unlike mainland U.S. voters voting for candidates that promise reducing the U.S. debt, while actually increasing the U.S. debt after they are elected.
None of the proposed solutions address this Puerto Rican reality, American reality, and Global reality. Instead, the solutions mentioned in this article only punish either (or both) (a) honest Voters, or (b) well-intentioned Bondholders. We need proposals that punish the perpetrators and reclaim the stolen funds.
5
I believe a follow-up article is in order, researching exactly how a territory of only 3.5 million inhabitants could rack up up debts of $70 billion, larger than the debt of all but two US states. Where did that money go? How was it spent? This would seem to be at least as interesting as the behavior of a group of hedge fund managers.
15
Agreed. Could we have an article on a few boondoggles financed by the Puerto Rico bondholders? (normally I would say taxpayer, but considering ...)
And without all the half facts and misleading information provided in this one, as document by myself and many other commenters.
And without all the half facts and misleading information provided in this one, as document by myself and many other commenters.
Certainly many commenters misunderstand two things. First, the 20% return is not a reflection of the interest rate on the bonds, but a combination of the rate on the bonds and the unique and very significant tax advantages associated with PR bonds. Second, both Puerto Rico and the lenders were making a bet that with the extra time the extra cash allowed, PR could turn around its economy sufficiently to be able to make the necessary bond payments. I don't think anyone was necessarily negotiating in bad faith at the beginning. Two sides were making the same long bet on PR, and they lost. Now it's time to pick up the pieces.
Also, it's fair to say that the funds are not the only ones to blame here. PR spending has been out of line with revenue for a very long time, even before the recession. Say what you want abotu the hedge fund guys, maybe they are in fact evil - that doesn't mean the PR gov't is a symbol of innocence and competence. PR has proved that it is unable to govern itself in the new era where it cannot rely on regulatory arbitrage to attract investment and prop up its revenues.
Also, it's fair to say that the funds are not the only ones to blame here. PR spending has been out of line with revenue for a very long time, even before the recession. Say what you want abotu the hedge fund guys, maybe they are in fact evil - that doesn't mean the PR gov't is a symbol of innocence and competence. PR has proved that it is unable to govern itself in the new era where it cannot rely on regulatory arbitrage to attract investment and prop up its revenues.
3
So where is ex governor Luis Fortuno? These guys come in, destroy, and leave and the next guy holds the bag. I agree strongly with many of the comments regarding 20% return. These are "intelligent investors". A 20% return when the market return is maybe 1% this year, the fed rate is 0% and they "invest" and are surprised that they lost their investment.
It's becoming pretty obvious that these guys are continuing to game the system.
We love the free press and the NYT especially. Great story. Keep it up.
It's becoming pretty obvious that these guys are continuing to game the system.
We love the free press and the NYT especially. Great story. Keep it up.
6
Stories like this remind me of how the USA became so big, in addition to waging wars like the one against Spain in 1898 that yielded colonial outposts like Puerto Rico: The USA also very deftly purchased huge amounts of land at bargain basement prices from cash-strapped European powers ($15 million for the Louisiana Purchase from France, Florida for officially nothing from Spain, $7.2 million for Alaska from Russia; indigenous peoples had no say in any of these transactions, of course).
If China can't have Taiwan, maybe for a price it can settle for a smaller island in the Caribbean?
If China can't have Taiwan, maybe for a price it can settle for a smaller island in the Caribbean?
4
Polonius:
Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
Hamlet Act 1, scene 3, 75–77
2
I have no pity for the hedge fund vultures however there is much more to this story. For years, Puerto Rico was able to attract many US corporations to the island for the tax free exemptions they were getting. US Corps pulled out billions of dollars in the process but the people on the island were able to least benefit from the thousands of jobs that were created on the island and add to the island's tax coffers. When the tax exemptions had run their course in 1996, the companies pulled stakes and took the jobs with them and nothing was created to fill the vacuum. As a US Colony, Washington DC basically abandoned the island but at the same time the PR government did not introduce austerity measures until it was too late. In this relationship, the US and investors have made billions off the back of Puerto Ricans, who are US citizens and have fought in every US war since WW I and now are moving in to buy everything on the cheap and further depress an impoverished population. If PR were a state, or at least given the right to vote in congress (after all they do pay Federal taxes, just not personal income tax), I doubt that they would be in this situation. It is exploitation by the US government and their corporate benefactors at the expense of the people. They are US citizens but as a colony, they've always had second-class citizenship. PR should not pay, default and go from there. The powers that be have taken out a lot more than they've ever put into it.
6
Manton,
Yes, defaulting "will lead to capital flight by residents...a deeper recession, and more people fleeing the island..." but this has been occurring for years. This is the storm that proceeds the calm. Eventually the storm passes and the calm returns. It is an effect that usually spans an average of 20 years or a couple of generations. Believe it or not, it is part of the natural order of things when matters get to this point. But new growth cannot occur until either the Commonwealth defaults or its public instrumentalities are permitted an orderly dissolution under Chapter 9.
Yes, defaulting "will lead to capital flight by residents...a deeper recession, and more people fleeing the island..." but this has been occurring for years. This is the storm that proceeds the calm. Eventually the storm passes and the calm returns. It is an effect that usually spans an average of 20 years or a couple of generations. Believe it or not, it is part of the natural order of things when matters get to this point. But new growth cannot occur until either the Commonwealth defaults or its public instrumentalities are permitted an orderly dissolution under Chapter 9.
2
Mainland public pension funds and ordinary investors also stand to lose if the island is allowed to declare bankruptcy. For states such as California, any resulting shortfall will be paid out of the states' general funds, which is to say by ordinary U.S. taxpayers. So it is not only the filthy rich, for whom I have little sympathy, who would suffer financial loss.
Hedge funds are easy to hate. The California Public Employees Retirement fund, or the Ilinois Teachers' pension fund sound a lot less vilainous. We should remember that public and private pension funds have billions', perhaps trillions, invested in hedge funds.
Finally, under existing laws, Puerto Rico had to pay high interest rates. But without those anti-bankruptcy protections, lenders would have demanded far more.
What's happening to Puerto Rico is a tragedy, but it is not as simple as evil hedge funds and billionaires sucking the financial blood from innocent Puerto Rico.
Hedge funds are easy to hate. The California Public Employees Retirement fund, or the Ilinois Teachers' pension fund sound a lot less vilainous. We should remember that public and private pension funds have billions', perhaps trillions, invested in hedge funds.
Finally, under existing laws, Puerto Rico had to pay high interest rates. But without those anti-bankruptcy protections, lenders would have demanded far more.
What's happening to Puerto Rico is a tragedy, but it is not as simple as evil hedge funds and billionaires sucking the financial blood from innocent Puerto Rico.
4
Innocent Puerto Rico chose of its own free will to borrow the money, now they refuse to pay it back? Innocent Puerto Rico earned its fate
2
As a retiree on the mainland, some of my lifetime savings were invested in General Obligation bonds from Puerto Rico. I just lost 50% of my investment. Am I superrich? No, just a retired school teacher. I can only deduct $3,000 a year on the income tax. This is unfair too; it should be whatever was lost.
5
sorry but th govt is not interested in protecting little people like yourself
now, had you been goldman sachs, th govt would be rushing truckloads of cash as fast as they could to your office
one only gets bailed out in america if one is super rich and helped cause th problem that necessitated th bailout
if that doesnt make sense then you know youre in america
now, had you been goldman sachs, th govt would be rushing truckloads of cash as fast as they could to your office
one only gets bailed out in america if one is super rich and helped cause th problem that necessitated th bailout
if that doesnt make sense then you know youre in america
5
It's called moral hazard. Everyone assumes that a quasi state of the U.S., like Freddie, Frannie, Puerto Rico, etc, is general credit of the U.S. Therefore they over invest in those securities.
It's the financial industry that wants a bailout. The promise of a 20% profit went sour and now pain is greater then greed. It's high noon to reel in the financial industry.
4
Just another example of low quality debt going Kaboom! lately. When you see one cockroach, there are bound to be more you cannot see.
This is what happens in any situation where the monies in an economy either do not circulate because they are hoarded/wasted in a few corners (killing the speed of money and the economy's overall ROI), is siphoned overseas by corporate/wealthy interests (classic Ponzi scheme where returns are not re-invested) or the people at the top of the pyramid game the system so that taxes are not paid (the debt builds until the interest cannot be paid). This was the story Greece but it is also the story of a lot of countries these days.
Puerto Rico is not unique. It is the entire Western capitalist system in microcosm.
This is what happens in any situation where the monies in an economy either do not circulate because they are hoarded/wasted in a few corners (killing the speed of money and the economy's overall ROI), is siphoned overseas by corporate/wealthy interests (classic Ponzi scheme where returns are not re-invested) or the people at the top of the pyramid game the system so that taxes are not paid (the debt builds until the interest cannot be paid). This was the story Greece but it is also the story of a lot of countries these days.
Puerto Rico is not unique. It is the entire Western capitalist system in microcosm.
3
Caveat emptor.
Puerto Rico would be well advised to default. In the end, it is the only real solution to its problems. The natural order of things is disrupted when lenders continue to lend and borrowers continue to borrow despite negative market and economic conditions, respectively.
It is irrelevant now which party is at fault. In order to return to a state of equilibrium, Puerto Rico must default. Doing so will restore order, which is paramount above all, including the interests of all those involved in this situation.
Puerto Rico would be well advised to default. In the end, it is the only real solution to its problems. The natural order of things is disrupted when lenders continue to lend and borrowers continue to borrow despite negative market and economic conditions, respectively.
It is irrelevant now which party is at fault. In order to return to a state of equilibrium, Puerto Rico must default. Doing so will restore order, which is paramount above all, including the interests of all those involved in this situation.
4
doing so will lead to capital flight by residents -- already hug --, less investment, a deeper recession, and more people fleeing the island. a pin prick to the creditors in comparison. This is not hard to fix in a win-win way.
• ...the impoverished United States territory and its unlikely saviors fell apart, setting up an extraordinary political and financial fight over Puerto Rico’s future.
“Humans see what they want to see.” ~ RICK RIORDAN (b. 1964) American author
A "future" where the people no longer matter. Call it what it is, a powerless "colony" ruled from Washington. "Impoverished United States territory" comes close but doesn't quite make it. "Unlikely saviors" looting the spoils of the vanquished is adding insult to injury.
“En el albor del siglo veintiuno a la pobre gente del pobre pueblo la matará un empacho de asco.”
(In English: “In the dawn of the 21st century the poor people of the poor nation wil die from a bellyful of disgust.)
~ LUIS RAFAEL SÁNCHEZ
from:
ESA ANTIGUA MISERIA
(That Ancient Misery)
EL NUEVO DÍA
San Juan PR
Sunday, 20 December 2015
“The urge to save humanity is almost always only a false-face for the urge to rule it.” ~ H.L. MENCKEN
“Humans see what they want to see.” ~ RICK RIORDAN (b. 1964) American author
A "future" where the people no longer matter. Call it what it is, a powerless "colony" ruled from Washington. "Impoverished United States territory" comes close but doesn't quite make it. "Unlikely saviors" looting the spoils of the vanquished is adding insult to injury.
“En el albor del siglo veintiuno a la pobre gente del pobre pueblo la matará un empacho de asco.”
(In English: “In the dawn of the 21st century the poor people of the poor nation wil die from a bellyful of disgust.)
~ LUIS RAFAEL SÁNCHEZ
from:
ESA ANTIGUA MISERIA
(That Ancient Misery)
EL NUEVO DÍA
San Juan PR
Sunday, 20 December 2015
“The urge to save humanity is almost always only a false-face for the urge to rule it.” ~ H.L. MENCKEN
4
Rubio and the schemers exploiting PR got to write their own rules and still failed miserably, these are the same con men who nearly bankrupted the US while Bush and his deregulation policies allowed these spit and polished thugs to steal US taxpayers blind. They can take the loss to their overstuffed bank accounts.
5
Time for all people everywhere to admit that hedge funds are the economic version of ISIS. They are willing to decapitate economies everywhere to satisfy their own rapaciousness. They should never be bailed out. Certainly not by US taxpayers.
12
Puerto Rico has had a bloated public sector for decades and has financed it by borrowing. They agreed to pay high rates because the alternative was default. All they did was postpone the day of judgement till now. I doubt that creditors will get 100 cents on a dollar back and don't particularly care either way. But they aren't the bad guys in this mess. It is the politicians who didn't have the courage to fix the economic mess years ago. Puerto Rico is basically a failed state. It's people are voting with their feet by moving to the mainland. If the Congress changes the law to allow them to restructure their debt it must be in a way that breaks the cycle as opposed to simply kicking the can down the road.
5
The state of a country is really nothing more than a collective summary of the state of the individuals within it.
2
Bruce Rauner and Mike Madigan... watching?
It's King Madigan who needs to pay attention. Gov Rauner is well aware that 1+1=2, but Madigan still thinks union teachers are entitled to multimillion dollar pensions for 1 afternoon of substitute teaching
1
To the best of my knowledge, Donald Trump has been mute on the topic of Puerto Rico's fiscal downward spiral since the mainstream media began paying attention rather recently. Wonder what his thoughts are? After all, one of his own golf resorts in PR recently filed for and granted Chapter 11.
3
Isn't it time for Puerto Rican independence?
4
Doesn’t this story remind you of Christmas? No celebration of the birth of a child. Instead the real symbol of Christmas greets us with ho, ho, ho, while his jolly mechanical eyes measures the size of our wallets.
And there is Puerto Rico celebrating the free market, rather than fruits of democracy. We all believe in the free market. Now, we don’t want to disappoint the rich but there is no free market. What exists are our economy, our society and standing in between is our government. When the government is fair we have the opportunity to prosper. At best, government balances societies demands on the economy and resists the privileged few that run the economy who often begin to think the economy is theirs to do as they wish—like starving the society.
Today, greed has the bit in it’s teeth. The electorate sways in the winds of wealth-generated public relations, which many citizens confuse with the news. Meanwhile, our government is drunk on bribery. Government is lead by power-hungry greedy politicians that demonstrate principle only to threaten the Money to assure more bribes will flow to prevent those principles from becoming law.
So the society, the people of Puerto Rico are having any shed of decent government stripped away, all promise of the pursuit of happiness much less the common welfare are about to be taken by creditors protected by a corrupt Congress. This is government of, by, and for the money. America looks on as Puerto Rico is carved up—whose next?
And there is Puerto Rico celebrating the free market, rather than fruits of democracy. We all believe in the free market. Now, we don’t want to disappoint the rich but there is no free market. What exists are our economy, our society and standing in between is our government. When the government is fair we have the opportunity to prosper. At best, government balances societies demands on the economy and resists the privileged few that run the economy who often begin to think the economy is theirs to do as they wish—like starving the society.
Today, greed has the bit in it’s teeth. The electorate sways in the winds of wealth-generated public relations, which many citizens confuse with the news. Meanwhile, our government is drunk on bribery. Government is lead by power-hungry greedy politicians that demonstrate principle only to threaten the Money to assure more bribes will flow to prevent those principles from becoming law.
So the society, the people of Puerto Rico are having any shed of decent government stripped away, all promise of the pursuit of happiness much less the common welfare are about to be taken by creditors protected by a corrupt Congress. This is government of, by, and for the money. America looks on as Puerto Rico is carved up—whose next?
1
Ho, ho, ho, Big Government greed borrowing money and refusing to pay it back.
The Times should retract the statement that the individuals referenced in the beginning of the article have "taken on an outsize role in financing political campaigns in the aftermath of the Supreme Court’s 2010 Citizens United decision," and post a correction. The Citizens United decision does not address individual financing of political campaigns. It pertains solely to corporate spending.
The reference to the decision in this article appears to reflect an uninformed, partisan prejudice that Citizens United is the all-purpose bogeyman for any political financing that the author deems shady. No attempt is made to substantiate the notion Citizens United enabled any of the referenced individuals to do anything they could not do before Citizens United. The weasel word "aftermath" suggests a cause-and-effect relationship. If that is the claim, it should be supported with facts, or at least be informed by an understanding of what Citizens United actually held. This article does neither.
The reference to the decision in this article appears to reflect an uninformed, partisan prejudice that Citizens United is the all-purpose bogeyman for any political financing that the author deems shady. No attempt is made to substantiate the notion Citizens United enabled any of the referenced individuals to do anything they could not do before Citizens United. The weasel word "aftermath" suggests a cause-and-effect relationship. If that is the claim, it should be supported with facts, or at least be informed by an understanding of what Citizens United actually held. This article does neither.
2
Narrative over facts, that's the liberal way.
The article states the money poured in and within months were spent and there was no money to pay back
What the article doesn't tell us is who spent this money and what did they do with it and why can't they pay it back.
What the article doesn't tell us is who spent this money and what did they do with it and why can't they pay it back.
5
Puerto Ricans pay a number of Federal taxes on commodities, import/export taxes, etc as well as full Social Security and Medicare payroll taxes. They receive scant Medicaid assistance from the federal govt, across the board lower reimbursement for Medicare, and no SSI been though they are paying fully into those systems. That is quite unfair to begin with. Didn't we fight a war of independence over taxation without representation? They have no voting representation, none, in the US government. If they were a state, they should have two US Senators and about 7-8 US House members based on population.
40% of Puerto Ricans live in poverty, the economy is getting worse, and many more are not living comfortably by any standard. So when I read comments about the failure of a supposed luxury "social welfare state" living off the largesse of the American taxpayer, I have to roll my eyes in utter disbelief.
Here various hedge fund managers apparently jumped to lend money at a 20% return to a commonwealth in very bad financial straits - with no bankruptcy protection - knowing full well they had politicians in their pocket who would either bail them out or ultimately allow them to seize assets in Puerto Rico as payment. This is capitalizing on the poor no less than banks making home loans to those they knew could never meet the mortgage payment long term.
40% of Puerto Ricans live in poverty, the economy is getting worse, and many more are not living comfortably by any standard. So when I read comments about the failure of a supposed luxury "social welfare state" living off the largesse of the American taxpayer, I have to roll my eyes in utter disbelief.
Here various hedge fund managers apparently jumped to lend money at a 20% return to a commonwealth in very bad financial straits - with no bankruptcy protection - knowing full well they had politicians in their pocket who would either bail them out or ultimately allow them to seize assets in Puerto Rico as payment. This is capitalizing on the poor no less than banks making home loans to those they knew could never meet the mortgage payment long term.
37
But Puerto Ricans do not pay any federal income taxes, the taxes that fund Medicaid, welfare, and food stamps, which 1/3 of their population uses.
3
When we're done with the terrorists, we'll need to turn our attention to the bankers/investors.
4
The biggest threat facing America is Big Government
INSURANCE VS INVESTMENT Is a distinction that those who bet on Puerto Rico's economic recovery would do well to consider. Since those investors are not "too big to fail," they need to realize that when you make a bet on a high risk deal, sometimes you win, but more often you lose (according to the law of probability). If investors wanted to have some safety net, which they would vociferously deny to the 99%, they needed to have invested in organizations with government insurance. But the didn't. They could have invested anywhere, but they chose Puerto Rico. With every freedom there comes duty. The duty of the investors is to restructure the debt so that Puerto Rico can recover, not so that it will be destroyed. Why should the US taxpayer fund temporary fire sale property values to be gobbled up by the 1%, paid for by the 99%? Not that the 1% has a sense of proportionality or balance that anyone else has. They're entitled, so they operate according to their own set of rules. Laws are for losers. The 1% often show disdain for both laws and the losers of the 99%. In a democracy they're entitled to express their viewpoint. But it does not mean that they have any right to dictate the future of the US or its Protectorate. You'll never convince me that welfare for the millionaires and billionaires is the way to build a strong economy and nation with any pretense to equality. Meanwhile to the 1% I say, Qu'ils mangent de la brioche. Let them eat cake! My head?!?!
2
Puerto Rico never asked for a bail out. They merely asked for equal treatment. Approval of the Chapter 9 provision doesn't cost the mainland tax payers a cent. It allows the current Puerto Rico administration, who inherited this snow ball, to restructure and reorganize this mess in prudent fashion.
The Republican faction in the US Congress is too beholden (that means owned by) to Wall Street who opposes this fair treatment because they still think they can squeeze water out of the turnip. (Let's cut health care and education for example, how's that for brilliance?).
The answer is clear and simple, just takes a little intestinal fortitude. On Monday, January 4th the Governor should send out the word that no debt payments will be made until he (the government of Puerto Rico) restructures its debt. He should name his fiscal oversight Board and move on.
If anyone is still standing on the 5th, maybe everyone can sit down and talk about it. Or maybe chapter 9 will start making sense to the Republicanos in the Congress.
This is not an issue of status, nor of poor administration nor much less of bail outs. We are way beyond that. This is about reasonable fairness or federally sponsored economic plunder.
We must understand our past to understand our future. This is the same scenario of economic plunder that placed all the island's sugar wealth in the hands of Wall Street 100 years ago. That's what started this whole tragedy.
Read your history. It repeats itself.
The Republican faction in the US Congress is too beholden (that means owned by) to Wall Street who opposes this fair treatment because they still think they can squeeze water out of the turnip. (Let's cut health care and education for example, how's that for brilliance?).
The answer is clear and simple, just takes a little intestinal fortitude. On Monday, January 4th the Governor should send out the word that no debt payments will be made until he (the government of Puerto Rico) restructures its debt. He should name his fiscal oversight Board and move on.
If anyone is still standing on the 5th, maybe everyone can sit down and talk about it. Or maybe chapter 9 will start making sense to the Republicanos in the Congress.
This is not an issue of status, nor of poor administration nor much less of bail outs. We are way beyond that. This is about reasonable fairness or federally sponsored economic plunder.
We must understand our past to understand our future. This is the same scenario of economic plunder that placed all the island's sugar wealth in the hands of Wall Street 100 years ago. That's what started this whole tragedy.
Read your history. It repeats itself.
8
Chapter 9 is great, and a matter t of fairness, but it doesn't solve the larger and more problem of the government's own debt. default will be a catastrophe and is avoidable
A helpful definition from the Oxford dictionary :
Parasite :
An organism that lives in or on another organism (its host) and benefits by deriving nutrients at the host’s expense.
Parasite :
An organism that lives in or on another organism (its host) and benefits by deriving nutrients at the host’s expense.
1
I lived in a gated community in PR. Many of the homes were owned by self-employed professionals. The homes cost from the high six figures to millions. Year after year, the local press reported that the declared income of these professionals was$18,000 per year. Why on earth should US taxpayers bail out an island of tax cheats?
5
As the prospectus remind us that investments are not risk free and may lose value. The hedge fund managers should read their own marketing materials. Any fund with a 20% rate of return is high risk with no guarantee of government intervention. They knew that PR was irresponsible with money but they made a bad bet. Any government that attracts business with the guarentee of no taxation is not thinking strateg They must think they are too big to fail.
7
The rightist narrative that the hedge funds somehow acted in good faith while others did not does stand up to real-world examination. Obviously the vulture style hedge funds figured out that they could get first in line and force one of three options on OTHER bondholders - both public and private. They could accept either: 1) Draconian/unsustainable cuts to balance the budget; 2) massive bankruptcies among other public entities in the territory farther down the priority order for payment; or 3) federal bailout. The fact that they hoodwinked tea party types into what will likely be a bailout shows: a) how stupid the tea party crowd really is (no news there); and b) how easily purchased is the support of craven republicans who don't even care much for the own "no-public-bailout" ideology when a big fat bribe is dangled under their nose. And of course, this does not excuse excessive spending and bad decision making by Puerto Rican leadership of both parties. Part of the moral there is that going the downward spiral of a low-tax, low-wage, low-investment society is pernicious for all but the 1% (and even they will be losers in the very long run." To paraphrase Thatcher, "the problem with the one percent's form of vulture/disaster capitalism is eventually the 99% run out of money."
9
Draconian cuts are not needed to balance the budget. Puerto Rico's deficit as a share of GDP actually is about 1/3 lower that the Federal government's. Time for Puerto Rico to sit with all its creditors to discuss a workable solution which will not result in a catastrophic default.
2
There was no "figuring out", the law clearly states that bond holders are first in line to claim assets in bankruptcy. Cutting excess fat from a bloated budget is hardly draconian
3
No, the law says no such thing. In fact, what the law says is that Puerto Rico is not eligible to file bankruptcy.
Why is there no mention of the serious drought affecting Puerto Rico?
no one wants to rain on your parade(smiley).
Heard the phrase 'slave to your lender', it's true. PR should not borrow if they are not serious to keep their promise to repay their lenders.
Bankruptcy is a process of walking away from your obligations without reforming, oh and it does require future borrowing, who is now going to refinance the $67 billion that NYT has conviniently forgotten to mention? Yes the 95% of debt still outstanding. Guess what, no one is. So NYT does a disservice to PR.
The Wall Street evil stories are past their time, very poor story based on 5% of the problem, without a solution. Guess what, other states will have to increase taxes if PR goes bankrupt. States and cities will not get funding if they get into stressed situations because no one will give them a lifeline.
Bankruptcy is a process of walking away from your obligations without reforming, oh and it does require future borrowing, who is now going to refinance the $67 billion that NYT has conviniently forgotten to mention? Yes the 95% of debt still outstanding. Guess what, no one is. So NYT does a disservice to PR.
The Wall Street evil stories are past their time, very poor story based on 5% of the problem, without a solution. Guess what, other states will have to increase taxes if PR goes bankrupt. States and cities will not get funding if they get into stressed situations because no one will give them a lifeline.
3
To be fair Dave, they did mention it once, without any emphasis of its significance, of course. Then they went right back to ruffling the feathers of their liberal fighting cocks, who they want not to be complacent and to turn out in large numbers in November.
2
The story is on-sided in the extreme. Here are just a few examples. First, residents of the States have to pay the costs of the Federal Government's debt. When this is accounted for, Puerto Rico's taxpayers pay less in debt service than taxpayers in any state. Second, while it is clear that the government's cash reserves are very low, it is not at all clear that the government's debt is unsustainable. Taxpayer supported debt is only about 40% of the island's GDP and the deficit is less than 2% of GDP. Even the outside report commissioned by the Governor pointed out that modest spending cuts could be made without harming public services. Third, extending Chapter 9 bankruptcy to Puerto Rico's municipalities and government-owned corporations is sensible and fair, but will not do anything to prevent a default on debt service payments owed by the central government itself. A default would be very costly for the island;'s economy undoubtedly leading to more capital flight, lower investment by residents (significant share of the island's debt is held by residents), and more emigration as job prospects would be even worse than now. A combination of modest belt tightening and bridge financing is what is needed to reach an optimum solution for the the island itself. The only source of such funds -- excepting a bailout from Congress with very strict conditions -- is to return to negotiating bridge financing from the creditors.
1
The federal government encouraged retirees and those on fixed income to buy Puerto Rico municipal bonds by making them tax free in every state of the union, something no other state can do. The federal government thereby put its name behind Puerto Rico. The average person like me, a municipal bond holder in Puerto Rico, should not be victim to bankruptcy for Puerto Rico. Penalize the predatory hedge funds. But not those who bought Puerto Rico municipal bonds with full faith in the United States of America. Bankruptcy for fixed income purchasers of Puerto Rico municipal bonds is a betrayal, a betrayal akin to allowing banks to declare bankruptcy and wipe out personal savings.
1
Not only that, the Puerto Rican government is a government created under Congress's plenary power over the territories. The bonds are issued by that delegated authority. I don't see how, by farming out bond issuance to a subsidiary, Congress can evade the clear constitutional mandate in the Fourteenth Amendment that the validity of the public debt of the United States shall not be questioned. These bonds should be deemed federally guaranteed, and Congress should act to put Puerto Rico's house in order.
2
During a bankruptcy process debt payments are prioritized 1) creditors (Hedge Funds), 2) secured creditors, 3) bondholders ….
1
I am not well versed in all that, but I agree wholeheartedly. These municipal bonds should be federally guaranteed, or the blessings of the federal government for such bonds is an empty promise from hereon in.
The PR government did not do anything that a number of US states and municipalities have not done in the past: borrow money to fund popular programs for which taxes did not supply enough revenue, and keep borrowing until it became obvious to everyone that the debt could not be repaid without drastic measures. Detroit did the same, and went into bankruptcy. California did the same, and pulled itself out of the hole with a series of tax increases and spending cuts. Bankruptcy isn't available to PR under current law, and it's questionable whether tax increases and spending cuts will provide enough revenue to pay back the island's bonds on time and in full. What to do?
The first thing to do is recognize that the market failed. Sophisticated investors are supposed to be able to figure out whether a bond (a loan) is a good investment. If that were true, investors would have stopped buying PR's debt a long time ago and the situation would not be nearly as dire as it now is.
The second thing to do is recognize that PR can't be allowed to dig a hole like this for itself again and then come crying to the federal government for help. The strings that come with any help from the federal government have to include a PERMANENT limit on PR's ability to borrow, a limit tied to actual revenues as calculated by someone who is NOT paid by the PR government.
The first thing to do is recognize that the market failed. Sophisticated investors are supposed to be able to figure out whether a bond (a loan) is a good investment. If that were true, investors would have stopped buying PR's debt a long time ago and the situation would not be nearly as dire as it now is.
The second thing to do is recognize that PR can't be allowed to dig a hole like this for itself again and then come crying to the federal government for help. The strings that come with any help from the federal government have to include a PERMANENT limit on PR's ability to borrow, a limit tied to actual revenues as calculated by someone who is NOT paid by the PR government.
3
Puerto Rico should just default on all their debt. Use what little tax collection they have for basic services. It would be terribly painful in the short term, but otherwise they are under the gun forever. Who's going to make them pay? Are we going to send the army in to get the hedge fund money?
1
When the federal court in San Juan orders the marshal to arrest the governor and treasurer for disobeying a court order to pay the bonds, that may be a clue as to who can "make them pay".
They will not be able to borrow any more money.
That is always the issue when defaulting on debt.
That is always the issue when defaulting on debt.
1
The $73 billion debt of Puerto Rico is a shock to it's economy along with high energy and water expenses has slammed the island's private sector. Congress needs to dedicate time to find solutions and establish a new political economy for PR. The island has developed very closely to the rest of the states and needs new tools to maintain what it has built. PR needs good modifications to establish fiscal stability.
I would urge all investors everywhere to boycott government bonds. The leftist modus operandi is to borrow money, refuse to pay it back, and then blame the lenders to the extent of advocating violence towards any and all investors!
3
Seems to me that the biggest domestic default in recent memory was that of Orange County, California, which far from being a bastion of liberalism.
2
Orange County defaulted in 1994 and repaid all creditors by 1996. Plus, the Washington Public Power Supply default was bigger by $1 billion. Get your facts straight
Seldoc: more notorious than Detroit?
How Orwellian, the bondholders lobby against a bailout rallying the Tea party no less, will actually seeking, well a taxpayer bailout!! These wealthy individuals are going to start a crisis in our democracy with their lobbying groups and soft money.
2
Very fine article; thanks. This answers many questions and then some.
3
"“It’s really a wealth transfer from the bondholders to the municipalities,” Mr. Spencer said."
Yeah, right. The fact remains that these hedge funds aka 158 families have been the beneficiaries of the biggest wealth transfer in world history. American public's wealth and assets have become the wealth and assets of a tiny minority. This has to end, else there is going to be a revolution in the country.
Yeah, right. The fact remains that these hedge funds aka 158 families have been the beneficiaries of the biggest wealth transfer in world history. American public's wealth and assets have become the wealth and assets of a tiny minority. This has to end, else there is going to be a revolution in the country.
13
Gee, Cuba when compared to its neighbors is looking better and better, are they sure they want to open their doors to all this wretchedness.
3
It's remarkable to see the misinformation still being spewed out over the "bailouts" of the banks during the financial crisis. The government ended up profiting to the tune of billions of dollars when the financial institutions repaid the funds with interest.
Of course, the feds could have just let them crash.....dragging us into not a recession but a depression.....
Of course, the feds could have just let them crash.....dragging us into not a recession but a depression.....
2
So banks repaid their loans but Big Government won't repay its loans
1
:If the Congress wants to bail out Puerto Rico, the legal and moral way to do that is in a bankruptcy proceeding in which the bondholders are paid 100% of what they are owed, aka the face amount of the bonds. The Idea that the bondholders should take a hit because they are wealthy is nonsense. The first obligation of governments is to enforce laws, not bend or amend them ex post facto in favor of an economic class. If economic transactions aren't enforced by governments, only the exercise of power, economic or political, remains, which is, of course, the condition about which the article really is complaining.
4
There is nothing more greedy nor immoral than borrowing money and then refusing to pay it back
7
The hedge funds have only wanted bail-outs, and always expected them.
A U.S. Territory set up with no bankruptcy options, and with no Federal regulations on local government spending, was a gleaming pot of gold for predatory capitalists. These goons bet on the U.S. government bailing out their principle and profits. Puerto Rico has been an open back door to the U.S. Treasury.
What is most galling are the astro-turf ogs that label themselves "Patriots." Their volume can be turned on and up to argue precisely against what they will force to happen: bailouts. How long will the majority of the American voting public sit on their duffs and allow this debauching of democracy continue?
A U.S. Territory set up with no bankruptcy options, and with no Federal regulations on local government spending, was a gleaming pot of gold for predatory capitalists. These goons bet on the U.S. government bailing out their principle and profits. Puerto Rico has been an open back door to the U.S. Treasury.
What is most galling are the astro-turf ogs that label themselves "Patriots." Their volume can be turned on and up to argue precisely against what they will force to happen: bailouts. How long will the majority of the American voting public sit on their duffs and allow this debauching of democracy continue?
7
If we ever had any doubt about how Wall Street owns Congress, one only has to read this:
"Mr. Rubio’s staff even joined in drafting the bill. But this summer, three weeks after a fund-raiser hosted by a hedge-fund founder, Mr. Rubio broke with those backing the measure. Bankruptcy, he said, should be considered only as a 'last resort.'"
These same people, we learn, have "put millions of dollars behind candidates of both parties, including Hillary Clinton and Jeb Bush."
So who are you going to vote for in the upcoming primary? Clinton or Bush or Rubio who receives $1 million at a shot from people like this, or Bernie Sanders who receives $30 average from 2 million individuals like you?
"Mr. Rubio’s staff even joined in drafting the bill. But this summer, three weeks after a fund-raiser hosted by a hedge-fund founder, Mr. Rubio broke with those backing the measure. Bankruptcy, he said, should be considered only as a 'last resort.'"
These same people, we learn, have "put millions of dollars behind candidates of both parties, including Hillary Clinton and Jeb Bush."
So who are you going to vote for in the upcoming primary? Clinton or Bush or Rubio who receives $1 million at a shot from people like this, or Bernie Sanders who receives $30 average from 2 million individuals like you?
7
Sanders the data thief has lost the moral high ground. How can he pass judgement when he has overseen such malfeasance?
1
Investing used to involve risk, now it involves government bailouts.
Corporate financiers are sucking money out of government coffers and expect us all to bail them out when the tide turns against their bets.
The world of finance has to be regulated by wiping out their activities from existence. They are nothing short of theives.
Corporate financiers are sucking money out of government coffers and expect us all to bail them out when the tide turns against their bets.
The world of finance has to be regulated by wiping out their activities from existence. They are nothing short of theives.
6
Puerto Rico's Big Government borrows money, refuses to pay it back, and the lenders are the thieves?
5
You'll recall it was hedge funds that lent Big Government money when Bog Government ran out of other people's money. It's Big Government that needs to be wiped out
2
looks like a revolution waiting to happen.
new owners should be wary about showing up to collect their prize or they could end up dead.
this is not just a financial game to a lot of the poor people on the island who reaped none of the benefits; it is their life.
just saying.
new owners should be wary about showing up to collect their prize or they could end up dead.
this is not just a financial game to a lot of the poor people on the island who reaped none of the benefits; it is their life.
just saying.
Capitalism says you get higher interest return for higher risk of not getting you money back. Wallstreet likes to throw out the rules of capitalism whenever it suits their profits. Wallstreet is acting more like a loan shark demanding for high interest return without any risk of default. I believe another applicable term would be "rent-seeking", if taxpayers or pensioners money ends up bailing out Wallstreet.
12
First and foremost, the Times seems to focus extensively on the hedge fund creditors, while also acknowledging that they only make up at most 1/3rd of the creditors affected. Who are the others? If you invest in a mutual fund that covers sovereign debt (a lot of them do), just look in the mirror. It seems like the Times has an agenda--focusing on the big bad hedge fund guys, while overlooking who this mostly will hurt.
Second, this has already been pointed out but I want to re-emphasize: the bonds were probably issued at a much lower coupon (think 10%). As the outlook looked grim, the bonds began trading at significantly lower prices, thus raising the effective yield to 20%.
Finally, no mention of the final victims of Puerto Rico's folly--American state and city governments. If PR defaults, this will raise borrowing costs (some more than others) for every state and municipality across the country. The cumulative effect will be billions of dollars in higher interest payments, paid for by regular Americans. Of course, because the costs will be dispersed, no one will ever talk about it. But make no mistake, PR's financial folly will have a "tax" on all Americans.
All told, poor financial reporting on the part of the Times. Read WSJ and FT for your business and financial news.
Second, this has already been pointed out but I want to re-emphasize: the bonds were probably issued at a much lower coupon (think 10%). As the outlook looked grim, the bonds began trading at significantly lower prices, thus raising the effective yield to 20%.
Finally, no mention of the final victims of Puerto Rico's folly--American state and city governments. If PR defaults, this will raise borrowing costs (some more than others) for every state and municipality across the country. The cumulative effect will be billions of dollars in higher interest payments, paid for by regular Americans. Of course, because the costs will be dispersed, no one will ever talk about it. But make no mistake, PR's financial folly will have a "tax" on all Americans.
All told, poor financial reporting on the part of the Times. Read WSJ and FT for your business and financial news.
7
Could not have put it better myself. 66% of the bond holders are NOT Hedge Funds. Are we to believe they are sitting quietly on sidelines? My guess they are utilizing both GOP and Democratic allies so that narrative would not fit as well into the political purpose of why the NYT wrote this article.
1
We know from an August article in the times that more than 20 percent are Puerto Rico citizens and businesses (such as credit unions). That has been transformed, from a reason for significant alarm in that article, to less than 20 percent in THIS article, and a reason for doubting the bona fides of the 60 Plus representatives.
So twenty percent Puerto Ricans. And we know mutual funds that give state residents tax free income have invested very heavily in Puerto Rico bonds as they are also tax free. Plus individual investors (I've owned a few Puerto Rico bonds but they've all matured or been called) and probably some institutions/brokerages. The hedge funds are a minor part of the picture but the times is focusing on them because people hate them, and don't hate seniors who rely on their income payments.
So twenty percent Puerto Ricans. And we know mutual funds that give state residents tax free income have invested very heavily in Puerto Rico bonds as they are also tax free. Plus individual investors (I've owned a few Puerto Rico bonds but they've all matured or been called) and probably some institutions/brokerages. The hedge funds are a minor part of the picture but the times is focusing on them because people hate them, and don't hate seniors who rely on their income payments.
2
By far the biggest losers in any massive default will be the people and economy of Puerto Rico.
Flush the investors. They entered into the relationship with open eyes and "figured" they could always get paid-for politicians to bail them out. Due diligence needs to brought back to this type of investing. If the country, state or territory allows itself to get into a position of default, it needs to pay for its incompetence and, most-likely, corruption. Of course, when innocent citizens end up paying the price, politicians howl. Well, vote for competence and against graft!
3
The island lived beyond its means for many years, The day of reckoning had to come sooner or later. The deal with the hedge funds was to push the day of reckoning and pretend they did not have a problem. Puerto Rico may be the most egregious but they are certainly not alone. Chicago, Illinois and New Jersey are in the same boat. The problem everywhere is bloated Public Sector payrolls and unsustainable retirement ages and public pension promises. The capture of the political system by the public sector unions makes solutions impossible until you have a full blown crisis as in Puerto Rico.
7
Actually the main condition of the investors was that Puerto Rico credibly commit to balancing its budget within about 2 years.
"Puerto Rico could be a test case for the rest of the country, paving the way for troubled states like Illinois to escape unsustainable debts".
Frankly there is no "could" about it. A hedge fund manager now rules from the governor's mansion in Illinois, and, as an earlier NYTime's article pointed out, he has dozens of other oligarchs funding his campaign to pack the Illinois Legislature and Supreme Court with hirelings and fellow travelers. Over then next three or so years Gov. Rauner and his financial cabal hope to drive Illinois' government further into economic crisis, a crisis which can be used to gut government pensions, destroy the labor movement and free Illinois' oligarchs from the tyranny of taxes and regulations. Let a thousand oligarchs bloom!
Frankly there is no "could" about it. A hedge fund manager now rules from the governor's mansion in Illinois, and, as an earlier NYTime's article pointed out, he has dozens of other oligarchs funding his campaign to pack the Illinois Legislature and Supreme Court with hirelings and fellow travelers. Over then next three or so years Gov. Rauner and his financial cabal hope to drive Illinois' government further into economic crisis, a crisis which can be used to gut government pensions, destroy the labor movement and free Illinois' oligarchs from the tyranny of taxes and regulations. Let a thousand oligarchs bloom!
5
Illinois is in a financial crisis solely because of Big Government and ultra-greedy unions. Union greed is bankrupting Illinois and Chicago. Unions don't care who dies, as long as they get their millions of taxpayer dollars. Gov Rauner was elected to restore sanity to the state, but the Dems and their greedy special interests will have none of it
3
Puerto Ricans are moving in droves to Orlando, which may result in a more Democratic Florida, including a Democratic senator, perhaps congressman Patric Murphy, to replace Marco Rubio.
5
And a bankrupt Orlando
2
The condensed version...
The Republican governor at the time enacted legislation making Puerto Rico a tax haven. Money poured in, but surprisingly did little for Puerto Rico overall because people seeking tax havens aren't exactly known to be community-minded or interested in municipal fiscal health. Shocker. The next governor courts hedge funds for salvation... because that always works out so well... especially at 20% returns. When things fall apart in short order, Rubio reverses himself and abandons his Puerto Rican constituents in favour of his donors (but says his actions are unrelated to his donors), and opposes bankruptcy... along with most other Republicans. Instead $3B of US tax-payer money has been thrown down the hole so the hedge funds and other investors can continue to earn their 20% returns - returns that by their very nature say *high risk*, whilst the screws are applied to Puerto Rico. Par for the course within the realm of American capitalism, otherwise known as socialism for the rich.
The Republican governor at the time enacted legislation making Puerto Rico a tax haven. Money poured in, but surprisingly did little for Puerto Rico overall because people seeking tax havens aren't exactly known to be community-minded or interested in municipal fiscal health. Shocker. The next governor courts hedge funds for salvation... because that always works out so well... especially at 20% returns. When things fall apart in short order, Rubio reverses himself and abandons his Puerto Rican constituents in favour of his donors (but says his actions are unrelated to his donors), and opposes bankruptcy... along with most other Republicans. Instead $3B of US tax-payer money has been thrown down the hole so the hedge funds and other investors can continue to earn their 20% returns - returns that by their very nature say *high risk*, whilst the screws are applied to Puerto Rico. Par for the course within the realm of American capitalism, otherwise known as socialism for the rich.
10
Puerto Rico proves again that Big Government socialism doesn't work
2
Some of us know of Rubio's fiscal illiteracy, considering his own personal fiscal woes. So hearing him pontificate on fiscal matters is like Carson on pro-choice or Trump on equal pay for women, say. These and the other candidates, Reps and Dems alike, are all puppets of and megaphones for their wealthy donors' agendas. Perhaps Sanders is the exception.
@ Larry
What "doesn't work" is the tired US imperialist colonial ambitions – military or economic.
Get used to it, oh Exceptional One!
What "doesn't work" is the tired US imperialist colonial ambitions – military or economic.
Get used to it, oh Exceptional One!
1
This sentence made me sit up straight:
"Hedge funds commissioned their own economic study of the island’s finances, which concluded that further cuts to public spending, in particular to education and health care, would allow the island to keep up."
They want to let people suffer and die so that they can get their debt payments?!
They want to stunt the future of Puerto Rico and its citizens so that they can get their payments now?
For shame, for shame.
"Hedge funds commissioned their own economic study of the island’s finances, which concluded that further cuts to public spending, in particular to education and health care, would allow the island to keep up."
They want to let people suffer and die so that they can get their debt payments?!
They want to stunt the future of Puerto Rico and its citizens so that they can get their payments now?
For shame, for shame.
10
Hedge fund managers who engage in this kind of "investing" should be going to jail. Do you know that these guys don't pay the same taxes that we do because they allegedly take risks? What risks! Republicans who support this bail out belong in jail along with any anyone else who does. This money will go right into the pockets of FMs who think the rest of us are just dumb for paying taxes. This must stop!
3
Actually the study you refer to came to exactly the same conclusions on where cuts could be made in public spending without reducing the scope or quality of public services as the Governor's own study. Look it up. The same study highlighted how a win-win agreement could be reached with creditors without going through a defaulot which would devestitate even more the local economy
1
I find it interesting that investors wanted to make Puerto Rico "the Singapore of the Caribbean," put tons of money into hotels and all, which haven't made it, and are looking to recoup their money. Damn the 40% of people living in poverty. But guess who will get the shaft? Anyone crying that hand-outs are costing way too much better get a grip! If there truly is a 40% poverty level, the problem is not hand-outs but not having a plan to educate and put these people to work. Once again, power and greed lead to downfall at the expense of the "little people."
3
Is not this the same Wall St that screwed up Greece, or to phrase it differently took advantage of financially ignorant politicos and those same politicians interested only in serving their own immediate self-interests, not those of their constituents in both Puerto Rico and Greece.
When will the world learn? Beware the boors of Wall St whose only interest is their own.
Would that Greece and PR both say enough and begone. Let the .01% dangle having to buy more legislation, legislation that is so obviously bought and corrupt that it founds the revolt necessary to again bring a just world.
When will the world learn? Beware the boors of Wall St whose only interest is their own.
Would that Greece and PR both say enough and begone. Let the .01% dangle having to buy more legislation, legislation that is so obviously bought and corrupt that it founds the revolt necessary to again bring a just world.
3
Not all bond holders are billionaire hedge funds. My husband and I are retirees who purchased Puerto Rico bonds to supplement our retirement income. If we sold the bonds at the current price, we lose one third of our investment. Come January 1, no one knows if we will receive the interest payments we rely on for our well-being Therefore not allowing Puerto Rico to declare bankruptcy is also in the interest of ordinary, middle class retirees and other tax payers.
5
I'm sorry to hear that you invested in PR but it was junk bond quality. The risks were there and if you didn't notice that a 20% return was a bit high you just weren't watching. I see no reason to back stop your risking investment.
6
You and your husband made a bad investment decision. The reality is that every investment carries a certain degree of risk which you accepted when you went ahead with purchasing the bonds. To argue that your interests somehow override those of ordinary Puerto Ricans, who stand to be deprived of accessible health care and education if they are barred from declaring bankruptcy, strikes me as extraordinarily selfish and callous. Fiscal responsibility starts with accepting the consequences of your own financial decisions.
5
Kent: What you ignore is that the government has the ability to pay. It is choosing not to pay, in spite of laws and its own constitution. Although at least 20 percent (per the August article on this website) of its debt is owned by its own citizens, and a default will mean disaster for many Puerto Ricans who have invested their savings in their own government's bonds.
The word, I think, is "deadbeat".
The word, I think, is "deadbeat".
2
I don't understand the obsession to do things out of credit. I don't think this was honestly negotiated! Puerto Rico owes a whopping $72 billion to its creditors (private investment firms). In order to pay back that money they will cut spending, and rise taxes to pay off their debt. Most important all at the people's expenses.
1
Buying stock in Johnson and Johnson, or IBM, etc. is an investment. Buying some of these hot souffle bonds of what amounts to a three card monte government is pure speculation.
2
Perhaps this is not the entire problem but the energy policy followed by Puerto Rico is a microcosm of the short sightedness which has affected our entire country ... Blessed by the potential for abundant solar, wind, and even hydroelectric power, Puerto Rico generated electricity exclusively by use of diesel generators, and all that oil had to be imported from the US by ship --- Are we to believe that over the past few decades, when everyone knew that fossil fuel was the energy industry of the past, not one person or group of people decided to innovate and create a new future? --- Shameful, and an exaggerated version of the blindness and greed that has shaped our entire energy policy ... We are all playing catch up because we chose not to see the future.
4
Forgive their debt, have the US taxpayers reimburse creditors for their losses and set the commonwealth free to be on its own, no longer part of the USA.
1
No I refuse to make fund managers whole. I absolutely refuse.
1
The article can be summarized in one sentence: "For years the island had borrowed to pay its bills." All the rest about hedge funds, presidential campaign contributions and the wealth of certain individuals is fluff. Why was there no oversight on borrowing?
1
Because there was a Democratic administration in Washington that needed to keep Latinos onside for 2012.
If Gov. Padilla had made these claims representing a private firm, everyone would be clamoring for him to go to jail. Why is it not so now?
4
Whatever we do for Chicago we should do for Puerto Rico
1
Perfect! Let's have them both fail--as a lesson to Liberals--and anyone else paying attention, that too much government spending is poisonous to a free democracy.
1
Taxpayers around the county cannot be held responsible for the poor fiscal managment and irresponsible behavior of local governments and, by proxy, the local population that elected those governments (e.g. Chicago, Illinois, Puerto Rico). These localities will have to face the consequences of financial mismanagement on their own. They took on the risks and now they must face the consequences on their own.
Did PR really issue bonds with a 20% interest rate? Probably not. More likely, the commonwealth issued (for example) bonds with a 10% rate issued at par (1000.00). Now because of the troubles, those same 10% bonds are trading at 1/2 of their original value (500 instead of 1000) which doubles the effective yield from 10% to 20%.
It's not a "bailout" to expect to be repaid when you loan money.
It's not a "bailout" to expect to be repaid when you loan money.
1
They didn't "loan money", they made bad investments hoping to get richer on the backs of everyone else. These ultra-rich investors make me sick. May they all be visited by ghosts of Christmas past, present and future.
1
The bonds were issued with a 8% coupon at a price of 93. This equates to a yield of 8.73% (if they pay) tax free. The bonds trade now at 72.5, a 22% loss to the buyers.
1
Read the article again. The 20% considers tax effects. That is, if you got an investment with a 20 percent return, then paid taxes on it all, and I assume federal, state, and city, at maximum rate, whatever you would have left (certainly less than half) is what Puerto Rico was paying.
3
Ok, now that everyone has vilified the "lender of last resort" - the hedge funds - over their infusion of a much needed $3.5B, what's your answer to the other $66.5B in unsustainable debt? PR is in the hole $70B yet most of these comments are screeching about the financing of just 5% of it. You can argue the merits or demerits of the deal struck that pays a 20% vig to the stakeholders but that's on the PR gov't that took,the deal. They HAD to know that CONSTITUTIONALLY the bond holders were protected, to the exclusion of all others.
Now, back to the debt as a whole - $70,000,000,000.00. PR's population is 3.548M, of which 40% lives in poverty. Keeping in mind that PR is specifically barred by law from filing bankruptcy as a territory, or in any sector (i.e. Public utilities), and of course no more deals with "the devil", what sort of solution or solutions is/are there to address PR's self-proclaimed fiscal death spiral? Oh, and they can't shaft you and me, the American taxpayer.
Now, back to the debt as a whole - $70,000,000,000.00. PR's population is 3.548M, of which 40% lives in poverty. Keeping in mind that PR is specifically barred by law from filing bankruptcy as a territory, or in any sector (i.e. Public utilities), and of course no more deals with "the devil", what sort of solution or solutions is/are there to address PR's self-proclaimed fiscal death spiral? Oh, and they can't shaft you and me, the American taxpayer.
8
The answer is Bigger Government and even more spending! It's failed everywhere every time, but this time it'll work! The mind of a liberal is a scary place...
2
Bill, since Larry thinks government spending can't solve it, I suppose the solution would be for Puerto Rico to declare independence and just repudiate its debt. That would prevent the American taxpayer from having to pay anything, and the investors who took risks would just be wiped out. A true "free market" solution!
1
I'm serious. Isn't that the Ayn Rand philosophy, government is just to protect us from invasion by a foreign power, and every one of us has to take our own risks? Why should the US government do anything to protect hedge funds', or anybody else's, bottom line? We're all in this world alone, and we have to calculate our own risks and opportunities. If I am a "job creator" (one of Rand's "atlases"), I won't have to worry about some crooked territorial government. Because I am a productive entrepreneur, I can make my own way in the world. Let Puerto Rico go to hell.
The one word missing in the article or comments is responsibility. Thatcher's statement "... at some point you run out of other people's money" could also be rephrased, "At some point you run out of other people's responsibility" - i.e., at some point I become responsible for my actions, even if they are invited or welcomed by my adversary. Investors looked at Puerto Rico and said, "If you're stupid enough to give away your kingdom for a bowl of beans I'll take it." That's financially shrewd but nevertheless irresponsible. Investors knew they would gain more than their 20 percent return; they could wind up owning Puerto Rico's economy and thus its people. That grossly irresponsible behavior reduces Puerto Rico and thus its citizens to an asset. Puerto Rico's officials acted irresponsibly by not confessing prior governmental malfeasance and conveying the message, "It's time to own up and pay up." Both sides crave instant gratification. I want mine and I want it now! Each side wants its adversary to shoulder its own (ir)responsibility. The solution is (a.) to set a cap on the dollar amount investors will receive from Puerto Rico, with payment guaranteed by the U.S. government over 50 years; and (b.) to require Puerto Rico to get federal approval for any and all future borrowing until the above debt has been repaid. Children, and especially these adversarial brats, sometimes need a stern parent to keep them from killing each other. That is a Christmas gift that's long overdue.
4
There is absolutely NO rational reason the US Taxpayers should be responsible for any debts owed to sophisticated private hedge fund firms or other investors who knowingly took on a high risk - high reward scenario with the hope of earning vast returns of 20% on municipal bonds. Didn't we learn anything from this just a few years back with privatizing the profits and socializing the loses to Wall Street banks, AIG, et al?
2
The Caribbeans have long been a cauldron of corruption, high crime and low productivity, and Puerto Rico, despite its privileged Commonwealth status fits right in. High density population with insufficient arable land surface are contributing factors to this sorry state of affairs but in the end the true culprit is unmitigated corruption at every level of government and business.
To the list of failed states, we can add a fair number of Central America countries whose traumatized population just about warrants refugee status.
As an American, the real question I ask myself is what on earth is taking place in our "sphere of influence"? If we can't fix Puerto Rico and countries the size of a few counties like Haiti, does anyone believe that our trillion dollars decade long involvement in Afghanistan, Iraq, Libya and the rest of it have a chance to succeed?
Puerto Ricans and all inhabitants in that hemisphere deserve much better.
To the list of failed states, we can add a fair number of Central America countries whose traumatized population just about warrants refugee status.
As an American, the real question I ask myself is what on earth is taking place in our "sphere of influence"? If we can't fix Puerto Rico and countries the size of a few counties like Haiti, does anyone believe that our trillion dollars decade long involvement in Afghanistan, Iraq, Libya and the rest of it have a chance to succeed?
Puerto Ricans and all inhabitants in that hemisphere deserve much better.
6
I have no sympathy for the hedge funds and the political shenanigans are reprehensible. Nonetheless, changing the rules in the middle of the game only encourages-and rewards-irresponsible behavior.
1
If the hedge funds found themselves on the losing end, you know they would do everything possible to change the rules in the middle of the game.
The law states that bond holders are first in line to collect in bankruptcy. It's Big Government liberals trying to change the rules in the middle of the game
1
This isn't a story about Puerto Rico. This is a story about the post citizens united political reality we now live in. Government and laws are for sale and politicians running for office don't have the pride or courage to admit they speak for the highest bidder so long as they get paid along the way. Is there any pride left in being a representative for the people, or is it just another business decision to run for office.
6
Maybe we ought to teach our young that fighting side by side with senator Hatch's constituents in the armed forces or other right wing narrow minded Americans is just not worth it. While fighting side by side with mostly conservative state republican soldiers in Korea, Vietnam, Bosnia, Kosovo, Iraq, Afganistán, we were supposedly fighting for the American flag that today is turning it's back on Puerto Rico. Young Puerto Ricans think for whom and what you are fighting for before you decide to sacrifice your life.
3
No we're turning our backs on billionair fund managers who will pocket the money and let PR sink. No bailout.
A series of tax reforms and incentives for US companies to come to the island and pay little or no US taxes. This eventually became section 936 of the IRS code. So for decades PR held its own with new US factories and businesses such as the big Pharmacuetacals and even Silicon valley got involved. A drive throught the island in the late 1980's factories with names from companies like HP, Microsoft and Apple were all over the island. Then PR elected a Republican pro statehood governor who was not opposed to the then Clinton admin plan to abolish section 936. Despite dire warnings that the island would go into an economic death spiral it was passed and signed by Bill Clinton in 1993. Congress needs to restore section 936 or give the island bankruptcy access like all other states. If these billionaire vulture capitalists get their way PR will become a 4th world country with no education system . I say lets just tell these greedy billionaires to go elsewhere and then declare independence from the USA. Have a economic summit with China and invite the Chinese to invest and build on the sland. At the mere mention of the chinese i bet congress will then act.
3
Classic misinformation tactics. Members of congress brand the private debt restructuring a bailout and then legislate an actual US taxpayer bailout so the private debt can be paid. Investment banks are running congress with no end in sight. Many of these hedge fund managers also evaded jail for their crimes leading to the great recession.
14
After the last economic crash hedge funds seem to have realized a sure way to make money (20%!?) is to buy toxic debt, and then run to the government for bailouts. Just as borrowers need to be responsible for poor choices, investors need to be responsible for poor choices. Putting 3 billion dollars on a 7 billion dollar debt that will continue to grow is like trying to put out a raging forest fire with a thimble of water.
5
So, because many of the investors are rich, it's only appropriate (fair?) that they should lose their investment returns, because 'they can afford it.' The demonizing of wealthy people is new in this country, but is a growing trend. These investors have as much right to their money as do all the bond holder and pension fund investors do. People who want to blame the rich because they can afford to hire lobbyists and influence the political process to protect their investment would likely do the same thing if they had the money to do so (though I'm betting they would never admit it). Puerto Rico is in this position because of greedy, sleazy politicians, the same way Greece and Venezuela are in the position they're in, because of greedy, sleazy politicians who sell their souls, and their citizens' welfare, for money and power. The people of Greece are paying the price for electing greedy, sleazy politicians to run their country, and you can bet the EU and the IMF, also demonized for trying to protect THEIR investments, will not be willing to allow Greece to discharge its debts in bankruptcy. Neither should the investors who invested in Puerto Rico. The greedy, sleazy politicians should be prosecuted if they are found to have sold citizens a bill of goods; Puerto Rico's citizens will have to suffer the consequences of bad decisions, same as the Greeks. Perhaps they'll learn something from this.
8
If Hedge Funds own less than a third of Puerto Rican debt, who owns the rest? Guess who reader, it might be you. These Puerto Rican bonds are spread over mutual funds owned by individuals and in single state funds. Do the holders of a Maryland single state fund know that 50% of the fund is invested in Puerto Rican bonds? So these are the people who will really be hurt by bankruptcy haircuts. The real villain here is Bill Clinton, who in 1995, signed a bill to eliminate Puert Rico's tax breaks. The economy never recovered. Also add Puerto Rico Governors that never cut back when revenues dropped.
4
My father's municipal bond fund has an investment in these bonds, and we are concerned about the impact on his fund. The funds pay for his long-term care. Not every investor is a billionaire.
1
Every investor is hated by the left. Be careful and be armed, they are coming after you and won't stop until they confiscate your entire net worth
1
I keep thinking that the monied interests of this country can't tear the fabric of representative democracy anymore apart then the have, with their bailouts, their tax breaks, their lawyers and lobbyists, their preferential treatment in Congress.
Yet now they will determine the fate of an entire commonwealth of millions of Puerto Requeños, consigning them to permanent poverty and/or making US taxpayers assume the risk they took in buying P.R.'s bonds in the first place.
Once again, the rich internalize profits and externalize risk. What a racket.
Yet now they will determine the fate of an entire commonwealth of millions of Puerto Requeños, consigning them to permanent poverty and/or making US taxpayers assume the risk they took in buying P.R.'s bonds in the first place.
Once again, the rich internalize profits and externalize risk. What a racket.
10
Puerto Rico lived far beyond its means. They borrowed huge sums of money and now refuse to pay it back. They determined their fate, and they earned their fate
3
@ Larry
While the corporate and military United States milked it dry only to cast it away. Such is the fate of colonies.
Puerto Rico learned debauchery from the best.
While the corporate and military United States milked it dry only to cast it away. Such is the fate of colonies.
Puerto Rico learned debauchery from the best.
1
Yes, from the leftists who ran Detroit and Greece into the ground
The photo showing the car parked up on the sidewalk in front of the book store says it all.
1
The US had one of the greatest bankruptcy laws in the history of the world and it was one of our countries greatest laws. GOP tried for years to tear it down. Finally they did, and the law they replaced it with does only one thing. It makes it so costly and difficult to declare bankruptcy that many people do not have the main thing the law was meant to do, provide someone a fresh start. The famous people like Disney and others who got that fresh start and then contributed billions to the US economy is legendary.
The GOP at every turn has shown protecting the rich is their only objective. No doubt many Democrats do the same. But there is a clear line they are crossing, The Bush bailouts should not happen again Yet the GOP is desperately working overtime to guarantee the laws to prevent them passed in the wake of them get torn down. It actually seems only Warren being in the Senate has stopped much of that from happening. And now we see them wanting to steal money from the people of Puerto Rico needed for education and health. Typical GOP. They like their voters ignorant and dead. If all the GOP are going to do is give billions to rich people and tell them do not worry, no matter what investment you make there is no risk of failure. If we don't bail them out we will make sure people starve and die before they have to risk their billions being lost.
The GOP at every turn has shown protecting the rich is their only objective. No doubt many Democrats do the same. But there is a clear line they are crossing, The Bush bailouts should not happen again Yet the GOP is desperately working overtime to guarantee the laws to prevent them passed in the wake of them get torn down. It actually seems only Warren being in the Senate has stopped much of that from happening. And now we see them wanting to steal money from the people of Puerto Rico needed for education and health. Typical GOP. They like their voters ignorant and dead. If all the GOP are going to do is give billions to rich people and tell them do not worry, no matter what investment you make there is no risk of failure. If we don't bail them out we will make sure people starve and die before they have to risk their billions being lost.
3
John is of course referring to the law known as BAPCPA, which was supported by those 3 great Republicans, Chris Dodd, Hillary Clinton, and the Senator from Mellon Bank, our Vice President Joe Biden
Here's something else to factor into the equation. If PR is able to avoid repayment by changing the law, interest rates for new issues for states and municipalities all over the country will go up. Investors will require higher rates of return to compensate for the increased risk that state and local governments can default.
Nothing is free. If PR is able to default, rates on municipal bond issues will cost all local governments more.
Nothing is free. If PR is able to default, rates on municipal bond issues will cost all local governments more.
4
Let the hedgfonds hold the bag, those invstors don't really need that money formtheir survival. They took the gamble because of the 20% interest, a form of usery actually and now they lost. This is the kind of redistribution we need in the US and the world!
3
I can't blame the hedge fund billionaires. They are no different than Madoff in a way except they have high priced Ivy League Lawyers advising them on every deal as to how to manipulate the law to make their scheme work. We really have to blame our politicians who are so cheap to buy.......whether it be by Israelis, Saudis or hedge fund. We have the best government Jerusalem and Riyadh can buy. Why not send the millions of Syrians and Afghans and Iraqis who are moving to Europe to Puerto Rico?
1
Actually, Puerto Rico is most like Madoff. PR, like Madoff, promised to be a good fiduciary and also promised a guaranteed 20% return on the investor's money and also promised to place the bondholders, first in line for repayment. Now, it turns out, less than 3 years after the agreement, PR can't/won't live up to any part of the agreement. In fact, all the money is gone (just like Madoff) and the investors have only their regrets. Who in PR will go to jail?
3
It should be noted that the twenty percent return is not the entire interest rate of the bonds. Rather it is a combination of the interest on the bonds and the tax savings to the bond holders based on the tax code. The exact interest rate that the Puerto Rican Government accepted in not disclosed in the article.
6
The bonds in question were originally sold with interest rates of around 5%.
1
Since 2008, the average American earns nothing on their bank savings accounts. We all could have bought Puerto Rico bonds and enjoyed a 20% return instead - but we did not because we knew they were too good to be true and we could lose our principal.
Hedge funds knew this as well but since Big Corporate Money now owns the American government, they were confident they could protect their investment by buying the right politicians to protect their bonds.
Everyone expected that ultimately the US Taxpayer would once again transfer wealth to the already wealthy.
Hedge funds knew this as well but since Big Corporate Money now owns the American government, they were confident they could protect their investment by buying the right politicians to protect their bonds.
Everyone expected that ultimately the US Taxpayer would once again transfer wealth to the already wealthy.
4
The good old USA is headed in the same direction. This week's omnibus bill increases our deficit by $2 trillion over the next 10 years. Spending increase with no funds to pay for it. Gutless politicians on both sides of the aisle. Senators from both parties battling to keep or add some dollars for some initiative that is good for their home states. Overwhelming support from the democrat party, some of whom like Nancy Pelosi, called it a win over the Republican agenda. Puerto Rico, suffering from a severe budget problem and an inability to fund it's debt, decided to provide tax incentives in order to get investments onto the island. Sound familiar? It's called betting on the come.
1
Since when is investing risk free? How can investors possibly get paid before pensioners? The hedge funds operate more like organized crime. They buy politicians who do their bidding and prey on those most vulnerable.
5
They can possibly get paid because that is the agreement everybody made.
This disaster stems from ill devised political remedies to a bad economic situation. This situation stemmed from the removal without any substitute of section 936 of the US tax code, that allowed US manufacturing companies to set in the island with tax advantages. These advantages were crucial to offset the higher production, shipping and utilities costs in the island. The lack of good paying work has made all sorts of proffesionals to leave for the mainland, snowboling the situation.
The bond issue has a far more damaging component that is not discussed even by local newspapers; there are +\- $20 billions of this debt that is held by local retirees, union funds, insurance companies, banks and credit unions, these credit unions carry in their books an oversized chunk, and have close to 900,000 working class members. The uncertainty created by the situation has destroyed, the value, the wealth, of all the good faith holders of these bonds. A default event will carry horrendous consequences, not yet openly disscussed to the before mentioned holders.
The bond issue has a far more damaging component that is not discussed even by local newspapers; there are +\- $20 billions of this debt that is held by local retirees, union funds, insurance companies, banks and credit unions, these credit unions carry in their books an oversized chunk, and have close to 900,000 working class members. The uncertainty created by the situation has destroyed, the value, the wealth, of all the good faith holders of these bonds. A default event will carry horrendous consequences, not yet openly disscussed to the before mentioned holders.
2
Putting aside the reporter's editorializing as to the nature of the Hatch proposal ("It was also, in effect, a bailout"), it seems a logical approach. To retroactively apply bankruptcy laws to debts marketed and sold on the premise that those laws would not apply upends the municipal bond market. If Congress wants that application to be the new public policy, fine. But understand that existing and future municipal bond markets will be very different - and more expensive for the issuers.
Hatch's proposal is logical because - rather than a "bailout", which may require nothing of substance from the recipient, it demands a restructuring of the PR government and its operations.
Its easy to focus on the institutional bondholders (the "killers", as Trump calls them) but many pension funds and savers of all classes are mixed up in this mess. Congress has to be careful how it handles this program because if the MUNI market is significantly changed, many savers will be forced into a risk pool (stock market) they recoil from altogether.
Hatch's proposal is logical because - rather than a "bailout", which may require nothing of substance from the recipient, it demands a restructuring of the PR government and its operations.
Its easy to focus on the institutional bondholders (the "killers", as Trump calls them) but many pension funds and savers of all classes are mixed up in this mess. Congress has to be careful how it handles this program because if the MUNI market is significantly changed, many savers will be forced into a risk pool (stock market) they recoil from altogether.
Cut PR loose. they are nothing but a drain on us anyway.
2
The tea-party lady has things backwards: the status-quo she is advocating is the tax-payer supported bailout, one for the big-money investors who made bad decisions. She is either ignorant of wuo,made the bad secisions or a narcisist who believes everybody else is ignorant.
3
She's got it backwards only if you believe the T-P actually believes its rhetoric about taxes. Her position is absolutely consistent with undermining the social contract between citizens and government in favor of corporate interests--the actual agenda of the T-P in my opinion. The T-Ps simplistic position reduces to government=bad, corporations=good. That's why she doesn't even have any evidence for her specific claim about "taxpayer funds at risk"--it doesn't matter to her so long as corporations are enriched and the relationship between the state and the governed is weakened.
The three main points that come out of the article:
Under the guise of opposing a "bail-out" of Puerto Rico, the hedge funds have forced the US taxpayer to bail out Puerto Rico.
Hedge fund managers have no problem "relocating" to an island where 40% of the residents live in poverty, as long as they can live in isolated enclaves in San Juan where they are protected from seeing the poverty, which frees them up to busily work on steps to ensure that the residents continue to live in poverty.
Money has corrupted politics.
Under the guise of opposing a "bail-out" of Puerto Rico, the hedge funds have forced the US taxpayer to bail out Puerto Rico.
Hedge fund managers have no problem "relocating" to an island where 40% of the residents live in poverty, as long as they can live in isolated enclaves in San Juan where they are protected from seeing the poverty, which frees them up to busily work on steps to ensure that the residents continue to live in poverty.
Money has corrupted politics.
11
Any public authority promising a 20% return is a Ponzi scheme and any sophisticated investor knows this. Hence, the bet is about who gets paid and who pays among the uber-rich investors, the local Puerto Rican public and the U.S. taxpayers. With enough campaign contributions and rentable legislators the scheming investors may have law on their side and be able to hoodwink taxpayers. Only an independent media stands in the way of quiet theft by exposing the crime. Thank you New York Times.
What to do? Savaging public services such as education, health care and payment of public retirees to payoff the ultra-rich schemers is unacceptable as is ripping off U.S. taxpayers. The answer is to tell the bond buyers they invested in Puerto Rico's future, not its looting. Convert the bonds to much longer term maturities with interest rates equal to U.S. treasuries and payable only if Puerto Rico hits certain benchmarks of public success, giving bondholders some incentive to be on the same side as the public good. The argument for capitalism is that it is suppose to channel individual effort and reward consistent with broader public gain. It is a job of government to insure incentives make this a reality. Any laws which promote public harms and theft are illegitimate.
What to do? Savaging public services such as education, health care and payment of public retirees to payoff the ultra-rich schemers is unacceptable as is ripping off U.S. taxpayers. The answer is to tell the bond buyers they invested in Puerto Rico's future, not its looting. Convert the bonds to much longer term maturities with interest rates equal to U.S. treasuries and payable only if Puerto Rico hits certain benchmarks of public success, giving bondholders some incentive to be on the same side as the public good. The argument for capitalism is that it is suppose to channel individual effort and reward consistent with broader public gain. It is a job of government to insure incentives make this a reality. Any laws which promote public harms and theft are illegitimate.
111
Hey, some of your "ultra-rich schemers" are mom and pop bondholders who lent some of their savings to get modest returns (at least better than the 0.25% they get from CD's). A fund is just a large grouping of relatively small investors. If they want wise financial discipline, they should stop electing governors who spend all the money and then whine that they can't spend more because they have to pay back John Q. Public who lent it to them.
2
And, if the corporate bond buyers refuse, then revoke their corporate charters. The entire concept of a corporation with limited individual liability rests on the same premise you reference when you say, "on the same side as the public good." If a corporation serves no public good then there is no justification for its existence in the first place.
Wally, that happens when you, through a bond fund in your 401K or IRA, invests in government debt and expects to get repaid? Your bond fund dumps the investment at 15 cents on the dollar. A hedge fund buys it, hoping to make a better return on a high risk investment. You and other investors already took a big loss, but you think the hedge fund should get screwed instead of the government of Puerto Rico that threw the money away? I agree the taxpayers should not be on the hook.
Our legal system provides for bankruptcy relief for state and local governments. Unfortunately, Territories do not enjoy access to that same fiscal solution. The problem is that financial decisions are generally made where the benefits are realized near-term time-iframe; but, the bills and potential problems often occur afterward, under new leadership. Basically, that is what happened in Puerto Rico.
The island has held many past votes regarding statehood, but it never did. Granted, the current Republican “Leadership” in Congress would probably fight hard against it, suggesting that it is coming when it is a basket case. Actually, the GOP probably fears admitting it since, based on past history, it votes for the Democrats.
Congress would need to grant Statehood, if it is requested, and the President would sign the Bill. There are many pros regarding this solution; but, its is the only clear-cut solution to an otherwise worsening g problem.
http://thetruthoncommonsense.com
The island has held many past votes regarding statehood, but it never did. Granted, the current Republican “Leadership” in Congress would probably fight hard against it, suggesting that it is coming when it is a basket case. Actually, the GOP probably fears admitting it since, based on past history, it votes for the Democrats.
Congress would need to grant Statehood, if it is requested, and the President would sign the Bill. There are many pros regarding this solution; but, its is the only clear-cut solution to an otherwise worsening g problem.
http://thetruthoncommonsense.com
That won't solve the problem. Under Federal bankruptcy codes, only local governmental units can go bankrupt. Not States.
2
Yes, you are right. At the same time, the situation in Puerto Rico is somewhat unique. As U. S. Citizens, many of the younger, more-educated Puerto Ricans have migrated to the Mainland--especially to Florida. That leaves a large portion of the population on the Island as being young or old, and a great number of them are sickly.
So, when you consider that businesses are dying and the GDP is tanking big time, and at the same time, the demand for safety net services is skyrocketing. Little-by-little, government revenue is declining while expenses are increasing; but, per capita annual income is drastically low and inflation is rising.
Puerto Rico is somewhat like a state of falling off a cliff, with no bottom in site. Basically, there is no potential solution in site.
So, when you consider that businesses are dying and the GDP is tanking big time, and at the same time, the demand for safety net services is skyrocketing. Little-by-little, government revenue is declining while expenses are increasing; but, per capita annual income is drastically low and inflation is rising.
Puerto Rico is somewhat like a state of falling off a cliff, with no bottom in site. Basically, there is no potential solution in site.
Cheekos
States are not eligible for bankruptcy.
States are not eligible for bankruptcy.
Hedge fund managers are characterized as "wealthy" and "vultures", but who are they actually representing? Large pension funds provide the bulk of their funds' capital. So millions of public and private sector employees and retirees place their faith that these managers will help protect their incomes. Is it really a surprise that they act to protect their investors' capital? It's their fiduciary obligation.
3
Puerto Ricans want the benefits of citizenship without the strictures of being federal taxpayers. The hedge funds and mom and pop investors should have thought about that.
1
Let them go bankrupt with the same rights as states. Why should we bail out large wealthy investors who are getting 20 % interest. The reason the interest and tax breaks are so high because the investors up front knew it was high risk. We should not be bailing out the super rich once again,
7
States have sovereign immunity and cannot go bankrupt. In addition, if states could declare bankruptcy you would destroy a lot of small investors who thought they were putting their money in “safe” investments.
Be careful what you wish for.
Be careful what you wish for.
1
We bailed out the predator banks. Help this island that is part of America.
Our congress put all kinds of goodies in their basket and then went home for Xmas. Puerto Rico is important we shouldn't embarrass ourselves and leave it to hedge fund managers to save.
Our congress put all kinds of goodies in their basket and then went home for Xmas. Puerto Rico is important we shouldn't embarrass ourselves and leave it to hedge fund managers to save.
1
Before Puerto Rico, I'd rather see my own state - Illinois - given a bailout.
Why is it that fiscal crisis debates always focus on the lenders and not the borrower's who led their populace on the road to ruin. If bankers should presumably go to jail for their practices during the financial crisis, shouldn't we have discussions about holding politicians to the same standards and accountability? As a former banker for many municipalities, I can tell you that many politicians had no problem borrowing and leveraging public monies as much as they could to garner favors and votes, while putting future state and local populations at risk for non-payment of debts. Of course, they had no risk since they would be out of office when the bills come due. We should severely penalize all parties involved in risky bond deals and financial engineering to dis-incentivize practices that put future generations on the hook for bad financial decisions. I bet many former politicians at the GDB in Puerto Rico are comfortably relaxing at their beach houses while reading the NYT interesting piece about Hedge Funds..
10
Let these vultures lose their money, it is crookedly earned and the Puerto Rico politicians are weeklings, well, as most politicians.
2
So, let's see. You borrow money from the Devil, and then you're surprised when there's the Devil to pay?
1
Let Puerto Rico fall apart. Who cares. I hope the USA does not bail out this country. The politicians knew exactly what they were doing. The hedge fund guys knew what they were getting into. Nobody was stupid.
1
The involvement of the Tea Party in Puerto Rico's fight to win debt relief shouldn't come as a surprise. There was always a strong racist element to its opposition to President Obama. The threat that Puerto Rico might be granted fair and reasonable debt protection, something provided to mainland American cities, is just the impetus to stir the Tea Party's nativist ire.
2
When PR defaults, And the 3G$ from Hatch goes up in smoke, we will see that he favored a special deal for financial backers over the kind of bankruptcy available in most of the country. It will then be interesting to see if he doubles down.
"Hedge funds commissioned their own economic study of the island’s finances, which concluded that further cuts to public spending, in particular to education and health care, would allow the island to keep up."
Kinda says it all doesn't it? Cut education and health care so the billionaire hedge fund operators can satisfy their insatiable avarice at the expense of the poor and indigent. So very Republican of them.
The devil with the Hedge fund billionaires, theirs was a greedy motivation expecting usurious returns from people with their back to the wall. There was and is nothing charitable about these carrion eaters unless you want to call their donations to lobbyists and Senator Rubio charity.
Kinda says it all doesn't it? Cut education and health care so the billionaire hedge fund operators can satisfy their insatiable avarice at the expense of the poor and indigent. So very Republican of them.
The devil with the Hedge fund billionaires, theirs was a greedy motivation expecting usurious returns from people with their back to the wall. There was and is nothing charitable about these carrion eaters unless you want to call their donations to lobbyists and Senator Rubio charity.
5
Since you care so much about healthcare and education, I guess you're willing to pay for Puerto rico's excess, right? Right??
1
Great article. A very interesting dynamic taking shape in Puerto Rico!
Unbelievable that a US Senator would think he could propose to bail out the investors at our collective expense and suffer no political backlash for doing so. Shame on Senator Hatch.
2
The promise made by Puerto Rican officials to repay these loans with 20% interest was a transparent lie made to secure funding otherwise unavailable. The hedge funds who believed these deceptions were greedy fools for doing so. Puerto Rico will now either default of declare bankruptcy, if allowed, and the bondholders will lose most, if not all, of their "investment". After this occurs, Puerto Rico will need even more money. Who among you will lend them your hard earned money?
4
Hedge Funds, late to the game, yet entering into contracts that preempt the long standing social contracts. Under no circumstance should a recently elected government be allowed to sell out the commitments of a prior government. I have no understanding of contract law, but this does not pass the smell test.
1
The Tea Party folks were Had, Had, Had. Allowing the same bankruptcy and restructuring options to PR and its local governments and authorities as available to the 50 States and their subsidiaries is not a bailout. It simply ends a legal loophole that was too good to be true.
By contrast, paying $3 Billion in US Taxpayer-backed borrowing (not like the Feds have extra tax revenues themselves, folks) to support PR government and social services, so PR can pay bondholders 100 cents on the dollar, is a bailout. Privatized profit, socialized risk. A rotten deal for Federal taxpayers.
By contrast, paying $3 Billion in US Taxpayer-backed borrowing (not like the Feds have extra tax revenues themselves, folks) to support PR government and social services, so PR can pay bondholders 100 cents on the dollar, is a bailout. Privatized profit, socialized risk. A rotten deal for Federal taxpayers.
5
Tea party folks work for the types that had them. These types support theTP because if the TP comes to power, it will dismantle regulation and oversight of industry and finance.
1
No state is allowed to declare bankruptcy, please check the facts before commenting.
The article should read how Puerto Rico ruined itself, so much
so that even Puerto Ricans don't want to live there any more.
If it gets a bailout, I'm not sure it's worth consideration of statehood.
Better to just let it have full independence, pay its own bill and
let it go.
so that even Puerto Ricans don't want to live there any more.
If it gets a bailout, I'm not sure it's worth consideration of statehood.
Better to just let it have full independence, pay its own bill and
let it go.
3
We should have given Puerto Rico independence long ago, no matter if they liked it or not. Why must we have this albatross around our neck?
6
So these hedge fund investors, many who, no doubt, sat on the boards of the big banks that lobbied for and received a huge bailout in '07-'08 are many of those lobbying rigorously against the PR bankruptcy protection initiative, deriding it as a bailout? Now that's some chutzpah, how do these individuals live with themselves?
Those hedge-funders who like to cite Singapore as an example fail to recognize that Singaporean government invested in her people. They didn't cut education and health care. On the contrary, they decided to build up the workforce by investing heavily in their people. Sadly it was something that the previous PR government neglected to do. Real estate can be washed away be storms but the human spirit proves much more resilient to adversity. This unfortunate chain of events should serve as a cautionary tale to other small countries, particularly island nations (one of which, I am a descendant of) that the best investment and the one that will yield the longest lasting benefit is your human capital. Governments ought to stop ingratiating themselves to investors who are unwilling or unable to see this.
Those hedge-funders who like to cite Singapore as an example fail to recognize that Singaporean government invested in her people. They didn't cut education and health care. On the contrary, they decided to build up the workforce by investing heavily in their people. Sadly it was something that the previous PR government neglected to do. Real estate can be washed away be storms but the human spirit proves much more resilient to adversity. This unfortunate chain of events should serve as a cautionary tale to other small countries, particularly island nations (one of which, I am a descendant of) that the best investment and the one that will yield the longest lasting benefit is your human capital. Governments ought to stop ingratiating themselves to investors who are unwilling or unable to see this.
5
The hedge funds had a sure thing.
They would get 20%, and most importantly, go to the head of the line.
Just another data point in the corruption of the Republican Party, that now a massive lobbying effort is in place to save their investment.
They would get 20%, and most importantly, go to the head of the line.
Just another data point in the corruption of the Republican Party, that now a massive lobbying effort is in place to save their investment.
4
Sorry Mr Cliche, (Marco Rubio), forgiving the debt will go a long way towards repairing the damage the corporate world that has exploited the people of Puerto Rico has done.
Mr. Cliche it is you and your corporate buddies that got Puerto Rico in trouble.
Mr. Cliche it is you and your corporate buddies that got Puerto Rico in trouble.
4
Trade Puerto Rico and $200bb to the EU for Greece. Deal of the millennium.
1
The broader implications of this story and the unstated picture it paints of our current political system, especially how moneyed interests exploit an ignorant electorate, make it a must read. The interplay of money and politics described in this article is but one example of a dynamic that pervades our body politic today and a dynamic that is a harbinger of our downfall. We can no longer claim to be a model for freedom and liberty to the rest of the world so long as this dynamic is accepted in our politics.
5
What jurisdiction is not under full attack by the financial industry these days on the planet earth? There is no safe place? Its tyranny knows no bounds. Money is not meant to be the master, the tyrant of civilization. Money is meant to facilitate civilization. Money and financial markets have become weapons of mass destruction in the hands of an obnoxiously overgrown, gignormous beast of a financial industry. The financial industry has lost its place in the natural order of a rational civilization. It artificial stance as the fountainhead and master of civilization is the foundation of our irrational civilization that is in complete chaos. The financial armies need to be dismantled and we need to recognize we are destroying ourselves, our planet, our very souls by worshiping the false lord of money.
4
I love thsi story because of the David and Goliath narrative! The key to the puzzle is understanding who and what David represents and who and what Goliath represents. If you have read M. Gladwell's book by the same name you would understand by the time David feld Goliath he was really a nibble, well trained hunter who knew how to handle his weapon with precision and skill. You decide who is who and let me know! Gladwell concluded Goliath never really had a chance as the larger, stronger, yet lumbering, stupid giant! I guess the ending may not have been written for this battle, or has it?
1
To call these Hedge funds vultures is to disparage real vultures who offer ecological services in nature. Many if not most hedge funds in contrast offer little of value to our financial system and in the case of PR have exacerbated a financial mess. Bankruptcy should available to PR.
41
once again, a good day for the capitalists.
2
When I first went to purchase a house I was told, by all the banks I approached, that I was able to finance numbers well, and I mean WELL above what were obviously (even to me, an economic layman) logical or even possible given my income. Thankfully I did not take advantage and was not too hurt by the crash.
Who told the Puerto Rican Gov't that they would be able to make these numbers? The lenders, of course, who danced visions of an economic rebound in the, evidently, naive minds of the gov't of Puerto Rico. Who is to blame for this situation? Both the gov't who ate it up and the funds who sold it. Who will pay? The teachers, truck drivers, grocers and, in general, the folks in Puerto Rico who don't own hotels and are just trying to get by and help their kids.
The powerful screw around and the people get screwed.
What's new about this?
Who told the Puerto Rican Gov't that they would be able to make these numbers? The lenders, of course, who danced visions of an economic rebound in the, evidently, naive minds of the gov't of Puerto Rico. Who is to blame for this situation? Both the gov't who ate it up and the funds who sold it. Who will pay? The teachers, truck drivers, grocers and, in general, the folks in Puerto Rico who don't own hotels and are just trying to get by and help their kids.
The powerful screw around and the people get screwed.
What's new about this?
23
Hw does the U.S. Government get away with protecting the interest of "capitol" over the interest of humans, okay citizens. When will our leaders consider the interest of citizens?
I am voting for Bernie because he is viable; he is the sanest choice. I cannot vote for anyone who participates in the madness; I cannot vote for anyone who is entrenched in the political landscape.
The Hedge Funds and powerful interests are bringing Puerto Rico (and all of us) to our knees. We continue to generate wealth and power for them and they continue to insist we owe more. Not only that but powerful interests like Hedge Funds are re -writing laws that pretty much impose servitude for generations. receive more government welfare (oops I mean subsidy, tax rebates...), and will increase the coffers of the 1%.
I am voting for Bernie because he is viable; he is the sanest choice.
I am voting for Bernie because he is viable; he is the sanest choice. I cannot vote for anyone who participates in the madness; I cannot vote for anyone who is entrenched in the political landscape.
The Hedge Funds and powerful interests are bringing Puerto Rico (and all of us) to our knees. We continue to generate wealth and power for them and they continue to insist we owe more. Not only that but powerful interests like Hedge Funds are re -writing laws that pretty much impose servitude for generations. receive more government welfare (oops I mean subsidy, tax rebates...), and will increase the coffers of the 1%.
I am voting for Bernie because he is viable; he is the sanest choice.
17
In your first sentence, do you mean "capital" rather than "capitol"? A capitol is a big building where congressmen meet, for your reference.
I thought crazy Bernie told us the problem was too many brands of deodorant for sale
1
Why are you quibbling over spelling when the real issue is not what the hedge funds did but what PR did to itself for many years.
1
So, Puerto Ricans do not pay any federal income taxes, even though they receive many billions from the federal government. Also, as a territory, they spend far more than they raise in local taxes. Its economy is a mess, and cannot be sustained.
I think Puerto Rico should trade its property to the bondholders in exchange for debt relief, and all the Puerto Ricans could migrate to the mainland. Then the hedge fund people would take over the island, and they could try to turn it into something like Singapore.
I think Puerto Rico should trade its property to the bondholders in exchange for debt relief, and all the Puerto Ricans could migrate to the mainland. Then the hedge fund people would take over the island, and they could try to turn it into something like Singapore.
After what was done to the bondholders at GM, I'm surprised that anyone including hedge funds would buy municipal bonds like Puerto Rico. The short term answer may be to force bondholders to take the haircut but, at some point, no one will buy municipal debt.
1
Hah! And I guess you will be the first to invest here!!!! Shame,shame!
Marco Rubio again selling his soul to few coins of silver.
21
If PR simply voted to become a state, they would have bankruptcy protection along with all the other rights and responsibilities that come with statehood.
2
The law does not allow states to declare bankruptcy.
3
Sadly all that has to do with money is where the ultra rich play games on who makes the biggest numbers for which everyday people are the ones who suffer at their mistakes.
8
If you think th future is grim for Puerto Rico, imagine the prospects for the residents of its poorest possession, the island of Culebra. A brief visit to this magnificent island will make it hard to believe one is still in the United States of America. What can one do against the big money interests which are trying harder than ever to protect their predatory interests. This is not a matter of tourism, it is a matter of survival for this island and its natives. But, what can one do?
2
The key to economic success for Puerto Rico is to become the destination of choice for Syrian refugees --with the federal government paying to resettle and educate a couple hundred thousand in PR. This would be a real boost to the PR economy -- and there won't be anyone in Congress to protest because PR has no elected members of Congress.
3
They wouldn't be happy where there is no opportunity of jobs or anything...
This is a simple case of hedge funds making a bad bet. They gambled and lost. It happens everyday for millions who play the stock market - which is many millions with 401k plans. It should not be any different for those who gamble and buy politicians (Rubio) to protect their investment with taxpayer dollars.
17
Did you miss the part about Hillary receiving over $800,000?
2
The fault for this lies with the politicians in Puerto Rico who supported constitutional amendments to protect the debt owing to the hedge funds. These types of provisions allow more borrowing under fiscal circumstances when no more borrowing should occur. Similar provisions protecting pensions to state employees and exempting student loans from bankruptcy laws fall into the same category. Without these laws lenders would be forced to be more prudent and borrowers would be forced to be more fiscally responsible. It is a fine mess, but there are no good guys, no innocent victims, everyone involved is tainted.
4
Yes, everyone is tainted, but the financial industry endangers us all. Its job is to promote the allocation of our wealth to productive activities. Instead, it scams its way to hollow profits, and it is the major player in corrupting our governments.
Our greed driven markets are essential. How else can we determine the relative value of a diamond and a loaf of bread? But, without careful regulation, our markets will run amuck. The PR dilemma is clearly a dramatic example of market failure.
Unfortunately, we will not have careful regulation as long as our citizens are too lazy to understand the world about them and too lazy to be politically active and vigilant.
Our greed driven markets are essential. How else can we determine the relative value of a diamond and a loaf of bread? But, without careful regulation, our markets will run amuck. The PR dilemma is clearly a dramatic example of market failure.
Unfortunately, we will not have careful regulation as long as our citizens are too lazy to understand the world about them and too lazy to be politically active and vigilant.
2
What a very interesting concept that the hedge fund managers have dreamed up. Taking advantage of the fact that PR is not a state, they "lend" it the money they need to keep solvent. Then when it comes time to pay the piper government officials read the fine print and take it out on the backs of their citizens. Kind of like letting your teenagers pay your mortgage with your credit card.
Martin Shkreli would be so proud !
Martin Shkreli would be so proud !
1
After reading this article, there can be no question who controls
our government: the ultra-rich. Anyone who thinks their elected
representatives actually represent their interests is a chump.
our government: the ultra-rich. Anyone who thinks their elected
representatives actually represent their interests is a chump.
19
Not certain I feel bad for hedge funds who thought guaranteed 20% returns were perfectly reasonable.
5
You cannot change the rules in the middle of the game. Period. Bankruptcy will hurt seniors around the country, and those who bought the bonds around par. It will have unintended consequences that cannot be fully predicted including instability in financial markets. Puerto Rico has not produced audited financial statements for the past two financial years. Are they trying to hide something, or are they just incompetent? Why are there agencies where 98% of their budget goes to salaries, instead of to services. The current administration has added to the government payroll rather than trimming expenses. Garcia Padilla has hired expensive consultants who have added to the debt worries.
Here is my five point plan to address the problem:
1. Appoint a FEDERAL control board. This board must immediately stabilize the finances.
2. Float $3 billion to insure that all bonds and programs are covered. This does not have to be considered a bailout, as it can be called and is repayment for three years of underpayment of Medicare and Medicaid.
3. Audit the island's accounts. I doubt that anyone can predict what will be found. Further action will be dependent on findings.
4. Establish Puerto Rico as a proud gateway of commerce, perhaps from Europe to Central and South America.
5. Establishment of statehood. The status of Puerto Rico is completely unclear.
Puerto Rico is a territory of the United States. Like it or not, Washington DC is responsible.
Here is my five point plan to address the problem:
1. Appoint a FEDERAL control board. This board must immediately stabilize the finances.
2. Float $3 billion to insure that all bonds and programs are covered. This does not have to be considered a bailout, as it can be called and is repayment for three years of underpayment of Medicare and Medicaid.
3. Audit the island's accounts. I doubt that anyone can predict what will be found. Further action will be dependent on findings.
4. Establish Puerto Rico as a proud gateway of commerce, perhaps from Europe to Central and South America.
5. Establishment of statehood. The status of Puerto Rico is completely unclear.
Puerto Rico is a territory of the United States. Like it or not, Washington DC is responsible.
5
2. Float $3 billion from US taxpayers to bail out the plutocrats. US taxpayers are underpaid on Medi/medi and your solution is more money from US taxpayers. Are you kidding? The "super rich capitalists bailed out of their risky investment by US taxpayers"----where have I heard this before?
It should be a foregone conclusion that trying to shore up an economic system by borrowing at 20% interest rate is a certain failure. The funds should have realized the obvious and so should have the PR government. PR should default and be given the same protections as every other entity.
It should be a foregone conclusion that trying to shore up an economic system by borrowing at 20% interest rate is a certain failure. The funds should have realized the obvious and so should have the PR government. PR should default and be given the same protections as every other entity.
3
The NYT got it wrong. They did not borrow at 20%. The value of the bond has fallen, making it effectively close to that. Garbage in, garbage out.
2
This article spent a lot of its words arguing for the relative comfort or poverty of the island and its investors. Isn't the law supposed to be the same no matter how much you have in your bank account ? Is the view of liberals so jilted and based on a perception of back-room deals, that they immediately jump to redistribution to favor their preferred groups ?
The extent to which someone can discharge their debts through bankruptcy varies. It is already the case that mortgages and some student debt cannot be discharged - and as a result, these loans attract more interest and carry lower interest rates. Likewise, the recent bond sales by Puerto Rico and its affiliates clearly sold under the premise that the obligors could not discharge their debt through bankruptcy. "Not only were the bonds guaranteed by the Puerto Rican Constitution, but under a wrinkle of federal law, the island’s public corporations and municipalities — unlike those of the 50 states — do not have bankruptcy as a recourse."
As a result, even in their distress, the island paid far lower interest rates than similar obligations in Detroit or Greece (who could declare bankruptcy). Now they are intending to renege on that provision only months after issuing some of these bonds. More than insolvency (which perhaps is not the island's fault entirely), isnt' this outright fraud ? When someone steals your money, are they less guilty because the victim was rich than if he is poor ?
The extent to which someone can discharge their debts through bankruptcy varies. It is already the case that mortgages and some student debt cannot be discharged - and as a result, these loans attract more interest and carry lower interest rates. Likewise, the recent bond sales by Puerto Rico and its affiliates clearly sold under the premise that the obligors could not discharge their debt through bankruptcy. "Not only were the bonds guaranteed by the Puerto Rican Constitution, but under a wrinkle of federal law, the island’s public corporations and municipalities — unlike those of the 50 states — do not have bankruptcy as a recourse."
As a result, even in their distress, the island paid far lower interest rates than similar obligations in Detroit or Greece (who could declare bankruptcy). Now they are intending to renege on that provision only months after issuing some of these bonds. More than insolvency (which perhaps is not the island's fault entirely), isnt' this outright fraud ? When someone steals your money, are they less guilty because the victim was rich than if he is poor ?
5
By the logic of the leftists here, if a robber robbed a hedge fund manager, I mean mugged him on the street, said robber would not be guilty of any offense and in fact would be due public thanks. The manager after all can afford to lose the money, he should man up and not press charges, and being robbed shows what a wuss he is. So sayeth the hipsters.
If, by carrying a gun, the manager prevented the robbery, then the manager should of course go to prison, and every picture printed in the New York times of him will show him either with his mouth wide open or with a police officer in focus to show that he is in custody. The robber would never be shown that way, especially if black, and we would hear all about his mother's health issues that justify him being let back out on the street. The manager's relatives would go unmentioned, except if he is related to the Koch brothers.
If, by carrying a gun, the manager prevented the robbery, then the manager should of course go to prison, and every picture printed in the New York times of him will show him either with his mouth wide open or with a police officer in focus to show that he is in custody. The robber would never be shown that way, especially if black, and we would hear all about his mother's health issues that justify him being let back out on the street. The manager's relatives would go unmentioned, except if he is related to the Koch brothers.
1
The hedge funds knew it was a risky bet, hence the high interest returns. If we are truly a capitalistic society, they gambled and lost. They are going to have to take a haircut. Do I feel sorry for them? No!
The only real solution is a U.S. appointed Financial Control Board to come down here and take over the finances. They need to reorganize most of the government agencies, they need to appoint qualified people to run them, they need to tap into the vast underground cash economy, they need to look at the property tax scenario and reassess property based on some coherent plan...and that is just for starters. We have a corrupt, incompetent and dysfunctional government. Nothing will change until that is fixed.
The only real solution is a U.S. appointed Financial Control Board to come down here and take over the finances. They need to reorganize most of the government agencies, they need to appoint qualified people to run them, they need to tap into the vast underground cash economy, they need to look at the property tax scenario and reassess property based on some coherent plan...and that is just for starters. We have a corrupt, incompetent and dysfunctional government. Nothing will change until that is fixed.
7
Puerto Rico is the major remaining relic of the US' flirtation with empire building under President McKinley, urged on by Teddy Roosevelt and others in the US Navy. Since then, the US can't seem to figure out what to do with it. It's beyond time to fish or cut bait: independence or full statehood.
3
Theodore Roosevelt was never in the United States Navy. He was, however, Assistant Secretary of the Department of the Navy at the start of the Spanish American War.
1
Desperate people have nowhere to go but to loan sharks and then get their legs broken. This is the image our capitalist democracy presents to the world we're trying to lead. And this paper keeps chanting trump, trump, trump, like Hillary did last night, while dismissing Sanders for persistently addressing the heart of our malaise.
3
You can say all you want about rich people, hedge funds, etc., but the bottom line is that the people who really stand to lose (on the investor side) are people with these bonds in their mutual funds. That means everyday schlubs like me who were told these were safe investments. So, my dearest NYT, when you turn this into a "let's sock it to the rich people" spiel as you have here, you're missing a huge part of the story. What it really is is intellectual dishonesty. (And yes, I know there is one line in the story about the little guy losing out).
Add to that the fact that Puerto Rico's own constitution says this stuff will be paid back. At what point do you hold people to their promises?
I think the real story here (besides another Republican sending something spiraling into fiscal ruin) is the fact that Puerto Rico essentially made a promise that they are now trying to unmake, and royally - and I mean ROYALLY - screwing a whole lot of small investors in the process.
You're going to have a whole lot of small investors holding these bonds read your story this morning with a very different take than yours. A VERY different take.
Add to that the fact that Puerto Rico's own constitution says this stuff will be paid back. At what point do you hold people to their promises?
I think the real story here (besides another Republican sending something spiraling into fiscal ruin) is the fact that Puerto Rico essentially made a promise that they are now trying to unmake, and royally - and I mean ROYALLY - screwing a whole lot of small investors in the process.
You're going to have a whole lot of small investors holding these bonds read your story this morning with a very different take than yours. A VERY different take.
4
Maybe you won't be so quick to believe what your brokers call "safe"?
I am amazed at the article and the comments. If I recall that many articles and editorials, as well as the vast majority on comments - castigated the European Union for not giving Greece a free pass and write off its debts. But when it is nearer to home the shoe seems to be on the other foot. As it is a U.S. territory/colony the U.S. has a responsibility to try and sort out this mess
1
Once again ordinary hard pressed Americans are left to bail out the hedge funds who gambled recklessly.
It is no surprise then when ordinary Americans experience this looting by the super wealthy elite and the way in which politicians like Marco Rubio can be bought by them that they gravitate towards Donald Trump.
The system is rotten to the core and ordinary Americans are sick and tired of bailing out the super wealthy elites and having politicians like Rubio serve their interests.
It is no surprise then when ordinary Americans experience this looting by the super wealthy elite and the way in which politicians like Marco Rubio can be bought by them that they gravitate towards Donald Trump.
The system is rotten to the core and ordinary Americans are sick and tired of bailing out the super wealthy elites and having politicians like Rubio serve their interests.
3
Who will pay? The Federal taxpayers, of course. If it is government debt, who else can it be. Don't be conned by the idea that hedge fund people will pay, seeing that they purchased most of the debt at a big discount, even at 50% they are winners. What does all this mean? Puerto Rician's will get more free stuff. Remember, Mx. Hillary has promised to come to the rescue, and is she not a person of her word?.
This is a simple, recurring, age-old problem. A borrower with poor credit borrows money. To secure the loan with such poor credit the borrower (Puerto Rico) had to commit to repayment with very high interest rates. Both parties (Puerto Rico and the hedge funds) knew the very high risk of default. Even so, Puerto Rico signed an agreement placing repayment to the bondholders in front of any other creditor, including basic governmental services, in order to obtain the loan. Without that guarantee, the loan would not have been made. Knowing this, who then negotiated in bad faith. Surely, Puerto Rico's officials knew they would have to choose between providing basic governmental services to their citizens or paying the bondholders. Puerto Rico's pending default illustrates yet again, the hazards of loaning to a high risk government. Experience in the recent past with GM clearly illustrates the path that will be taken: the government will confiscate the bondholders money, who will not be repaid, in order to satisfy what they claim is the "higher good": protecting the welfare of ordinary citizens. This action, unfortunately, will also seriously harm those Puerto Ricans who, alongside these hedge funds, invested their life savings in these bonds to obtain the "promised" 20% interest. The age old adage applies: "Neither a borrower nor a lender be". Once again, promises made on paper, signed before attorneys and notaries, seem worthless.
29
Toni,
Polonius' speech was intended to show he was a fool.
Polonius' speech was intended to show he was a fool.
1
Toni--The GM bondholders got or will get their money. The unions have made sacrifices to allow this to happen. Check your facts before writing!
In fact, the Obama administration changed the law to put their favored group, the UAW, in front of the legally superior claim, so YOU check your facts.
Default is a stop gap. The only solution is to stop the intolerable levels of corruption in the PR government and bring it into the union as a US state, subject to the laws and discipline (?) of a state. Allowing PR to stand outside the normal checks and balances is a simple roadmap for corruption, nepotism, and abuse of both the citizens and US financial institutions. Hedge funds are not the beneficiaries of this borrowing - PR politicians and their on-island business partners and families took the money. PR 51st state.
That's like saying that the way to cure a 14 year old of irresponsibility is to make him an adult. You just want two Democratic senators and seven members of the House of Representatives.
1
My first thought is that we need to have some big hedge funds and banks fail to provide market discipline to their rapacious practices. But then I realized these guys are so egocentric and rapacious, that would not matter to the remaining ones. We need sound regulation instead. Which is unlikely given the way our political system is for sale and the skill of bankers and hedge fund managers in amassing portfolios of politicians.
87
I definitely agree the hedge funds are playing hardball, but ultimately is the is the Puerto Rico government that put itself in this situation with decades of overspending and poor governance.
Major US banks in the early 2000s made substantial Puerto Rican bond purchases and then sold the bonds (and the risk! ) to investors such as hedge funds and garnered a windfall through underwriting corresponding in principle to their contemporaneous sales of mortgage backed securities. Investors around the world trusted the sales pitches of the banks who , essentially , cheated them. The banks had the capital to lavish on high risk debt , but also the chicanery to pass that risk to unsuspecting investors - the banks deceit and unprecedented profiteering has undermined the financial system - the banks would not have purchased the bonds, and Puerto Rico would not have incurred the now "unpayable" debts, if they knew they would have to accept the risk. The banks wanted high rate investment returns without risk , and realized it , but at the price of the solvency of the banking system itself.
Make no mistake,
Puerto Rico is no more than a brutal case of US colonialism.
Something that, according to US self assertion, should be a thing of the past.
But there you go again.
This is the contradiction of the political marketing of the USA, a land of the free and opportunities, and political reality in which the US has become an empire of oppression and economic blackmail.
The problems of Puerto Rica are deeply rooted in the laws governing the economy and the political manoeuvrability of the local government which is more a blinded and bound caretaker government of a colony than a real state.
Puerto Rico could save itself only if it either gets full sovereignty or becomes a full member of the Union instead of being a colony.
Puerto Rico is no more than a brutal case of US colonialism.
Something that, according to US self assertion, should be a thing of the past.
But there you go again.
This is the contradiction of the political marketing of the USA, a land of the free and opportunities, and political reality in which the US has become an empire of oppression and economic blackmail.
The problems of Puerto Rica are deeply rooted in the laws governing the economy and the political manoeuvrability of the local government which is more a blinded and bound caretaker government of a colony than a real state.
Puerto Rico could save itself only if it either gets full sovereignty or becomes a full member of the Union instead of being a colony.
It is implied in the article that the investors ran a risk in order to earn a 20 percent return on their Investment. Since they control the important politicians, that is not actually the case. The investors knew from the outset that they could use their political muscle to guarantee payment, thereby making the investment risk-free.
3
The word "Socialism" is very ambiguous and raises fear of governments controlling all citizens moves (reading through these posts). What is wrong with "Socialist" Denmark where 70% of businesses have less than 50 employees (seems to always be at the top of the Happiest Citizens charts). What is wrong with "Socialist" Sweden or "Socialist" Finland. Point is that equality in these countries is considered one of the most important values in society. When very few families are running a country, and making sure that the hedge funds get bailed out at the expense of the majority, the word Oligarchy should raise fear and not the word Socialism.
1
In August the NYT was bemoaning what a catastrophe the bond crisis was for PR residents: "More than 20 percent of the government debt is owned locally. And as values have plunged, some of the most intense pain is being felt by the tens of thousands of Puerto Ricans who bet much of their savings on the bonds." (http://www.nytimes.com/2015/08/09/business/dealbook/pain-of-puerto-ricos... Now the same newspaper is suddenly claiming that Puerto Ricans in fact hold little of the territory's bonds: "exactly who the group was speaking for was unclear. Puerto Ricans own less than a fifth of the island’s debt, according to government officials." Did the amount of debt held by locals drop so much in only four months? Of course not. The difference is that this article has a clear agenda: to portray mainland hedge funds (with all of their Republican Party ties, of course) as the villains. Come on, NYT. You can't have it both ways.
3
Possibly the times is being literally accurate here, as the amount could have shifted from 20.00001 to 19.99999 in the course of months. But your example shows how bright reporters can use the fact that they know how to imply things that are not true and the fact that the millennial audience does not grasp such nuances, to make their audience believe this false picture. Note, for example, how many people are commenting in the belief that the funds received a 20 percent return on investment when that is nowhere stated in the article. Read up on "tax equivalent yields" and also note that if you don't get your principal back, that kinda lowers your return into the negative digits.
2
The concept to lure investment and commerce based on no taxes, aka supply-side economics, or trickle-down, once again proves a poor business model. When will we learn?
Greed has grown long teeth! Its tastes must be satisfied, despite the opaque denials of Sen. Rubio, a jelly fish when it comes to funds and donors. His record shows more ambition than principal or principle.
A key organizational element in the mission to yet again tap taxpayers through Congress for funds to repay private risk is astroturfing, a technique not commonly known but developing influence in heavyweight financial cases and other causes. Argentina got hit by an effort that even shifted our foreign policy! These media fronts have been set up using parallel mailing lists for organizations, then being offered funding for employees, events, and meetings. Taking a page from Americans For Prosperity and their state chapters, lobbyists are deepening popularist ties as a new stone in their arsenal of influence and threats.
A key organizational element in the mission to yet again tap taxpayers through Congress for funds to repay private risk is astroturfing, a technique not commonly known but developing influence in heavyweight financial cases and other causes. Argentina got hit by an effort that even shifted our foreign policy! These media fronts have been set up using parallel mailing lists for organizations, then being offered funding for employees, events, and meetings. Taking a page from Americans For Prosperity and their state chapters, lobbyists are deepening popularist ties as a new stone in their arsenal of influence and threats.
38
How is this greed.
If you gave someone money on the condition you would get paid back and they didn't pay you back would you do something to make them pay the money back.
If you gave someone money on the condition you would get paid back and they didn't pay you back would you do something to make them pay the money back.
John, thanks!
If the borrower is not qualified, and by every matrix, Puerto Rico was not qualified for even high risk, high interest loans, competent loan and safety officers should have refused the loans. If accepted, the lenders must accept the risk!
Greed occurs when the lender turns to a third party within the political economy. In this case, using legislation to connect Congress as a third party (although Congress had no original interest!) in order to bail out the bad loans.
Commonly, when governments reset deficits (Iceland, Greece, Spain, Brazil, even New York City), lenders are compelled under terms to wait until new bonds are issued in exchange as a part of the refinancing; an accepted legal practice under New York law which governs most of the world's financial transactions and lending.
I can't go to Congress to have debts paid owed to me! Why should hedge funds?
If the borrower is not qualified, and by every matrix, Puerto Rico was not qualified for even high risk, high interest loans, competent loan and safety officers should have refused the loans. If accepted, the lenders must accept the risk!
Greed occurs when the lender turns to a third party within the political economy. In this case, using legislation to connect Congress as a third party (although Congress had no original interest!) in order to bail out the bad loans.
Commonly, when governments reset deficits (Iceland, Greece, Spain, Brazil, even New York City), lenders are compelled under terms to wait until new bonds are issued in exchange as a part of the refinancing; an accepted legal practice under New York law which governs most of the world's financial transactions and lending.
I can't go to Congress to have debts paid owed to me! Why should hedge funds?
1
Economically, and strategically, the best bet is to default. That will force the rich hedge fund managers back to the table to cut a deal. Maybe a 50% haircut would be appropriate.
43
Probably not. Puerto Rico is not a sovereign, and a federal judge could easily require compliance with the deals or officials go to jail, just like Kim Davis, easy peasy.
Well the Porto Rico bankruptcy protection same as for Argentina is available in the International law of Pari-Passu financial definition of Pari-Passu
financial-dictionary.thefreedictionary.com/Pari-passu
Pari passu Refers to the equal ranking of securities. Pari Passu Describing securities or debts with equal claim on some right. A new issue of a security may be ... a thing the SCOTUS has been debating several years now without finding any way to proceed.
financial-dictionary.thefreedictionary.com/Pari-passu
Pari passu Refers to the equal ranking of securities. Pari Passu Describing securities or debts with equal claim on some right. A new issue of a security may be ... a thing the SCOTUS has been debating several years now without finding any way to proceed.
3
They should have become a state. Then, all of this wouldn't have happened. If my memory is right, they had a chance to move toward statehood but didn't to take advantage of aide etc. they they got precisely because they weren't a state. Wrong move in the long run.
4
Not. Puerto Rico culture weighs heavy on ultimate change. Crime, a general poor work ethic must be brought to a higher standard before you make state comparisons.
1
the congress of USA never offered it
1
Yes, become not just another state but, another welfare state, great idea. Send your money not mine. Look at Detroit, still think it would be a good idea? Many, I would believe, see an opportunity to gain an abundance of dem voters. Much like the insanity of admitting hundreds of thousands from the Mid East.
This line of thinking is why Trump is where he is today.
This line of thinking is why Trump is where he is today.
The uninformed comments are unbelievable and informed by hatred.
1. Puerto Ricans do pay high local taxes. Its not a state but a colony. Hence, the island should not pay federal taxes.
2. Puerto Rico boomed economically in the 50s and 60s. But Cuban immigrants were welcomed in the 60s, they made a lot of money and did not reinvest in the island. They betrayed Puerto Rican hospitality. And they were not the only immigrants who exploited Puerto Rico.
3. Puerto Ricans do learn English starting in first grade, by law. For students, it just another subject and it is not considered a foreign language. But how does anyone expect Puerto Ricans to be fluent when its not a language used in daily speech. Puerto Ricans do not hate Americans but they are still proud of their Spanish heritage as the second oldest European settlement in the Americas. How do you expect them to deny this fact?
And now the elite wants to exploit what is left of it. How sad that this island that was a paradise has been destroyed. The same will happen to the US mainland and Europe.
1. Puerto Ricans do pay high local taxes. Its not a state but a colony. Hence, the island should not pay federal taxes.
2. Puerto Rico boomed economically in the 50s and 60s. But Cuban immigrants were welcomed in the 60s, they made a lot of money and did not reinvest in the island. They betrayed Puerto Rican hospitality. And they were not the only immigrants who exploited Puerto Rico.
3. Puerto Ricans do learn English starting in first grade, by law. For students, it just another subject and it is not considered a foreign language. But how does anyone expect Puerto Ricans to be fluent when its not a language used in daily speech. Puerto Ricans do not hate Americans but they are still proud of their Spanish heritage as the second oldest European settlement in the Americas. How do you expect them to deny this fact?
And now the elite wants to exploit what is left of it. How sad that this island that was a paradise has been destroyed. The same will happen to the US mainland and Europe.
28
'...Puerto Ricans do pay high local taxes. Its not a state but a colony. Hence, the island should not pay federal taxes...'
Yet they collect federal benefits, such as Medicaid and Medicare, food stamps, and welfare.
One third of the residents use food stamps, down from 50%, so it is fair to ask what is in it for us.
The US should, pay off their debt by purchasing the small islands it wants for military purposes and then cut Puerto Rico lose.
They have always been a net drain on the US taxpayers and that will never change until they have to sink or swim on their own.
Yet they collect federal benefits, such as Medicaid and Medicare, food stamps, and welfare.
One third of the residents use food stamps, down from 50%, so it is fair to ask what is in it for us.
The US should, pay off their debt by purchasing the small islands it wants for military purposes and then cut Puerto Rico lose.
They have always been a net drain on the US taxpayers and that will never change until they have to sink or swim on their own.
1
Thank you FSMLives for reading my comment. Puerto Ricans do pay social security and medicare taxes. However, some states in the US get more money from the federal government than they contribute. And if Puerto Rico became a state and paid federal taxes, it would get more money back like those states. Also, Puerto Ricans got drafted in the military, and now volunteer, and fought and died for this country. Yet you never hear about that contribution, besides the many cultural and scientific hard work not credited. Moreover, it is amazing what Puerto Ricans have survived on for a quality of life higher than the rest of Latin American, comparable to Mississippi but, unlike that state, on low salaries and a higher cost on living. Puerto Ricans must pay double and triple for food, cars, etc. than those living on the mainland. So what is the hatred about? Jealousy?
Complicated ordeal with all involved being intensionly misleading, including the authors of this article. PR bonds do not pay a 20% interest rate. A 20% return includes the tax benefit when compared to buying a taxable investment. It also assumes that the bond holders are in the highest tax bracket. Far too many assumptions not to be fully explained in the article. Unfortunately, the authors have given the wall street scoundrels and their protectors (Hatch/Rubio) ammo to dismiss them.
4
the article included the tax benefit in the 20%.
1
"Nevertheless, some of the biggest hedge funds kept buying, drawn by the promise of what was a 20 percent return, based on the interest rate coupled with the tax exemption"
Two questions --
Where did the borrowed money go?
Is this a case of the wealthy buying the Government?
Where did the borrowed money go?
Is this a case of the wealthy buying the Government?
2
40 millions USA citizens live in poverty and they speak English, so knowing English or not knowing it is not the solutiion nor the problem. It might help, but not necessarily. As long as the USA have a colony dressed up with the euphemism "territory" that is under the control of burecrauts in DC the vultures in PR and the USA will drain its limited resources and then blame fhe Puerto Ricans.
13
you are correct SIR
1
One has to take the long view on Puerto Rico. Essentially, it is in its state, because of neglect and leadership intransigence by the United States, for over a 100 years. Specifically, Puerto Rico's ambiguity as an American Territory is at the root of her problems. While it could have been resolved unilaterally by the US decades ago, as of 2012 the majority of Puerto Ricans have spoken in favor of statehood. However, the US has dragged its feet, first by killing HR 2499 in 2010, and then failing to act on the 2012 plebiscite by Puerto Ricans.
With that in mind, it is clear that PR's problems have been exacerbated by the US and this mess is an American one not Puerto Rican. Therefore the US needs fix the problem once and for all.
Start with the bond debt, these were necessitated to plug gaps in PR's budget. The gaps could also have been plugged by the US, who would have supervised the debt more effectively. Instead, the US did nothing, forcing PR to Wall Street under their very noses. A kinder version would have Wall Street Hedge Funds doing the job of the US, believing in PR's future, funding it, and learning the hard way that no good deed goes unpunished.
In either case, the US is directly, legally, morally and ethically responsible for this mess, and needs to step in forcefully. First, by making bond holders whole again, and next, by hastening PR's rebirth as the US's 51st American state. ¡Próspero año nuevo!
With that in mind, it is clear that PR's problems have been exacerbated by the US and this mess is an American one not Puerto Rican. Therefore the US needs fix the problem once and for all.
Start with the bond debt, these were necessitated to plug gaps in PR's budget. The gaps could also have been plugged by the US, who would have supervised the debt more effectively. Instead, the US did nothing, forcing PR to Wall Street under their very noses. A kinder version would have Wall Street Hedge Funds doing the job of the US, believing in PR's future, funding it, and learning the hard way that no good deed goes unpunished.
In either case, the US is directly, legally, morally and ethically responsible for this mess, and needs to step in forcefully. First, by making bond holders whole again, and next, by hastening PR's rebirth as the US's 51st American state. ¡Próspero año nuevo!
8
So, as usual someone is the victim and the US taxpayer has to fork over billions of dollars to make them feel better about themselves .
1
No, US citizens, both in Puerto Rico and in Wall Street, are victims of decades-long neglect by the US government supported by US taxpayers. US taxpayers need to pay up, not to feel better about themselves, but as compensation and correction for past neglect by the US government, which they have tacitly supported (but if it makes you feel good, that's perfectly fine too).
1
Why would the mainland citizens want Puerto Rico as a state?
The government should purchase the small islands it wants for military purposes and pay off their debt, then cut them loose.
There is no benefit to the taxpayers in having yet another state where much of the population is on the dole.
The government should purchase the small islands it wants for military purposes and pay off their debt, then cut them loose.
There is no benefit to the taxpayers in having yet another state where much of the population is on the dole.
Puerto Rican bonds' discount to face value was a tip off that the debt markets priced Puerto Rican securities correctly: as essentially worthless. These hedge fund/private equity investors didn't heed that warning. They only saw upside. They didn't see those low prices for what they were: red flags.
Now that that warning is proved correct they want a government bailout, just like in 2008.
No.
The answer from our wonderful Congress should be "no more bailouts". They placed their bets, shouldered that risk fully reflected by the low bond prices, ignored the odds against them -- and came up short. Their horse didn't come in. Their play didn't pan out.
They lost.
So pay up and shut up.
Now that that warning is proved correct they want a government bailout, just like in 2008.
No.
The answer from our wonderful Congress should be "no more bailouts". They placed their bets, shouldered that risk fully reflected by the low bond prices, ignored the odds against them -- and came up short. Their horse didn't come in. Their play didn't pan out.
They lost.
So pay up and shut up.
60
when you are a colony you don't have a choise we paid our taxes and didn't have representation, so the congress is respnsible.
You never paid a penny of federal income taxes if you are a PR resident so don't try and confuse the issue with "taxes."
Does this remind anyone of Greece? The PR government was too cowed and/or corrupt to collect taxes. So the government didn't have enough revenue. So PR bonds were an investment too good to be true. Then Hedge Funds bought in because of tax benefits.
Starve the Beast then bail it out at tax payer expense just barely enough to make debt payments by also cutting services, pensions and education and no more government support for the little people in the form of jobs.
Give Puerto Rico bankrutcy protection as the bill tried to do. Force tax collection as a condition and let the hedge funds do some starving because the loans they made were a bad investment in misery for Puerto Ricans who are American citizens.
Unfortunately the political campaign investments legalized by the Supreme Court were a winning investment for Big Money. Again.
Starve the Beast then bail it out at tax payer expense just barely enough to make debt payments by also cutting services, pensions and education and no more government support for the little people in the form of jobs.
Give Puerto Rico bankrutcy protection as the bill tried to do. Force tax collection as a condition and let the hedge funds do some starving because the loans they made were a bad investment in misery for Puerto Ricans who are American citizens.
Unfortunately the political campaign investments legalized by the Supreme Court were a winning investment for Big Money. Again.
8
Another example of rogue Capitalism ''best business practices''.
6
Seems to me that the hedge funds are going to end up with a lot of real estate in the Caribbean that is practically worthless, because there will be no public services. What happens when Puerto Riccan refugees start landing in Florida? They are American citizens, so we can't turn them away. Imagine, American boat people!
This is a situation which has been in the making for decades, but which no one has been paying attention to until now. Corruption may be rampant in PR, but investors have ignored that. All that they have seen is the potential to make a killing. They don't care if they turn Puerto Rico into another Haiti.
This is a situation which has been in the making for decades, but which no one has been paying attention to until now. Corruption may be rampant in PR, but investors have ignored that. All that they have seen is the potential to make a killing. They don't care if they turn Puerto Rico into another Haiti.
23
When the default in Puerto Rico hits, will the hedge funds visit us here in Haiti. Banks here lend to the private sector at 16% and some of the private sector is doing quite well. Of course, Haitians are not Americans and don't have the option of moving to New York, and local Haitian firms are also subject to mismanagement and occasional bankuptcies.
1
Start landing in Florida? They already are. Anyone who can leave pretty much already has. The people see the hand-writing on the wall. There is no future for average working people in Puerto Rico. They can freely emigrate to the US and the flow started long ago.
2
Once you accept the obvious fact that while the United States is still formally a democracy it is for all intents and purposes an oligarchy in which the super rich can buy as many politicians as they need, essentially own the 5-man Republican majority on the Supreme Court and are taking over more and more media outlets to con ordinary people into opposing unions, shredding public education, hating government and calling for endless war, everything makes sense.
25
It is outrageous that US taxpayers could be on the hook for a bailout of Puerto Rico. Puerto Rico, governed almost exclusively by liberals, has been overspending and overgrowing for decades - and has been warned constantly to get its fiscal house in order. I don't want a dime of Federal money spent bailing them out. I am sick and tired of democrat and liberal controlled cities, as well as Puerto Rico, spending themselves into near bankruptcy and then expecting the rest of us to pay for their fiscal irresponsibility. Let them face severe austerity for a decade or so and perhaps other cities will get the message.
5
Sovereign Latin American nations have a long and unfortunate history of blaming troubles that are largely of their own making on such outside influences as the International Monetary Fund, the World Bank, and, more recently, "global finance." It would be a great pity if an American territory like Puerto Rico, many of whose people are rather wonderful, were to become yet another upholder of that deplorable tradition.
5
There are certain facts that are incontrovertible and there is no reason for Puerto Rico, despite the Times' sentiment, to renege on its debt. Puerto Rico borrowed the money over many years by selling tax exempt bonds, which had a guarantee on payment of interest and principal as stated in the Puerto Rico Constitution. The bonds, as they are tax free, were generally sold at lower than market interest rates, thus subsidizing municipal borrowers. The tax free status of the bonds has been established by the U.S. Constitution and Supreme Court rulings. However, nothing, except a higher interest rate, requires that the borrower sell tax free bonds. They can just as easily sell taxable bonds. The fact that many of the bondholders are wealthy and do not live on the island is totally irrelevant. That fact does not absolve Puerto Rico from its obligations. In the 1970s, New York City faced bankruptcy. The state intervened, formed the Municipal Assistance Corporation, and an Emergency Financial Control Board, sequestered the tax money collected to pay off all bonds and NYC survived, prospered and today enjoys a high credit rating. There is no reason Puerto Rico cannot follow a similar course. Blaming lenders is ridiculous. Puerto Rico is not some naïve borrower. There bonds were floated by brokers after Puerto Rico obtained legal advice and clearance from some of the most sophisticated law firms in the country. The debt must be repaid.
4
"On the surface, it is a battle over whether Puerto Rico should be granted bankruptcy protections, putting at risk tens of billions of dollars from investors around the country. But it is also testing the power of an ascendant class of ultrarich Americans to steer the fate of a territory that is home to more than three million fellow citizens."
In other words we are back to the 2008 syndrome or "too big to fail"
Why should the taxpayer, once again, need to bail out the:
- bad, greed driven choices of the 1%,
- bad, ideology and market driven Republican Governor choice to use fiscal incentive (tax cuts from public coffers) as a means of sustaining collective goods and services.
The hedge funds took a calculated risk that panned out, why should they want to continue basking in the sun tax free while taxpayers and pensioners who have both paid dearly into the system need to add yet another notch to their already tight belts.
In other words we are back to the 2008 syndrome or "too big to fail"
Why should the taxpayer, once again, need to bail out the:
- bad, greed driven choices of the 1%,
- bad, ideology and market driven Republican Governor choice to use fiscal incentive (tax cuts from public coffers) as a means of sustaining collective goods and services.
The hedge funds took a calculated risk that panned out, why should they want to continue basking in the sun tax free while taxpayers and pensioners who have both paid dearly into the system need to add yet another notch to their already tight belts.
19
20 percent is Usury. This Usury is not a crime before the law, but it is a crime before God. The predator capitalists who feed in this economic niche (national poverty and impoverished people) crossed a moral line. A religious man will say 'This is a sin against humankind, and a grave sin against the Holy Spirit - it will not be forgiven'.
13
Capitalisms worst enemies are capitalists, in this case the vulture funds.
Senator Rubio has shown as much spine on bankruptcy for Puerto Rico as he did on immigration. He was for them before he was against them.
Think how prejudiced the vulture funds and Congress look to Latin America.
Senator Rubio has shown as much spine on bankruptcy for Puerto Rico as he did on immigration. He was for them before he was against them.
Think how prejudiced the vulture funds and Congress look to Latin America.
22
Isn't it a bit ironic that Puerto Rico (Rich Port) is, in fact, a Puerto Pobre (Poor Port)? Puerto Rico will never get ahead so long as they keep begging for 'mas dinero'. Puerto Rico's greatest resources is tourism and its' natural beauty. But it will never know the its great potential until it learns budget and stop spending money it doesn't have. The people, culture and island of PR are beautiful! What a shame that its terribly inept government continues to destroy the opportunities for this beautiful country.
6
It's also three hours by air from Miami, with other beautiful islands (including Cuba) much closer. Being a US territory isn't good enough. I went to Guam and Saipan earlier in the year. Both are US territories, but due to distance, most tourists are Japanese.
Who pays? The little guy who cannot avoid paying taxes and doesn't have a lobbyist.
PR been a tax haven for many people including many PR residents but they won't be paying we will. There will be protests...if you question the PR bail out you're a racist....that sort of thing. Nothing will change not the policies that brought PR here or the culture but that's ok the nasty main landers will pay.
PR been a tax haven for many people including many PR residents but they won't be paying we will. There will be protests...if you question the PR bail out you're a racist....that sort of thing. Nothing will change not the policies that brought PR here or the culture but that's ok the nasty main landers will pay.
5
Puerto Rico is, and will remain, an economic basket case, as long as the population is not educated in English, and as long as the government continues to employ vastly more people than needed, including nearly as many teachers as the island had when there were nearly twice as many children in school as there are today. The absolute size of the debt is not itself the problem. Puerto Ricans do not pay federal income tax, and the commonwealth receives large subsidies from the US treasury. As a result, the debt levels of Puerto Rico need to be compared to combined federal/state/local levels elsewhere and in absolute terms, this level per person is actually lower than on the mainland. The problem is that even this low debt level is unpayable for an economy in decline with a population heavily living on welfare.
People who want to pay the hedge funds less than other creditors don't understand the most basic facts of the financial system. If a creditor who buys in the secondary market is paid less than other creditors, primary creditors who need immediate cash will be unable to sell their claims for any price, and the liquidity of the municipal bond market will evaporate.
People who want to pay the hedge funds less than other creditors don't understand the most basic facts of the financial system. If a creditor who buys in the secondary market is paid less than other creditors, primary creditors who need immediate cash will be unable to sell their claims for any price, and the liquidity of the municipal bond market will evaporate.
5
Puerto Rico's biggest fear has been realized: the opening to Cuba by the US. Cuba is a more attractive and more desirable destination than PR. The downward spiral, exacerbated by huge levels of corruption, will, sadly, but inevitably, continue.
11
The hedge funds are the bad guys, why? Because they lent money when no one else would?
"Their cash-starved island had persuaded some of the country’s biggest hedge funds to lend them more than $3 billion to keep the government afloat."
Anyone care to guess what a default (not keeping "the government afloat") would have looked like in 2014?
So the people who stepped up to bail out PR based on the island's Constitution- "Puerto Rico was required to pay back its debt before almost any other bills"- are being unreasonable when expecting legal protection under the Constitution? The same Constitution that was invoked in a successful effort to attract investors?
Amazing how the NYT makes the story about the lenders who lent money based on the rule of law rather than the profligate borrower. An analysis of the reasons behind PR's $70B in debt would be more enlightening than a critique of those who lent the last $3B. But it wouldn't fit the preferred narrative, would it?
"Their cash-starved island had persuaded some of the country’s biggest hedge funds to lend them more than $3 billion to keep the government afloat."
Anyone care to guess what a default (not keeping "the government afloat") would have looked like in 2014?
So the people who stepped up to bail out PR based on the island's Constitution- "Puerto Rico was required to pay back its debt before almost any other bills"- are being unreasonable when expecting legal protection under the Constitution? The same Constitution that was invoked in a successful effort to attract investors?
Amazing how the NYT makes the story about the lenders who lent money based on the rule of law rather than the profligate borrower. An analysis of the reasons behind PR's $70B in debt would be more enlightening than a critique of those who lent the last $3B. But it wouldn't fit the preferred narrative, would it?
7
Uh, I don't think the hedge funds donated money. They stepped up because they knew they could manipulate congress into making them whole. They offered a drowning colony a very expensive lifeline of dubious quality, serving returns to their investors and not the people of Puerto Rico. Fascinating that you try to paint these blood suckers as Mother Teresa. Mthose politicians who took this money should be defrocked, but hedge funds to a risk and lost. Kind of tired of using taxpayer money to pay off their losing bets again.
3
When you lend money, you assume the risk that the borrower won't be able to pay. It's what you are supposed to assess carefully when you lend. But what these lenders want is a new deal after the fact. They made poor lending decisions and instead of taking the loss, they now want the federal government to change laws to ensure that they don't lose. I say no. Forget about it. They can take the loss and everyone involved can learn the lessons they need to learn from the experience, e.g. in Puerto Rico the citizens can figure out who is not on their side and should not be elected.
3
Cornflower:
You seem to have the opposite. The laws and territory constitution guarantee repayment, and I imagine the federal courts, if called upon, would require it. It is the governor of Puerto Rico who wants "a new deal" to allow Puerto Rico to avoid the repayments.
As it stands, either they pay or they get sued, and they will lose in the courts because of the clear mandate of the Puerto Rico constitution.
You seem to have the opposite. The laws and territory constitution guarantee repayment, and I imagine the federal courts, if called upon, would require it. It is the governor of Puerto Rico who wants "a new deal" to allow Puerto Rico to avoid the repayments.
As it stands, either they pay or they get sued, and they will lose in the courts because of the clear mandate of the Puerto Rico constitution.
1
1- When will Wall Street learn that under the rules of capitalism, losing means losing?
2- When will my fellow Puerto Ricans wake up for a century of servitude and demand sovereignty?
5
sovereignity comes in two forms
1 as an independent country
2 as an state of the union
1 as an independent country
2 as an state of the union
2
Jorge: I don't think the Puerto Ricans have earned sovereignty of either sort. At this point, they probably should not have responsible government. Possibly the price to get bailed out of this is to reinstate the Foraker Act.
but neither form allows for a sovereign to file bankruptcy
The problem in Puerto Rico is the enormous tax evasion. Puerto Rico has the ability to collect 25 billion each year in taxes . That is 30 % of gnp. that is the amaunt the US and all industrialized countries collect. Puertro Rico only collects 10 billion. 85% of the tax revenues comes from those earnings more than 85000. So the rich in Puerto Rico are the tax cheaters. The partidocracy of two corrupt political parties dont have the political will to correct tax evasion because they depend on the cheaters to finance their political campaigns , the electoral law is a joke.The US goverment should not pay the 73 billion debt squanderd and stolen by corrupt politicians , they should insist that tax evasion is eliminated. The Us could guarante the debt but a federal supervisory structure should be put in place with the IRS advising to eliminate the debt that can and must be paid.The real culprits here are the tax evaders and corrupt political system of Puerto Rico. I am not wealty me and my wife could loose all our savings in a bankrupcy scheme that will be a windfall to corrupt politicians and tax evaders. If tax evasion is eliminated the debt can be paid and an investment fund could be established that could develop local entrepeneurs . tourism ,agriculture. Puerto Rico coud do away with the dependence from federal funds and the artificial economy that is also a source of our malady and predicament.Puerto Rico could become the Singapur of the carribean and independence
11
So true. Corruption must be forced out of the system or let them suffer until it does.
1
It seems that whenever the U.S., or even more significantly U.S. financial groups concerned just about their own profits, go meddling in the economies of other countries, the outcome is seldom good.
4
PR is not another country, it is just a territory of USA or bettered said a colony
The conduct of people like Rubio and Hatch is disgusting in so many ways. Looked at as a transaction, it is nothing more than a quid pro quo, you give me money, I will give you legal protection. Rubio especally was up to his neck in efforts to help Senator Blumenthal help the people of Porto Rico, that is until Rubio met some friendly contributors who had some ready cash and that ended his efforts on behalf of the Porto Ricans! Hatch was no more subtle. It was a straight out money for protection scheme, and Hatch's coffers were enriched and the money men got what they wanted, legal protection. People like Rubio and Hatch roundly deserve to be exposed for what this is, a legal payoff, a quid pro quo in any language. It is pathetic!
29
And if you made the players Hillary Clinton, Elizabeth Warren, and Israel, your attitude would be "Oh, no promises were ever made. Senator Warren's staff just was helping out while she was considering whether this was good policy and she decided against. Sorry, Jews, you're going for a haircut."
My only question is why these people don't get investigated by the Justice Department for bribery and influence-peddling.
The SEC needs to evaluate whether the financial statements included in the debt offerings (e.g., PREPA) were accurate or instead misstated the financial condition of PR. If the investors were misled, the issuance is invalid. in any event, any changes to the rules must be prospective affecting future debt offerings.
4
There has always been a culture of poverty in Puerto Rico that precluded economic success. Since the 1960's we have poured money into the island and given all kinds of tax incentives to promote development, all to no avail. Billions wasted, while the economic "Tigers" of Asia were rising. If the problem is deep seated cultural deficits, no amount of mone will help.
17
Go to Puerto Rico and you'll see that what they have basically is tourism. Old Town San Juan is a ghost town of small hotels that were probably owned by local families and they used to profit from the tourism. Now the big international hotels, Hilton, Marriott, etc. siphon off all the trade. Locals can work for peanuts in the big hotels and restaurants and in providing tourist services. So money is siphoned off of the island and the island and its inhabitants just sink lower and lower.
1
none of the tigers were colonies of the USA subjected to all the laws and rules that the congess desired and deprived of representation at the same time
Typical musical chairs scenario - free ride for the free marketers to be free from taxation (Big Pharma and luxury resorts in this case) and then wonder why the govt of PR cannot pay their 20% interest hedge-shark loan back! The 1% gets the last chair free from taxes and the rest gets stuck with the tax bailout bill.
When all states stop providing tax giveaways to private interests to lure them to so called "create jobs", for them to pick up and leave when another state (or country) is willing to give them even more free stuff (free tax haven), maybe the vicious destructive circle will stop.
When all states stop providing tax giveaways to private interests to lure them to so called "create jobs", for them to pick up and leave when another state (or country) is willing to give them even more free stuff (free tax haven), maybe the vicious destructive circle will stop.
8
PR would be a perfect location to test the effectiveness of a "citizens income". Instead of bailing out either lenders or the government, give every PR citizen a weekly paycheck - perhaps $250. Let's see how money flows in this relatively isolated economy. Will new businesses form to provide new services to people who suddenly have dollars to spend? Will new employees be needed at established businesses? Will tax collections increase allowing the funding of public services? Will PR be able to stand on it's own after a few years of this grassroots cash infusion? Let's make PR the largest economic experiment in economic recovery.
1
It has already been an experiment for leftist Democrat Big Government policies. The experiment failed
3
As was trickle-down Larry, but that doesn't stop republicans from trying to still use it as a tool to rip,off the middle class.
1
These are the people who have been calling the shots in PR> You clearly didn't read the article. The politicians who figure prominently are Republican: "Private-equity magnates, hedge funds and investment advisers began moving to the island. They settled in Condado and a handful of coastal enclaves like the Dorado Beach Resort, where the billionaire investor Toby Neugebauer, who provided $10 million to the presidential campaign of Senator Ted Cruz of Texas, bought a home."
Puerto Rico is well able to afford their debt. Puerto Ricans are EXEMPT from US income tax. Puerto Rico levies its own income tax at the same level as the US income tax its citizens don't pay. Thus Puerto Ricans essentially have no liability for the federal debt. Their debt load therefore should not be compared to mainland state's debt but rather the the combined federal and state per capita debt of mainland residents. By that comparison, Puerto Rico's debt load per capita is less than in any of the 50 states.
Puerto Rico government is even more wasteful and more corrupt than mainland governments. It has refused to make the reductions in government payroll that is more than appropriate. It pays government employees NOT to work many more days per year than federal or state employees. Its retirement benefits are grossly over-generous with very early age retirement. It refuses to provide audited books for its revenues and expenditures.
Even now its thoroughly dishonorable governor (with support of his party's politicians and gov't employees union leaders) has repeatedly declared that he will intentionally violate the Puerto Rican Constitution and refuse to give the first prioity is specifies to government general obligation debt.
As despicable and dishonorable as its politicians are, those politicians have the support of a majority of Puerto Rico's citizens.
The people of Puerto Rico deserve no consideration and no sympathy and the politicians belong in prison.
Puerto Rico government is even more wasteful and more corrupt than mainland governments. It has refused to make the reductions in government payroll that is more than appropriate. It pays government employees NOT to work many more days per year than federal or state employees. Its retirement benefits are grossly over-generous with very early age retirement. It refuses to provide audited books for its revenues and expenditures.
Even now its thoroughly dishonorable governor (with support of his party's politicians and gov't employees union leaders) has repeatedly declared that he will intentionally violate the Puerto Rican Constitution and refuse to give the first prioity is specifies to government general obligation debt.
As despicable and dishonorable as its politicians are, those politicians have the support of a majority of Puerto Rico's citizens.
The people of Puerto Rico deserve no consideration and no sympathy and the politicians belong in prison.
17
you are wrong PR has paid its taxes all along
Several important points relevant to the complexity of this situation are left out of this article. The territory has never defaulted on its debt which allowed it to pay lower interest rates to its many creditors (it is not known exactly how many of them are Puerto Ricans but the suggestion that only 1/5 of them are is by far the lowest out there). Puerto Rico still has not produced audited financial statements for 2014 and 2015 which Congress and the rating agencies have repeatedly asked for. The financial reports commissioned by the Puerto Rican Gov have been rife with errors, some in the billions of dollars. Padilla courted Hedge Funds and other investors (at this time last year) by saying, "We will keep our word, will honor our debts," and "It would be a mistake to default." Following the failed Argentinian model (which is now 10 years running), he then deliberately cast them as "Vultures." His own party has since abandoned him, and his brother and others close to him are now facing corruption charges. If a Detriot style restructuring were to play out in Puerto Rico the result would be significantly higher debt service costs for generations.
9
If they made money they were going to keep it. Now that they are losing it they want us to pay. That is why they are called "hedge" funds. When the bill comes round, they hedge...
3
Puerto Rico should demand independence and reparations for 117 years of American colonialism and immediately default on its loans.
10
The US give Puerto Rico its independence and demand reparations for 50+ years of unfunded welfare, food stamps, Medicare and Medicaid that the island population makes generous use of.
So the Hedge funds have now been admitted to the to big to fail bloc and we'll pay the bills?
10
So Big Government admits it's Too Big To Fail and claims the right to refuse to repay loans it promised to?
4
It worked for Donald Trump. It's called bankruptcy. Puerto Rico is just the right size to fail. But hedge fund puppets Marco Rubio and Oren Hatch will make sure the taxpayers bail out their donors and the machine lives on. We are all part of one big corruption cycle. The wealthy buy congress and in return congress further enriches the wealthy. Money comes from you and me, working for a living and paying taxes to a broken leadership system that funnels our money into the hands of their sponsors through war and tax loopholes. When they retire from congress, a nice cushy job awaits. When will it stop? #RubioHedgeFundPuppet.
3
Why is it that liberals insist on changing any laws that they don't like to favor their constituents. The rule of law and private property is what makes this country great and why people from everywhere else in the world flock here with their assets to be protected from banana republic dictators. Just like with GM the government wants to hand out goodies to its political friends on the back of people who made legally protected investments. I hope this plays out the way liberals want and let's see what happens to the municipal bond market and what the knock on impact is for all of those state and local governments who spend more than they have when the spigots get turned off.
11
Liberals? It's republican Orrin Hatch who is proposing $3 billion in bailouts, which will go to the hedge funds. How much more handing out goodies to political friends can you get?
21
No one should ever lend another dollar to any government. Put them on a cash basis. Governments have almost never paid back their debt. They just borrow again to roll over maturing debt, and they borrow more than they repay to go further into debt. It goes on until they finally default. Politicians don't even intend to repay any debt they take on. And their purpose is always to spend more than their revenues in order to favor their constituents. This is true of liberals and conservatives, Democrats and Republicans.
1
So now anyone who is critical of some hedge fund behavior is a "liberal"? What a warped perspective.
2
Congress & the Obama Admin should have stepped in years ago and offered Puerto Rico some sort of IMF-style workout plan involving a combination of low-interest loans & structural reforms. Putting together a 20-year govt reform & investment plan would certainly be better than the mess outlined in this article. Puerto Rico clearly needs to streamline & reform its bureaucracy but there are other problems that also need to be fixed, such as the archaic 1920's Jones Law that mandates that only US based-shipping companies can transport goods to & from the island. Seriously, it's 2015 and we can' t get rid of a 1920 law that enriches US shipping companies at the expense of the residents of Puerto Rico??
Now that this is all a huge mess, I'd give first priority to paying investors who put their money in early on, before PR became high-risk. I'd give 10 cents on the dollar to the hedge fund vultures who piled in in 2013 when the investment was clearly labelled high-risk. That's what risk is all about, hedge fund fellas.
One last question: Should Puerto Rico & US municipalities even be allowed by law to issue high-risk, high-yield debt? It's clearly a warning bell signaling very deep problems, ones that will almost inevitably blow up within a few years. It seems like govt entities shouldn't be allowed to do this since it just kicks the can down the road--better to tackle these problems earlier rather than later.
Now that this is all a huge mess, I'd give first priority to paying investors who put their money in early on, before PR became high-risk. I'd give 10 cents on the dollar to the hedge fund vultures who piled in in 2013 when the investment was clearly labelled high-risk. That's what risk is all about, hedge fund fellas.
One last question: Should Puerto Rico & US municipalities even be allowed by law to issue high-risk, high-yield debt? It's clearly a warning bell signaling very deep problems, ones that will almost inevitably blow up within a few years. It seems like govt entities shouldn't be allowed to do this since it just kicks the can down the road--better to tackle these problems earlier rather than later.
43
Obama deal with an issue? His specialty is kicking the can down the road
1
The Jones Act covers all shipping between U.S. ports, not just P.R., and without it we would almost certainly not have a functioning merchant marine or commercial shipbuilding industry in this country. Ask any general or admiral if he/she thinks that is a good idea.
I suspect that exempting P.R. from the act would have very little effect on the current problems down there, but might be a good idea if only to put to rest the canard that it is causing the crisis.
I suspect that exempting P.R. from the act would have very little effect on the current problems down there, but might be a good idea if only to put to rest the canard that it is causing the crisis.
1
The Jones Act applies to the entire US, just like Puerto Rico. It prevents non-US ships with low labor costs from siphoning off the coastal trade (that is, carrying goods or passengers between two US ports without stopping at a far foreign port in between. It also affects cruise ships, for example they will not carry you between LA and Seattle, but will between LA and Vancouver.
Talk about an one sided article trying to create sympathy.
Those hedge funds which lend for 20% return did invest knowing that it was going to be bad. They did it after Puerto Rico had already had tonne of debt.
As told by the article, PR did say they are insolvent after a few months!
Try saying that to your bank which lent money. It is looks more like PR politicians were trying to pull a fast one with Hedge Funds. PR politicians cant be trusted and should not get a bailout via BK or Chapter 9.
But PR needs to clean its house. For eg, income tax is never fully collected, some business/agencies have never paid electricity bills, etc. They need to make sure that all these mundane things work as well oiled machine.
Those hedge funds which lend for 20% return did invest knowing that it was going to be bad. They did it after Puerto Rico had already had tonne of debt.
As told by the article, PR did say they are insolvent after a few months!
Try saying that to your bank which lent money. It is looks more like PR politicians were trying to pull a fast one with Hedge Funds. PR politicians cant be trusted and should not get a bailout via BK or Chapter 9.
But PR needs to clean its house. For eg, income tax is never fully collected, some business/agencies have never paid electricity bills, etc. They need to make sure that all these mundane things work as well oiled machine.
6
Actually the bank would not lend you money because you would be a bad risk if you looked like Puerto Rico. But the hedge funds who own Congress changed the calculus of that risk. You and I will end up using our tax money to make sure the wealthy investors get their 20% return. I think the word for that is "sucker". Marco Rubio is a hedge fund puppet, for the record.
56
Several years ago, I strongly considered buying some Puerto Rico bonds. I was offered a seemingly terrific deal: I could borrow at 1.5% and lend at 9-10%.
After a doing a little research, I realized it was a horrible deal and passed on the bonds. Constitutional guarantees notwithstanding, I knew there was no way Puerto Rico would repay the bonds even though they could--easily--if they honored their constitutional commitments and put bond payments ahead of the other impossible promises the territorial government had made. There's an unwritten rule in every government debt issuance: politics comes first. While the hedge funds and other bondholders are within their rights to challenge Puerto Rico's plans to violate its own constitution, I am certain that they will receive pennies on the dollar at most. That is a risk of doing business. I only hope that there is no bailout: if I as an individual investor could figure out that Puerto Rico bonds paying 10% were wildly overpriced, smarty-pants hedge fund managers should have been able to see that they were jumping into a stupid deal. They certainly don't need a taxpayer-financed free put option, and the government of Puerto Rico definitely doesn't need implicit bond insurance that will allow it to continue borrowing without cleaning up its finances.
After a doing a little research, I realized it was a horrible deal and passed on the bonds. Constitutional guarantees notwithstanding, I knew there was no way Puerto Rico would repay the bonds even though they could--easily--if they honored their constitutional commitments and put bond payments ahead of the other impossible promises the territorial government had made. There's an unwritten rule in every government debt issuance: politics comes first. While the hedge funds and other bondholders are within their rights to challenge Puerto Rico's plans to violate its own constitution, I am certain that they will receive pennies on the dollar at most. That is a risk of doing business. I only hope that there is no bailout: if I as an individual investor could figure out that Puerto Rico bonds paying 10% were wildly overpriced, smarty-pants hedge fund managers should have been able to see that they were jumping into a stupid deal. They certainly don't need a taxpayer-financed free put option, and the government of Puerto Rico definitely doesn't need implicit bond insurance that will allow it to continue borrowing without cleaning up its finances.
20
Thank you Supreme Court for the Citizens United decision allowing for $1 = 1 vote. This is the result. Puerto Rico will cut its healthcare and education until it exists only to service hedge fund debt. It's citizens will flood the mainland in search of benefits and we all end up paying for another bailout for the wealthy. Watch out America. Coming to a state near you soon. Thanks Marco Rubio for betraying this piece of America but remaining true to your hedge fund sponsors.
75
I think that is not a completely accurate narrative. The politicians over promise benefits to get votes. Citizens are greedy and want benefits without paying more taxes. The classic case is Illinois and some local counties/cities of CA in the U.S. The govt. is cutting healthcare, education, libraries, local police, fire stations etc. because the taxes collected are not enough to pay the benefits. Yes, the hedge funds owners are greedy and want their 20% return, but who are the people who issued those bonds? Why didn't they tell their citizens that taxes have to go up? Because citizens don't want to hear the unvarnished truth and will not elect those politicians.
1
To default or not default, that is the question Gov. Garcia Padilla faces now. He has said he would rather pay local government employees than bondholders, yet, will he do it? He has already decided not to seek reelection. Default means lawsuits that will be costly for both sides but more so for Puerto Rico. But more importantly default runs the risk of swift passage of Republican sponsored senate bill that will name a federal control board, named by the President, to virtually take over the island's finances. Our local elected leaders might as well go home rather than face the indignities that this bill ensures. The board will undoubtedly do what the governor has eluded all this time, to consolidate government agencies and fire government employees so as to reduce expenses and follow Republican doctrine of small or smaller government and pay bondholders. What will the local reaction be to these new changes? It looks like we will have to decide what our political status needs to be.
6
This is too good not to share:
"IT WILL not be long till Congress and the White House start squabbling again about the budget in Washington, DC. But before they create another artificial debt crisis, Barack Obama and his Republican opponents ought to pay some attention to a real one 1,500 miles to their south-east.
Puerto Rico, an American territory, risks a Greek-style bust. With $70 billion of debt outstanding, the equivalent of 70% of its GDP, it is more indebted than any of America’s 50 states. (Puerto Rico is not technically a state, but its bonds are treated as if it were.) Yields on its bonds have soared as high as 10%, as investors fret it may be heading for a default.
Published by The Economist, October 26, 2013
Over two years ago but the US political system paid no attention.
"IT WILL not be long till Congress and the White House start squabbling again about the budget in Washington, DC. But before they create another artificial debt crisis, Barack Obama and his Republican opponents ought to pay some attention to a real one 1,500 miles to their south-east.
Puerto Rico, an American territory, risks a Greek-style bust. With $70 billion of debt outstanding, the equivalent of 70% of its GDP, it is more indebted than any of America’s 50 states. (Puerto Rico is not technically a state, but its bonds are treated as if it were.) Yields on its bonds have soared as high as 10%, as investors fret it may be heading for a default.
Published by The Economist, October 26, 2013
Over two years ago but the US political system paid no attention.
16
My thought exactly the moment I read that phrase!
"Tea Party groups, usually the harshest critics of Wall Street lobbyists, joined the fray."
"Tea Party" groups as the harshest critics of Wall Street lobbyists?
Poof!
There goes Mahler & Confessore's credibility.
"Tea Party" groups as the harshest critics of Wall Street lobbyists?
Poof!
There goes Mahler & Confessore's credibility.
4
It's Puerto Rico's own fault for not declaring bankruptcy before and instead buying from the hedge funds. Classic politicians kicking the can down the road. As if they could have paid 20% on the bonds.
34
Puerto Rico never has had the power to declare bankruptcy, under US Law. Not even today.
Puerto Rico is a possession of the Holy Christian US Empire.
The US Congress (thus the American People) has the last word in this matter.
Puerto Rico is a possession of the Holy Christian US Empire.
The US Congress (thus the American People) has the last word in this matter.
3
Puerto Rico can't declare bankruptcy because it's a territory, that's what they are trying to change.
4
As the article states, "On the surface, it is a battle over whether Puerto Rico should be granted bankruptcy protections, putting at risk tens of billions of dollars from investors around the country." It seems that Puerto Rico can't use bankruptcy protections, or it would have by now.
2
Outside of tourists hotels that will soon face fearce completion from Cuba, Puerto Rico has been a welfare state. They should be allowed their independence as much of their population desires. It will be tough going at first, but in the long run, they will be better off.
1
They were "allowed" their independence in a referendum vote in 2012. Only 5.55% chose the independence option. There had been previous referendums to decide the political status of PR, most recently 1998.
1
Puerto Rico should simply default and get it over with. The model to follow is Iceland, not Greece or an American state.
There are no doubt crooks who have looted the accounts of Puerto Rico, these individuals should go to prison whether they are Puerto Rican government officials or investors. The hedge funds which made bad loans should lose their money ... all of it. If they go out of business, so be it. Failure is a part of capitalism; blood cannot be squeezed from a cabbage.
Puerto Rico has been overburdened with excessive debt for decades. The hedge fund managers would be presumed to know that the $3 billion pittance and public relations would be insufficient to resolve $65+ billions in bad debts. What's needed is restructuring, the sooner it is done, the less costly it will be.
There are no doubt crooks who have looted the accounts of Puerto Rico, these individuals should go to prison whether they are Puerto Rican government officials or investors. The hedge funds which made bad loans should lose their money ... all of it. If they go out of business, so be it. Failure is a part of capitalism; blood cannot be squeezed from a cabbage.
Puerto Rico has been overburdened with excessive debt for decades. The hedge fund managers would be presumed to know that the $3 billion pittance and public relations would be insufficient to resolve $65+ billions in bad debts. What's needed is restructuring, the sooner it is done, the less costly it will be.
17
what about the US Congress that aproves all the laws and reglaments regarding the economy of PR. if you make the rule you assume the responsibility .
1
Given the choice to vote for independence, PR voted 'no', so it is not as if the US is some colonial oppressor. Let PR declare bankruptcy, and move on from there.
3
And let's not forget, shall we, that when local voters turned down independence in the late 1940s, some who did not agree showed it by trying to assassinate a President of the United States, Harry Truman.
"Impoverished" place turns to hedge funds for financial help and their economy gets decimated? While the hedgers skate off with another windfall profit... Where have we already heard essentially the same story before? Greece, Spain, Ireland, Iceland, US municipalities...
20
Back to the past, October 26th, 2013, The Economist featured this article
"Greece in the Caribbean
"Stuck with a real debt crisis in its back yard, America can learn from Europe’s Aegean follies"
America learned nothing, as did Puerto Rico, that partied on as Greece did after the 2010 bailout.
When you have a corrupt political class, reforms, however necessary, can simply not be implemented.
"Greece in the Caribbean
"Stuck with a real debt crisis in its back yard, America can learn from Europe’s Aegean follies"
America learned nothing, as did Puerto Rico, that partied on as Greece did after the 2010 bailout.
When you have a corrupt political class, reforms, however necessary, can simply not be implemented.
4
the difference betwin PR and Grece is that grece is free country and PR is a colony of USA. the colonizer has to pay for it.
3
We don't owe you anything. You have duty to take responsibility for yourself and get your house in order. If you can't or won't, you will have earned your fate
6
The only thing you owe us are the tools to fix the mess... But Republic cans don't even want to give us that. We are indeed at your mercy, because you are and have been the owner of Puerto Rico for over a 100 years. If the mainland does not want to deal with its colony then it seems like its time to part ways.
So, hedge funds who invested in risky debt in the depressed economy of Puerto Rico want the federal government to step in and ensure their billion dollar investment at a 20% return. My my my. Al Capone had more integrity.
76
no madam what they want is to be paid,the problem is that pr is a colony under the power of congress. if you have the power you also have the responsibility.
Nice try. With one sweeping motion you have made US taxpayers responsible for unpayable debt that was unpayable on the day the loan was made, a fact that the lenders knew. Whatever happened to risk? Doesn't a 20% return connote some likelihood of default? Under your scenario, this PR dent is as money-good as a treasury bill. Which is paying 1/2%. But this was 20%. Oh wait, the taxpayer gets ripped off again. #RubioHedgeFundPuppet
1
they should default. This will throw throw the scurrilous lending practices of the hedge funds, in puerto rico, greece and elsewhere, into sharp relief. It will put PR on Congress' plate, it will force them to give them bankruptcy, or to finance their government, and the Repubs will, Hatch in particular, have to shoulder the blame. The Repubs want to play chicken? PR should take 'em on.
13
Privatize the profits. Socialize the losses.
So what's changed with Wall Street's greedy elite? Nothing.
So what's changed with Wall Street's greedy elite? Nothing.
30
The most interesting piece in the article is the sober statement that 158 families have contributed 50% of presidential election funding thus far... hundreds of millions of dollars. Wow. Poor Puerto Rico doesn't stand a chance against that much fire power. Granted the island shouldn't have borrowed such huge sums. Equally ridiculous is the fact that so many were willing to lend such sums to a remote island of dubious political integrity, abysmal public safety and services and an enormous gap between the few "haves" and the millions of "have-nots". All of that said, if a few wealthy mainland US families can wield such power over Congressional discourse and decisions as described, then we are doomed as a pluralist democracy.
217
When you jump in shark infested water, it's the fault of them sharks when they attack you.
So implies the NY Times.
So implies the NY Times.
5
They asked for help from people not accustomed to helping anybody: hedge fund managers. The island borrowed money they and everybody else knew they cannot pay. Not at the usurious interest rates the "bondholders" required. But the "bondholders" were greedy. They overlooked the bold faced part of the bonds saying they carry significant risks. And now they would like someone else to bear that risk: taxpayers through Orin Hatch's $3B bailout proposal, or islands population through further cuts in education and health care. Is Puerto Rico supposed to close its public schools and hospitals in order for a dozen of super-rich Americans to keep their 20% cut?
8
Actually the bold faced part said that the bondholders would be paid first. It's Puerto Rico who wants to change the rules midstream.
5
I traveled often to PR in the early and mid 90s. The only place I ever saw in the US where the beat cops all carried submachine guns. The San Juan Police Department building, which backed up on projects, had to install bulletproof glass in all their windows due to constant sniper fire. The hotels locked the beach access at 7:00 PM; if you were on the wrong side of the barrier, you fended for yourself. Every cinder block shack had iron bars on the outside of the windows. And the well-off lived in gated compounds on hills overlooking the underclass.
I wouldn't have lent PR any money. The hedge fund managers who traveled there and saw the conditions had the same opportunity; the greed was just too strong.
I wouldn't have lent PR any money. The hedge fund managers who traveled there and saw the conditions had the same opportunity; the greed was just too strong.
4
No--Puerto Rican politicians foolishly gave them a guarantee of repayment.
1
I was there in May, actually, for a day. I walked all around San Juan and feared nothing, including in the area a little to the east of the Morro where I understand there are many drug dealers and few police. I saw elderly people ashore from the two cruise ships in port. I didn't notice anyone mugging them, or me.
Consider going back. You may be surprised.
Consider going back. You may be surprised.
While your main point is well taken, I have to question your statements about beat cops all carrying submachine guns, hotels locking beach access at 7 PM, etc. during your travels to the island in the 90s. A native Puertoriqueno, I just moved back to San Juan and hope that although in a minute way, I am helping my "isla del encanto". However, I was fortunate enough to be able to visit PR yearly while living abroad since the early 70s. Never during these visits did I ever see the picture you portray. As a matter of fact, you can count with one hand if at all, hotels that have the ability to lock access to the beach. What I am in agreement with you is the fact that many of the well-off not only have shielded themselves in gated compounds but have also been able to avoid paying their fair share of taxes. Also, as in the mainland, PR is has to support and maintain a large influx of illegal aliens, many of which are poor and come here in search of welfare programs not existing in their countries. This is the 800 lb. gorilla that our politically correct system is not wiling to openly discuss or address appropriately.
Hatch & Co. are willing to use taxpayer money to bail out their investor buddies when called to arms. Where will they be when the public employee unions come calling to bail out their pension funds?
5
This seems like sympathy for the defaulter, with a lot of random hate jabs at Republicans (including a current challenger to Trump), hedge funds, and anyone with two nickels to rub together. Possibly this article could have had less of the hating and more information on what Puerto Rico has actually done to cut costs.
7
Investors (must) take the risks of their investments, but changing the rules of the game a posteriori is an issue as well. It is time for Porto Rico to make choice between becoming a State or becoming an independent country. This territory status is neither this or that.
5
In the current climate in this country, do you think the Republican-led Congress would look kindly on adding in a new state full of poor, brown-skinned people whose native language is not English? Puerto Rico's ability to become the 51st state is theoretical only.
5
I am more worried about the Puertoricans turning down such opportunity than Republicans. Your implied assertion of Republican racism is wrong, cheap and not at all helpful.
And as you want to play the party partisan game, maybe you should think of Pelosi who excluded America Samoa from federal minimum wage increases to favor Star-Kist from her district but excluded Puerto Rico where the national minimum wage weighs heavily on the economy.
And as you want to play the party partisan game, maybe you should think of Pelosi who excluded America Samoa from federal minimum wage increases to favor Star-Kist from her district but excluded Puerto Rico where the national minimum wage weighs heavily on the economy.
1
Why would the US taxpayers want Puerto Rico as a state? One third of the population is on the dole, despite not paying federal income taxes, and that is an improvement over the 50% it was for decades.
What could possibly be in it for us but another burden?
What could possibly be in it for us but another burden?
If the pattern continues then anyone that can afford to leave PR will have emigrated to the US and very rich Americans will own an island tax haven with a lot of very poor people that won't have the ability to pay for much of anything, let alone billions in debt.
If the pattern in the US continues the very rich won't be paying much in taxes because they live in island tax free havens, and the rest of us will be stuck with the trillions in debt, at ever higher risk and an ever diminishing ability to pay it off. Just like PR now. Luckily we can print our own money so that the very rich can keep hoarding more of it.
If the pattern in the US continues the very rich won't be paying much in taxes because they live in island tax free havens, and the rest of us will be stuck with the trillions in debt, at ever higher risk and an ever diminishing ability to pay it off. Just like PR now. Luckily we can print our own money so that the very rich can keep hoarding more of it.
12
I am an Irish Catholic from a one red light town in Pennsylvania, I own a small business that employs 25 people. My pastor is from Puerto Rico. The youth minister that supports the children in my parish is married to a wonderful women from Puerto Rico. My niece is married to a young marine who served on Marine One whose family is from Puerto Rico. His father is also a Marine. My point is that Puerto Rico and the people of Puerto Rico are part, parcel and as much the United States as Sullivan County Pennsylvania, Brooklyn New York, Des Moines Iowa or Los Angeles California. They are us. To some of you it should be important that they work and pay taxes, to others of us it is important that they live as Americans and fight and die as Americans. All of us should stand together.
22
don't care if the investors lose all or if the puerto rican government has to cut to the bone to service the debt - either is fine. what i am afraid of is a federal govt bailout, money that would simply go to the investors, and that is what i bet is going to happen.
179
Well, please write to your Conressperson and you US Senators and tell them you do not want any federal money to go to help either party and that you strongly feel Puerto Rico and its creditors should hash it out among themselves.
However, there might be a place for the feds to participate in the process without committing any public funds. For example, changing the law in such a way as to allow PR to use bankruptcy process to restructure its debt, but at the same time to place PR finances into hands of an independent monitor to assure that the bad practices would be reformed.
However, there might be a place for the feds to participate in the process without committing any public funds. For example, changing the law in such a way as to allow PR to use bankruptcy process to restructure its debt, but at the same time to place PR finances into hands of an independent monitor to assure that the bad practices would be reformed.
Did I read this correctly? We taxpayers are "investing" $3 billion in Puerto Rico to help assure that the US hedge funds will not lose any of the money they poured in chasing those 20% returns? These guys take the cake.
What happened to their investor risk? How many times do we have to bail out Wall Street before we, the people, finally get a break? Anybody in Washington looking out for us, please speak up now!
What happened to their investor risk? How many times do we have to bail out Wall Street before we, the people, finally get a break? Anybody in Washington looking out for us, please speak up now!
451
Rich people usually risk someone else money. Hence the saying "Societize the risk, privatize the profits".
Another outrage brought to you by our corporatist government! We need to stop the freezing of hard working taxpaying Americans.
Please contact Barack Obama, 1600 Pennsylvania Ave, Washington DC, 20006. It was his administration that spent more money bailing out investors and the like than all the other administrations ever. You blame the 1% for free money when half of our Federal Budget does the exact same thing? The people wanted a liberal president, welcome to the reality you all wanted so badly.
When investors lend money to a government, the possibility that the government might be able to change the law to avoid repayment should be part of the calculus. No sympathy for the investors here.
314
Did you really believe what you just wrote? Whatever happened to the rule of law and to contracts?
2
Investors rely on specialists, such as legal counsel, financial advisors, Big 6 CPA's to evaluate IPO's, Etc. They do not walk into these transactions with blindfolds or duped. The rule is always: Caveat emptor!
Puerto Rico has no sovereign powers. If Puerto Rico defaults in a substantial way, the funds, lenders, investors will eventually turn to the Sovereign, A/K/A the good old USA, to honor Junior's pledge. What are high-powered lawyers good for, anyway, if not for this type of case? What is the Supreme Court for, anyway?
We are talking here about the third-ranked jurisdiction under the US flag in terms of debt: NY, California, Puerto Rico? Do not write us off as a tiny little island in the middle of nowhere.
Puerto Rico has no sovereign powers. If Puerto Rico defaults in a substantial way, the funds, lenders, investors will eventually turn to the Sovereign, A/K/A the good old USA, to honor Junior's pledge. What are high-powered lawyers good for, anyway, if not for this type of case? What is the Supreme Court for, anyway?
We are talking here about the third-ranked jurisdiction under the US flag in terms of debt: NY, California, Puerto Rico? Do not write us off as a tiny little island in the middle of nowhere.
1
What is the role of S&P, Moodys, Fitch?
Over 90% of the time they are advisers to the lenders, funds, investors.
Over 90% of the time they are advisers to the lenders, funds, investors.
1
This is a good article but is way overdue. Puerto Rico is in the final stages of this saga that has been unfolding for years. Unfortunately, you could read more about it in the Economist than US news sources, including the NY Times.
What is not pointed out nearly clear enough here is the impact of the phase out of a critical tax free provision, “section 936”. As an executive with a major US manufacturer, I know firsthand that this has led to the shuttering of many manufacturing facilities on the island. (It is simply not a convenient place to ship raw materials to and finished goods from.) This loss of jobs followed by the emigration of a huge percentage of the productive workforce has made Puerto Rico’s debt unserviceable.
But even as a strong fiscal conservative, I favor a restructuring of the debt. Puerto Rico is not blameless, but it is not a Greece or Argentina. These countries directly drove themselves into insolvency with irresponsible social programs and a culture of tax evasion. We should let Puerto Rico declare bankruptcy but impose the “penalty” of direct federal oversight for a period of time.
What is not pointed out nearly clear enough here is the impact of the phase out of a critical tax free provision, “section 936”. As an executive with a major US manufacturer, I know firsthand that this has led to the shuttering of many manufacturing facilities on the island. (It is simply not a convenient place to ship raw materials to and finished goods from.) This loss of jobs followed by the emigration of a huge percentage of the productive workforce has made Puerto Rico’s debt unserviceable.
But even as a strong fiscal conservative, I favor a restructuring of the debt. Puerto Rico is not blameless, but it is not a Greece or Argentina. These countries directly drove themselves into insolvency with irresponsible social programs and a culture of tax evasion. We should let Puerto Rico declare bankruptcy but impose the “penalty” of direct federal oversight for a period of time.
13
OUR Federal government, closing in on 19 trillion in debt should oversee Puerto Rico's finances? Uhuh...good one!
2
The point of federal takeover is not simply the federal government providing PR's budget, but the total replacement of the government administration, similar to Detroit. An appointed governor would have the power to hire and fire entrenched bureaucracy administrators, privatize services and renegotiate contracts. And this with the traditional roadblocks to change such as tenure and union contracts removed. Nothing scares a government and bureaucracy more than their complete loss of this power. This would also be a deterrent to any other territory following suit.
before you blame the 1%, how about some derision for public employees unions who vote as a bloc and grant themselves full pensions with health benefits upon "retirement" at the age of 53. Don't they deserve some of the blame?
32
No, they deserve all the blame and none of the false "promises" that were made
3
You mean like the benefits ALL Americans once had before the vultures took the money?
I own some Puerto Rican Bonds that come due in 2029. I would be very disappointed if those go bad.
Originally they belonged to my father and were sold to him by his "wealth manager". I wondered why he would invest my father in bonds that he would have to live to be 114 to begin collecting on. But he assured me "there's never been a default on a Puerto Rican bond."
He got that factoid from their sales prospectus and I guess he never bothered to do his "wealth manager" due diligence and ascertain if that statement had much likelihood of remaining true.
Originally they belonged to my father and were sold to him by his "wealth manager". I wondered why he would invest my father in bonds that he would have to live to be 114 to begin collecting on. But he assured me "there's never been a default on a Puerto Rican bond."
He got that factoid from their sales prospectus and I guess he never bothered to do his "wealth manager" due diligence and ascertain if that statement had much likelihood of remaining true.
13
Robert: You do not appear to be aware that municipal bonds pay interest semi-annually, thus your father was not waiting until age 114 "to begin collecting on". And it is very usual in the municipal bonds market to seek longer terms to increase the interest rate. But again, you do not appear aware that there are interest payments. Which leads me to question the scenario you posit.
If it sounds too good to be true...
Move the Capitol to PR. It will become the richest US territory within a year or less.
5
No thanks. Puerto Rico already has its own capitol on a hill, by the sea, not by a river.
Another example of how dangerous the Supreme Court's Citizens United decision can be.
Most Americans don't have time to think of all the ramifications of this decision.
And the TransPacific Partnership also.
Our branches of government are giving away citizens' powers to corporations and Wall Street.
Most Americans don't have time to think of all the ramifications of this decision.
And the TransPacific Partnership also.
Our branches of government are giving away citizens' powers to corporations and Wall Street.
21
this has nothing to do with citizens united. there is no clear right answer to this debt problem - bankruptcy does indeed bail out the govt which may indeed need major reforms. the govt borrowed the money. the govt was mismanaged. should there not be some consequences for that?
1
TO SJoe--
"Politics" is less and less about representing citizens and communities' interests. A citizen's vote counts for little compared to huge campaign donations to legislators.
"The investors with a stake in the outcome are some of the wealthiestpeople in America. Many have TAKEN ON AN OUTSIZE ROLE IN FINANCING POLITICAL CAMPAIGNS in the aftermath of the Supreme Court’s 2010 Citizens United decision..."
"Politics" is less and less about representing citizens and communities' interests. A citizen's vote counts for little compared to huge campaign donations to legislators.
"The investors with a stake in the outcome are some of the wealthiestpeople in America. Many have TAKEN ON AN OUTSIZE ROLE IN FINANCING POLITICAL CAMPAIGNS in the aftermath of the Supreme Court’s 2010 Citizens United decision..."
1
As Shakespeare said in Hamlet: "Neither a borrower nor a lender be." How true in this case.
Neither side is exactly covering itself with glory here. Puerto Rico borrowed money it clearly knew it could not repay, and the hedge funds were just payday lenders on a large scale.
Neither side is exactly covering itself with glory here. Puerto Rico borrowed money it clearly knew it could not repay, and the hedge funds were just payday lenders on a large scale.
30
Interesting title for the article. It makes it sound as if Puerto Rico actually has a future. Once these vultures get through there, you might as well install a dictator and start growing bananas.
10
This is just another example of depradatory capitalism. The 1% knew exactly what was going to happen, they are experts after all.They just care about their profits and they know they can buy politicians from either party to pursue their agenda. Just another step on their world domination plan.
38
This is an example of predatory government that has predictably run out of other people's money
6
The hedge funds expected a 20% return! Just why do you think they could get such a fantastic rate of return?
Because this was an extremely risky investment.
The investment went south and now the hedge funds want their money back.
They are the ones looking for a bailout.
Because this was an extremely risky investment.
The investment went south and now the hedge funds want their money back.
They are the ones looking for a bailout.
460
not really. puerto rico could simply default on the debt. then the legal maneuvering would begin - the investors would not be able recover all their money. bankruptcy does bailout the puerto rico govt, and they were the one's who willingly borrowed the money.
2
They did not expect, or get any such return. That is the times saying it would be equivalent to a 20 percent return which would be subject to full taxes, which this is not. It is like saying a 3 percent return on a muni's "tax equivalent yield" of, say, 4 percent.
4
".... under the island’s Constitution, Puerto Rico was required to pay back its debt before almost any other bills, whether for retirees’ health care or teachers’ salaries." That sounds like a safe loan to me.
Afraid that if the hedges continue to disenfranchise the private citizenry of its wealth, health and children's destiny, a backlash will evolve under a new messiah with only contempt for the social contract and rule of law that allows the hedges and their heirs to flourish.
8
The hedge funds manufacture a false bailout narrative so they and their fellow ultra-rich investors don't lose a penny, turn around and get a senator to propose an actual taxpayer-funded bailout and the same hedge funds are all in. The more things change...
25
Why does this article imply that Chapter 9 bankruptcy is available to states? To cities and municipalities, yes, but not states.
Puerto Rico is the canary in the coal mine because the same situation is true in many US cities and states, most especially thanks to the unfunded pension liabilities.
Sadly though any bankruptcy by PR or any cities will be farces like the ones for Detroit, GM and Chrysler, wherein the bond holders, whose claims clearly had priority were passed over in favor or unsustainable pension funds and others further down the priority list
Puerto Rico is the canary in the coal mine because the same situation is true in many US cities and states, most especially thanks to the unfunded pension liabilities.
Sadly though any bankruptcy by PR or any cities will be farces like the ones for Detroit, GM and Chrysler, wherein the bond holders, whose claims clearly had priority were passed over in favor or unsustainable pension funds and others further down the priority list
5
Well, I am sure that we the American taxpayers will make whole the hedge funds and others that loaned Puerto Rico money. I mean is that a punch line, "loaned Puerto Rico money." Why not, after all even though we pay salaries and benefits to all the elected officials, we the people are not considered lobbyists, we are just the old mundane employer. Even though the "employer" is given good lip service, we know that it is a joke. I personally have been turned into a complete cynic regarding my country and its government, by the elected officials of this government. Take credit, it is your due.
7
Predictably, Liberals flock to a story like this and come away with entirely the wrong message. For them, this is a story ready-made, conforming to their invented world--a world controlled by Oligarchs, Plutocrats--the hated 1%--who are (what else?) taking advantage of the defenseless underclass of a poor island.
It would never occur to Liberals that the real lesson to be learned is of the failures of Socialism--of people overwhelmed by their self-indulgent reliance on government, peoples who have been bought off with their own money--who, when the music stopped, had spent all of their own, borrowed whatever they could beg from investors--and now, having run through all that, will naturally come looking to their equally bankrupt protector (in the form of the U.S. taxpayer) to bail them out.
As much as the NY Times would like to make this tragedy about the "evil wealthy"--it is more correctly a story about the failures of Socialism. And if we don't learn the right lessons---and heed the warnings, we will just as surely jump off the same cliff a short while later. I'm not sure the crumpled carcasses of Greece, Venezuela and Puerto Rico, lying at the bottom of that cliff, will be enough to cushion the blow.
It would never occur to Liberals that the real lesson to be learned is of the failures of Socialism--of people overwhelmed by their self-indulgent reliance on government, peoples who have been bought off with their own money--who, when the music stopped, had spent all of their own, borrowed whatever they could beg from investors--and now, having run through all that, will naturally come looking to their equally bankrupt protector (in the form of the U.S. taxpayer) to bail them out.
As much as the NY Times would like to make this tragedy about the "evil wealthy"--it is more correctly a story about the failures of Socialism. And if we don't learn the right lessons---and heed the warnings, we will just as surely jump off the same cliff a short while later. I'm not sure the crumpled carcasses of Greece, Venezuela and Puerto Rico, lying at the bottom of that cliff, will be enough to cushion the blow.
41
When did all this become as simple as liberals vs. the hated 1%? That's apples and oranges when this is a pureé of problems and issues. You write as your hated 1% uniformly represents a class that is preternaturally at war with the ills of socialism. Yet this hated 1% loaned a state these funds so it can continue an accelerated level of said ill socialism. Who's at least ethically bankrupt here? An ill socialist government is good enough to bilk? What's more, these 1% people loaned this state these funds to continue their socialism at 20% interest. That is USURY--high class loan sharking.
There's a lot of problems in Puerto Rico. It doesn't just boil down to the ills of socialism nor the hated 1%. Some people made some bad loans to a bad government of a poorly treated colony that continues to make bad decisions.
Socialism, like capitalism, is an antiquated way of trying to describe today's socio-political landscape. There's a whole new form of economy that has taken root. No one's taken the time from all the Lib vs. Tea mudslinging to really wrap our heads as to what it all means.
There's a lot of problems in Puerto Rico. It doesn't just boil down to the ills of socialism nor the hated 1%. Some people made some bad loans to a bad government of a poorly treated colony that continues to make bad decisions.
Socialism, like capitalism, is an antiquated way of trying to describe today's socio-political landscape. There's a whole new form of economy that has taken root. No one's taken the time from all the Lib vs. Tea mudslinging to really wrap our heads as to what it all means.
11
Puerto Rico's problems are the result of a major economic downturn, not socialism (the right is mesmerized by the myth that social safety nets are always the cause of severe recessions).
10
"the failures of Socialism"?
HUH?
The victims in all cases you site are people in DEMOCRACIES and the predators are indeed the "evil wealthy" in a capitalist system run utterly amok!
In what shape or form does "socialism" possibly come into play?
HUH?
The victims in all cases you site are people in DEMOCRACIES and the predators are indeed the "evil wealthy" in a capitalist system run utterly amok!
In what shape or form does "socialism" possibly come into play?
6
Did I read that correctly? 20% return and the US government covers any shortfall?
13
You did not read it correctly. 20 percent was not a return, but a "tax equivalent yield". The actual rate of return is probably about half that. And, of course, carries a very high risk.
3
Here said: the 10% return "carries a high risk."
Retrospectively, the hedge funds effectively now are not acknowledging that the bonds they bought carried a high risk--they argue that the law does not allow a contractual default. But the hedge funds are on logically shaky grounds--a 10% return clearly implies high risk to sophisticated buyers, but which buyers now deny such high risk existed. Prospectively, a warning label was put on these on these bonds--the interest rate--which rate (and risk implication) was demanded by the buyers.
Retrospectively, the hedge funds effectively now are not acknowledging that the bonds they bought carried a high risk--they argue that the law does not allow a contractual default. But the hedge funds are on logically shaky grounds--a 10% return clearly implies high risk to sophisticated buyers, but which buyers now deny such high risk existed. Prospectively, a warning label was put on these on these bonds--the interest rate--which rate (and risk implication) was demanded by the buyers.
1
Fine. Until Puerto Rico gets a change in federal law, they need to pay per their constitution or responsible officials should go to jail for contempt of court when a judge orders them to pay. And yet they have defaulted on some bonds already.
Let's make Puerto Rico the 51st state. With a pending bankruptcy and most citizens already on the federal dole due to a 50% unemployment rate, we can get two new Democrat senators out of the deal.
4
This was intended to be a sarcastic comment reflecting the willingness of the ethically challenged Democrats to do anything to stay in power. I didn't think it would be published.
In the eyes of independent observers, what responsibility does a colonial/imperial power bear for the actions of its colony/protege/ward/?
Firms/institutions go broke due to mismanagement.
The motive for financial failure is profit and greed: filthy lucre! Good intentions is part of the equation: economic development, jobs, infrastructure projects.
Do not lose sight of greed and filthy lucre!
The US took PR and Cuba from Spain by force in 1898 (spoils of war= "botín de guerra"). Puerto Rico is neither a state, an independent country, nor a true Commonwealth. Puerto Rico is an unincorporated territory of the holiest and most benign, and most mighty country in the world and of all history. The US Congress ultimately owns all waters and lands of Puerto Rico, including space rights.
Puerto Rico is like a minor child with an adult parent responsible for the child's every act. When a minor child commits a crime or misdeed, the society and world look to the parent for restitution, retribution, etc.
The US should go to the UN or World Court in the Hague , admit and declare that its relationship or compact with Puerto Rico is flawed; and propose some honorable and fair roadmap for both its 3.5 million citizens and the bondholders/creditors, and other stakeholders. Do not ignore Puerto Rico due to its mall physical size (3,600 sq. miles). How big is Hong Kong relative to Mainland China? But look at its influence/impact on China's economy since the UK left. USA beware!
Firms/institutions go broke due to mismanagement.
The motive for financial failure is profit and greed: filthy lucre! Good intentions is part of the equation: economic development, jobs, infrastructure projects.
Do not lose sight of greed and filthy lucre!
The US took PR and Cuba from Spain by force in 1898 (spoils of war= "botín de guerra"). Puerto Rico is neither a state, an independent country, nor a true Commonwealth. Puerto Rico is an unincorporated territory of the holiest and most benign, and most mighty country in the world and of all history. The US Congress ultimately owns all waters and lands of Puerto Rico, including space rights.
Puerto Rico is like a minor child with an adult parent responsible for the child's every act. When a minor child commits a crime or misdeed, the society and world look to the parent for restitution, retribution, etc.
The US should go to the UN or World Court in the Hague , admit and declare that its relationship or compact with Puerto Rico is flawed; and propose some honorable and fair roadmap for both its 3.5 million citizens and the bondholders/creditors, and other stakeholders. Do not ignore Puerto Rico due to its mall physical size (3,600 sq. miles). How big is Hong Kong relative to Mainland China? But look at its influence/impact on China's economy since the UK left. USA beware!
7
Sucker punch to PR for privatization of the island, businesses, like other private equity schemes in US, and grabbing debt is icing. Off shore has a new meaning.
2
There is no greater greed than borrowing money and then refusing to pay it back
36
What about lending money and expecting it to be risk free? Part of lending is accepting risk. The hedge fund folks are just angry because they made a horrible investment. When I lose money on investments I can't make moral arguments about how I should get my money back. Getting a 20% return means they were being paid a handsome return in exchange for taking a big risk. Sometimes people take big risks and lose. I have no sympathy for billionaires who make bad investments.
117
who said it was risk free? let puerto rico default.
13
They did not get a 20 percent return. Read it carefully.
6
They need to raise taxes.
5
They already tried that--and it drove out all of the corporations. Puerto Rico once had thriving pharmaceutical, chemical and manufacturing base. They have since chased them all away--making the problem even worse.
4
Raising taxes is the solution for out of control government spending like more booze is the solution for alcoholism
3
Jesse - "They have since chased them all away--making the problem even worse."
Wait, isn't that what the Democrats want to do in the United States, raise taxes, especially on those "evil" corporations?
Wait, isn't that what the Democrats want to do in the United States, raise taxes, especially on those "evil" corporations?
3
The Territory is obviously in a deep hole such that even a thinned down bureaucracy would not completely or possibly even closely bring financial stability to the island. I suspect that the problem should be adressed as quickly as possible by defaulting on the next scheduled payment. That should draw the attention of all involved. Then the government salary rolls can be thinned appropriately, government services reduced, and lender's expectations moderated. The bondholders may have to retreat to a zero percent interest position, in the hope the Islanders could at least repay the principal amounts owing over the next 25 to 40 years. Lots of similarities to Detroit and Illinois here.
3
Ah; another Detroit in the wings, one on a even larger scale. PR has been spending more than it can chew for years. I know its larger brother our Federal Government likes to do the same thing. Uncontrolled spending has consequences as much as Bernie Sanders and his ilk like to pretend it does not.
20
Under the US Constitution ( Article III Section 2 clause 1 ) the Congress has complete authority over the territories like Puerto Rico. In the Insular cases the Supreme Court held that the only limitation on that power is that fundamental human rights , such as those enumerated in the First Amendment, cannot be violated.The form of government for Puerto Rico was established by Congress and it can change it if it wishes The same is true of the hands off policy of the US with respect to local self-government. At some point Congress must act, probably in the form of an imposed federal fiscal control mechanism. Perhaps at that point it will be absolutely clear that Puerto Rico is a colony of the USA and the vexing matter of the island's status may be addressed. And Puerto Ricans can have no doubt that "Commonwealth" is simply Colony by another name.
7
What about the requirement in the Fourteenth Amendment that the public debt shall not be questioned? Are the issuances of a subsidiary of the federal government public debt?
2
Excellen!
2
@FloridaRob, that's a nice idea, but hedge funds don't do reform statesmanship. They extract as much of their capital as they can by any means necessary and don't care who or what it hurts.
42
In a bankruptcy the debtors hold the creditors captive. Bankruptcy is not just a legal term, it is a state of being-- of being not able to pay. The bondholders may sue and go to court, but that is a long, complicated and messy process that consumes cash along the way. Puerto Rico is already frozen out of the credit markets. Puerto Rico may get these hedge funds to negotiate simply by doing nothing
4
I have little sympathy for hedge funds. We need a financial transactions tax. I'd like more detail on the Obama plan; the island clearly needs major reform, but squashing people's needs to pay bondholders in a rigged game is not the answer.
80
How awful is this, that the 1% has complete control of an American territory? If we don't revamp the kind of capitalism we are practicing, there will be little to like in America thirty years from now. Have we passed the point of no return or can we still completely undo Reaganomics? If not, if conservatives continue their ways and the plutocrats are not stopped, there will be more than a Bernie Sanders' revolution in the United States of America. It's coming. People are running out of patience.
272
You're engaging in wishful thinking.
2
The underlying debate is ideologically hedged between principles of social democracy and the strain of wannabe-unbridled capitalism since the Reagan era, Marco Rubio's flip flop on this and other issues is revealing of the effort required to straddle the broadening divide.
There is a practical conundrum emerging from the societal imbalance of wealth, how to preserve value when assets are beyond the reach of market demand, be it a one bedroom rental apartment in SF starting at $3700.
The failed answer is Austerity, in reality the snake oil designed to protect the outlandish gains of the 1%. How else protect from monetary erosion the accumulated wealth of the few than by taking it out of the hide of the many. Whether you call it taxpayer bailout or diminished earned benefits from pensions, health care / medicare and investment in the future through underfunded education.
The bulwark is enshrined in Citizens United, as demonstrated from examples in this article with Marco Rubio or Orrin Hatch, the value of having (for some) the best politicians money can buy.
There is a practical conundrum emerging from the societal imbalance of wealth, how to preserve value when assets are beyond the reach of market demand, be it a one bedroom rental apartment in SF starting at $3700.
The failed answer is Austerity, in reality the snake oil designed to protect the outlandish gains of the 1%. How else protect from monetary erosion the accumulated wealth of the few than by taking it out of the hide of the many. Whether you call it taxpayer bailout or diminished earned benefits from pensions, health care / medicare and investment in the future through underfunded education.
The bulwark is enshrined in Citizens United, as demonstrated from examples in this article with Marco Rubio or Orrin Hatch, the value of having (for some) the best politicians money can buy.
3
Perhaps not, I have little doubt Bernie Sanders is unelectable in the current political landscape, my hope is that he will be opening a floodgate of frustrations that will allow the collective conscience to perceive there are other avenues of political discourse.
Fundamentally, the ultra rich are neither Republican nor Democrat. What they seek is influence over whomever is elected. What is most interesting is the idea that Puerto Rican bonds were so attractive, not because of the fundamental ability of the citizens/economy to pay, but because the legal loopholes and politics ensured that they were a great bet.
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In short, they weren't investors, they were gamblers. We need to get gambling out of high finance.
2
Thanks to the authors for putting together this very informative article. I actually know very little about Puerto Rico, so I learned a lot. This is scary stuff and, as usual, it looks like the lower middle class will be the losers. Also, as usual, I am not particularly impressed by Wall Street.
66
50% on food stamps, high crime and a conduit for drugs to US. The Navy bases closed down, and all the young people are leaving.
It is time to give the country back. With out Uncle Sam to support them, then perhaps these investors will roll up their sleeves and make this place proper.
It is time to give the country back. With out Uncle Sam to support them, then perhaps these investors will roll up their sleeves and make this place proper.
2
Give it back to whom? Surely you are not suggesting the revocation of Puerto Ricans' US citizenship. Usually the IRS wants several kilos of flesh before allowing folks to give up their US citizenship.
I don't think they are that type of investor. They aren't there to make P.R. better, they are there to pick its carcass.
10
The investors and what army?
Puerto Rico's economic disaster looks like something new--because many people are hearing about it for the first time. But, this has been a long time in the making. At one point, in recent history, the Island seemed to be backing away from the fiscal precipice--in electing a true Conservative, who went about cutting bloated bureaucracy, pushing back against the unions, and putting the economic house in order. But by that point, Liberalism had already woven its disease into the populace--too many people were afraid to lose to much free stuff. So, those who had been bought off with their own money elected a Liberal the next time 'round--and thus, here we are today--mired in unconscionable debt, on the edge of insolvency.
This story is not new for another reason: Greece, Venezuela--and even earlier in history, Cuba, North Korea, the Soviet Union--all followed the same road to financial ruin--the road of Socialism.
Although overused--Thatcher's words were never more true: "The problem with Socialism is that eventually you run out of other people's money". Puerto Rico ran out of it's own a long time ago--lived on the bondholders' dime--and now want ours. I say...let them learn a valuable lesson about spending--and in turn teach a few others bound to follow their path, that Socialism is poison to the well-being of any society.
This story is not new for another reason: Greece, Venezuela--and even earlier in history, Cuba, North Korea, the Soviet Union--all followed the same road to financial ruin--the road of Socialism.
Although overused--Thatcher's words were never more true: "The problem with Socialism is that eventually you run out of other people's money". Puerto Rico ran out of it's own a long time ago--lived on the bondholders' dime--and now want ours. I say...let them learn a valuable lesson about spending--and in turn teach a few others bound to follow their path, that Socialism is poison to the well-being of any society.
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The unconscionable debt of which you speak has its roots in the conservative former governor Fortuno's policies, which could hardly be called socialistic. Garcia Padilla, the Democrat who succeeded him, raised taxes and cut spending.....hardly socialism. You assert that Puerto Rico now wants "our" dime, by which I assume you mean American taxpayers. Please explain just how American taxpayers will be on the hook should PR be allowed to go bankrupt. If anyone will be on the hook it will be the vulture hedge funds, who in my opinion took outsize risks in pursuit of easy money. Perhaps they shall reap what they sowed.
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As opposed to conservative administrations that freely hand public resources over to a small elite who then use their wealth to effectively buy more financial protection from the same conservatives. It's very easy to avoid national bankruptcy when you can have great depressions with 25% unemployment instead.
Also, as a member of two unions, I wonder what people mean when they say that unions are somehow ruining state economies. Do you mean that if all unions were eventually abolished and- hence- real wages and benefits were greatly reduced for many workers, then the relative price of food, housing, and utilities (and medical care) will suddenly somehow drop? And then, again relatively, everyone will be better off? I don't believe that would happen. Or do you mean that my hypothetically-reduced salary will somehow be offset by a bigger tax return? I'd rather have a bigger real salary than a bigger tax return, thanks.
Also, as a member of two unions, I wonder what people mean when they say that unions are somehow ruining state economies. Do you mean that if all unions were eventually abolished and- hence- real wages and benefits were greatly reduced for many workers, then the relative price of food, housing, and utilities (and medical care) will suddenly somehow drop? And then, again relatively, everyone will be better off? I don't believe that would happen. Or do you mean that my hypothetically-reduced salary will somehow be offset by a bigger tax return? I'd rather have a bigger real salary than a bigger tax return, thanks.
17
With all due respect, BrainDoc, that is just so much Liberal, revisionist buh-loney. 60 minutes (not exactly a Conservative media outlet) did a story in 2009 on the incredibly difficult situation Fortuno inherited. It was described as dire--even back then, with huge debt, and over 25% of all citizens as government employees--and the remaining majority on public assistance. Also described was the flight of business from the island--driven out by regulation and high fees and taxes. You've been reading waaaay too much Krugman. As usual, he is wrong--and in turn, so are you.
2
Puerto Rico would be in a more sympathetic position if it had not been a serial abuser of investors, refusing to provide timely accurate financial statements as required, pandering politically to a declining population of increasingly government dependent people, and ignoring the advice given it for years to reform its politics and finances. The governor made a bet when he turned to the hedge funds. He bet that they would be satisfied with less than par at maturity, that he could guilt the Congress into granting statehood, and that he could rely on politics instead of economics to resolve his problems without pain for his people. He is not the first losing gambler to make excuses to his bookie just the one with the largest amount due.
22
Bookies generally have enforcers to assure payment. What enforcement option do hedge funds have technically outside of the United States? Who can actually come to collect? A hedge fund army? Maybe militant investors with their power ties tied around their heads.
4
PR statehood is in the hands of PR, they have voted on it many times and have rejected it.
...and prosecute those that offer the bribes and those that receive them.