As reported here on several earlier posts, hedge funds saw that Puerto Rico was staggering under debt and bought up its bonds. Now that Puerto Rico is virtually bankrupt, the New York Times reports today that the financiers are fighting bankruptcy protection. States and cities may declare bankruptcy, but Puerto Rico must get permission from Congress to do so. Forcing Puerto Rico to pay back its lenders will require austerity that cripples the island and its people. Lenders have proposed that the debt could be paid off by slashing health care and education.
To block proposals that would put their investments at risk, a coalition of hedge funds and financial firms has hired dozens of lobbyists, forged alliances with Tea Party activists and recruited so-called AstroTurf groups on the island to make their case. This approach — aggressive legal maneuvering, lobbying and the deployment of prodigious wealth — has proved successful overseas, in countries like Argentina and Greece, yielding billions in profit amid economic collapse.
The pressure has been widely felt. Senator Marco Rubio, whose state, Florida, has a large Puerto Rican population, expressed interest this year in sponsoring bankruptcy legislation for the island, says Senator Richard Blumenthal, Democrat of Connecticut. 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…..”
“What they are doing, by getting all the resources for themselves, is undermining the viability of Puerto Rico as a commonwealth,” said Joseph E. Stiglitz, the Nobel Prize-winning economist. “They want their money now, and they want to get the rules set so that they can make money for the next 20 years.”
This is predatory capitalism at its worst.
On this earlier post, a couple of commenters argued that the hedge funds had only a small investment in Puerto Rico and that I was wrong for saying they were pressuring P.R. to cut services and programs to repay their debt. Why were they defending the hedge funds? Because one of the major lenders to P.R., John Paulson, made a gift of $8 million to Eva Moskowitz. So they take from the children of P.R. and give to the children who are retained in SA.
Diane Ravitch's blog 
Reblogged this on Politicians Are Poody Heads.
Just got back from spending a month in Puerto Rico. The people there are very scared about their future. These are good people. Large numbers volunteer for the armed services. There is an awesome memorial honoring public school professionals having a positive impact on the ed. system, located in Old San Juan (question: is there a similar memorial in the USA? If so, where?). Talked with a graduate from the high school in Utado, where over 500 students walked out to protest the impending transfer of positions from the school and thus weakening the educational offerings at the school. This student action resulted in a reversal of the decision and the positions were saved. The people of Puerto Rico hold public education in high regard. The USA should step in and help resolve this situation to limit damages. We are so quick to spend money on bombs that destroy. Let’s help build something for a change!
Keep your eyes on Puerto Rico. The islanders are facing a brutal disaster capitalism attack. If we allow the corporatists and privatizers to destroy PR schools, it will only be a short step to do the same on the mainland. But even more importantly, we need to watch how the Puerto Ricans are fighting back! They are an inspiration to us all! Viva Puerto Rico!
Just saw “The Big Short”, with amoral Wall-Street-ers raping a pillaging the housing / loan industry, with no one ever being held accountable.
They’re doing the same things to public schools, and apparent, the entire U.S. territory of Puerto Rico.
The NY Times article is wrong in a very important detail. Chapter 9 Bankruptcy protection is NOT available to states. Were a state to be in the same condition as Puerto Rico it would be in the same boat: No bankruptcy available.
My understanding is that the issue is whether Chapter 9 should be available to Puerto Rico’s public authorities and municipal entities, as it is to those within states. E.g., the Puerto Rico Electric Power Authority, the Puerto Rico Highways & Transportation Authority, the Puerto Rico Infrastructure Finance Authority, etc.
This is disgusting and so transparent. What will it take for us to wrestle back democracy from Wall Street?
I can’t pretend to understand what is happening in Puerto Rico or more to the point how it got to this point and that the U.S. allowed it to get to this point. As a protectorate of the U.S., I don’t see how the U.S. government can deny responsibility for what is happening. There is a story in the Bible about a landowner who forgives the debts of one of his servants. The servant goes out and threatens a man who owes him and has him jailed. I am mangling the story horribly I am sure and there may be more than one version, but the parallels are pretty obvious. I’m thinking the response should be as well.
One word: HORRORS!