Chicago groups join PR leaders calling for debt audit
Coinciding with the release of the “Wall Street’s Power Grab in Puerto Rico” study, VAMOS4PR and Chicago-based stateside labor, community, cultural, and human rights groups joined Puerto Rico leaders in calling for an audit into the legality of Puerto Rico’s $72 billion debt.
“This report provides further proof that the Debt Audit Commission is needed to find out the legality of Puerto Rico’s debt,” Roberto Pagan, SEIU Local 1996/SPT president said. “Without the debt audit commission, Puerto Ricans have no say in the restructuring of a debt that affects them.”
Released by ReFund America Project, the report highlights how the restructuring of PREPA’s debt is deeply flawed and should be disregarded as a model for the restructuring of Puerto Rico’s $72 billion debt, the group said.
“Puerto Rican residents have already suffered enough as budget cuts have cut worker pay and decreased hours,” said Gerson Guzmán-López, SEIU Local 1199/UGT president.
“The restructuring agreement made with Puerto Rico Electric Power Authority was far more generous to creditors than to ratepayers who ended up bearing the burden with increased electric rates,” he said.
Because Puerto Rico is unique in that its excluded from filing Chapter 9 bankruptcy the island has less power over its own finances than a mainland state or city. In addition, investors do not have to pay state, local, or federal taxes on the bonds because PREPA is tax-exempt. These two factors, along with bondholders’ position to make massive profits made Puerto Rico a target, the group said.
Upon examining bond deals made between 2007 and 2013, ReFund America Project found that:
- Banks and legal firms collected more than $101 million in issuance fees for the bonds.
- Banks underwrote bonds that pushed the final maturity of the debt beyond the Puerto Rican Constitution’s 30-year limit.
- Banks like JPMorgan Chase and UBS have collected at least $65 million in termination penalties on interest rate swaps connected to PREPA bonds.
- Banks such as JPMorgan Chase and UBS also underwrote both the original bond deals that included the toxic swaps to which they were counterparties. JPMorgan also was an underwriter on a bond deal that was used to make payments for swap termination penalties. Such banks set up deals that gave them multiple paydays.
“Essentially, when it became apparent that Puerto Rico’s economy was in peril, hedge funds pushed the Puerto Rico Electric Power Authority into a restructuring agreement they knew would be disastrous to the island’s economy but beneficial to the bondholders,” said Saqib Bhatti, director of the ReFund America Project and one of the report authors.
“Wall Street is using Puerto Rico as a laboratory for what it wants to do in states like Illinois,” said Amisha Patel, executive director of the Grassroots Collaborative in Chicago.
“Banks like JPMorgan Chase made millions by targeting both Puerto Rico and Illinois with predatory loans, and now they want to cut essential services to protect their profits while communities suffer,” Patel said.
The group said Thursday the impact on the Puerto Rico economy has been devastating. Hundreds of schools have been shut down and healthcare services have been crippled, jobs have been cut and hours have been slashed, hurting the most vulnerable people on the island. In addition, hundreds of thousands of people have been forced to abandon their island homes; many have moved to Florida, New York and Illinois among other states.
“I never wanted to leave Puerto Rico, my departure always feels more like I was kicked out, and every day feels like half of me is always over there,” said Rossana Rodriguez, a member of Chicago Boricua Resistance.
“I moved to Chicago alone, all my family is still in Puerto Rico. I would love to be able to go back, but under the current conditions, finding a job would be really hard for both me and my husband,” she said.
Following the release of the report, VAMOS4PR and partner organizations called on Gov. Ricardo Rosselló to reinstate the Debt Audit Commission immediately; for the Financial Oversight Board to void any debt the commission finds illegal and ask the U.S. District Court to reject the current PREPA restructure.
“The Puerto Rican Cultural Center stands with our brothers and sisters in Puerto Rico and alongside the Puerto Rican Diaspora, to call for real solutions to the $72 billion debt; pay cuts, school closings, unaffordable healthcare and “gentrification” are not solutions,” said José E. López, Puerto Rican Cultural Center executive director.