The mainstream media says Puerto Rico is in debt trouble because the island's government irresponsibly issued debt that it couldn't pay. As is evidenced through an understanding of the history of Puerto Rico, that's an absurdly fragmentary and incomplete explanation.
In reality, Puerto Rico is a U.S. territory that Washington has continuously marginalized economically, creating a high cost of living, high unemployment, and taxation (and regulation) without representation. The island could only finance its public services through widespread issuance of bonds (egged on by Wall Street hustlers).
Then, the hedge fund vultures came in, buying Puerto Rico's debt and demanding it be repaid, using strongarm legal tactics, intimidation, and even lobbying the U.S. federal government--even as Wall Street fat cats have been pushing to turn Puerto Rico into a tax haven where they can dodge paying their fair share of taxes.
The hedge funds themselves, like BlueMountain, have been lobbying the federal government to forbid Puerto Rico from restructuring its debt. Dark money groups like the Center for Individual Freedom, almost surely the recipient of money from the hedgies, has also lobbied strongly against restructuring.
What does it say about the hideous marriage of our banking system and our government when hedge funds making millions from Puerto Rico's crisis get to bribe politicians into curbing efforts for the island to get its debt under control? Somebody is being fiscally irresponsible alright.
In response to the vultures, the island government has done everything it can to pay back the debt: delayed tax refunds, cut back on health care and public transportation services, fired 30,000 public-sector workers, closed 100 schools, increased the sales tax by more than 50 percent, and even forced community credit unions to take IOUs in exchange for cash.
Only 40 percent of Puerto Rico's labor force have jobs, and the island's poverty rate is extremely high. None of that bothers the vulture hedgies, who are making off with millions while bribing congress to force more austerity onto the island.
That's what vulture hedge funds do--buy up debt of governments suffering crises, then begin aggressively litigating and lobbying against fair terms of repayment. The hedge funds are doing this all over the world, and they're doing it in Puerto Rico.
This story is part of PBI's What Wall Street Costs America project. Click here to learn more about how you can get involved with this important national project. And please download and share the graphic below: