It’s a time filled with reality and unreality. Or perhaps we should call it dysreality, since it seems that reality is not lacking but distorted.
The macro—Puerto Rico is about to default on 422 million bucks worth of debt repayment.
The micro—I entered the café at 11:30 in the morning yesterday, only to find that while open, the establishment had only emergency lights on. Right—I know what to say when the lights go off, so I called out, “I…AM…A…GHOST!”
That’s when Santana said, wearily, “hello, Marc.”
Santana is my age, or perhaps younger. Anyway, he remembers New York City in the 70’s, when he was living up in Inwood. There, he felt at home, and part of a community. He moved back to a small town on the island, where he doesn’t feel the same. And now, he was sitting in the dark in the café he has recently taken over.
So we sit in the dark, and Santana tells me—he’s lost X amount of money. Nor does he know precisely what happened, but every business on the street lost power as they were opening up at 9 AM. In addition, he has no idea when the power will be restored, and that’s a problem since tonight is the poetry open mic. And that means it’s his best day.
We say the things that every Puerto Rican says: the politicians are crooks, they have ruined the island; Cuba is the new threat, the people there want to work.
I point out to him: he and his family are Puerto Rican, and they work…well, I’ve never believed in that expression, “working like a dog.” So I’ll use the phrase a black colleague from the South Side of Chicago once used: most days, Santana and clan are busier than a cat covering up shit.
So we are sitting in a dark café, and there is something strangely intimate about it, since there is nothing to do. As I write this, I am watching the clan of Santana unload groceries from Costco. But yesterday, there was nothing to do but wait, and tell the customers wanting to trade money for coffee that the deal was off.
I tell you the micro since it’s something we can all get on board with. Is there anyone, anywhere, who wouldn’t sympathize with Santana, sitting in every way powerless in his dark, hot café? But something happens on the way to macro—which means that ideology intrudes, the battle lines are drawn, blame is assigned, responsibility is disavowed.
And I tell you that because I have watched John Oliver on Puerto Rico, and yes, I agreed with a lot of what he said. But is it time to point out some things that don’t fit the narrative? Aren’t we at the point where are only chance out of this mess is to look honestly at all sides of the issue, and hope to find some way out?
Narrative: the vulture funds are sticking it to Puerto Rico.
Fact: John Oliver himself said it. Only 30% of the debt is held by vulture funds. The rest is held by individual investors, many of them Puerto Rican, and in mutual funds. I know two people, elderly and now retired, who suffered greatly from buying Puerto Rican bonds, and seeing their worth diminish. I do not know any hedge fund managers.
Narrative: the politicians got us into this mess, now they’ll have to get us out of it.
Fact: we elect the politicians, and the population all watched as every government for the last twenty years got us closer and closer to this mess. Oh, wait—we didn’t watch. We gave up on reading the news because it was too depressing, and we got cynical and decided that all politicians were crooks. Which meant, of course, that no one was holding any politician to any standard. So then we really did get crooks. Try telling your kids that they’re headed for life in the state penitentiary, and see where they’ll end up. That’s what we’ve done with our politicians.
Narrative: The fiscal control board is stripping us of the limited self-government we have, and thus re-imposing the worst abuses of colonialism on us.
Fact: Well, first of all, did we do a really good of of self-governance? No—and we are not alone. Nor is it all our fault: we, like everybody else, suffered from the economic crisis of 2008 to 2010 (roughly). And if we suffered, so did a number of other states and municipalities. From nymuniblog.com:
Most notably, the comptroller (of New York) determined that over 100 local governments have insufficient cash to meet current liabilities, roughly 300 local governments had deficits during 2010 and 2011 or both, and 27 municipalities have seemingly exhausted their reserve funds.
I got to nymuniblog.com because I was curious about the financial crisis of New York in the 1970’s. Doesn’t anybody remember that? Doesn’t anybody remember when the Bronx was burning and no fire truck would dare go there, when whole blocks of Amsterdam Avenue were boarded up or burned out, where virtually everyone had seen a murder, or at least a shooting?
The city was a mess, and the same voices were singing the same songs then as now. New York was begging for help, Cashman and West were pleading musically just as Lin-Manuel Miranda is now, and the conservatives were telling the city, well…
So what finally played out? First came the Municipal Assistance Corporation, which was a dud. Then came the, well, here’s Wikipedia:
It failed to achieve results and the state came up with a much more drastic solution the Emergency Financial Control Board (EFCB). It was a state agency, and city officials had only two votes on the seven-member board. The EFCB took full control of the city's budget. It made drastic cuts in municipal services and spending, cut city employment, froze salaries and raised bus and subway fares. The level of welfare spending was cut. Some hospitals were closed as were some branch libraries and fire stations. The labor unions helped out, by allocating much of their pension funds to the purchase of city bonds—putting the pensions at risk if bankruptcy took place. The city's banks and the state of New York did not have enough credit to handle the entire crisis, Federal loans and loan guarantees were needed, which Congress provided it (sic) in the "New York City Seasonal Financing Act" of December 1975.
In short, the Emergency Financial Control Board did much of what is being proposed for Puerto Rico: it stripped the city of fiscal control, it imposed severe measures, it brokered a deal between the unions and the city, and it finally got Washington to provide loans, which were repaid with interest. Did New Yorkers like it? Of course not—they hated it, who wouldn’t? But twenty years later, the city was back on its feet.
I could go on and on, but at this point, perhaps, you have pegged me: a Republican, a statehooder, a fiscal conservative. In fact, I am none of those things. Certainly our colonial status has much to do with where we are. The cabotage laws are completely unfair. Congress has dragged its heals on this crisis and is about to throw us under the bus. I would go further, and wonder why any state or municipality should have been permitted to wrack up such a debt. The bartender—as my friend Lady once said—is responsible for getting the drunks out of his bar in not too bad a shape. Who was tending bar when we were getting sloshed on debt?
My worry is that our love of narrative will blind us to some things that all of us should worry about. And here, in a situation that is somehow the lovechild of Salvador Dali and García Márquez, is what I worry about.
The Government Development Bank is broke: where did the money go?
Well, what money there was got withdrawn and put into banks in the private sector. That meant that the biggest bank on the island—Banco Popular—got a lot of accounts. But was it the municipalities who transferred their funds? The agencies? And who authorized this? And who oversaw the transaction? And what about the organic law creating the BGF (the Spanish acronym for the GDB)? Can you simply disband a government bank, and put it into the private sector?
Or is it the private sector? And is Banco Popular now liable to action by creditors? If so, is my money safe? And how will the state banking commission regulate Banco Popular, now that it is some hybrid of a private and a public bank?
Oh, and what about all the regulatory bodies that we have, that supposedly guard us against corruption, though the controller recently reportedly on a municipality that spent megabucks on a coliseum that never opened? So now how is the controller going to do her / his job?
Funny thing about Banco Popular, because at the same time this was happening, the bank was transferring some government debt to another entity. Of course, you’d have to read Caribbean Business to be let in on that secret, and then you’d have to know business to figure out what means. And do I? Of course not, so I have idea what it meant to be the “trustee to 3.8 billion dollars worth of GDB debt.”
Well, I wouldn’t want to be on the hook for 3.8 billion dollars of GDB debt, and neither, it seems, did Banco Popular. So they requested to be relieved of the trusteeship of the debt. And guess who now is the trustee? The Wilmington Trust, National Association. And that sounds all very much on the up and up, right?
Well, it did to me, until I came upon this:
Yes, the Wilmington Trust has become the first bank to be indicted for allegedly concealing information about the bank’s loan portfolio. And this is CBS news, of 7 January 2016. Presumably just a few months before the government of Puerto Rico assigned Wilmington Trust as trustee for 3.8 billion dollars of GDB debt.
Is this a good thing, a bad thing, or just a thing? Curiously, I am less interested in those questions than in one other question…
…why isn’t anyone talking about this, and asking these questions?