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.[15][16][17][18]
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?
