Posts Tagged ‘Puerto Rico’
June 9th, 2016 at 9:13 am
Puerto Rico Bailout Bill Allows “Gifts, Bequests, or Devises of Services or Property” to Control Board Members
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As reported by Bloomberg yesterday, the PROMESA bailout bill for Puerto Rico includes a provision that would allow members of the control board to “accept, use, and dispose of gifts, bequests, or devises of services or property, both real and personal” for the purpose of “aiding or facilitating” the board’s work.

If that wasn’t bad enough, the House Natural Resources Committee claimed that such language is “fairly commonplace in ensuring statutory objectives are met in circumstances where non-federal sources of funding will be necessary.” Accordingly, the rationalization for the provision in this case is that the board will be able to “fulfill its purpose” in the event that Puerto Rico’s government can’t (or rather chooses not to) provide “sufficient funding” for it.

Will the Puerto Rican government actually fund the control board knowing its existence is widely opposed by the Puerto Rican people?  And, of course, there’s the little matter of Puerto Rico allegedly being “out of money,” as their governor has so stridently claimed for months. According to the CBO, the board will cost $370 million over its lifetime.  So it appears that these gifts will come in handy.

So who will be in the giving spirit?

The provision is crafted in such a way that any stakeholder looking to buy influence on the board will be able to do so.  Perhaps labor unions (SEIU, in particular), which already have generously given their time and resources to help Puerto Rico’s government produce a report claiming that billions of dollars of its debt is invalid, will take center stage in the gift-giving war, hoping to ensure that the Commonwealth’s underfunded public pension system is provided preference over bondholders.  Or what about certain hedge funds looking to convince the board that their claims should be prioritized over the claims of other bondholders, including those afforded first priority in Puerto Rico’s Constitution?

Indeed, rather than actually weighing Puerto Rico’s competing claims, and clarifying where they stand in the context of Puerto Rico’s Constitution, some in Congress have decided to invite a contest between who can out-bribe the others.  When people say that Washington is broken, revelations like this help explain why.

June 7th, 2016 at 6:10 pm
Who Authored Puerto Rico’s Self-Serving Audit Report?
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Last week, ahead of this week’s vote on the PROMESA bailout legislation for Puerto Rico in the U.S. House of Representatives, a commission appointed by Puerto Rico’s government released a preliminary report charging that the Commonwealth violated its Constitution in issuing billions of dollars of its $72 billion debt.  If the bonds were in fact sold illegally, the report insinuates, then the government shouldn’t have to pay them back.

In other words, they would punish lenders for the Puerto Rican government’s own mistakes.

So not only would Puerto Rico’s government get a free pass from its obligations after illegally issuing some of its debt, it would effectively be allowed to stiff good faith bondholders.

It’s worth emphasizing that the legislative body that created this commission, whose membership includes Puerto Rico legislators with obvious conflicts of interest, authorized the very same bond sales that it now seeks to repudiate.

That is morally and logically backward, and sounds like a plot characteristic of a lawless dictatorship.  And for very good reason:  Shenanigans like this are a tried and true tactic of leftist Latin American countries, rooted in the rhetoric of Cuban Dictator Fidel Castro from 30 years ago.  It has been attempted with varying degrees of success by governments or factions in Brazil, Argentina and Ecuador.  More recently over in Europe, a similar government-appointed commission made nearly identical claims in Greece.

Conspicuously, Puerto Rico’s government has not directed any funding toward this commission that it created a year ago.  So that raises an obvious question:  Who is behind this report?

Well, we already know that SEIU was heavily involved in the drafting process, and was one of a number of “stakeholders” to provide “in-kind labor contributions.”  The SEIU, of course, has a vested interest in ensuring that its members receive preferential treatment over good faith bondholders in Puerto Rico, even if Congress has to rewrite the rules to make that possible.

It also has been reported that SEIU has deep ties to consulting firms retained by the Garcia Padilla Administration.  It also is tied directly to the Administration through former president Dennis Rivera, who came under fire earlier this year for running a questionable non-profit in Puerto Rico whose only paid employee is the governor’s brother.

What about those “other stakeholders” who contributed?

We can’t know for sure, but there are commonalties between Puerto Rico and other governments that have attempted similar tactics.  For example, they all had a common ally in Jubilee, the leftist religious organization that has fought to wipe out bondholders in debt disputes across the world, and which has been a staunch advocate before Congress of doing the same to the American savers who lent money to Puerto Rico.

Ecuador, Argentina and Greece also all at one point retained the same counsel as Puerto Rico, which has built a reputation helping leftist governments to avoid repaying the money that they’ve borrowed.

One thing is clear:  The Commission’s report amounts to a political and negotiating ploy.  It’s designed to give Puerto Rico enormous leverage over the innocent people from whom it borrowed, threatening them with the prospect of the all-powerful PROMESA control board invalidating 100% of their debt.

Members of Congress should, at the very least, understand the lengths to which Puerto Rico’s government is going to escape its obligations.

June 3rd, 2016 at 12:45 pm
The Puerto Rico Governor’s New Slush Fund
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While Congress debates a bailout for Puerto Rico, a different – but related – debate rages among legislators in the Commonwealth over Governor Garcia Padilla’s final budget proposal for the Puerto Rican Government.

The proposal has been met with justified criticism, as noted in part by Puerto Rican publication El Vocero, that should come as no surprise. The Governor’s proposal, which includes nearly $1 billion in increased expenditures for a Commonwealth that otherwise claims it “cannot pay” its debts, is a veritable goodie basket for Garcia Padilla allies.

Of the $973 million in increased expenditures, some $522 million would be diverted into the Garcia Padilla Administration’s new slush fund, something called the Financial Advisory Authority and Fiscal Agent of Puerto Rico (FAAFA). FAAFA will assume the role of the Governor’s old slush fund, the long-unregulated and now insolvent Government Development Bank.

Also included in the budget is $91 million for an unprecedented discretionary fund, an extra $215 million to bail out bankrupt municipalities, and an increase of $69 million for the “professional services” of the very expensive consultants and lobbyists.

All of this spending comes despite the fact that, for the first time, the budget makes no appropriation for the payment of principal and interest on payments to general obligation debt.  That’s a clear violation of Puerto Rico’s Constitution, which affords explicit priority over all other government expenses to the savers who invested in those bonds.

We’ve long warned that, given the cover of the legal stay and cramdown mechanisms included in the Congressional PROMESA legislation, it’s inevitable that Puerto Rico would default on the money it owes to bondholders, walk away from negotiations, and begin to frantically divert its resources to friends and allies on the island.

Now, in plain terms, the Governor has promised to do precisely that.  While the Governor fills the coffers of his new slush fund and lines the pockets of his army of consultants and Big Labor cronies, the Puerto Rican people, the municipal lending market and America’s seniors and savers will pay the price.

The question is whether Congressional conservatives are watching and ready to act accordingly.

May 8th, 2016 at 6:41 pm
Wisconsin Politifact Couldn’t Fact Check Cheese

So there are these folks in Wisconsin who run a version of “Politifact,” complete with a “Truthometer.”  Problem is, theirs needs to be recalibrated.

They subjected one of CFIF’s ads to their Truthometer. They decided we told a half-truth in calling the bailout for Puerto Rico a bailout, because no taxpayer funds would be used, which we never said, even though some of their “experts” experted that the negative effects on individual bondholders would, in fact, be pretty much what we said. Go figure.

If they had started by fact-checking themselves, they’d have been on more credible footing, since they identify CFIF several times as a “Super PAC” and once as a “political action committee.”  CFIF is not now, nor has it ever been a Super PAC, ditto political action committee. The Truthometer’s worst designation – “Pants on Fire” – is too silly for grown-ups to use, so we’ll give them a big fat zero for that one.

The bill currently before Congress, H.R. 4900 or PROMESA, would bail out Puerto Rico. It would do so by empowering a financial oversight board to force “Super Chapter 9 bankruptcy” restructuring of Puerto Rico’s debt, which means that Puerto Rico could renege on paying its creditors all it owes them, even though a great deal of that debt is protected and prioritized by Puerto Rico’s constitution, which is how the bonds were sold as being really, really safe.

Since a large portion of that debt is held by individuals, they involuntarily will be paying for Puerto Rico’s bailout. Thus, what we actually said:  “Retirement accounts crushed. A bailout on the backs of savers and seniors.”  Or, as the so-called fact-checkers in Wisconsin put it:  “And Duffy’s bill, experts tell us, almost certainly would mean lower returns for perhaps hundreds of thousands of Americans who invested in what long had been regarded as safe Puerto Rican bonds.”

Ultimately, our “sin” is adjudged as taking “things out of context.”  Precisely how do we take “things out of context” when we specify the exact context we use?

After attacking CFIF, they attempt to defend the restructuring by writing: “With an Oversight Board managing a debt restructuring, savers likely will get a lower return than they expected. But without such a board, creditors would be fighting in court and the returns for individuals (sic) investors would likely be lower still.”

In actuality, creditors are already fighting in court, and given that one class of Puerto Rican bonds was issued under the “full faith and credit” of Puerto Rico’s constitution, the law is on their side. One reason for the urgency of restructuring (and along with the bill forcing a retroactive moratorium on litigation) is the fear that courts will indeed rule for the creditors.

One final note: The Wisconsin piece accuses CFIF of throwing around the word “bailout.”  Here’s a term we will throw around: journalistically challenged. Fact check that.


Thomas Humber is founder of CFIF, and has been a recovering journalist for forty years.

April 13th, 2016 at 11:37 am
CFIF’s Response to House Natural Resources Committee re: PROMESA
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Linked here and below is a letter to House Committee on Natural Resources Chairman Rob Bishop, which serves as our response to his invitation for CFIF’s Timothy Lee to testify at today’s legislative hearing regarding HR 4900, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA).

Read the letter here (PDF).

April 8th, 2016 at 10:31 am
Puerto Rico: Representatives Say They Oppose Bailout, But That’s Exactly What “Super Chapter 9” Bill Means
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CFIF opposes the dangerous proposed “Super Chapter 9” bankruptcy legislation for Puerto Rico (under the title “Puerto Rico Oversight, Management, and Economic Stability Act” or “PROMESA”), which was recently released by the Committee on Natural Resources in the House of Representatives.

Believe it or not, that proposed bill constitutes an even more dangerous version of the Obama Administration’s unprecedented bailout proposal, leaving American savers and retirees to pay the price for the fiscal irresponsibility of politicians in Puerto Rico.  It also would create a dangerous precedent encouraging high-spending states like Illinois to seek the same bailout from Congress, it would raise borrowing costs for states, it would undermine the value of retirement funds across America and it would remove any incentive for fiscally irresponsible states to enact meaningful reform.

Unfortunately, some in Congress claim to oppose a bailout for Puerto Rico without recognizing and acknowledging that the proposed legislation means exactly that.  Representative Rob Bishop (R – Utah) offers a leading example, saying that, “there will be no bankruptcy, there will be no bailout.”

Fortunately, Mainstreet Bondholders, a project of the 60 Plus Association, provides a useful corrective appropriately entitled “Read the Bishop Bill – This Is Super Chapter 9”.  It itemizes in easily-understood bullet-point terms how, “Insisting that this bill is not Chapter 9, and simply renaming it something else, does not change the substance of the legislation.  Make no mistake – this is exactly what the Obama Administration asked for when it lobbied for Super Chapter 9!”  It is worth the quick read.

Those who support the proposed legislation, including Rep. Bishop, may have their hearts in the right place.  But that doesn’t change the fact that the bill would bring precisely the sort of bailout on the backs of Americans they purport to oppose.

We at CFIF therefore ask all Americans to contact their elected representatives in Congress to express their unequivocal opposition to the House’s “Super Chapter 9” bailout plan for Puerto Rico and its spendthrift politicians.

March 12th, 2016 at 10:09 pm
Tell Representative Rob Bishop to Say No to Obama’s “Super Restructuring” Bailout of Puerto Rico
The Center for Individual Freedom (“CFIF”) today launched a radio advertisement in Utah warning against the dangers posed by the Obama Administration’s “Super Restructuring” proposal for Puerto Rico.

Right now, House Natural Resources Committee Chairman Rob Bishop (R-UT) is considering the creation of an unprecedented restructuring regime to address Puerto Rico’s debt crisis. This restructuring mechanism, proposed by the Obama Administration, goes far beyond the authority that states possess under Chapter 9 of the U.S. Bankruptcy Code by allowing Puerto Rico to stiff bondholders who now enjoy constitutional guarantees of repayment in favor of bailing out government pensions.

Such a blatant and dangerous violation of Puerto Rico’s Constitution is neither a credible nor conservative solution to the Puerto Rican debt crisis.

As multiple governors have noted in letters to Congress, the precedent set by such a “Super Restructuring” regime would have major consequences for states, including Utah. Borrowing costs would skyrocket for state governments, harming their ability to finance critical services and infrastructure projects, and the value of retirement funds that hold Puerto Rico and other guaranteed state bonds would plummet.

Perhaps even more alarming: If enacted by Congress, this plan could pave the way for a series of Puerto Rico-like events to occur across the country. If Congress demonstrates a willingness to rewrite bankruptcy rules to bail them out, high-spending, debt-ridden states will be even less likely to cut spending and balance their budgets.

CFIF’s radio ad urges all Utahns to call Representative Bishop’s office at (801) 625–0107 and tell him to protect taxpayers and bondholders by saying “no” to the Obama Administration’s “Super Restructuring” bailout of Puerto Rico’s bloated, irresponsible government.

February 8th, 2016 at 2:53 pm
Puerto Rico: Lingering Questions for Banco Popular’s Richard Carrion
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Late last year, we posed several questions to Banco Popular President and CEO Richard Carrion, in conjunction with his appearance as a witness during a Congressional hearing on Puerto Rico’s public debt.

Our questions centered mainly upon his recent emergence as a staunch advocate of a unilateral restructuring of Puerto Rico’s debt, a bizarrely anti-lender stance for the head of the  Island’s largest bank.  Among our questions, we asked how Carrion’s bank had avoided the severe exposure to Puerto Rican debt experienced by the Island’s other lenders and citizens, and why Popular – a private sector leader by any definition – has been so reluctant to align with other private sector actors in negotiating a consensual debt solution between Puerto Rico and its lenders.

Needless to say, we found Carrion’s newfound fondness for complete restructuring puzzling.

A closer look at Popular’s financial disclosures, however, reveals the real reason the bank so proudly advocates in support of a super restructuring:  In 2014 and 2015, Popular shed massive amounts of government and public corporation debt that would be subject to a restructuring, enabling it to emerge as an ally for the Garcia Padilla Administration.

In December 2014, Popular was itself a large bondholder, with approximately $337 million of their $811 million (42%) exposure to Puerto Rican debt in public corporations PRASA and PREPA.  Its exposure to General Obligation debt was roughly $82 million, or 14% of its holdings.

Fast forward one year.  Banco has reduced its exposure to debt that would be subject to a restructuring drastically, now holding only $59 million of public corporation debt (10%) and $23 million (4%) of general obligation debt.  The remaining 86% of its exposure is to debt is in the form of loans to municipalities, which are not and never have been part of the restructuring discussion.  It has actually increased its exposure to this “safe” municipality debt by about $20 million over the same time span.

In other words, over the last year, Banco Popular has shed exposure to hundreds of millions in debt that would be subject to La Fortaleza’s scheme, while unsuspecting Puerto Ricans held various debts (PFCs, GOs, PREPA) and lost their hard-earned money.

Herein lies the twist:  Carrion’s timing was impeccable, but it also raises red flags.

In a recent news report, the Washington Free Beacon notes Carrion’s relationship with Antonio Garcia Padilla, the scandal-plagued brother of the governor who is the lone employee of a suspicious island-based non-profit.  That non-profit, of which Carrion is a board member, has received large contributions from Banco Popular and is housed in the bank’s San Juan headquarters.  Was Popular given advanced warning of this plan in exchange for that money?

As if that’s not already bad enough, there’s more.  Popular’s close relationship with the Garcia Padilla administration continues to pay dividends.  Banco stands to generate another $9 million in profit from the government’s recently proposed liquidation of Housing Finance Authority Assets, another windfall for what has already been a profitable financial crisis for the bank.

And what about the rest of the bondholders – those who will be wiped out by an unconstitutional restructuring, and don’t have the luxury of dumping their life savings in exchange for sweetheart deals from the Garcia Padilla administration?

If Popular truly seeks to restructure these debts for the good of Puerto Rico, will it support the same type of unilateral restructuring for other types of loans taken out by regular Puerto Ricans who are Popular customers?  Will Popular allow its own clients to restructure their mortgages and car loans and cease and desist from any and all foreclosure processes against these borrowers?

Call us skeptical.

December 1st, 2015 at 1:44 pm
Puerto Rico Should Work With Stakeholders to Reach Consensual Solution to Debt Crisis
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At today’s hearing, Richard Carrion testified that as a professional banker, he was “extremely reluctant” to testify in favor of debt restructuring.  Yet Carrion has given no weight to promising proposals put forth by the private sector, preferring instead to trumpet the agenda of his friend Governor Garcia Padilla.  As demonstrated by today’s bond payment, the Puerto Rican government has the means to meet its obligations, and should work with stakeholders to reach a consensual solution.

December 1st, 2015 at 10:43 am
Puerto Rico Debt Crisis: Richard Carrion Is a Problematic Witness Sitting Alongside Governor Garcia Padilla
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At today’s Senate Judiciary Committee hearing on Puerto Rico’s fiscal situation, Governor Alejandro Garcia Padilla will likely face tough questioning from Senators displeased with his handling of the island’s economy.  Sitting alongside Gov. Garcia Padilla to face those questions will be a close friend from the Commonwealth’s financial sector:  Banco Popular Chairman and CEO Richard Carrion.

Carrion, whose bank is no stranger to asking for federal assistance – it received almost $1 billion in TARP funding from the Treasury (which it did not repay until July 2014) – is a longtime Garcia Padilla supporter who continues to maintain a close relationship with the Puerto Rican government.  Additionally, Banco Popular’s General Counsel Javier Ferrer is the former GDB President under Gov. Garcia Padilla, and longer-tenured lawmakers will also be familiar with the bank’s previously cozy relationship with Representative Luis Gutierrez, who lobbied for that TARP funding for the bank in 2008.

The island’s largest lender holds unmatched influence over the Island’s financial sector, controlling over 40% of the Commonwealth’s credit market.  It has also benefited from Puerto Rico’s debt crisis by collecting underwriting fees on large swaths of the public debt and acting in a fiduciary capacity for many debt issuers.

At today’s hearing, we therefore urge Senators to consider the motivations behind Carrion’s testimony.

Over the years, Banco Popular stands as the biggest beneficiary of Puerto Rico’s debt crisis, collecting fees to underwrite huge swaths of Puerto Rican debt.  Since 2008, Banco Popular’s subsidiary, Popular Securities, has been involved in the underwriting of over $56 billion in Puerto Rican bond offerings, mostly for the Puerto Rican government.  In that capacity, Popular has had a direct hand in the issuance of billions of dollars of debt to investors on the island and mainland, including to small investors, pensions, and mutual funds.  As underwriter, Popular has performed due diligence on every bond offering in which it has been involved.  Yet in advocating for a complete restructuring of Puerto Rico’s debts, Popular is now asking to restructure the very same bonds it recommended to regular investors saving for retirement after having passed judgment on their suitability for such investors.

In addition to fees collected as underwriter, Popular also acts in a fiduciary capacity for several bond issuers, serving as paying agent, escrow agent, and trustee.  These issuers include institutions with deep ties to Gov. Garcia Padilla’s administration, including the Government Development Bank, COFINA, the University of Puerto Rico, and the recently defaulted Public Finance Corporation among others.

Despite having already profited handsomely on the debt crisis that it has helped to create, Popular is now advocating for a complete restructuring of the government’s public debts.  At first glance, it seems strange that a large lending institution like Popular would take such an anti-lender stance on Puerto Rico’s debt, especially given that it helped to issue so much of it.  Through an agreement with JP Morgan, and previously Morgan Stanley, however, Popular is only exposed to a small fraction of the underwriting exposure for any offering made to mainland US investors.  Further, most of Popular’s outstanding exposure to Puerto Rico debt is to several of the Island’s 78 municipalities, which has never been part of a restructuring proposal.  Their direct exposure to debt that would be subject to a restructuring is minimal.

Even after a total debt restructuring, Popular would no doubt choose to continue its practice of selling  loans made to struggling, regular Puerto Ricans to mainland institutional investors and hedge funds at steep discounts, who in turn seek 100% repayment from the borrowers.  To be clear, Popular has long engaged in these dealings with Wall Street, having already unloaded over $1.75 billion in loans to institutional investors which are in varying states of foreclosure.

All of this suggests a self-serving agenda.  While it carries minimal direct exposure to the debts that it seeks to restructure, Popular stands to profit handsomely on the backs of regular Puerto Ricans by continuing to sell their loans to Wall Street firms when they cannot pay their debts.

It triggers the question, then, that if Popular truly seeks to restructure these debts for the good of Puerto Rico, will it support the same type of unilateral restructuring for other types of loans taken out by regular Puerto Ricans who are Popular customers?  Will Popular allow its own clients to restructure their mortgages and car loans and cease and desist from any and all foreclosure processes against these borrowers?  Or will it reap the financial benefits of the crisis that it is creating for Puerto Rican borrowers?

In addition to those questions, here are some others that Senators would be wise to ask of Carrion:

  • What is your relationship, personally and professionally, with Gov. Garcia Padilla, his administration and his family?
  • How is it that your bank, the largest in Puerto Rico, has avoided the exposure to public securities experienced by other banks?
  • As a recipient of a large federal bailout resulting from poor lending practices, what qualifies you to advise on the best path forward for Puerto Rico’s recovery?
  • As a private sector leader, why are you not working with other members of the private sector to reach a consensual solution?
  • If you are willing to advocate for massive debt forgiveness to the Puerto Rican government, are you willing to provide similar debt forgiveness to regular Puerto Ricans that struggle to make loan payments to your bank?

Considering that the biggest beneficiary of the Puerto Rico debt crisis now calls for “Super Chapter 9” bankruptcy and broad restructuring powers, those are all reasonable questions.

November 2nd, 2015 at 9:37 am
WSJ’s O’Grady: “Puerto Rico Doesn’t Need Bankruptcy”
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We at CFIF have steadfastly opposed the effort by some to upend American bankruptcy laws in order to allow Puerto Rico to declare bankruptcy.  “American taxpayers,” we believe, “should not be saddled with yet another bailout and force Americans saving for retirement to take a financial hit.”  Rather, “Congressional Republicans should guide Puerto Rico into doing the right thing:  trim spending and taxes, stand up to unions and undertake badly-needed governing reforms.”

We’re therefore happy to find in this morning’s Wall Street Journal that weekly “Americas” columnist Mary Anastasia O’Grady agrees:

[T]here is little evidence that Puerto Rico faces a humanitarian crisis any more than the heavily indebted states of California and Illinois.  And as to the deteriorating fiscal environment, it seems to be largely the work of Gov. Alejandro Garcia Padilla, who has been signaling markets that default is a policy goal.  As Carlos Colon de Armas, a professor of finance at the Graduate School of Business at the University of Puerto Rico, told me last week, ‘If, instead of doing everything it can do in order not to pay, the government of Puerto Rico were doing everything it could do in order to pay, things would be very different.'”

The answers to Puerto Rico’s situation, as is the case with fiscally irresponsible states like Illinois and even the federal government itself, lie with the tried-and-true concepts of fiscal responsibility, lower taxes, fewer regulations and respect for established rule of law and contractual expectations.

October 1st, 2015 at 5:07 pm
CFIF Leads Coalition Opposing “Super Chapter 9” Bailout for Puerto Rico
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In a letter addressed to Senate Finance Committee Chairman Orrin Hatch and Senate Judiciary Committee Chairman Charles Grassley, the Center for Individual Freedom (“CFIF”) this week led a coalition of a half dozen prominent free-market organizations urging opposition to any legislation that grants Puerto Rico “Super Chapter 9” status. 

“‘Super Chapter 9’ would give Governor Alejandro Garcia Padilla a free pass to violate Puerto Rico’s constitution, but would do nothing to bring about meaningful fiscal reform,” the letter reads.

“It is our hope that Congress will instead take the lead on this tough issue by urging the Garcia Padilla Administration to implement real fiscal reform and uphold the constitution before any consideration of restructuring the non-constitutional debt,” the letter continues.  “If necessary, Congress has the legal authority to consider measures such as a federal control board to oversee financial reform.  When, and only when, reform is enacted, Congress can then consider a process that encourages an orderly restructuring of Puerto Rico’s debts that respects the constitutionally-protected bonds and the rule of law.”

In addition to CFIF, the letter was signed by the leaders of Frontiers of Freedom, Hispanic Leadership Fund,  Institute for Liberty, National Taxpayers Union and Taxpayers Protection Alliance.   

Read the letter by clicking here (PDF).

August 24th, 2015 at 11:44 am
Puerto Rico: Rule of Law and Fidelity of Contract, Not Bankruptcy
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At CFIF, we stand for the rule of law and with American taxpayers, investors, savers and seniors against the destructive proposal floated by some in Washington, D.C. of changing longstanding law to allow Puerto Rico to declare bankruptcy.

Accordingly, we’re happy to see that in her weekly “The Americas” column in today’s Wall Street Journal, Mary Anastasia O’Grady highlights the way in which pro-bankruptcy advocates undermine the rule of law by disregarding contractual property rights:

The governor, and the legislature which his party controls, made a conscious decision when they approved the budget not to put the funds aside for that payment.  ‘They are explicitly legislating default because they think that puts the creditors on their knees.  Then the creditors will have to make concessions…  Creditors have protections [in bond contracts],’ he adds, ‘and a court of law is going to enforce those agreements.’  Securitized bonds provide bondholders with a property right to a designated cash-flow stream.”

As we specified previously, better alternatives exist:

For example, the Puerto Rican government could actually pay the hundreds of millions of dollars it owes to the power authority (PREPA), or Congress could impose greater oversight over Puerto Rico.  Remember, a financial control board was effective in reforming the District of Columbia’s finances 20 years ago, accomplished on a bipartisan basis by a Republican Congress and a Democratic president.  Ultimately, that might be the way to put in place comprehensive, structural reforms so that Puerto Rico never again spirals out of control.”

The solution is adherence to the rule of law and the enforcement of mutually bargained-for contract, not yet another bailout imposed upon American taxpayers.

August 20th, 2015 at 10:20 am
Greetings From Puerto Rico… the Welfare State
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Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

July 27th, 2015 at 4:50 pm
Video: Puerto Rico Today, America Tomorrow?
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In this latest installment of the Freedom Minute, CFIF’s Renee Giachino discusses Puerto Rico’s debt crisis, explains why a Chapter 9 bailout is a bad idea, and warns that Puerto Rico should serve as a wake-up call for the entire nation to get its fiscal house in order.

June 1st, 2015 at 9:39 am
Bankruptcy for Puerto Rico? Bad Idea
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Puerto Rico’s years of fiscal mismanagement, cronyism and corruption have come to a head.  The island territory is at least $73 billion in debt, and guess who Congressional Democrats think should pick up the tab:  American taxpayers, savers and seniors.

Puerto Rico Resident Commissioner Pedro Pierliusi and Governor Alejandro Garcia Padilla are working with fellow Democrats to lure Republicans into passing a bill (H.R. 870) that would give Puerto Rico a bailout, and allow Puerto Rico to walk away from its debts.

We at CFIF are concerned that some Republicans in Congress are receptive to this taxpayer bailout.  Representative Goodlatte of Virginia, who chairs the House Judiciary, recently visited Puerto Rico to explore pursuing Chapter 9 having set the legislative process in motion when he consented to having a public hearing on the proposal back in February.

Chapter 9would hurt thousands of hardworking Americans on the mainland and in Puerto Rico who have invested savings in Puerto Rican bonds.  And longer-term, it would do nothing to reform a broken Island.  Furthermore, a Chapter 9 bailout flies in the face of principles for which Republicans are supposed to stand:  limited government, fiscal responsibility and the rule of law.  Some Puerto Rican apologists have even suggested that if Puerto Rico is not granted Chapter 9, the Island will just come calling for a bailout.  But that is a false choice, and a stick-up by San Juan and their cronies.

Fortunately, better alternatives exist.

For example, the Puerto Rican Government could actually pay the hundreds of millions of dollars it owes to the power authority (PREPA) or Congress could also impose greater oversight over Puerto Rico. Remember, a financial control board was effective in reforming the District of Columbia’s finances 20 years ago, accomplished on a bipartisan basis by a Republican Congress and a Democratic President.  Ultimately, that might be the way to put in place comprehensive, structural reforms so that Puerto Rico never again spirals out of control.

This brings us back to the Republican Congress, specifically Rep. Goodlatte.  At a minimum, holding a hearing signals openness to the bill.  Yet, this changes the rules in the middle of game and can have economic consequences, which Rep. Goodlatte has acknowledged.

Now that Rep. Goodlatte has met in Puerto Rico with its leaders, fellow conservatives are looking to him to put the brakes on this bailout.  As Jay Marts of the Virginia Northern Shenandoah Tea Party writes, “H.R 870 is not a conservative solution,” but “a gift to the Democrats.”

American taxpayers should not be saddled with yet another bailout and force Americans saving for retirement to take a financial hit.  Instead, Congressional Republicans should guide Puerto Rico into doing the right thing:  trim spending and taxes, stand up to unions and undertake badly-needed governing reforms.  The time is right for a control board.