|The National Puerto Rican Coalition (NPRC) has denounced US Treasury Secretary Jack Lew’s “alarmist rhetoric” about the Obama administration’s July 1 deadline for Senate passage of the Puerto Rico Oversight, Management, and Economic Stability Act (the so-called PROMESA bill, HR 5278), which recently passed the House of Representatives.
“Secretary Lew’s letter to Senate Majority Leader McConnell is filled with misleading and inflammatory rhetoric about the administration’s July 1 deadline, which is being used to push senators from both parties to hastily pass this deeply flawed legislation,” NPRC.
According to NPRC, the reality is that on July 1, with or without legislation, Puerto Rico will likely default on some bond payments. On July 2 lawsuits will be filed, and those will work their way through the process. “However, this is not Armageddon. Fires won’t burst out on the streets of San Juan and chaos will not ensue. Yes, eventually the state government will not have the money to pay the lenders, however, this will happen whether this legislation passes or not. There is time for Congress to get this right. A bad bill is worse than no bill,” the coalition continued.
The NPRC pointed out that, if Congress does not pass this legislation, the federal executive branch has many tools at its disposal. “Regardless of the alternatives to PROMESA, and there are several, a flawed bill that deprives Puerto Rico of their right to self-government must not be an acceptable alternative,” NPRC said. “Puerto Rico does not need fear mongering from the Obama Administration, particularly when they have been ignoring this issue for so long. What Puerto Rico needs is a good legislation, which balances the need for debt restructuring authority with respect for the basic civil rights that every single Puerto Rican is endowed with as an American citizen. “President Obama was twice elected leader of this country because he ran on a platform of equality for all Americans, and we call on him now to live up to that promise,” the NPRC concluded.
However, according to Richard Lawless, a former senior banker, Lew worked for Citibank when the bank was among the first firms to sell bonds issued by one of Puerto Rico’s largest municipal agencies when it was technically bankrupt at the time it issued these bonds and could not pay them back.
Witnesses testifying at Puerto Rico Senate investigative hearings in early 2015 said that although the credit agencies (Moody’s, Fitch and S&P) knew of the insolvency, they could secure good credit ratings for the bonds for the “right fee”. According to the same testimony, Wall Street’s biggest banks knew all this but for the “right sales fees” they would sell these junk bonds as safe retirement income to their retired investors.
“Now, using their position in government, all three of these gentlemen [Lew and two of his former Wall Street colleagues, now Treasury Department counsel] marketed congress for a full bailout of Puerto Rico with taxpayer dollars and the innocent bondholder’s money,” Lawless asserted.