Thursday, December 31, 2015

End of the Year Cop Out: Puerto Rico By Default

"Puerto Rican officer kills 3 colleagues" Associated Press  December 29, 2015

SAN JUAN — A Puerto Rico police officer fatally shot two high-ranking officers and a policewoman on Monday after an argument at work that temporarily shut down the station in the US territory’s second-largest city, authorities said.

The suspect was immediately arrested.

The suspect held a female lieutenant, a male commander, and a policewoman hostage in an office before he killed them, police spokeswoman Mayra Ayala said. Other police officials identified the officer as Guarionex Candelario.

Ayala said authorities were about to start negotiations with the suspect when the victims were killed. She said police did not have a motive.

Governor Alejandro Garcia Padilla said the suspect was injured during the shooting and remains hospitalized. Padilla declined to say what kind of injuries the officer received and how they were inflicted.

The shooting occurred inside the lieutenant’s office at the police headquarters in the southern coastal city of Ponce.

Ayala said the suspect worked in the antidrug division. Officials said the victims were Lieutenant Luz Soto Segarra, Commander Frank Roman, and policewoman Rosario Hernandez. Roman was named Commander of the Year for Ponce in 2014.


"Governor says Puerto Rico to default on $37M in interest due" by Michael A. Fletcher Washington Post  December 31, 2015

Puerto Rico will skirt a catastrophic default on the vast majority of more than $1 billion in bond payments due in early January, an outcome that required island officials to raid cash set aside to pay other debts.

They used to call it robbing Peter to pay Paul. What you are seeing regrading the commonwealth is the tip of the iceberg regarding the bankruptcy of America at the hands of bankers.

The financial maneuvers will allow the cash-strapped territory to escape default on all but $37.3 million owed to creditors, a relatively small default that marks the second time since August that it will have missed a bond payment.

The moves allow Puerto Rico to buy time as officials hope Congress will help restructure its staggering debt burden.

Are you a bank?

But with the island suffering from a decadelong recession that has shrunk tax revenues and ignited a large migration to the mainland, officials said major defaults loom in May unless lawmakers give the territory an orderly process for restructuring its debt.

‘‘The use of over $100 million in reserved funds to make debt service payments for several of the commonwealth’s issuers should underscore that the commonwealth is running out of options to pay its debt,’’ Melba Acosta Febo, president of Puerto Rico’s Government Development Bank, said in a statement.

As a territory, Puerto Rico lacks the option of bankruptcy that has been used successfully in the past in cities and counties grappling with suffocating debt, including Detroit, Vallejo, Calif., and Jefferson County, Ala.

As if declaring bankruptcy (at bottom) is almost a good thing.

Sorry for ditching those on you.

The Treasury Department has joined with Puerto Rican officials to press members of Congress to pass legislation enabling the commonwealth to seek Chapter 9 protection from creditors or create a financial control board that would have enough authority to coerce recalcitrant bondholders to join a restructuring plan.

Bondholders is a nice way of saying bankers and other corporate investors like hedge funds.

‘‘Today’s announcement that Puerto Rico will miss additional payments demonstrates the gravity of the commonwealth’s fiscal crisis and the need for Congress to act now,’’ a Treasury spokesman said in a statement Wednesday. ‘‘Puerto Rico is at a dead end, shifting funds from one creditor to pay another and diverting money from already-depleted pension funds to pay both current bills and debt service.’’

That's the first item to pay in state budgets.

Congressional Republicans generally have opposed granting a bankruptcy option to Puerto Rico, which some members liken to a bailout even though it would not cost any taxpayer money. Others want Puerto Rico — which has slashed public pensions, cut jobs, and withheld income tax refunds to stay afloat financially — to do more to trim spending and free money to pay creditors.

Still, House Speaker Paul D. Ryan, a Republican from Wisconsin, has said that the House would work to craft a legislative package by the end of March to deal with Puerto Rico’s financial problems — a pledge that has left some Puerto Rican leaders cold.

‘‘These payments are due now,’’ Puerto Rico Governor Alejandro Garcia Padilla said in a speech Wednesday.

In late June, Garcia Padilla called the territory’s more than $70 billion debt ‘‘unpayable.’’ The debt had mounted over the years as a succession of leaders relied on loans to plug increasing budget shortfalls. The cycle of deficits and borrowing was enabled by the fact that Puerto Rican bonds were long seen an attractive because money that investors earned on them is shielded from federal, state, and local taxes.

The island’s economy has been in free fall since 2006 when a lucrative tax break that lured manufacturers was fully phased out.

That can't be the only reason.

Now, just 40 percent of adults in Puerto Rico are in the labor force, and unemployment has been in double digits for the past 15 years. The bleak economy has caused the largest migration of Puerto Ricans to the mainland since the 1950s.



Puerto Rico deal is only a small fix for $70 billion debt crisis

Puerto Rico’s governor warns of likely default on debt

Looks like the death of the island, doesn't it?

Also see:

"Puerto Rico had run completely out of cash, and that as of Tuesday it was going to “claw back” certain revenues dedicated to paying debts, and use the money instead to provide government services and service general obligation bonds." 

That will get you in trouble and possibly killed.

"General obligation bonds were sold to investors with an explicit constitutional promise that timely repayment would take priority over all other expenditures on the island. Failing to pay general obligation debt when due is almost unheard-of. For decades, general obligation bonds have been marketed as virtually default-proof, and a major restructuring of them now by Puerto Rico would raise unwelcome questions about the credibility of the time-honored “full faith and credit” pledge that stands behind such bonds."

Which in turn would raise unwelcome questions about government and entire economic $y$tem.

Finished this post just in the Nick of Time, if you know what I mean.