Wall Street caused Puerto Rican crisis, poor Puerto Ricans pay for it

This video says about itself:

Cash-Strapped Puerto Rico at Hedge Funds’ Mercy

24 July 2015

TRNN’s Jessica Desvarieux explores how investment funds OppenheimerFunds and Franklin Advisers are pressuring Puerto Rico to pay in full, while Congress won’t grant the island nation authority to file for bankruptcy. But is this a ploy to further privatize Puerto Rico?

By Kate Kilpatrick:

Homeless, drug-addicted more vulnerable amid Puerto Rico debt crisis

On tough San Juan streets, city’s most marginalized residents eke out living in precarious underground economy

July 31, 2015 8:00AM ET

SAN JUAN, Puerto Rico — Rafael, 36, tried to run when he saw the van carrying coolers of chicken soup, orange drink and sweetened hot coffee park at one of the final stops of its Friday night rounds. The sun had just come up, a soft morning light revealing the disheveled figure who limped speedily toward the volunteers.

Kamille Camacho Monclova, 23, a public health student whose easy rapport with the city’s homeless and drug addicted has been developed over several years of doing these overnight rounds, yelled out for him to hurry.

“I can’t run with two ulcers,” the man called back.

When he finally reached the van, Rafael — who, like other street people in this story, Al Jazeera America is identifying only by first name — collapsed onto nearby steps and rolled up the left leg of his soiled black pants to reveal an ulcer that extended from his knee to ankle, the raw flesh eroded deep into the tissue and muscle but not yet to the bone. The odor from the wound was as unrelenting as the swarm of flies around it, which Rafael shooed away, to little effect. He pulled up the right leg of his pants to reveal a similar gaping lesion.

He tried going to the municipal hospital, he explained, but there he was told the doctors don’t clean wounds for tecatos, a derogatory term for drug addicts.

“If they are complaining, it’s because it does happen,” Camacho said of people being refused treatment at hospitals. “They are not going to complain for nothing. They’re people used to handling a lot of bad situations and pain.”

Puerto Rico’s middle class is bearing the brunt of the island’s $73 billion public debt and attending economic crises, which have led to sales and property tax hikes, fueled already high crime rates and sparked large-scale migration to the U.S. mainland. Although 45 percent of the population lives below the poverty line, according to American Community Survey estimates, lower socioeconomic classes have so far been buffered from the effects of the current crisis by the island’s high rates of public assistance, in the form of food stamps and subsidized rent, electricity and water.

But repercussions from the economic crisis will now undoubtedly affect the most marginalized members of Puerto Rican society too, leaving homeless, mentally ill and drug-addicted residents even more vulnerable than they already are.

Camacho said, “If people right now have problems because of lack of service, I don’t want to imagine.”

Puerto Rico: Dr. Jose 'Chaco' Vargas Vidot, center, speaks to volunteers before they head out on their Friday night rounds

Dr. Jose “Chaco” Vargas Vidot, center, speaks to volunteers before they head out on their Friday night rounds. Photo: Christopher Gregory for Al Jazeera America

Iniciativa Comunitaria was founded in 1992 by José “Chaco” Vargas Vidot, a doctor, university professor and longtime public health professional and humanitarian aid leader. The nonprofit provides health, education and harm-reduction services to people marginalized by traditional health systems, particularly the homeless, drug addicts, sex workers and people with HIV.

The group has seen a 20 percent reduction in federal funding since last year. “They cut first 20 percent on prevention and then another 20 percent on direct services” such as detox, drug treatment, said Vargas.

“Usually we provide services in terms of demand of services,” he continued. “Now we put a cap. We don’t serve everybody, because we don’t have sufficient personnel and hours of intervention that could facilitate a very efficient intervention.”

In response, the organization has eliminated positions, consolidated workspaces and increased the number of volunteers as well as fundraising efforts.

“The physical and mental deterioration of people is a result of poor access to services,” Vargas said. As that access is further strained by budget cuts, he fears societal phenomena such as outmigration, mental illness, domestic violence and crime will intensify.


34 thoughts on “Wall Street caused Puerto Rican crisis, poor Puerto Ricans pay for it

  1. The PR crises was caused by years of poor leadership. This has occurred ever since the departure of Munoz Marin who lifted PR out of the poor US governship of the island. PR has ignored one of the most common sources of revenue for all governments; property taxes. Now it is too late to invoke a meaningful property tax base. The residents are over their heads in overly large mortgages made possible by the zero to close to zero property tax. PR bet on some future source that never occurred.


    • Hi, Luis Muñoz Marín was governor of Puerto Rico from 1949 to 1965. He was a member of the Popular Democratic Party, sister party of the Democratic party in the USA; and defined himself as ‘democratic left’ (he was a member of the Puerto Rican Socialist Party at one time). When he was young, supporters of US statehood for Puerto Rico (allies of the US Republican party) violently attacked his family.

      According to Wikipedia, he ‘promoted a minimum wage, initiatives to provide food and water’.

      But also:

      ‘In 1948, the Puerto Rican Senate passed Law 53, also known as the Gag Law, which would restrain the rights of the independence and Nationalist movements in the island. The Senate at the time was controlled by the PPD and presided over by Luis Muñoz Marín.[43]

      The Ley de la Mordaza (a gag law) passed the legislature on May 21, 1948 and was signed into law on June 10, 1948, by the U.S.-appointed governor of Puerto Rico, Jesús T. Piñero. It closely resembled the anti-communist Smith Act passed in the United States, and was perceived as an effort to suppress opposition to the PPD and the independence movement.[44]

      Under this law it became a crime to own or display a Puerto Rican flag anywhere, even in one’s own home. It also became a crime to speak against the U.S. government; to speak in favor of Puerto Rican independence; to print, publish, sell or exhibit any material intended to paralyze or destroy the insular government; or to organize any society, group or assembly of people with a similar destructive intent. Anyone accused and found guilty of disobeying the law could be sentenced to ten years’ imprisonment, a fine of $10,000 dollars (US), or both.[45]


      According to Dr. Leopoldo Figueroa, a member of the Partido Estadista Puertorriqueño (Puerto Rican Statehood Party) and the only non-member of PPD in the Puerto Rican House, the law was repressive and in direct violation of the First Amendment of the U.S. Constitution, which guarantees freedom of speech.[46] Figueroa pointed out that every Puerto Rican was born with full citizenship, and full U.S. constitutional protections.[47]

      Muñoz Marín used Law 53 to arrest thousands of Puerto Ricans without due process – including members of other political parties, and people who did not vote for him.[48]’

      So, a mixed legacy.


  2. You ignore “Operation Bootstrap” and the benefits it brought to PR. You also ignore my rebuttal against the comment that Wall Street caused PR’s problems, but rather that PR has caused its own problems – – – much like Greece.


    • Hi Waldo,

      ‘Operation Bootstrap’ fitted in with Muñoz Marín policies, self-described as ‘democratic left’. It was rather similar to the New Deal of President Roosevelt in the USA. It included government money for housing, a program of agrarian reform which limited the area held by large sugarcane interests, etc.

      So, like Roosevelt’s New Deal, a program hardly popular with the right wing of the US Republican party. In the anti-Roosevelt Hearst media, there was this rhyme:

      The Red New Deal with a Soviet seal,
      Endorsed by a Moscow hand
      The strange result of an alient cult
      In a liberty loving land.

      There was not only criticism of Operation Bootstrap from the right. Also, from the left, eg, in John Gerassi’s The Great Fear in Latin America:


      One may ask to what extent Operation Bootstrap only led to short-term progress and did not solve long term issues.

      Did Puerto Pico (and Greece) ’cause their own problems’? Both ‘Greece’ and ‘Puerto Rico’ are not monoliths. In both, there are rich people and poor people. While rich people often contributed to the problems, poor people who did not cause the problems often suffer most from them. And in both countries, politicians and bureaucrats made decisions harming most people in collusion with external powers.

      In Greece, some of the problems were caused by joining the Eurozone. That eliminated the possibility which sovereign countries usually have of devaluing currency to stimulate exports (Puerto Rico does not have its own currency, so cannot do that either. Contrary to Greece, it also does not have its own banking system).

      Other factors in Greece: pressure by the German and French governments to spend lots of money on French and German weapons:


      and the fraudulent role of the Goldman Sachs bank in Greece:


      and the ‘medicine’ of austerity prescribed by the European Union, European Central Bank and IMF for the Greek economy. ‘Medicine’ which did not work, but only led to a worse and worse downward spiral, making it more and more impossible to repay debts.

      Some of that goes, differently:


      but somewhat similarly, for Puerto Rico



      Hedge Funds Helped Wreck Puerto Rico’s Economy, And The Poor Are Paying The Price:


      Liked by 1 person

      • As I said prior; PR set up housing for the poor people but forgot (?) to gradually increase the property tax on residential housing. How does a country exist without a property tax base unless it has a boon in some natural resource? Puerto Rico is rich in copper in their central mountain area but chose not to allow mining it. That was their choice which I can not fault. But the goose has died and no more golden eggs are available unless the mainland US decides to bail them out.
        I personally saw all this occurring because I have visited relatives ever since 1963. I lived in the inexpensive housing (casarios and individual homes) created during operation bootstrap. I saw the sugar cane (my father-in-law managed a cane plantation) economy change while they tried planting tomatoes, pineapples and other crops that would not deplete the soil. So I know first hand what PR has been through; all the boon and bust cycles. But the common factor that I will never understand is the lack of taxing residential property in order to pay for the infrastructure.
        Blaming hedge funds for PR’s economy is like blaming hedge funds for the ruination of Orange County California’s fiscal demise several years ago. It is not the funds – – – it is the lack of fiscal responsibility for those who were supposed to be guarding the golden goose.


        • Hi Waldo, thanks for your personal reminiscences.

          The crisis in Puerto Rico (like in Greece) has a complex of causes. For some of them, see


          Included there: “Interest income paid to owners of bonds issued by the government of Puerto Rico and its subdivisions are exempt from federal, state, and local taxes (so called “triple tax exemption”).[f] Unlike most other US triple tax exempt bonds, Puerto Rican bonds retain tax exemption regardless of where the bond holder resides in the United States,[e][f][g] a marketing and sales advantage consequent to the restriction typically imposed on municipal bonds with triple tax exemption in which exemptions are available to bond holders that reside within the state or municipal subdivision that issues the bonds.”

          These bonds were largely bought by the hedge fund billionaires, who now advocate closing Puerto Rican schools. Which would lead to a further downward spiral for Puerto Rico.

          One of the other causes:

          “Puerto Rico is subject to the Commerce and Territorial Clause of the Constitution of the United States and, therefore, is restricted on how it can engage with other nations, sharing most of the opportunities and limitations that state governments have, albeit not being one. Puerto Rico is also subject to the different treaties and trade agreements ratified by the United States, as well as all other laws enacted at the federal level.

          One of the most significant economic restrictions imposed to Puerto Rico is the Merchant Marine Act of 1920, also known as the Jones Act, which prevents foreign-flagged ships from carrying cargo between two United States ports, a practice known as cabotage.[m][n][o][p][q] Because of the Jones Act, foreign ships inbound with goods from Central and South America, Western Europe, and Africa cannot stop in Puerto Rico, offload Puerto Rico-bound goods, load mainland-bound Puerto Rico-manufactured goods, and continue to U.S. ports. Instead, they must proceed directly to U.S. ports, where distributors break bulk and send Puerto Rico-bound manufactured goods to Puerto Rico across the ocean by U.S.-flagged ships.[r]

          Puerto Rican consumers ultimately bear the expense of transporting goods again across the Atlantic and Caribbean Sea on U.S.-flagged ships subject to the extremely high operating costs imposed by the Jones Act.[s] Elías Gutierrez, an economist, urban planner, and former director of the School of Planning of the University of Puerto Rico, asserts that, “Under the protection of federal statutes, a monopsony has been siphoning scarce resources from the poorest U.S. jurisdiction to sustain a segment of U.S. industry that has become uncompetitive due precisely to the protection it has enjoyed.”[10] He further explains that, “Although the Commonwealth of Puerto Rico and the United States should be considered the senior partners in a common market, the Cabotage laws, in practical terms, constitute a protective barrier that favors Mexican and Canadian ports of origin and destination against producers in Puerto Rico.”[10] The local government of Puerto Rico, however, has requested several times to the U.S. Congress to exclude Puerto Rico from the Jones Act restrictions. Each request has not been granted. [t]

          Another federal statute that contributed to the crisis was the expiration of the section 936 of the U.S. Internal Revenue Code which applied to Puerto Rico.[u] This section was critical for the economy of the island as it established tax exemptions for U.S. corporations that settled in Puerto Rico and allowed its subsidiaries operating in the island to send their earnings to the parent corporation at any time, without paying federal tax on corporate income. The whole economy of the island based itself around this privilege, and was and has been unable to recoup after its loss.[u]

          Puerto Rico also receives less federal funds when compared to states of the United States, although most residents of Puerto Rico do not pay federal income taxes.[v] The island is usually treated as if it were a state for all legislative purposes, albeit not enjoying all the benefits of being one.[w]

          In terms of monetary policy, Puerto Rico does not control its money supply, nor its coinage, nor its interest rates as it uses the U.S. dollar for currency and is subject to the Federal Reserve as its central bank even though it is not a state of the United States.”

          Liked by 1 person

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  7. Greed, fraud, dishonesty, and arrogance: these are the words that best describe the reality of Wall Street today.

    We can no longer tolerate an economy and a political system that have been rigged by Wall Street to benefit the wealthiest Americans in this country at the expense of everyone else. While President Obama deserves credit for getting this economy back on track after the Wall Street crash, the reality is there is a lot of unfinished business.

    That’s why today in New York City I announced my plan for taking on Wall Street. We must break up the banks, end their casino-style gambling, and fundamentally change the approach of the financial industry to focus on helping the American people.

    When I am president, we will reform Wall Street and our financial system to make it work for all Americans. I want to tell you about what I will do, then ask you to add your name to endorse our plan.

    To those on Wall Street, let me be very clear. Greed is not good. In fact, the greed of Wall Street and corporate America is destroying the fabric of our nation. And here is a promise I will make as president: If Wall Street does not end its greed, we will end it for them.

    As most people know, in the 1990s and later, financial interests spent billions of dollars in lobbying and campaign contributions to force through Congress the deregulation of Wall Street, the repeal of the Glass-Steagall Act, and the weakening of consumer protection laws.

    They paid this money to show the American people all that they could do with that freedom. Well, they sure showed the American people. In 2008, the greed, recklessness, and illegal behavior on Wall Street nearly destroyed the U.S. and global economy. Millions of Americans lost their jobs, their homes, and their life savings.

    Meanwhile, the American middle class continues to disappear, poverty is increasing, and the gap between the very rich and everyone else is growing wider and wider by the day. But the American people are catching on. They also know that a handful of people on Wall Street have extraordinary power over the economic and political life of our country.

    We must act now to change that. Our goal must be to create a financial system and an economy that works for all Americans, not just a handful of billionaires.

    There are eight points to my plan, and I want to go through each of them here because I think it’s important for our campaign to discuss specific policies with our supporters. Some of this may seem a little in the weeds, but I trust our supporters to be able to handle this kind of policy discussion.

    Here’s my plan for what I will do with Wall Street when I am president:

    Break up huge financial institutions in the first year of my administration. Within the first 100 days of my administration, I will require the Secretary of the Treasury to establish a “Too Big to Fail” list of commercial banks, shadow banks, and insurance companies whose failure would pose a catastrophic risk to the U.S. economy without a taxpayer bailout. Within one year, my administration will break these institutions up so that they no longer pose a grave threat to the economy.

    Reinstate a 21st Century Glass-Steagall Act to clearly separate traditional banking from risky investment banking and insurance services. It is not enough to tell Wall Street to “cut it out,” propose a few new rules and slap on some fines. Under my administration, financial institutions will no longer be too big to fail or too big to manage. Wall Street cannot continue to be an island unto itself, gambling trillions in risky financial instruments. If an institution is too big to fail, it is too big to exist.

    End too-big-to-jail. We live in a country today that has an economy that is rigged, a campaign finance system which is corrupt, and a criminal justice system which often does not dispense justice. The average American sees kids being arrested and sometimes even jailed for possessing marijuana. But when it comes to Wall Street executives — some of the most wealthy and powerful people in this country whose illegal behavior hurt millions of Americans — somehow nothing happens to them. No jail time. No police record. No justice.

    Not one major Wall Street executive has been prosecuted for causing the near collapse of our entire economy. That will change under my administration. “Equal Justice Under Law” will not just be words engraved on the entrance of the Supreme Court. It will be the standard that applies to Wall Street and all Americans.

    Establish a tax on Wall Street to discourage reckless gambling and encourage productive investments in the job-creating economy. We will use the revenue from this tax to make public colleges and universities tuition free. During the financial crisis, the middle class of this country bailed out Wall Street. Now, it’s Wall Street’s turn to help the middle class.

    Cap Credit Card Interest Rates and ATM Fees. We have got to stop financial institutions from ripping off the American people by charging sky-high interest rates and outrageous fees. In my view, it is unacceptable that Americans are paying a $4 or $5 fee each time they go to the ATM. And it is unacceptable that millions of Americans are paying credit card interest rates of 20 or 30 percent.

    The Bible has a term for this practice. It’s called usury. And in The Divine Comedy, Dante reserved a special place in the Seventh Circle of Hell for sinners who charged people usurious interest rates. Today, we don’t need the hellfire and the pitchforks, we don’t need the rivers of boiling blood, but we do need a national usury law.

    We need to cap interest rates on credit cards and consumer loans at 15 percent. I would also cap ATM fees at $2.

    Allow Post Offices to Offer Banking Services. We also need to give Americans affordable banking options. The reality is that, unbelievably, millions of low-income Americans live in communities where there are no normal banking services. Today, if you live in a low-income community and you need to cash a check or get a loan to pay for a car repair or a medical emergency, where do you go? You go to a payday lender who could charge an interest rate of over 300 percent and trap you into a vicious cycle of debt. That is unacceptable.

    We need to stop payday lenders from ripping off millions of Americans. Post offices exist in almost every community in our country. One important way to provide decent banking opportunities for low-income communities is to allow the U.S. Postal Service to engage in basic banking services, and that’s what I will fight for.

    Reform Credit Rating Agencies. We cannot have a safe and sound financial system if we cannot trust the credit agencies to accurately rate financial products. The only way we can restore that trust is to make sure credit rating agencies cannot make a profit from Wall Street. Under my administration, we will turn for-profit credit rating agencies into non-profit institutions, independent from Wall Street. No longer will Wall Street be able to pick and choose which credit agency will rate their products.

    Reform the Federal Reserve. We need to structurally reform the Federal Reserve to make it a more democratic institution responsive to the needs of ordinary Americans, not just the billionaires on Wall Street. It is unacceptable that the Federal Reserve has been hijacked by the very bankers it is in charge of regulating. When Wall Street was on the verge of collapse, the Federal Reserve acted with a fierce sense of urgency to save the financial system. We need the Fed to act with the same boldness to combat the unemployment crisis and fulfill its full employment mandate.

    So my message to you is straightforward: I’ll rein in Wall Street’s reckless behavior so they can’t crash our economy again.

    Will Wall Street like me? No. Will they begin to play by the rules if I’m president? You better believe it.

    That is our plan to create an economy that works for all Americans, not just a handful of billionaires. If you agree with what we want to do, add your name to say that you stand with me.

    No president alone, not Bernie Sanders or anyone else, can effectively address the crises facing the working families of this country without a powerful grassroots movement. When we stand together, there is nothing we cannot accomplish.

    Thank you for standing with me.

    In solidarity,

    Bernie Sanders


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