Puerto Rico’s growing emergency
Hurricanes exacerbate financial crisis
Jule Pattison-Gordon | 10/11/2017, 10:22 a.m.
Garcia became head of Puerto Rico’s Government Development Bank in 2009. While there, he issued COFINA bonds, which are backed by sales taxes and thus draw from funds that otherwise would support public services. One of the banks that received steep fees for underwriting those bonds was Santander, where Garcia had been an executive and to which he returned after his government role, according to a report from the Hedge Clippers and Committee for Better Banks. Report authors questioned the financial logic behind many of the COFINA bonds issued, and charged that Garcia profited off exacerbating the financial crisis.
Garcia was appointed to the Financial Oversight and Management Board, which is charged with restructuring Puerto Rico’s finances to address the debt crisis. Meanwhile, Garcia also chairs the Caribbean Financial Group, which offers small, personal loans aimed at individuals with little access to credit from traditional lenders. The group’s loans have interest rates listed as high as 25 percent over four years, according to the Hedge Clippers-Better Banks report. That report states that such loans seem designed to extract profit from those with few alternatives, such as Puerto Ricans in the midst of the debt crises. Protestors demonstrated in Newton, Massachusetts in March, calling for Garcia to step down from the board.
The White House
President Donald Trump shook the finance industry when he said in an interview that aired on Fox News on Oct. 3 that Puerto Rico’s debt would be cleared. Following his comments, White House officials quickly backtracked, saying the president should not be taken literally.
“You know they owe a lot of money to your friends on Wall Street. We’re going to have to wipe that out,” Trump said on CNN. “You can say goodbye to that, I don’t know if it’s Goldman Sachs, but whoever it is, you can wave goodbye to that.”
The value of Puerto Rico’s general obligation bonds dropped after these comments, and White House budget chief Mick Mulvaney downplayed the comments on CNN.
“I think what you saw the president talking about was his acknowledgment that Puerto Rico is going to have to figure out a way to solve that debt problem in order to fix itself going forward,” Mulvaney said. “Puerto Rico is going to have to figure out how to fix the errors that it’s made for the last generation on its own finances.”
He told Bloomberg that the administration would not pay off Puerto Rico’s debt, but is preparing a rebuild and repair plan.
Critics have said the government is moving too slowly to rescue its citizens in Puerto Rico. According to figures provided to Vox on Oct. 3 by a spokesperson, FEMA had approved $691 million in grants to Florida to recover from Irma but only $35 million to Puerto Rico.