‘Bond predators’ on Puerto Rican debt want their bailout
BY FROMA HARROP
Puerto Rico is sinking in $73 billion of debt. Mired in a long-running depression, the U.S. territory has already cut essential services to bare bones. Puerto Rico can’t fully pay its bondholders without setting off total economic collapse.
One of two things can happen, short of doing nothing and setting off a humanitarian crisis. One is to let Puerto Rico restructure its debt in a federal bankruptcy court. The U.S. Treasury recommends that route.
A Chapter 9 bankruptcy would cost American taxpayers about nothing. Losses would be borne by the speculators who made the risky investments. The Financial Times has called hedge funds wagering on distressed Puerto Rican debt “bond predators.”
The other option is to have U.S. taxpayers bail out the island with enormous transfers of aid.
Guess which path the hedge funds want to take? The taxpayer bailout, of course.
And guess which side Washington Republicans are on? The hedge funds’. Funny how fast these “fiscal conservatives” forget their distaste for bailouts when their Wall Street benefactors come knocking for theirs.
Puerto Rico’s government debt comes with various levels of government guarantees, but none of it is safe. That some tax-exempt Puerto Rican bonds have recently traded for an average yield of nearly 42 percent illustrates how little that guarantee means.
Read more here: http://www.newsobserver.com/opinion/op-ed/article51951890.html#storylink=cpy
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