Political Report # 1372 Vulture Funds Stand To Make Millions In Wake Of Hurricane Maria

by Kate Aronoff, The Intercept

VULTURE FUNDS SCOOPED up hundreds of millions of dollars worth of Puerto Rican debt after Hurricane Maria hit - underwritten by Wall Street and purchased at a massive discount, according to new numbers compiled by the nonprofit LittleSis and provided to The Intercept. Now it's time for the payoff. A deal agreed to last week between creditors, the Puerto Rican government and the Washington-appointed fiscal control board overseeing the island's finances could now funnel hundreds of millions of dollars to those same bondholders in the coming decades. There's also ample reason to suspect at least some of those funds will be siphoned from federal recovery dollars, intended to help rebuild after the storm. According to court filings made public as a result of ongoing debt negotiations, several hedge funds have bought up massive amounts of Puerto Rican bonds in the year following Hurricane Maria, after which prices dropped. GoldenTree Asset Management, a bondholder for the Urgent Interest Fund Corporation - known by its Spanish-language acronym COFINA - owned $587 million worth of Puerto Rican government bonds before the storm, as noted in a filing dated August 18, 2017. As of another filing almost exactly a year later, the company owned $1.5 billion. Tilden Park Capital Management, another COFINA creditor, increased the value of its holdings by $370 million over the same period. General obligation bondholders Aurelius Capital Management and Monarch Alternative Capital have increased their holdings from $39 million before the storm to $488 million as of the last filing. (Aurelius and Monarch both also hold some COFINA bonds.) Due to complexities in the ways some bonds are valued, some hedge funds are reporting increases in bond holdings without actually purchasing more debt. Those bonds, called capital appreciation bonds, have been referred to as Puerto Rico's payday loans due to their predatory structure, in which interest is added back to principal, which increases exponentially over time. In the cases of GoldenTree, Tilden Park, Monarch, and Aurelius, the increases in reported holdings are so massive that they appear to be due to new purchases of debt.

Political Report # 1369 How Puerto Rico Became the Newest Tax Haven for the Super Rich

by Jesse Barron, GQ

A year after the tragedy of Hurricane Maria, the 51st state has become the favorite playground for extremely wealthy Americans looking to keep their money from the taxman. The only catch? They have to cut all ties to the mainland (wink, wink). The party known as Cocktails and Compliance-so called for mixing alcohol with tax advice-was thrown on a Friday evening in May, in a warehouse turned art gallery in Old San Juan. The host had kept his guest list confidential: It contained the names of hundreds of ultra-wealthy mainland Americans who'd moved to Puerto Rico to avoid paying taxes, most of whom were reluctant to advertise that fact. More than 1,500 mainlanders have established residency here since 2012, when the island rebranded itself as a tax haven, and the annual Cocktails is at the center of their social calendar. At a high table, polishing off a bourbon on the rocks, sat a compact man in his 60s wearing a black T-shirt and black suede loafers, no socks. This was Mark Gold, the Florida-born kingpin of traffic-ticket contesting. Gold has attended Cocktails and Compliance every year since moving to Puerto Rico in 2016. “I was looking at different tax havens,” he said, “Andorra, Lichtenstein, Monaco. But the problem is, you have to give up your U.S. passport. When I heard about this, it was too good to be true. But it's real. I live in paradise. I live at the Ritz-Carlton. I drive my golf cart to the beach club for breakfast. Then I go to my sunset yoga class on the beach.” A waiter offered to replace his drink. “Why not?” said Gold. Only seven months had passed since Hurricane Maria laid waste to the island's power grid, and one month remained until hurricane season returned. A reliable estimate placed the death toll at 4,600; 11,000 still reportedly lacked electricity. Residents were showering with pots and plastic cups. In Manhattan, a federal judge was trying to mediate between the various hedge funds that held billions of dollars of the island's debt. Every so often the MIT-educated governor went on television to extol the virtues of austerity. In San Juan, the recovery had been notably uneven. Brand-new shopping centers abutted hotels that looked arsonized; traffic lights stared dead-eyed into the street; FEMA was shuttling relief supplies from the waterfront to staging areas. Inside Cocktails and Compliance, however, the atmosphere resembled the aftermath not of a natural disaster but of a corporate convention, with people who usually saw one another in the daytime gradually succumbing to alcohol and dim lighting.

Political Report # 1321 Betsy DeVos is Helping Puerto Rico Re-Imagine Its Public School System. That Has People Deeply Worried

By Rachel M. Cohen The Intercept

Puerto Rico, in the midst of the chaos and instability following Hurricane Maria, is moving quickly forward with plans to institute a wide swath of education reforms, with the help of the aggressively ideological federal education department, helmed by Education Secretary Betsy DeVos. Puerto Rico's governor and education secretary have expressed openness to the concerns raised by parents, teachers and community members, and stress they are not looking to implement an extreme version of privatization. Yet at the same time, they have stoked fears by pushing forward a notably vague charter law that does little to address what people are most worried about. This "trust us" mentality has not been helped by the engagement of DeVos, nor by Gov. Ricardo Rosselló's recent visit to a notorious charter chain in Philadelphia last week - a prime example of the kind of low-performing, fiscally reckless charter that school advocates warn about. At a time when the island is starved of investment and inching slowly through a storm recovery, many Puerto Ricans worry that the government is treating this more as an opportunity to disrupt education, rather than stabilize it - while also potentially opening the doors for supercharged corruption.

Political Report # 1311 Media Ignoring Puerto Rico’s ‘Shock Doctrine’ Makeover

By Reed Richardson, FAIR.org

Nearly five months after Hurricane Maria struck Puerto Rico, more than a hundred thousand US citizens there still lack clean drinking water, and almost one-third of the island has no reliable electric power. As initial life-sustaining recovery efforts still grind toward completion, Puerto Rico’s Gov. Ricardo Rosselló has wasted no time using his territory’s recovery as an opportunity to push a number of policy proposals right out of the “disaster capitalism” playbook: from privatizing the island’s power utility to converting nearly all of its public schools to charters. And while the mainstream US press has been mainly focused on the Trump administration’s woeful institutional response to the storm, it has barely noticed this much more radical political transformation of Puerto Rico, and the potentially disastrous long-term consequences for the citizens who live there. Ever since Maria made landfall on September 20, the corporate press has been neglecting  the island in its coverage. Despite ranking second behind 2005’s Hurricane Katrina for property damage and lives lost, Maria has drawn markedly less media attention than the two major hurricanes that preceded it last summer. For example, according to a survey by the Tyndall Report, broadcast network evening news reports in 2017 devoted 30 percent less coverage to the aftermath of Maria than to Houston’s recovery from Hurricane Harvey. Likewise, Maria drew 12 percent less evening news coverage than Hurricane Irma’s devastation of Florida and the US Virgin Islands. NYT: FEMA Contract Called for 30 Million Meals for Puerto Ricans. 50,000 Were Delivered. New York Times (2/6/18) To be sure, major US news outlets have produced some notable pieces of accountability journalism about the storm’s aftermath. Intrepid reporting by the Daily Beast (10/24/17) uncovered how a tiny Montana energy contractor won an exorbitant $300 million no-bid contract to help restore the island’s power grid, a story that ultimately cost the head of the island’s power utility his job. A New York Times story this week (2/6/18) found similar incompetence and recklessness in Trump’s FEMA, which hired a one-woman company to provide 30 million meals to needy Puerto Ricans, only 50,000 of which were ever delivered. However powerful, the focus of these breakout stories is mainly anecdotal, and the outrage they engender tends to fade from headlines and cable news talk shows after a few days. In her seminal report on “disaster capitalism” (The Nation,  4/14/05), author and activist Naomi Klein noted how these stories can also have the perverse effect of distracting from much larger, systemic transgressions happening out in the open: If anything, the stories of corruption and incompetence serve to mask this deeper scandal: the rise of a predatory form of disaster capitalism that uses the desperation and fear created by catastrophe to engage in radical social and economic engineering. And on this front, the reconstruction industry works so quickly and efficiently that the privatizations and land grabs are usually locked in before the local population knows what hit them. Nowhere was this “shock doctrine,” as Klein christened it, more evident than in New Orleans in the aftermath of Katrina. Mere weeks after the storm hit-with many victims still missing or their bodies unrecovered-Republicans were already planning an onslaught of right-wing policy changes for the ravaged city, but few in the mainstream press took notice. One example was an email list of policies sent from Congress’s Republican Study Committee, at the time chaired by then-Indiana Rep. Mike Pence. The memo proposed dozens of “pro-free market” ideas for the Bush administration to consider for the still-suffering city, which were little more than a wish list for corporations and private enterprise. Similarly, Rep. Richard Baker, a Republican from New Orleans, offered this famously macabre comment on the storm’s devastating impact: “We finally cleaned up public housing in New Orleans. We couldn’t do it, but God did.” He got his wish, and accompanying the subsequent massive makeover of the New Orleans public housing was a rapid, wholesale restructuring of the city’s troubled school system. Klein’s 2007 book, Shock Doctrine, zeroes in on the bifurcated response post-Katrina and its impact on the schools: In sharp contrast to the glacial pace with which the levees were repaired and the electricity grid was brought back online, the auctioning off of New Orleans’ school system took place with military speed and precision. Within 19 months, with most of the city’s poor resident still in exile, New Orleans’ public school system had been almost completely replaced by privately run charter schools. Before Hurricane Katrina, the school board had run 123 public schools; now it ran just four. Before that storm, there had been seven charter schools in the city; now there were 31. New Orleans teachers used to be represented by a strong union; now the union’s contract had been shredded, and its 4,700 members had all been fired. Some of the younger teachers were rehired by the charters, at reduced salaries; most were not. More than a decade later, Klein’s book sounds eerily prophetic of Puerto Rico Governor Roselló’s post-Maria plans. Under his education reform proposal, announced just this week, the island would closely follow the roadmap of New Orleans, creating a voucher system and converting more than 800 public schools to charters that would be run by non-profits or corporations. If implemented-the plan would require approval of the Puerto Rican legislature, but many in the majority party have already come out in support of it-the move would represent a seismic shift for the island’s struggling school system, and a major milestone for US education policy. But mainstream US news organizations mostly shrugged at the news. Many, like the Washington Post, CBS News, CNN and MSNBC, didn’t even bother to cover it. For its part, the New York Times didn’t bother to write its own story. Instead, it just ran the same syndicated Associated Press article (2/5/18) that NBC News (2/5/18), ABC News (2/5/18) and Fox News (2/6/18) did. El Nuevo Dia: Ricardo Rosselló announces his education reform plan El Nuevo Dia (2/6/18) Tellingly, none of the national news coverage saw fit to mention New Orleans’ post-Katrina experience with charter schools, even though it closely resembles what Rosselló is proposing. Local news outlet El Nuevo Dia (2/6/18) did, however, giving its readers key context that the New York Times and Associated Press left out. It painted a much different picture than Rosselló’s rosy outlook: In Louisiana, which is one of the models the Island tries to follow, all public schools in the city of New Orleans were converted into charters after Hurricane Katrina, but did not reach the expected academic achievement. On the contrary, education and civic organizations have denounced segregation in the education system and that the poorest or most vulnerable did not have the same access to high-quality educational opportunities. In fact, a three-month investigation of New Orleans charter schools in 2015 by In These Times (8/28/15) found even more systemic failures. Formerly tight-knit communities were disrupted by the voucher system, teachers unions were gutted in favor of younger, cheaper and less experienced staff, and many students were left out or left behind because they were considered too difficult to teach, and thus threatened the charter schools’ standardized test scores track record. And a New Orleans Times-Picayune analysis (4/20/16) found that dozens of the city’s charter school executives ended up earning well over six-figure salaries, while teachers’ pay averaged closer to $50,000. A similar scenario played out at the end of January, when Rosselló announced plans to privatize PREPA, Puerto Rico’s antiquated, bankrupt public utility. Again, news organizations like ABC News (1/29/18), the New York Times (1/29/18), the Washington Post (1/29/18) and Fox News (1/29/18) all relied on one or two of the same news briefs from the AP for their coverage. However, few of these news organizations chose to include critical, historical detail from the AP, buried deep in one of its stories (1/23/18): Puerto Rico once privatized its water and sewer company only to have the government take it back in the early 2000s after problems with service, billing and quality requirements set by the U.S. Environmental Protection Agency. How would Rosselló’s plan avoid these same past mistakes? You won’t find any answers. CNN: Puerto Rico governor announces privatization of power utility CNN (1/22/18) CNN (1/22/18) and NBC News (1/22/18) wrote their own short articles on privatizing PREPA, but front-loaded Rosselló’s claims, with only cursory skepticism over selling off such a critical public asset. With no other alternative sources or plans presented, their coverage made privatization seem like a fait accompli. Left unmentioned were some of the reasons for PREPA’s dreadful state. To appease bondholders of Puerto Rico’s skyrocketing debt, the island instituted austerity measures in 2014, prompting hundreds of experienced PREPA employees to retire early to claim their pensions before the cuts kicked in (Economist, 10/19/17). They were never replaced, leaving maintenance and upgrades languishing. Similarly, Rosselló recently began stacking PREPA’s board with political cronies that had little to no experience in running a public utility. A Wall Street Journal article (1/22/1) on PREPA’s possible privatization waited until the final paragraph of the story to point out this detail, as well as the fact that Roselló intentionally undermined a regulatory appointee charged with oversight of the agency-something particularly relevant to how well a future privatized Puerto Rican power company might respond to public needs. Exacerbating nearly all of the many crises facing Puerto Rico is the territory’s broader fiscal situation-it currently suffers from $70 billion in debt-and federal oversight more focused on Wall Street bondholders than American citizens living in Puerto Rico. Again, only the Associated Press (1/17/18) seems to have paid much attention to the fact that, last month, the Trump administration withheld an already-approved billion-dollar emergency disaster loan, claiming Puerto Rico had too much cash on hand. This follows a little-reported announcement in late 2016 that the federal control board overseeing the territory’s finances rejected legislation creating a $100 million emergency fund for municipalities struggling in Maria’s aftermath-no matter that most of the island’s power, water and sewer systems have little to no funds left for operations. A rare Washington Post story (1/23/18) on the territory’s fiscal problems noted that Republicans in Congress are still intent on forcing it to honor its crushing financial burden, despite projections that the island’s economy will be devastated by a massive diaspora of nearly 500,000 people by 2020, according to one Hunter College study. As the Post story noted, House Natural Resources Committee chair Rob Bishop (R.-Utah) said the goal of the federal oversight legislation was “to return Puerto Rico to fiscal accountability and the capital markets, and this can only occur if the fiscal plans respect the lawful priorities and liens of debt holders.” Servicing a monumental debt in the midst of the island’s 11-plus-year recession while trying to rebuild from one of worst natural disasters in US history is tantamount to fiscal harakiri. But it does provide a handy excuse for Puerto Rican officials looking to tear down or sell off whatever is left of the public commons for pennies on the dollar. WSJ: Puerto Rico Doesn't Want Reform Wall Street Journal (11/24/17) When not ignoring the the pillaging of Puerto Rico, some in the corporate press were not so subtly trying to make it worse. In late November, a Wall Street Journal op-ed by “Americas” columnist Mary Anastasia O’Grady (11/24/17)-headlined “Puerto Rico Doesn’t Want Reform”-criticized the territory’s unwillingness to extend its own post-Maria misery when it dared to reject a predatory funding offer from PREPA bondholders. Puerto Rico rejected the offer. “The bondholders’ proposal is not viable and would severely hamper and limit PREPA’s capacity to successfully manage its recovery,” Puerto Rico’s Fiscal Agency and Financial Advisory Authority said at the time. It added that the offer had the “appearance” of “being made for the purpose of favorably impacting the trading price of existing debt.” Heaven forbid. The arch condescension in that “heaven forbid” sums up the disaster capitalism mindset. It also speaks to a broader failure of the press to cover more radical solutions to Puerto Rico’s formidable struggles. One such proposed solution, co-authored by Nobel Prize-winning economist Joseph Stiglitz back in September, has been all but blacked out of corporate media’s post-Maria coverage of the territory, although Bloomberg (1/16/18) did mention it when the territory’s new fiscal plan was rolled out early this year. Coincidentally, this plan rejects the conventional wisdom that the island should further retrench into austerity while stripping down its assets and selling it off for parts. Instead, Stiglitz calls for more borrowing and expansion, coupled with massive write-offs of Puerto Rico’s debt-as much as 80 to 90 percent-and canceling interest payments on the remaining debt for at least five years. Ironically, none other than President Trump endorsed the idea of radical debt forgiveness during his post-Maria visit to the island in October. “They owe a lot of money to your friends on Wall Street, and we’re going to have to wipe that out,” he said about Puerto Rico in the Washington Post (10/3/17). “You’re going to say goodbye to that. I don’t know if it’s Goldman Sachs, but whoever it is, you can wave goodbye to that.” NYT: White House Dials Back Trump’s Vow to Clear Puerto Rico’s Debt New York Times (10/4/17) This off-the-cuff comment, from someone whose White House is chock full of Goldman Sachs alums, clearly caught his staff off guard. A day later, it fell to his budget director, Mick Mulvaney, to do damage control, reassuring bondholders that they could safely ignore the president’s comments. In statements to the press, Mulvaney made it clear that a Puerto Rican debt jubilee, like so many of this president’s populist-sounding promises, would not be happening (New York Times, 10/4/17). But just because the White House wants to memory hole the inconvenient truth about Puerto Rico’s indentured servitude at the hands of Wall Street doesn’t mean the press should willingly oblige. Nor should journalists continue to ignore the long-term impacts of the privatization schemes its governor is intent on pushing through, or how the federal government enables them-not merely through its woeful emergency response, but in its failure to fund a full recovery. Though last week’s government shutdown budget deal did allocate more money for the island, the new disaster relief package-for Hurricanes Harvey, Irma and Maria, as well as California wildfires-only totaled $89 billion, whereas Puerto Rican officials have estimated more than $94 billion would be needed for the island’s recovery alone. And good luck seeing any news coverage point out that this shortfall could have easily been made up by taking some of the extra $165 billion that Congress happily added to the military budget. But then, under the “shock doctrine,” disasters are to be exploited, not mitigated-and the main role of the corporate press is not to notice. Original article can be found here: https://fair.org/home/media-ignoring-puerto-ricos-shock-doctrine-makeover/

Political Report # 1297 Puerto Ricans Fear Schools Will Be Privatized in the Wake of Hurricane Maria

By Aida Chavez and Rachel M. Cohen The Intercept

AS HURRICANE MARIA departed Puerto Rico, leaving utter ruin in its wake, one community in Vieques picked itself out of the wreckage by focusing on getting school back open. "The community took out of their own time and said, 'Let's do this, we need to repair and reopen this,' and we started working," Josuan Aloyo told The Intercept in Spanish. "Cleaning out the trash and debris, and trying to find people that had the proper tools." Aloyo, assistant director of Escuela Adrienne Serrano, said the school opened up immediately. Aloyo said they were determined to take in as many students as possible in the hopes of giving even a bit of order back to their lives. Right after the hurricane, Escuela Adrienne Serrano had 40 students, a number that steadily increased each week until they managed to bring 80 students back. But then, on October 18, Humacao School District's regional director told Escuela Adrienne Serrano to suspend classes. School administrators were told they "couldn't have students until they authorized us to open the school," Aloyo said. "We couldn't have classes until the firefighters certified us." "Ever since that moment, we didn't listen to them. We kept receiving the students that arrived but Friday, we ran out of potable water, so we had to start turning down students," Aloyo said. "We hope tomorrow, if we get water, we can start receiving students. Whoever shows up, we'll receive them. If there's no food in the cafeteria, well, we can just cook for them ourselves and make a simple breakfast and lunch."

Political Report # 1290 Puerto Rico Still in Crisis, Human Rights Violation

By Carol Schachet  Grass Roots Online

More than a month since Hurricane Maria tore through Puerto Rico, the island remains devastated. More than half the population remains without electricity, drinking water and basic sustenance, making it not only a catastrophe but also a human rights violation, according to Jovanna Garcia Soto, Solidarity Program Officer for Latin America at Grassroots International. She notes that water, food and tarps remain priority needs, especially in the central area of Puerto Rico. Jovanna flew to Puerto Rico to visit her family and to deliver much-needed funding support to organizations mounting a grassroots response, including grants from Grassroots International to support community-led just recovery efforts. The Situation on the Ground While the initial storm wreaked havoc for Puerto Rico's population and environment, the unfurling human disaster has less to do with weather than with political incompetence and willful indifference. Approaching the airport, the impact of the hurricane was visible in two ways - the swelled size of the island's rivers, and the blue tarps providing temporary roofs to homes. Most of those tarps have been provided by grassroots organizations rather than FEMA, whose presence Jovanna said has been "slow to non-existent" for most communities. Upon landing, the needs became immediate apparent. "The first thing I saw when we landed were around 25 people in wheelchairs waiting at the airport to flee the island. It is heartbreaking," Jovanna notes, commenting on the lack of basic services available to the vulnerable elderly population. Leaving the airport, extensive damage showed itself along the sides of roads, and even more so toward the interior of the island. "Trees lay flat on the ground everywhere," Jovanna noticed. In her hometown, most of the trees planted by her grandparents were uprooted, their trunks flat and leaves gone. The few that remained upright show wounds from the hurricane's fierce wind.