The President Who Hated to Pay His Debts Bashes Storm-Struck Puerto Rico
Donald Trump was a master of debt avoidance and failure to pay the people he owed. Now he is attacking hurricane-ravaged U.S. citizens for getting behind on their payments.
In the days when he owed Wall Street and the big banks far more than he could ever repay, the man who is now our president followed a basic principle:
Of course, even Donald Trump could not just stiff the big banks as he did with any number of contractors in his casino days.
Trump sought refuge in bankruptcies that he later insisted were not bankruptcies at all.
He thereby became a particular kind of launderer when it came to money, one who laundered not the dough but his self-image.
He remains so cleansed in his own mind that he felt free to pass fiscal judgment on Puerto Rico after it had been battered by a hurricane as never before.
“Texas & Florida are doing great but Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble ... Much of the Island was destroyed, with billions of dollars ... owed to Wall Street and the banks which, sadly, must be dealt with,” Trump tweeted on Monday.
Much of Puerto Rico’s more than $70 billion in debt was generated by bond sales from which Wall Street raked in nearly $2 billion in fees. One bank charged Puerto Rico in excess of 30 percent more than it charged Detroit.
As anyone could have predicted, Puerto Rico had trouble making the debt payments and the bonds were deemed “the junkiest of junk,” or about par with the $675 million in junk bonds Trump once used to finance his casino empire in Atlantic City—despite declaring that he would never reduce himself to such reckless financing.
As Puerto Rico staggered, hedge funds aptly known as “vulture funds” swept in, buying the debt at a discount of as much as 50 percent. They seemed assured of making a killing because the Puerto Rican Constitution is a vulture’s dream. Article 6, Section 8 states:
“In case the available revenues including surplus for any fiscal year are insufficient to meet the appropriations made for that year, interest on the public debt and amortization thereof shall first be paid.”
In other words, the government has to pay whoever held the debt before funding even the most basic services, hospitals and schools included. An added colonial twist in federal law prohibits municipalities and public corporations such as utilities in Puerto Rico—and only Puerto Rico—from declaring bankruptcy.
If such strictures had applied to Trump, he would still be paying off his casino debt. He was instead able to avoid personally incurring significant debt while pocketing millions for himself.
“Atlantic City fueled a lot of growth for me,” Trump told The New York Times last year. “The money I took out of there was incredible.”
As for Puerto Rico, Trump’s fellow billionaire, good buddy and big time backer John Paulson suggests that the island can save itself by becoming a tax haven. Paulson is said to have invested some $1.5 billion of his own money into hotels resorts and office buildings there.
“The Singapore of the Caribbean,” he has predicted.
Meanwhile, Puerto Rico staggered toward becoming the Detroit of the Caribbean, where schools and hospitals closed and the infrastructure crumbled. The vultures and the banks stood to get ever richer.
Blind greed took a hit in June of 2016, when the U.S. Congress stepped in with the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA.) Title III of the measure allows Puerto Rico, its municipalities and its public corporations to enter into a variation on bankruptcy. The process is under the supervision of a seven-member Financial Oversight and Management Board of Puerto Rico, appointed by the president and nicknamed La Junta.
Puerto Rico suspended debt payments while the Oversight Board promulgated a fiscal plan. The creditors challenged the plan as illegal, arguing in a lawsuit that “Obligations comprising ‘public debt’ are given a priority over all other debts and expenses of the Commonwealth, bar none, by the Commonwealth Constitution.”
A hearing was scheduled for September 19, to be held in in courtroom 5 at federal district court in San Juan but presided over via video by Judge Laura Taylor Swain in courtroom 17C in federal district court in Manhattan. The proceeding was rescheduled for October 4 due to what the clerk’s office in San Juan described as “the imminent passage of Hurricane Maria.”
Swain initially said she nevertheless expected the parties involved to submit electronic filing due on September 19. A San Juan-based lawyer for one of the creditors submitted a plea for an extension, noting that had recovered from one hurricane only to face another:
“Undersigned has not been able to respond to the Financial Oversight Board’s reply to our motion due to the effects of hurricane Irma. I was without water and electricity at home until last Tuesday, and without internet service up to today. The electricity returned to the office where the secretary is located today. I have put into service a mobile hotspot to be able to use adequately the internet (I have been able to see the docket entries in my cellular telephone after the service was restored, but not to see the documents). Today the electricity is back in service in the office.”
He went on, “Unfortunately, Puerto Rico faces a second major hurricane (María), and I have had to renew preparations at home for a probable major hit of said hurricane. (I hope that the impact be not so hard as projected). At this time, I do not honestly know when I will be back to normal operations, it will depend upon the results of the passage of Maria over or near Puerto Rico.”
He concluded, “It is therefore respectfully requested that this Honorable Court grant an extension of time to respond to the reply filed by the Oversight Board, for a term to be determined by the Honorable Court depending upon the effects of hurricane Maria in Puerto Rico.”
The lawyers for Puerto Rico responded with a filing that included a warning from the National Hurricane Center:
BULLETIN: Hurricane Maria Intermediate Advisory Number 13A NWS National Hurricane Center Miami FL
800 AM AST Tue Sep 19 2017
...POTENTIALLY CATASTROPHIC HURRICANE MARIA HEADED FOR THE VIRGIN
ISLANDS AND PUERTO RICO...
Maria is likely to affect Puerto Rico and the U.S. and British Virgin Islands as an extremely dangerous major hurricane tonight and Wednesday. Preparations to protect life and property should be rushed to completion.
The lawyers wrote, “As the Court knows, Puerto Rico is currently fully engaged in preparations for another hurricane. On September 18, 2017, Hurricane Maria ‘rapidly intensified into a major hurricane.’ Due to the potential impact of Hurricane Maria on Puerto Rico, on September 18, 2017, the Governor of Puerto Rico, Ricardo Rosselló, declared a state of emergency and activated the National Guard.”
The filing continues, “In anticipation of Hurricane Maria’s landfall, Governor Rosselló announced that the Government of Puerto Rico would work until noon on September 18, 2017, and would put into action the plans for the protection of public property and governmental facilities…
“The shutdown of certain government servers, the closure of government offices, and the need for responsible individuals to focus on hurricane preparation for their families, together with the anticipated loss of power in San Juan will hamper or eliminate communications.”
The filing also notes, “Additionally, the President of the United States, Donald Trump, declared a state of emergency for the island, making Puerto Rico eligible for federal assistance from any damage sustained by the storm. “
Trump seems to have set about doing exactly what you would want a president to do. But he then appeared to all but forget Puerto Rico even as situation turned so dire that the October 4 hearing was also cancelled, to be rescheduled at some time when things have returned to normal, whenever that might be. The order from Judge Swain read:
“On September 20, 2017, Puerto Rico was hit directly by Hurricane Maria, a Category 4 storm and the most powerful hurricane to strike Puerto Rico in nearly a century. Maria’s landfall came only two weeks after Hurricane Irma, and devastated Puerto Rico. Millions of American citizens whose U.S. home is Puerto Rico are without light, water, food, fuel and even basic sewer services. Hospitals are struggling without fuel and supplies; considerable areas of the island are isolated due to inaccessibility and one area is threatened by the imminent collapse of a decades-old dam that was heavily weakened by Maria and could possibly trigger a life-threatening flood. These Americans, who were in the process of restructuring billions in debt through these PROMESA Title III proceedings in the hope of emerging from an economic crisis of unprecedented proportions, now face an even graver humanitarian crisis, one also that threatens their already challenging path back to economic stability.”
The order continued: “The Government of Puerto Rico and the Financial Oversight and Management Board have requested that the Court postpone hearings that were previously scheduled to take place this week and next week. In light of the immediate crises and need for attention to the safety and stability of day-to-day life for the people of Puerto Rico, the Court grants their requests. The Court hopes that Puerto Rico will benefit in the coming days from the delivery of substantial portions of the massive federal aid that is needed immediately, in supplies, expertise and services, to ensure the safety of American citizens living in Puerto Rico and their retention of the foothold they have established on the path to economic recovery.”
The lawyers for Puerto Rico submitted to the court a document headed “The Current Situation in the Aftermath of Hurricane Maria." The filing stated, “Puerto Rico is currently facing one of its worst crises in modern history. Not only is the island facing extensive costs in the aftermath of Hurricanes Irma and Maria, it is also in the midst of a decade-long economic depression while attempting to restructure its debts.”
The report further stated, “The island’s only electricity service provider, PREPA, cannot provide power to any of its customers at this moment. Approximately 80 percent of the energy transmission infrastructure has been damaged. More than 70 percent of the customers of the Puerto Rico Aqueduct and Sewer Authority are also without potable water…
“Thousands of families have been displaced from their homes, which have been destroyed, and are now either living with family members or being indefinitely relocated to shelters...Multiple hospitals were severely damaged. The Government is currently coordinating the transfer of patients to other hospitals. In addition, the lack of access to gasoline is making travel difficult, including preventing doctors from easily getting to hospitals and patients from getting to medical facilities and pharmacies...
“The educational system has also come to a grinding halt, with many schools damaged and students unable to attend class because of hardships faced by teachers and students alike. Many of Puerto Rico’s schools are currently being used as shelters, so schools will not be able to reopen until displaced people can be relocated to other facilities.”
The report concluded, “Unlike other regions of the United States that have suffered catastrophic disasters, Puerto Rico’s situation is made far worse due to its geographic location as an island and its fiscal and economic crisis, which it was addressing prior to these storms. “
That sounds very much like what Trump said in his tweet, only his message was preceded by seemingly endless tweets about the NFL and none offering sympathy and reassurance for the people of Puerto Rico.
“But he turned suddenly empathetic when he was accused of worrying more about football players going on one knee than a whole island flattened in what was the farthest possible thing from a game.
At least erstwhile Donny the Deadbeat did not tweet again about the billions owed to Wall street and the banks “which sadly must be dealt with.”
In court filings, Puerto Rico and the oversight board say they are anxious to get back to restructuring the debt as a necessary step toward the island’s recovery.
When he visits there next week, maybe Trump can whisper in Spanish his basic principle back when he owed Wall Street and the big banks far more than he could ever repay