Economy Puerto Rico in Bankruptcy: Oversight Board Proposes To Screw Bondholders In Favor of Pensioners

It does, Alaska as well. It is less than you might think though. Consumers, at least about 10 years a ago, we’re paying an extra $10 per person per year. It is hard on business though, especially those exporting to the mainland.

The article I posted earlier said $5 and some change for those in Hawaii. It's gonna be hard on businesses no matter what when operating out of HI and AK.

The benefits of the Jones act are "national security" and operators being able to offer more frequent transit than would otherwise exist. The former makes total sense, not sure if the latter adds up.
 
Is there something currently preventing Puerto Rico from declaring bankruptcy? I agree that would be absurd and make am mockery of the system.
Better than to have them all move to Florida and effect the political balance.
 
People are massively overstating the effects of the Jones Act. Its a tiny fraction of Pueto Rico's problem.
The effect it has makes your Trump tax cuts pale in comparison. Even before they expire.
 
With the exception of the off-island creditors not receiving any of the funding, this is pretty much identical to a municipal bankruptcy.

And when I said utopian, I was referring to the idea that there is some path by which Puerto Rico can actually pay back its debt and go forward with even pennies on the dollars liability on its back. Plenty of businesses look at bankruptcy and find out that there is no payment plan under which they can adequately restructure their debt.

Toys R Us being a recent example of a company where bankruptcy simply could not solve their debt problem so they're shutting their doors permanently.

You can't do that with a municipality. So, given PR's dwindling population, massive infrastructure investment needed following a hurricane decimating the country, and the already sky-high debt that preceded that event...what good is a standard municipal bankruptcy proceeding where private capital entities will eat up significant public funds that should be rebuilding the country?

I’m well aware of the diff types of BK and how it effects govt vs correlations vs individuals.

It’s a simple balance between ever seeing a private nickle again and agreeing to pay back a portion of the debt. The difference between this proposed Warren / Sanders law and a municipal bankruptcy process is that they are just making up the rules as they go along.

If you are saying they should go through an orderly process then there is already one established by law (PROMESA), under which a BK like process is already occurring.

What Warren/Sanders are saying is that if debt is owed locally then there will be some dollars repaid. If it’s owed to non local pension plans, unions, and mutual funds that (LOL) wave all management fees, there will be dollars repaid. But if you are hedge fund, then you get zero. Sorry that’s the opposite of an orderly BK process where the creditors are getting repaid based on politics, not an orderly set of preferences governed by law. That’s not good long term for PR, it’s not good for how the country works as well.

The hedge funds are bottom dwellers, fine, but then so are all those pension funds and unions that unloaded the debt to these hedge funds when the debt go too risky in the first place. If we are saying we should change how debt gets traded and sold in this country then we should enact this law. That will have the impact of reducing the liquidity and attractiveness of certain segments of govt debt and make it more expensive.

And to be clear I support a rational and substantial reduction to PR debt in conjunction with other reforms (which included better PR management but also things like not caping social program support for things like Medicade).
 
The effect it has makes your Trump tax cuts pale in comparison. Even before they expire.

Read somewhere that the Jones act was costing PR half a billion a year. That’s a big peice of their total 70 billion if you go back far enough ...
 
Read somewhere that the Jones act was costing PR half a billion a year. That’s a big peice of their total 70 billion if you go back far enough ...
Who cares? They're practically Mexicans.
 
Why not? We bailed out the banksters and it's about time the favour was returned.
 
I wouldn't be opposed to wiping out PR's debt but pretty much only if we install some dictator that is fiscally responsible and won’t bloat the public sector and welfare and create a bunch of red tape for businesses
 
I wouldn't be opposed to wiping out PR's debt but pretty much only if we install some dictator that is fiscally responsible and won’t bloat the public sector and welfare and create a bunch of red tape for businesses
Hey, that sounds like Trump, someone needs to let him know PR is part of the US.
 
I’m well aware of the diff types of BK and how it effects govt vs correlations vs individuals.

It’s a simple balance between ever seeing a private nickle again and agreeing to pay back a portion of the debt. The difference between this proposed Warren / Sanders law and a municipal bankruptcy process is that they are just making up the rules as they go along.

Yes and no. What I've been saying is that this is pretty similar to what a standard municipal bankruptcy looks like. With the exception of not paying back the off-island creditors, I'm not sure what difference you see between the 2.

If you are saying they should go through an orderly process then there is already one established by law (PROMESA), under which a BK like process is already occurring.

What Warren/Sanders are saying is that if debt is owed locally then there will be some dollars repaid. If it’s owed to non local pension plans, unions, and mutual funds that (LOL) wave all management fees, there will be dollars repaid. But if you are hedge fund, then you get zero. Sorry that’s the opposite of an orderly BK process where the creditors are getting repaid based on politics, not an orderly set of preferences governed by law. That’s not good long term for PR, it’s not good for how the country works as well.

The hedge funds are bottom dwellers, fine, but then so are all those pension funds and unions that unloaded the debt to these hedge funds when the debt go too risky in the first place. If we are saying we should change how debt gets traded and sold in this country then we should enact this law. That will have the impact of reducing the liquidity and attractiveness of certain segments of govt debt and make it more expensive.

And to be clear I support a rational and substantial reduction to PR debt in conjunction with other reforms (which included better PR management but also things like not caping social program support for things like Medicade).

I strongly disagree here. The money being used to repay the creditors is public money. It's not PR's money, it's the U.S.'s money and so I'm perfectly fine with the U.S. setting requirements on accessing it.

When you say it's not orderly, I'm sure you mean something else because the rules seem clearly laid out, regarding when the funds can be accessed and who can access them, as well as what debt isn't cancelled. Perhaps you think the proposal isn't fair but it's certainly orderly.

Also, yes it will have the impact of reducing the liquidity and attractiveness of certain segments of PR debt. I don't see that as a negative. I see that as the natural outcome of being over leveraged and then bailed out.

But all this of comes back to my initial point which you're not resolving. Based on what is known about PR's current situation, from the dwindling population a/k/a tax base to the massive damage caused by a hurricane...how exactly is PR supposed to manage its debt and rebuild at the same time?

If you walked them into a standard bk proceeding, you'd be tying into a payment plan when significant amounts of their tax revenue would be spent on creditors who will not be adding anything to the improvement of the island. You will also be tying into a payment plan when we know that their revenue is falling year over year and unlikely to recover for years, if not decades.

So, how exactly does a municipal BK proceeding actually solve PR's problem?
 
Yes and no. What I've been saying is that this is pretty similar to what a standard municipal bankruptcy looks like. With the exception of not paying back the off-island creditors, I'm not sure what difference you see between the 2.



I strongly disagree here. The money being used to repay the creditors is public money. It's not PR's money, it's the U.S.'s money and so I'm perfectly fine with the U.S. setting requirements on accessing it.

When you say it's not orderly, I'm sure you mean something else because the rules seem clearly laid out, regarding when the funds can be accessed and who can access them, as well as what debt isn't cancelled. Perhaps you think the proposal isn't fair but it's certainly orderly.

Also, yes it will have the impact of reducing the liquidity and attractiveness of certain segments of PR debt. I don't see that as a negative. I see that as the natural outcome of being over leveraged and then bailed out.

But all this of comes back to my initial point which you're not resolving. Based on what is known about PR's current situation, from the dwindling population a/k/a tax base to the massive damage caused by a hurricane...how exactly is PR supposed to manage its debt and rebuild at the same time?

If you walked them into a standard bk proceeding, you'd be tying into a payment plan when significant amounts of their tax revenue would be spent on creditors who will not be adding anything to the improvement of the island. You will also be tying into a payment plan when we know that their revenue is falling year over year and unlikely to recover for years, if not decades.

So, how exactly does a municipal BK proceeding actually solve PR's problem?
Trump seemed willing to cancel the debt before he was told it might effect the economy. Just like he was willing to take our guns before due process before the NRA set him straight. We just need to find a middle ground.
 
I think you can make a case that a relief bill is in order but I just don’t get Sander’s need to vilify someone in his call (and I’m no great fan of the finance sector in general either). It’s almost like a verbal tick

Yeah. Sanders consistently painting Wall Street as villainous makes him pathological. He should be constantly demonizing the press instead. Then we would know he is of sound mind.

Trump-Baby-784x441.jpg
 
Trump seemed willing to cancel the debt before he was told it might effect the economy. Just like he was willing to take our guns before due process before the NRA set him straight. We just need to find a middle ground.

I actually think this is a decent middle ground. PR gets some chance at rebuilding. Pensions and the people relying on them don't get the shaft. Retailer investors get something.

Yes, the big banks aren't getting anything out of this but after 2007, I don't think they have much of an argument for unfair treatment considering how we bailed out their industry.
 
Yes and no. What I've been saying is that this is pretty similar to what a standard municipal bankruptcy looks like. With the exception of not paying back the off-island creditors, I'm not sure what difference you see between the 2.



I strongly disagree here. The money being used to repay the creditors is public money. It's not PR's money, it's the U.S.'s money and so I'm perfectly fine with the U.S. setting requirements on accessing it.

When you say it's not orderly, I'm sure you mean something else because the rules seem clearly laid out, regarding when the funds can be accessed and who can access them, as well as what debt isn't cancelled. Perhaps you think the proposal isn't fair but it's certainly orderly.

Also, yes it will have the impact of reducing the liquidity and attractiveness of certain segments of PR debt. I don't see that as a negative. I see that as the natural outcome of being over leveraged and then bailed out.

But all this of comes back to my initial point which you're not resolving. Based on what is known about PR's current situation, from the dwindling population a/k/a tax base to the massive damage caused by a hurricane...how exactly is PR supposed to manage its and rebuild at the same time?

If you walked them into a standard bk proceeding, you'd be tying into a payment plan when significant amounts of their tax revenue would be spent on creditors who will not be adding anything to the improvement of the island. You will also be tying into a payment plan when we know that their revenue is falling year over year and unlikely to recover for years, if not decades.

So, how exactly does a municipal BK proceeding actually solve PR's problem?


It’s not orderly because it’s not following any established set of properties for repayment of debt but coming in after the fact and making up the rules of repayment based on arbitrary political feelings.

And again there already is a BK like process that was set up in 2015 for PR, and while by it’s nature it is retroactive (it was set up after the fact), it tries to mimic a real municipality process, complete with judicial oversight if it comes to that. It’s called PROMESA (I’m not yelling btw, it’s an acronym).

The superiority of the process is that it does not arbitrarily just throw one class of creditors under the bus based on political grandstanding (which is what the hedge fund exclusion is). And certain hedge funds have even tried to have that process rules unconstitutional under the appointment clause IIRC, so I’m not siding with these asshats. And to repeat, the warren/Sanders law does not exclude off island debt from repayment; unions, pension funds, and mutual fund companies (that waive their fee because finance is evil) that hold debt get repaid. But hedge fund companies that bought debt from these same entities don’t.

The fact that it’s not PR money is sort off irrelevant imo. States often will give money as part of a municipal Bk process. It’s no different than giving the money to PR and PR using it to restructure. It’s a taxpayer funded bailout and should be used to give PR the best bang for its buck while maintain the credibilty of the finance system.

Reducing liquidity of debt to PR may have been a good thing historically given you had a mix of bad federal policy and local mismanagement papered over by ever growing debt fueled by tax gimmicks. But there is no rational argument for saying that higher risk based borrowing costs will be a boon to PR in the future. Rational policy and cheaper debt based on risk assessment (not tax gimmicks) are both good things. That’s the balance that the PROMESA process should be trying to strike, how much of a fuck you to debtors vs the future impact it will have (I would argue for a larger fuck you than not, btw so I don’t see this as part of any disagreement here).

The other reason for not taking the warren / Sanders approach is not just the effect on PR debt liquidity and borrowing costs, but overall. Is the new approach to govt BKs / govt bailouts to be only original debt holders of a certain flavor get special treatment? That of course will have its reactions and side effects. Those unions and pension funds will worry that they can’t offlaod riskier debt to the hedge guys as easily anymore, and their risk premium / borrowing rate will go up.

Again the BK process is supposed to balance fair treatment of creditors with allowing a fresh start where warranted. For govts the problem is the people causing the BK don't personally get impacted and unlike corpetations, there is no shareholder that gets blown out. So the moral hazard is immense and law is used to restrain the process somewhat. This keeps municipal borrowing costs in check. Warren / Sanders does not do that and usurps a process that already is in place that aims to take this factors into account.
 
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They sound stupider than Trump talking about this .
 
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