Jun 4, 2018 · by Jane Sasseen
U.S. District Court Judge Laura Taylor Swain is presiding over the biggest and possibly nastiest public bankruptcy ever filed in the United States.
Puerto Rico has a whopping $72 billion in debt. Only California has more bonds outstanding. On top of that, Puerto Rico owes its public employees more than $50 billion in pensions.
Richard Ravitch, who helped lead New York City out of its fiscal crisis in the 1970s, told WNYC he was watching the situation in Puerto Rico, where he has close personal and business ties. He said it’s hard to fathom.
“It's like if you were writing fiction about how a government could fuck itself up totally in every respect you couldn’t do it more imaginatively than what's happened here,” Ravitch said.
It is here, in New York City, that a bare-knuckle brawl will determine how much money Puerto Rico has to rebuild, and how much it will have to pay back to creditors.
Much of the burden of paying the debt back will fall on Puerto Ricans, many of whom, like artist Sarabel Santos, said they find the amount the government owes unfathomable. “How can we pay that? It’s completely insane. The people that are paying for that is us, it’s not the richest man. It’s not fair,” she said.
The case is as complex as it is unprecedented. On Judge Swain’s court docket are five separate but interlocking bankruptcies, including the Commonwealth itself, the highway authority, and PREPA, the island's struggling power company.
“I feel like each of these cases could be their own Detroit,” said Patrick Mohan, an analyst with Reorg Research, a firm that specializes in covering bankruptcies.
There are thousands and thousands of creditors, ranging from everyday Puerto Ricans to Aurelius, one of the most aggressive vulture funds on Wall Street. It owns nearly a half billion dollars of Puerto Rican bonds and is pushing hard to get as much back as it can.
With so much money at stake, the creditors are not only battling the government, they’re fighting each other over Puerto Rico’s limited resources.
In addition to Swain, Puerto Rico is also under the watchful eye of the Financial Oversight and Management Board. The federally appointed board has say over Puerto Rico’s finances and any future deal with creditors.
That process, too, has turned into a brawl. The board and Gov. Ricardo Rosselló have disagreed about pensions cuts and labor reforms. For now, however, they have reached a compromise, avoiding another round of costly litigation that would have landed on the desk of Judge Swain.
While the fighting continues, uncertainty is deeply affecting Puerto Rico, its economy and its people.
Vera Carothers contributed reporting to the series; It was produced in partnership with Latino USA.
Puerto Rico: The Future of Debt is supported in part by The Jacob and Valeria Langeloth Foundation, the Park Foundation, and Chasing the Dream, a WNET initiative on poverty, jobs and economic opportunity in America. Additional support is provided by the Corporation for Public Broadcastingas part of a collaboration between APM Reports, KCUR in Kansas City, KPCC in Southern California, WABE in Atlanta, and WNYC.
The series is also supported by the McGraw Center for Business Journalismat the CUNY Graduate School of Journalism.
