After Maria, Vulture Firms Are Trying to Bleed Puerto Rico Dry. They Must Be Stopped.

Jonathan Westin of New York Communities for Change discusses why Puerto Rico’s debt needs to be canceled.

Sarah Jaffe October 12, 2017

Even President Trump has said that Puerto Rico's debt must be canceled. (Hedge Clippers)

Wel­come to Inter­views for Resis­tance. We’re now sev­er­al months into the Trump admin­is­tra­tion, and activists have scored some impor­tant vic­to­ries in those months. Yet there is always more to be done, and for many peo­ple, the ques­tion of where to focus and how to help remains. In this series, we talk with orga­niz­ers, agi­ta­tors, and edu­ca­tors, not only about how to resist, but how to build a bet­ter world.

"The hedge fund managers that are trying to suck blood out of the island should be forced into cancellation of this debt because there is no way to pay it and, frankly, it is gone."

Jonathan West­in: I’m Jonathan West­in. I am the direc­tor of New York Com­mu­ni­ties for Change.

Sarah Jaffe: This week we learned about Seth Klar­man — the per­son behind the hedge fund that owns a whole bunch of Puer­to Rico’s debt. Tell us a lit­tle bit about that.

JW: Klar­man is a hedge fund man­ag­er and is gen­er­al­ly seen as kind of a pro­gres­sive Wall Street guy, but has hid in very inten­tion­al ways from being dis­cov­ered as one of the biggest bond­hold­ers of Puer­to Rican debt. The way the debt was acquired by many of these hedge fund man­agers was they bought it for cents on the dol­lar when they took over debt from Puer­to Rico, and are now try­ing to extract as much as pos­si­ble out of the island to pay that debt back even though they bought it for cents on the dollar.

SJ: It is almost like the peo­ple who buy bad stu­dent loan debt. Or bad cred­it card debt.

JW: Yes. I mean, they are preda­tors. That is real­ly what this is. There is a rea­son they are called vul­ture funds. It’s because they prey on very down­trod­den folks. They buy up debt from places that most peo­ple believe they won’t be able to recov­er [their mon­ey], but then they do every­thing in their pow­er to extract blood from a stone.

SJ: How did it come out that this was the firm that owned the debt?

JW: One of the groups that has been work­ing the most on the Puer­to Rican debt cri­sis is a group here in New York, based out of Buf­fa­lo, Kevin Con­nor and Lit​tle​Sis​.org, who have done lots of work in dis­cov­er­ing the folks behind a lot of the things that are hap­pen­ing in this coun­try. Hence, the name Lit­tle­Sis, the oppo­site of Big Broth­er. They were dig­ging on who were the own­ers of this Puer­to Rican debt because so many times in a lot of these cas­es — this is just like Wall Street trade­craft — they don’t want to be known for what they are doing so they hide them­selves in mul­ti­ple shell cor­po­ra­tions. Kevin and his team dug and found this per­son through ran­dom, obscure law­suit doc­u­ments that were filed in the debt cri­sis. They just un-rav­eled the lay­ers and dis­cov­ered Klarman.

Then, David Dayen from The Inter­cept con­firmed it. I think it was a mix­ture of real­ly great inves­tiga­tive work done by Lit­tle­Sis and real­ly great report­ing by David Dayen, who’s been cov­er­ing this and has been cov­er­ing lots of the finan­cial cri­sis and after­math, to bring it to light.

SJ: You and a bunch of oth­er folks have been doing work around hedge funds as the Hedge Clip­pers. What does this mean, dis­cov­er­ing who owns Puer­to Rico’s debt, for Hedge Clip­pers’ work?

JW: It just con­firms, for us, Who are these peo­ple behind so much of not only the cri­sis in Puer­to Rico, but so much of the cri­sis in this coun­try and around the world?” Puer­to Rico is not the only instance of where hedge fund man­agers have gob­bled up debt. They have done it in Argenti­na. They have done it in Greece. They have done it in many oth­er places. 

It lifts up a per­son we should now focus our atten­tion on. Which we are glad to do. A lot of the Hedge Clip­pers strat­e­gy has been to illu­mi­nate many of these hedge fund man­agers and all the evil they are doing across the world, going to their homes, going to fundrais­ers and galas that they are par­tic­i­pat­ing in, to expose them. I think many times they do so much of their work behind the scenes and they don’t want to be exposed. It is our job to make sure that peo­ple in this world know who the peo­ple are that are impov­er­ish­ing entire coun­tries and nations.

SJ: It is fas­ci­nat­ing when you put it that way. That a small group of indi­vid­u­als is impov­er­ish­ing entire nations.

JW: Yes, a small group of white men in New York, Con­necti­cut, etc. are impov­er­ish­ing nations. It is insane.

SJ: We are sit­ting in New York, many, many miles away from Puer­to Rico, but you are the direc­tor of a com­mu­ni­ty orga­ni­za­tion that has a lot of Puer­to Rican mem­bers who are feel­ing this very per­son­al­ly right now.

JW: Yes. We have a heav­i­ly Puer­to-Rican mem­ber­ship here in New York. Folks from the dias­po­ra. A lot of folks have moved up here over sev­er­al decades, but more recent­ly, there has been a lot of Puer­to Rican out­flow from the island because of the debt cri­sis and because of the dimin­ish­ing ser­vices. Then, obvi­ous­ly, you cou­ple on top of that Hur­ri­cane Maria which dev­as­tat­ed the island and wiped every­thing out. They are in a huge eco­nom­ic cri­sis and, obvi­ous­ly, our mem­bers, my fam­i­ly in par­tic­u­lar, we have fam­i­ly who live on the island, we feel it. This is real­ly in our bones, what hap­pened on the island.

We have a lot of New York­ers. If you look at even Gov­er­nor Cuo­mo and Bill de Bla­sio and, obvi­ous­ly, Melis­sa Mark-Viver­i­to who is the first Puer­to Rican speak­er of the city coun­cil, out there advo­cat­ing heav­i­ly on behalf of Puer­to Rico. As New York­ers, we feel this. There are so many con­nec­tions to the island and so much of New York cul­ture is derived from Puer­to Rican cul­ture. It is some­thing that hits home for all of us.

SJ: Talk a lit­tle bit more about the Hedge Clip­pers strat­e­gy and the work that your mem­bers have done around dif­fer­ent tar­gets over the last cou­ple of years.

JW: One of the key strate­gies in New York to real­ly push back on the hedge fund man­agers that were buy­ing up tons and tons of Puer­to Rican debt, was to lift up how New York City pen­sion funds were invest­ed with the same hedge fund man­agers impov­er­ish­ing an entire island of folks down in Puer­to Rico. We did a num­ber of press con­fer­ences and ral­lies call­ing for divest­ment from the hedge funds and suc­cess­ful­ly were able to get the City of New York to move pen­sion funds com­plete­ly out of these hedge funds and real­ly send a real­ly sharp mes­sage to hedge funds that you can’t go out in your day job and impov­er­ish an entire island of mil­lions of peo­ple while tak­ing our tax dol­lars to do it. We were able to move that mon­ey out of these hedge funds.

SJ: Have you had any run-ins or work around Robert Mercer?

JW: Yes. We have done a bit of work with­in Hedge Clip­pers and with Make the Road New York look­ing at Robert Mer­cer and how he is spend­ing a lot of his mon­ey to essen­tial­ly push anti-immi­grant poli­cies across the coun­try. He is based on Long Island. Renais­sance Tech­nolo­gies, which is his hedge fund, is based out there. He was Trump’s biggest backer. He and his daugh­ter were seen as very influ­en­tial in hand pick­ing the cab­i­net of Trump’s admin­is­tra­tion, includ­ing Steve Ban­non, who is the lead racist in charge.

If there was one per­son that was bankrolling the white suprema­cist move­ment in this coun­try, it is Robert Mercer.

SJ: It is inter­est­ing, too, because all of these peo­ple live in New York and Con­necti­cut. So much for the idea that racism is in one part of the country.

JW: Yes.

SJ: Back to the Puer­to Rico ques­tion. Trump men­tioned the idea of for­giv­ing Puer­to Rico’s debt the oth­er day. Of course, his peo­ple imme­di­ate­ly start­ed to walk it back, but does that give you an open­ing to press? Espe­cial­ly com­bin­ing that with now know­ing who holds the debt?

JW: Yes. I think Trump has val­i­dat­ed many of our posi­tions, which is the debt is gone. It washed away with the hur­ri­cane. It is unpayable. We should not pay it and we should force them to can­cel the debt. The hedge fund man­agers that are try­ing to suck blood out of the island should be forced into can­cel­la­tion of this debt because there is no way to pay it and, frankly, it is gone.

SJ: It is inter­est­ing that debt gets mor­al­ized in these ways. Like, How dare Puer­to Rico not pay its debts? How dare Greece not pay its debts.” But, espe­cial­ly when you are buy­ing debt as a spec­u­la­tor for pen­nies on the dol­lar, you are doing so with the assump­tion that there is a huge amount of risk baked into that, that you will not make your mon­ey back.

JW: Essen­tial­ly, they are glo­ri­fied debt col­lec­tors. That is what the hedge fund man­agers are act­ing as. In many cas­es, they are the ones that hiked up all the spend­ing and bor­row­ing. They cre­at­ed the debt and frankly there is no rea­son Puer­to Rico should pay it back. That is part of what Trump was talk­ing about when he was talk­ing about can­celling the debt.

I actu­al­ly think there are a lot of peo­ple in this coun­try that can sym­pa­thize with the huge amounts of debt that are pil­ing up and the ques­tion of where is all of this mon­ey going in our coun­try and in our econ­o­my, and frankly, glob­al­ly?” It is a con­tin­u­ing push and con­sol­i­da­tion of all of the wealth and cap­i­tal in this coun­try going to folks like these hedge fund man­agers, while every day Amer­i­cans are strug­gling and hav­ing to rely on debt to live. This is every­day Amer­i­ca. I am able to pay my rent and water bills by liv­ing on cred­it cards. I am able to send my kid to col­lege by bor­row­ing tons and tons of mon­ey.” So much of how we live now is debt cre­at­ed by Wall Street.

In this case, it is an entire island and coun­try that they have impov­er­ished. I think we are now see­ing the trag­ic ram­i­fi­ca­tions in a post-Hur­ri­cane Maria world. The only way they are going to get back on their feet is with heavy invest­ments into the infra­struc­ture of Puer­to Rico and not putting that mon­ey into the pock­ets of hedge fund man­agers that are try­ing to col­lect immoral debts.

SJ: Are there any actions planned for the next cou­ple of weeks?

JW: Yes, we are tak­ing hun­dreds of folks from the dias­po­ra, some folks from Puer­to Rico, to demand the can­cel­la­tion of the debt, to real­ly force the pres­i­dent to live up to his own words. We are going to be look­ing at some of our new-found cred­i­tors, specif­i­cal­ly Klar­man, and look­ing to do a series of actions around his role in the debt cri­sis. There are a num­ber of actions we are look­ing to take to real­ly force the issue that if the island is going to recov­er, there is no way they can pay this debt and they shouldn’t.

SJ: How can peo­ple keep up with you and Hedge Clip­pers and NYCC and per­haps join any of these actions or put pres­sure on people?

JW: Hedge​Clip​pers​.org, there is tons and tons of info on the peo­ple that hold Puer­to Rican debt and the preda­tors and the hedge fund man­agers and who they are. NYCC, they can fol­low New York Com­mu­ni­ties for Change on Face­book. We post a lot of our events on Face­book and we will be doing a lot of work over the next few weeks on this debt cri­sis, so they can fol­low us there, too.

Inter­views for Resis­tance is a project of Sarah Jaffe, with assis­tance from Lau­ra Feuille­bois and sup­port from the Nation Insti­tute. It is also avail­able as a pod­cast on iTunes. Not to be reprint­ed with­out permission. 

Sarah Jaffe is a for­mer staff writer at In These Times and author of Nec­es­sary Trou­ble: Amer­i­cans in Revolt , which Robin D.G. Kel­ley called The most com­pelling social and polit­i­cal por­trait of our age.” You can fol­low her on Twit­ter @sarahljaffe.
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