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

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. 

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Sarah Jaffe is a Type Media Center Fellow, co-host (with Michelle Chen) of Dissent magazine’s Belabored podcast, and a columnist at The Progressive. She was formerly a staff writer at In These Times and the labor editor at AlterNet. Her previous books are Work Won’t Love You Back: How Devotion to Our Jobs Keeps Us Exploited, Exhausted and Alone and 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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