Puerto Rican Governor Again
Hits Wall Street Control of Congress;
Demands Immediate Bankruptcy Relief
Jan. 8, 2016 (EIRNS)Responding today to the lawsuit filed yesterday against him and most of his cabinet, by bond insurers Assured Guaranty Corp. and the Ambac Assurance Corp., Puerto Rican Gov. Alejandro GarcÃa Padilla warned that had the U.S. Congress acted in December to grant the Commonwealth bankruptcy protection, this would have prevented the "race to the courthouse" and "litigation pandemonium" that will now ensue as a result of multiple creditor lawsuits.
"Unfortunately, the Congress, which answers to Wall Street lobbyists, has ignored Puerto Rico's crisis," GarcÃa Padilla said, "and has preferred that the 3.5 million American citizens on the island, and their creditors, fall into chaos." Congress can still act, GarcÃa Padilla added, by immediately passing the Puerto Rico Emergency Financial Stability Act of 2015, introduced in December by a group of Democratic Congressmen and Senators, which includes a provision to provide Puerto Rican agencies with bankruptcy protection. This, he said, would "prevent the humanitarian crisis that is about to occur, from careening out of control."
The lawsuit charges that the "clawback" of $163 million to which GarcÃa Padilla resorted to ensure payment of General Obligation bonds, on which there is a constitutional guarantee of payment, is unconstitutional, and demands that the government be barred from diverting any more funds from other agencies. The clawback of funds from the Infrastructure Financing Authority and the Public Financing Corporation, caused these two agencies to default on a combined amount of $37.3 million on Jan. 4. Ambac and Assured Guaranty covered the losses.
Puerto Rico doesn't have the legal structure to contend with multiple creditor lawsuits, the Governor said, and the result will be turmoil and great uncertainty for all parties. That's of no concern to the vultures that will be competing for their pound of Puerto Rican flesh, however. Ambac's CEO and president Nader Tavakoli, complained to the New York Times that the Commonwealth "has committed itself to a 'scorched earth' strategy of blaming its fiscal and structural problems on lenders, Congress, and others, in an effort to deflect responsibility and obtain retroactive application of bankruptcy laws."