Over the last decade he Government of Puerto Rico took on increasing amounts of municipal bond debt. Debt that could not be supported by the island’s shrinking economy. By 2015, government officials in Puerto Rico were reaching out to our Congress for a solution.
Many Democrats supported a taxpayer bailout or a wholesale bond default that would give Puerto Rico an opportunity to restructure its finances. Republicans pushed for a market solution that would include a government austerity program along with tax and regulatory changes that would promote economic growth.
It was clear that the Republicans as a group, did not want a solution that utilized tax payer dollars or violated the bondholders’ rights. There was a growing concern amongst the Republicans that any such solution would set up states and other municipalities for future defaults of their own.
Among the most ardent of those Republicans was Paul Ryan, the Speaker of the House. Mr. Ryan was very concerned about safeguarding core Republican principals that protected the bond holders, protected decades of case law regarding debtor’s rights and prevented the use of tax payer dollars as any part of the solution.
Treasury Secretary Lew was selected by the administration to promote a solution that would provide a taxpayer bailout or a structured bond default. Secretary Lew along with his Treasury Counsels, Antonio Weiss and Stephen Campbell marketed Congress and attended numerous committee meetings in support of the Administrations solutions.
It was not widely known that Secretary Lew, while COO of Citibank oversaw the issuance of much of Puerto Rico’s troubled debt from 2006-2008 and Counsels Weiss and Campbell worked for Lazard who resold much of this troubled Puerto Rico debt before joining the Treasury Department.
A few months ago, Secretary Lew met with Speaker of the House, Paul Ryan. After that meeting, Speaker Ryan abandoned his position on a Republican Puerto Rico solution and began publicly supporting the administration’s position. A solution that violated every core Conservative and Republican principal his party stood for.
Some say that Secretary Lew acknowledged Speaker Ryan’s bright career prospects and how supporting his Puerto Rico solution would not be forgotten by Wall Street and go a long way in winning the financial support he would need to seek higher office. All of this is speculation and unprovable. However, after the meeting, the following contributions rolled into Paul Ryan’s accounts. It should be noted that most were new contributors for Paul Ryan.
Some of Paul Ryan Contributions flowing in from his surprising support of the Puerto Rico Legislation
| Blackstone Group | Restructuring Advisor for Puerto Rico | $72,900 |
| Blackrock | Troubled Debt Purchaser | $39,100 |
| Cerberus Capital | Distressed Debt Specialist | $32,900 |
| Citadel | Hedge Fund (Banco Popular) | $27,200 |
| Carlyle Group | Hedge Fund – Distressed Debt | $20,800 |
| Bank of America | Underwrote the Bonds | $21,050 |
| $213,950 |
This limited list reflects $213,950 in contributions following the meeting of Treasury Secretary Lew and Paul Ryan. A real bargain for these Wall Street firms who are positioned to earn hundreds of millions, at the cost of American citizens.
Thanks to Secretary Lew’s efforts and Speaker Ryan’s support, the credit rating agencies and Wall Street’s biggest Banks are now much less likely to be held accountable for any role they played in this $70 billion-dollar mess.
About twenty-four million Americans own the Puerto Rico debt. Now they have no legal rights and Ryan has a $7,000,000 surplus in his reelection war chest. Good for Ryan, good for Wall Street.
Richard Lawless is a former senior banker who has specialized in evaluating and granting debt for over 25 years. He has a Master’s Degree in Finance from the University of San Diego and Bachelor’s Degree from Pepperdine University. He sits on a number of Corporate Boards and actively writes for a number of finance publications.