By Fighting Words staff
A delegation from the Moratorium NOW! Coalition to Stop Foreclosures, Evictions & Utility Shutoffs in Detroit, Michigan, visited Puerto Rico from September 26-29 in a solidarity tour hosted by UTIER, the Union of Electrical and Irrigation Workers of Puerto Rico. The theme of the tour was “The Bankruptcy of Detroit and Puerto Rico: Causes and Effects.”
Jonathan Roberts and Jerry Goldberg of Moratorium NOW! were featured speakers at a conference in San Juan attended by several hundred activists and workers on September 26. They were joined on a panel moderated by Luis Pedraza and which also featured Angel Figueroa Jaramillo, UTIER president; Rolando Emmanuelli Jimenez, UTIER’s attorney in the current bankruptcy proceedings; and Jose Carbalallo Cueto, a prominent Puerto Rican economist.
The Moratorium NOW! representatives also spoke at a conference at the University of Puerto Rico Mayaguez Campus, a meeting with the Mayaguez chapter of UTIER attended by various union presidents in the region, and with a gathering with activists at the El Candil Bookstore in Ponce. The Moratorium NOW! representatives were interviewed on at least 10 television and radio stations and featured in a full-page story in El Nuevo Dia newspaper.
Activist describes Detroit bankruptcy
At each stop on the tour, Goldberg, a founder of the Moratorium NOW! Coalition and an attorney who intervened in the bankruptcy on behalf of a City of Detroit retiree, shared the background to the Detroit fiscal crisis and the municipal bankruptcy itself.
Goldberg pointed out how the bankruptcy was a direct product of the housing crisis, which resulted in 67,000 Detroit families losing their homes to foreclosures due to the predatory, subprime mortgage lending practices of every major bank. The banks then took advantage of the fiscal crisis they created in Detroit by making unpayable loans to the city government itself, much like they have done to Puerto Rico.
Michigan’s reactionary governor Rick Snyder then appointed an “emergency manager” over Detroit, displacing its electing officials, with the mission of breaking union contracts and gutting social services to ensure the payment of debt service to the banks.
Because Michigan’s constitution guarantees the pensions of municipal workers, the emergency manager took the city into bankruptcy to go after these pensions. Bankruptcy Judge Steven Rhodes’ first ruling was that the bankruptcy court, a federal court, could supersede state law and that the pensions were fair game.
Retirees and workers under attack
Goldberg explained how ultimately, 78 percent of the debt reduction during the bankruptcy came off the backs of the city workers. When the elimination of their healthcare benefits is factored in, retirees experienced a 43 percent cut in their pensions.
He reviewed the trial against the banks’ interest rate swaps that occurred during the bankruptcy. Moratorium NOW! obtained all of the City of Detroit’s debt instruments through a Freedom of Information Act request. Then, with the help of radical economists, the group conducted a people’s audit of the bonds.
During the bankruptcy proceeding, Goldberg and other attorneys argued that because the bankruptcy is an equitable proceeding, where the interests of justice should outweigh statutory limitations, the court had the authority to cancel these fraudulent debt instruments.
As a result of this trial, Judge Rhodes actually rejected payments the emergency manager was ready to make to the banks, saving the city approximately $200 million.
Goldberg also described the trial against the massive water shutoffs that began during the bankruptcy as part of the emergency manager’s plan to regionalize and ultimately privatize the Detroit Water and Sewerage Department.
The audience gasped every time when Goldberg reported that Rhodes ruled that although water shutoffs cause irreparable harm to their victims, the risk of bondholders not getting paid was more important.
Detroit youth leader describes ongoing crisis
Jonathan Roberts, a Moratorium NOW! youth organizer who recently led a successful campaign to restore hundreds of tax-foreclosed homes to their rightful owners, spoke in Spanish to the audiences. He put to rest the myth of the “Detroit comeback.”
Roberts explained that while the rich are building hotels, stadiums and restaurants subsidized by public funds, over tens of thousands of Detroiters continue to experience water shutoffs and tax foreclosures.
Detroit neighborhoods look like wastelands and in the week before the visit to Puerto Rico, water was shut off to all Detroit Public Schools due to lead and mercury contamination of the water supply.
Developments in Puerto Rico bankruptcy
The Moratorium NOW! tour came at a time of several important recent developments in Puerto Rico’s bankruptcy proceedings.
On August 7, Judge Laura Swain, the New York federal judge presiding over Puerto Rico’s bankruptcy, held that Puerto Rico’s federal oversight board, appointed by the U.S. Congress pursuant to the Puerto Rico Oversight, Management and Economic Stability Act (Promesa), supersedes the elected government of Puerto Rico when it comes to financial and budgetary decisions for the island.
Judge Swain held: “The power bestowed on the Oversight Board by Section 205(b)(1)(k) of Promesa allows the Oversight Board to make binding policy choices for the Commonwealth. . . This power is consistent with Promesa’s framework, particularly in light of the mandate that the Oversight Board ‘provide a method for Puerto Rico to achieve fiscal responsibility and access to the capital markets, the Oversight Board’s ‘sole discretion’ to certify fiscal plans and put budgets of its own devising into effect.’”
This ruling has a similar effect to Judge Rhodes’ ruling in the Detroit bankruptcy, where he held that Michigan’s constitutional ban on impairing bankruptcy was inapplicable during a federal Chapter 9 bankruptcy. Of course, the ruling that a board appointed by a Congress that the people of Puerto Rico have no role in selecting is even more grotesque, cementing Puerto Rico’s colonial status.
In August, the Federal Oversight and Management Board for Puerto Rico reached an agreement to pay 93 percent of debt owed on senior Cofina bonds and 56 percent on subordinate Cofina bonds. Cofina bonds are backed by sales taxes.
The Cofina bonds, underwritten by Wells Fargo and Wachovia, are among the most notorious in Puerto Rico, with an initial principal of $2.6 billion, and total interest of $18.9 billion, for an effective interest rate of 734 percent. These bonds constitute part of Puerto Rico’s $120 billion in debt to the banks and other financial institutions.
Puerto Rico’s recovery from Hurricane Maria will cost more than $139 billion, for housing, water, energy system, public buildings and other infrastructure repair, according to a report from Puerto Rico’s governor to Congress.
A report by the Center for Economic and Policy Research dated June 2018 notes that the plan proposed by the Federal Oversight and Management Board for Puerto Rico projects “savings” of $11.8 billion through 2023, with $9.5 billion in cuts to expenditures for social needs including education, health care, public safety, funding to municipalities, etc. The plan mandates the introduction of “at-will employment,” government-wide reductions in benefits for workers, and an across the board cut in pensions.
Mass struggle needed
During each stop in the tour, when asked what his greatest accomplishment in Detroit was, Moratorium NOW! representative Goldberg concluded by reporting how Emergency Manager Kevyn Orr stated it was preventing civil unrest. Goldberg stated that he agreed with that statement and that Detroit needed more civil unrest to prevent the attacks on the working class that the bankruptcy signaled.
Goldberg said that the bankruptcy is another form of class struggle, and it was critical was for the workers to engage in the process and not rely on the lawyers and “experts,” both by packing the court and taking to the street.
This view was echoed by UTIER president Angel Figueroa Jaramillo and UTIER’s lawyer as well. At the conclusion of every stop on the tour, Ricardo Santos-Ramos, former president of UTIER and tour organizer, would get up and call for all organizations and unions in Puerto Rico to unite and take up the struggle.
With strong unions like UTIER and a history of heroic resistance to colonialism, it is certain that the people of Puerto Rico will be up to challenge and fight back against the attacks being planned on their living standards by the Fiscal Oversight Control Board.
The world working class has a duty to lend solidarity to the people of Puerto Rico in what is now the center of the battle against the austerity being imposed on the working class and oppressed by finance capital all over the globe.
1 Trackback / Pingback