Group Warns State of Illinois, Chicago Public Schools, and City of Chicago Headed Down Same Path Unless Legislators Stand Up to Wall Street Banks and Hedge Funds
CHICAGO, IL – On the eve of Three Kings Day (El Día De Los Reyes), a diverse coalition of groups held a press conference to call on the Federal Reserve to use its authority to offer debt relief to Puerto Rico to put an end to the painful austerity measures and harsh cuts that Puerto Ricans have been forced to live with for years.
At the start of this year, Puerto Rico failed to make a $174 million payment on the $72 billion in total debt owed by the island. Without bankruptcy protection and action by the Federal Reserve the island’s unsustainable debt load could trigger more disastrous austerity measures.
In an attempt to stave off its Wall Street and hedge fund creditors, Puerto Rico already has laid off 30,000 public sector workers, jumped the sales tax from 7 to 11.5%, closed 150 schools and says it may have to close another 600 (nearly half of the 1,387 that currently remain) over the next five years. Speaking to the current crisis on the island, State Senator Iris Martinez (D-20), who is also a member of national steering committee of the Puerto Rican Agenda, pointed out, “As the humanitarian crisis deepens, the poverty rate showed an even greater gap, with 45 percent of the island’s residents living under the federal poverty line, compared to 16 percent on the mainland.”
This crisis on the island was created by years of irresponsible policies pushed by Wall Street banks and stamped by the federal government, heaving unsustainable debt on the island.
“Wall Street banks pushed Puerto Rico deeper and deeper into debt even though they knew the island would not be able to pay it off,” said Saqib Bhatti, director of the ReFund America Project and a fellow at the Roosevelt Institute. “There’s a term for that: predatory lending.”
These predatory lending deals primarily included bad interest swap deals and have cost Puerto Rico nearly $640 million, and other complex financing schemes like capital appreciation bonds and the island’s “extraconstitutional” debt. These are the same types of bad deals that many governmental entities on the mainland have also found themselves locked into following the recession including the City of Chicago, Chicago Public Schools, and State of Illinois.
“Illinois is in a very similar boat to Puerto Rico right now: we are also in an unprecedented budget crisis in which we the social safety net is being shredded so that banks can get their checks on the first and fifteenth of every month,” stated Amisha Patel, Executive Director of Grassroots Collaborative. “In both instances we see families getting cut and Wall Street banks being paid. We have member organizations that have had to lay off staff, implement furlough days, or cut programs and services because the state of Illinois is not paying it’s bills. Meanwhile Illinois is still on pace to pay out $588 million to Wall Street banks despite not having a state budget.”
The City of Chicago and Chicago Public Schools are also on the hook from these predatory deals. Together they have either already paid or owe Wall Street firms like Bank of America $1.2 billion for toxic interest rate swaps. As a result of resources being drained by these bad bank deals Chicago Public Schools has closed schools, cut special education, and is now threatening to layoff 5,000 teachers.
“In Chicago and in San Juan, predatory deals profiting the big banks have been responsible for scores of school closings and cuts. In Illinois and on the island we’ve watched hedge fund billionaires spend their cash to buy political influence, influence they’ve used to protect profits, hand out tax breaks, and issue calls for students and teachers to sacrifice even more. We must stop Bank of America and the others from robbing our children’s futures and we stand with those demanding action to put the future of the Puerto Rican people ahead of profits,” stated Maria Cosme, member of the Chicago Teachers Union.
From Chicago to San Juan, our elected officials should be putting the needs of families ahead of wealthy Wall Street banks and hedge funds. Grassroots Collaborative remains committed to fighting back against financial institutions attempting to turn human suffering into profit.
Grassroots Collaborative is Action Now, American Friends Service Committee – Great Lakes Region, Brighton Park Neighborhood Council, Chicago Coalition for the Homeless, Chicago Teachers Union, Enlace Chicago, Illinois Hunger Coalition, Jane Addams Senior Caucus, ONE Northside, Service Employees International Union Healthcare Illinois Indiana