House Urged to Investigate Hedge Funds in Puerto Rico Crisisby
Democrat on resources panel says funds seek to affect outcome
Grijalva accuses Republicans of silence on Island's Fiscal Woe
The top Democrat on the U.S. House Natural Resources Committee is pushing for a congressional hearing into the role of hedge funds in Puerto Rico’s debt crisis.
Making the request Wednesday, Representative Raul Grijalva of Arizona pointed to a Sept. 4 report by his staff asserting that some hedge fund managers are trying to affect the outcome of the crisis to pad profits rather than accept losses from investment miscalculations.
“This behavior, while profitable, is reprehensible,” Grijalva wrote in a letter to committee Chairman Rob Bishop of Utah. “A hearing that casts the spotlight on this gross inequity could help Puerto Rico on the path to recovery,”
Puerto Rico is dealing with $73 billion in debt that its governor, Alejandro Garcia Padilla, says it can no longer afford. Republicans who lead both chambers of Congress have signaled little urgency in aiding Puerto Rico, while President Barack Obama’s administration has made clear it won’t bail out the commonwealth.
Bishop said he hadn’t yet looked at Grijalva’s hearing request, but will. He said there are jurisdictional issues on Puerto Rico between his panel and the Judiciary Committee. “I’m also going to be very respectful of traditional roles the Judiciary Committee should have,” Bishop said in an interview.
As recently as Tuesday, during a Senate Finance Committee hearing, the panel’s chairman, Orrin Hatch of Utah, also gave a dim view of sending more funding to Puerto Rico for some federal programs. He noted that the territory has received billions in additional federal dollars since 2009.
Puerto Rico, which defaulted on some securities for the first time in August, is seeking federal legislation that would allow its publicly owned corporations, such as the power company, to file for Chapter 9 bankruptcy protection, as U.S. cities can. The measure remains in limbo in Congress.
In a statement accompanying his letter to Bishop, Grijalva accused the Republican House majority of being “largely silent on the issue despite the committee having jurisdiction over Puerto Rico and other American territories.” In his letter, he points to his staff’s research on the hedge funds.
The minority staff report described how certain hedge funds bought up Puerto Rico debt thinking it was a good investment despite warnings to the contrary.
Now, Grijalva wrote in his letter to Bishop, “Rather than absorbing the occasional investment losses that are a matter of course when assessments are wrong, even by the most successful investment firms, these hedge funds are now working to pad their profits by cutting off relief options for families in the territory.”
The staff report criticized investment firms for lobbying against allowing bankruptcy protection and pushing instead for government austerity measures as the response to Puerto Rico’s crisis.