Wednesday, May 6, 2009

Puerto Rico's Bailout

On October 14th, 2008, the Treasury Department posted an announcement, the full text of which can be found at . Below is the first paragraph of said announcement:

Treasury Announces TARP Capital Purchase Program Description

Washington- Treasury today announced a voluntary Capital Purchase Program to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy.

Throughout this announcement, in three separate instances, "U.S" is used as an adjective to emphasize the fact that these activities are being conducted for the benefit of the United States. However, the Treasury, on its own website( ), posts information that would seem to contradict the stated purpose of the Capital Purchase Program as advertised to the public. According to the impressive interactive map, Treasury has funded $1,335,000,000 worth of transactions in Puerto Rico. A closer look at the reports reveal that the lions share of this amount, $935,000,000, went to Banco Popular (Popular, Inc.) , a San Juan based conglomerate with assets in excess of $45Billion. The most compelling piece of information that we can identify concerning Popular is that, in early 2008, it sold its US consumer finance division to AIG. This transaction was apparently quite beneficial, if not necessary for Popular- both Moody's and Fitch had placed the Company on "negative" outlook and were reviewing it for a possible credit downgrade. After the sale however, Moody's immediately assigned a "stable" rating to Popular.

To put Banco Popular's amount of US Government support in perspective, consider that it received more Federal support than the did the financial institutions of 34 individual US states. 

We did not choose to bring this information to light out of xenophobia(or any other phobia), but rather to point out that the public's attention has been skillfully manipulated throughout this entire economic episode. Case in point: there has been considerable rage leveled at Banks who received TARP money, and then planned to hire recent MBA's who happened to be from another country. However, there has been zero mention in the traditional media of the billion or so that has flowed directly to Puerto Rico.

Sphere: Related Content

No comments:

Post a Comment