Comment by 6stringmerc | Hacker News Reader

Comment by 6stringmerc | Hacker News Reader

All that text about Puerto Rico's financial difficulties and not one mention of the rampant fraud that spun up the debt from a reasonable amount to the $XB that is likely to default is the result of graft, corruption, and fraud enabled by many US and international actors.

Want to take a guess how many of those responsible for the transactions, debt issues, and back-office fund transfers are in jail and all their assets seized to repay the debt, a la Civil Forfeiture for drug crimes in the US?

I feel bad for the Citizens of Puerto Rico, because here in Dallas the Fire and Police Pension fund is probably insolvent due to a combination of graft and incompetence as well, and those responsible in both these circumstances seem to just shrug it off and go on with life, their pockets lined more than 90% will ever see in 20 years of hard work.

Talking about the debt in Puerto Rico without firmly acknowledging the conditions that led to it is irresponsible in my opinion. Hard to separate the two. And, if we're going to talk about accountability for the latter, then we should nail those who committed the former first. Likelihood of that? Heh, yeah I'm not optimistic - doesn't mean I can espouse what I believe to be a justifiable alternate course.

Would love to read more on the subject if you have links to both the PR and Dallas situations handy.

Not the OP, but I read this one recently about Puerto Rico: https://www.thenation.com/article/after-a-century-of-america...

Here is an article on the Dallas pension problem. http://www.economist.com/news/finance-and-economics/21711335...

The gist as I understand is that pensioners were promised a 8.5% return (which didnt happen) and (some?) retirees are able to withdraw their current value in their pension in full. There is talk of reducing benefits, which is causing a situation much like a run on banks to occur.

I've seen a few proposed solutions such as having the state of Texas help pay, to pillaging funds from DART (public transit), to tax increases.

It is a complete mess, and PR must be in such a bad position. In Dallas' case, it is obviously corruption that caused the problem, with no penalty, and the only recourse is to penalize those that did not cause the problem. Seems like PR is in a similar yet more dire situation.

Great find and thank you for kicking in - what the backstory might not address is that in pursuit of the 8.5% return, the fund management engaged in exceptionally risky investment schemes. Took trips to "scope out opportunities" on the Pension tab year after year totaling a bunch. The whole operation was shady and unchecked for at least a decade.

By the time anybody started paying attention, the wound had festered into a real infection. An almost uncontrolled fiasco of promises to the Police/Fire Unions and no chance of hitting the returns, and essentially gambling away millions that will only lose more in 10 years if that garbage isn't unwound like a bunch of bad Bear Stearns Swaps.

It's so ugly. It's an embarrassment. And the people who end up holding the bag look terrible for telling a 53 year old retired cop he shouldn't be able to pull out $1.7M in benefits and put a run on the account. Ugh!

Offering recourse to the pension-holders will clearly require penalizing groups that did not cause the problem.

But can't we also penalize those that made the un-keepable promises and mismanaged the funds? This won't make the policemen financially whole, but it would offer at least some sense of justice, and, more importantly, send a message to others currently operating similar schemes.

I'm not sure that is possible and I question if their actions were illegal. Investing is risky and when actual returns did not beat the guarantees, the investors decided to invest in riskier assets to attempt to make them whole. However I'm not excusing their behavior and they are clearly to blame. There was also questionable behavior but I'm not sure how illegal it was.

And if their actions were illegal, I wonder how many people were involved and able to be prosecuted. I imagine there are many, from investors to politicians, and thus an expensive endeavor for the city and state.

I think the best thing is to prevent this from happening in the future by monitoring and exposing these shenanigans early rather than before it is too late. Cities and states with pensions should take note of Dallas' problem and act accordingly. Contracts should include clauses for penalties and recourse so as to allow civil lawsuits.

its moral hazard by many parties, but after what happened in 2008 and the lack of punishment that should have come to wall street, the financial system learned that they could get away with anything.

Just wait until Trump gets rid of the Dodd-Frank Act and other regulations designed to prevent 2008 from re-occurring.

2008, Savings & Loans... Finance really can do anything

On a side note, it's hard to believe my off-hand dredging of historical knowledge would be a viable critique for a piece posted on Reuters, an establishment I genuinely respect. I'm no journalist, but maybe I could have a chance at helping them out. To quote the great Tyler Durden, "I can do this job from home."

How far does the graft and corruption have to take from us before we start publicly hanging them by their genitals?

All through history, the feeble voice of economically rational people has been no match for vociferous demagoguery. What I mean is, people will actually identify the source of the problem 50 years too late, and usually when all the primary actors are long gone. During the problem, everyone will vaguely sense that something is going wrong, rarely listen to the voices of restraint while the problems are being created, and ultimately the demagogues will blame everything on someone on the outside and take the insiders to war. The amazing thing here is, you don't even have to talk specifics. This movie script plays out over and over and over.

So the answer to your question is that it is never going to happen.

Maybe the AI overlords will learn from history. One can only hope.

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