One thing that caught my attention while reading this wistful, insidery feature in The New York Times about President Obama’s future (apparently a “post-presidential infrastructure” is involved) was a certain someone who attended a swanky dinner party at the White House recently. Sure, Toni Morrison was there, as well as Malcolm Gladwell and Eva Longoria, perhaps joining the prez in a taste of his fave, the extra-dry Grey Goose martini. But it wasn’t a glamorous showbiz/intelligentsia name that attracted my notice; it was Marc Lasry, co-founder and CEO of the hedge/vulture fund Avenue Capital Group.
Lasry is perhaps more famous at the moment as the new-ish co-owner of the NBA’s Milwaukee Bucks, a development that was so energizing for Wisconsin Governor Scott Walker that he signed a bill last week subsidizing a new arena for the team that, according to the Times, would “cost the public twice as much as originally projected.” But it turns out that Avenue Capital is one of the vulture funds that owns some Puerto Rico debt, and is currently aligned with Candlewood Investment Group, Fir Tree Partners, and Perry Corp, which have formed what is known as the GDB Ad Hoc Group (BGF is the acronym in Spanish), a coalition of vulture funds that hold bonds issued by Puerto Rico’s Government Development Bank.
Recently the GDB Ad Hoc Group has hired the law firm Davis, Polk & Wardwell to represent it in the upcoming battle with the Puerto Rico government, hoping to recoup its investment and avoid either the government’s debt-restructuring proposals or a move by Congress to change federal law to allow the commonwealth/unincorporated territory/colony to declare bankruptcy. The irony here is that this is the same law firm that helped orchestrate the US government’s bailout of AIG, the bad-mortgage debt-swapping machine at the center of the 2008 recession. So the same law firm that pushed for the AIG bailout is gearing up to force Puerto Rico to pay up, while Obama, who also favored the AIG bailout, has not even hinted that he would offer one to the troubled island.
“I haven’t seen the kind of focus that is necessary from this administration to respond to the crisis,” Representative Luis Gutiérrez told me in a phone interview earlier this month. While President Obama has yet to address the issue himself, he has directed White House Press Secretary Josh Earnest and Treasury Secretary Jacob Lew to suggest that although there will be no bailout, the bankruptcy laws should probably be changed to allow Puerto Rico to use them. These half-hearted Executive Branch pronouncements have done nothing to change the fact that the Republican-dominated Congress has no interest in either the House bill proposed by Puerto Rico’s resident commissioner, Pedro Pierluisi, or Senate legislation by Senators Charles Schumer and Richard Blumenthal to change the bankruptcy laws.