Guest: Florida residents hit hard in municipal bond fraud
Special to Historic City News
2015 witnessed what is likely to be the first of many large municipal bond defaults. Puerto Rico defaulted on $69 billion dollars in bonds. 80% of these bonds were owned by residents in the 50 states with New York residents coming in at over $2 billion followed by Florida residents at just under $2 billion.
Normally when you purchase a municipal bond and the money is lost, it is considered a normal “investment loss”. You took a risk and it didn’t work out. But if the municipal agencies were bankrupt when they floated the bonds, and the credit ratings agencies issued unjustified credit ratings, and the banks knowingly sold those bonds; that constitutes the crime of fraud.
That is exactly what we are looking at with the Puerto Rico Bond default. A criminal conspiracy between the municipal agencies, the credit rating agencies, and the banks.
There is no question today that the issuing agencies did not have the cash flow to make those bond payments. There is no question today that the credit rating agencies knowingly and intentionally issued good credit ratings for bankrupt municipal agencies. There is no question today that the banks then knowingly sold those investments to innocent investors.
The government of Puerto Rico has acknowledged on numerous occasions that all of what I have stated is true. The SEC has acknowledged that it is deeply concerning. The FBI has acknowledged that it all seems very troubling.
Why hasn’t the government done anything? Well they have. They passed a law (PROMESA) revoking all legal rights of the bond holders. The same legislation will prohibit any lawsuits against the issuing agencies.
It is clear that our officials in Washington have elected to throw the American people under the bus to protect their friends on Wall Street. It is clear that the DOJ has had this information for over a year and has been complicit in allowing it to continue. During the 2006 financial crisis no one was held accountable for trillions of dollars in fraud and it will be no different this time. The rich and powerful are indeed untouchable.
On September 27, 2016 at 10:00 a.m., there will be a Press Conference at the Waldorf Astoria Hotel outlining the specifics of this massive criminal enterprise. There is no doubt that after the Press Conference the American people will be clear on how broken and corrupt things are in Washington and how politically corrupt the DOJ has become.
-Richard Lawless is a former senior and executive banker who has specialized in evaluating and granting debt for 28 years. He has completed credit training programs with Wells Fargo Bank and Crocker Bank and has run multi-billion-dollar lending divisions for a number of major Wall Street banks. He has a Master’s Degree in Finance from the University of San Diego and Bachelor’s Degree from Pepperdine University. He sits on a number of Corporate Boards and actively writes for a number of finance publications.