Day Against Banks in Puerto Rico

June 2 was the Day Against Banks in Puerto Rico.

Organizers of the Day Against Banks were protesting the role played by banks in creating the debt crisis and the crushing austerity measures that resulted from it.

Organizers called on people to take collective actions against banks including closing bank accounts en masse, flooding customer service call centers with complaints about practices of banks, participating in agitprop performances in bank lobbies, and other actions to disrupt business as usual at the banks.

The debt crisis was years in the making and banks were at its center.

Puerto Rico has never recovered from a recession that began in 2007 after the US government ended a tax benefit to corporations that made Puerto Rico an attractive site for business investment.

According to a report issued in December by Hedge Clippers and Committee for Better Banks–two groups with strong ties to the US labor movement–banks, especially Santander, took advantage of Puerto Rico’s troubles to enrich themselves at the expense of the people.

Since the recession began, living conditions for most Puerto Ricans have deteriorated. The US Census Bureau estimates that more than 45 percent of the island’s residents live in poverty.

But during the same period, banks skimmed hundreds of millions of dollars in fees and commissions by encouraging the Puerto Rican government to engage in risky financial deals.

In 2008, Puerto Rico’s newly elected governor Luis Fortuño looked to banks to help Puerto Rico get out of its recession.

He appointed Carlos M. García, the CEO and President of  Santander Bank in Puerto Rico, to lead the Government Development Bank (GDB), the government’s financial advisor.

García brought with him other Santander executives to the GDB.

During their tenure, they advised the government to borrow heavily to pay off Puerto Rico’s bond debt and devised new debt instruments to do so.

One of their creations was called COFINA, a bond that was secured by setting aside a portion of revenue from a sales tax created and implemented by the Fortuño government.

That money should have gone toward providing services for people; instead, it was diverted into a fund used to guarantee payment on COFINA bonds.

In 2009 alone, Puerto Rico issued $5.3 billion worth of COFINA bonds used largely to refinance previously existing debt.

Some of the COFINA bonds were Capital Appreciation Bonds (CAP), which some experts have called abusive because their interest rates are so high. States such as California and Texas have restricted their use.

The compound interest rate on these bonds was between 6.875 percent and 7.125 percent.

One of these CAB deals underwritten by Santander in 2009 raised $139 million, but its final payout will be $730 million, more than five times the amount borrowed.

GDB also recommended using interest rate swaps as a hedge against future interest rate increases that would affect some of the bonds sold by the government.

But when interest rates declined, the government was forced to pay a $400 million to banks and other bond holders in penalties to get out of the interest swaps contracts. If it had not done so, the government would have lost even more money.

While the government and the Puerto Rican people were getting burned by bad bond deals, the banks that engineered the deals took home hefty fees and commissions.

Banks like Santander played the middle man in the sale of bonds by underwriting the bond sales.

Santander was the underwriter for $61.2 billion worth of bonds. Puerto Rico paid Santander and other banks more than $1 billion in underwriting fees and other fees for these deals.

While Santander and other banks enriched themselves, things got desperately worse for Puerto Rican workers.

The unemployment rate increased to 15 percent by 2015 and the island lost nearly 300,000 jobs.

Wages that were already low, remained low. The median household income is just under $19,000 a year.

But prices on basic necessities–water, power, food, and other consumer goods have increased.

The island is facing foreclosure crisis causing many people to lose their home.

And now the situation could get much worse.

After the Puerto Rican government in 2015 announced that it could no longer service the interest on its $70 billion public debt, the US government took action to protect banks and other investor bondholders.

The US was able to do so because Puerto Rico is still a colony of the US.

Legislation passed by the US Congress created the Puerto Rico Financial Control Board to oversee the island’s debt restructuring and ensure that investor interests are protected.

To do so, the board has recommended harsh austerity measures including a 10 percent cut to pensions, cuts in public workers pay, $550 million in cuts to Puerto Rico’s health care system, and cuts to public education including higher education.

In calling for the Day Against Banks, organizers of the action said that they want banks to feel some of the pain that ordinary Puerto Ricans feel every day.

“The time has come for the banks to feel the heat of a people tired of abuses,” reads an announcement calling for the Day Against Banks.


Quebec general strike ends after government orders workers back to work

The provincial government of Quebec on May 30 passed legislation ordering 175,000 striking construction workers back to work.

A general strike by construction workers that began on May 24 had shut down building projects both large and small all over the province of Quebec.

Workers walked off their jobs after negotiations between their bargaining representative Alliance Syndicale-Constuction (AS) and the construction employers’ association could not reach an agreement on a new contract.

According to AS, the employers’ association was seeking concessions that would among other things disrupt workers’ family lives and keep them at the beck and call of their employers during their time away from work.

“Employers are asking us to sacrifice time with our families to be available at work. There are limits on what you can ask of your workers, and those limits have been reached, “said Michel Trépanier, an AS spokesperson, explaining why the workers were on strike.

After the strike began negotiations between AS and the employers’ association continued, but Trépanier said that the employers did not take the negotiations seriously and instead pinned their hopes of ending the strike on a public relations campaign.

“We were laughed at,” said Trépanier describing the employers attitude toward the negotiations to the Toronto Star.

After AS broke off negotiations, an employers’ association spokesman told the media that he was surprised that AS decided to walk away from bargaining because the employers’ association had offered the workers a win-win compromise on the family time issue.

But Trépanier said that the employers’ offer was no compromise because it still required workers to be on call during much of their free time.

Perhaps one reason that employers did not take the negotiations seriously was because they knew from past experience that the government would step in to end the strike if negotiations could not produce an agreement.

After all, in 2013, Quebec’s National Assembly ended another construction workers strike by ordering the workers back to work under similar circumstances.

And that’s what happened again in 2017.

Shortly after negotiations broke off, Quebec’s Prime Minister Phillipe Couillard announced that he would seek passage of a back to work order from Quebec’s National Assembly.

AS called on its members to gather at the Assembly on May 29 to demonstrate their opposition to a back to work order.

When the National Assembly convened,  construction workers were on hand to demonstrate against Couillard’s proposal.

CBC News reported that, “riot police were called to monitor the boisterous crowd, which threw beer cans and urinated on the nearby press gallery building before thinning out by mid-afternoon.”

“People are angry, really angry,” said Trépanier to CBC, because Prime Minister Couillard’s proposal “contains exactly what the owners want.”

The demonstration caused the bill to be pulled down and reworked, but on May 30, the National Assembly passed a reworked back to work order, Bill 142,  that still gives employers much of what they wanted.

In addition to forcing workers to return to work, the bill gives workers a 1.8 percent pay increase, slightly more than the 1.6 percent raise proposed by employers but much less than the 2.6 percent raise proposed by AS.

It also requires the two sides to continue negotiating other issues under the guidance of a mediator.

It sets a five-month time limit on the negotiations. If the two sides can’t reach an agreement by then, the outstanding issues will be decided by arbitration.

Construction workers returned to work on May 31, but some were not happy with the bill that ended the strike.

“Arbitration takes away the conditions that we fought so hard for,” said Sylvain Boivin, a union representative for steelworkers to CBC. “It isn’t fair play, it benefits employers more than the unions.”

“We shouldn’t have been here today,” said Damien Leblanc, a construction worker at a work site explaining how he felt about the end of the strike to CBC.