WASHINGTON ― In 2015, as talk began to circulate on Capitol Hill of crafting legislation to help Puerto Rico manage its billions in debt, a hedge fund creditor paid a visit to Treasury Secretary Jack Lew’s new special counselor.
The creditor told Antonio Weiss, who would become the point person on the island’s fiscal crisis, that the Puerto Rico government should simply eliminate some waste and cut a certain number of jobs to pay back its debt. Don’t bet on Congress helping, the creditor said.
A year ago, the idea of lawmakers lifting a finger to help the beleaguered commonwealth was indeed a pipe dream. But Weiss knew better. He told the creditor that history indicated otherwise. When Americans’ livelihoods are threatened, he said, Congress moves in.
Puerto Rico is home to 3.5 million Americans.
Earlier this summer, after a year of haggling and revising, Congress passed legislation allowing the commonwealth to restructure its $70 billion in debt under the supervision of an oversight board. The bill didn’t satisfy everyone, but it is nevertheless the only piece of major economic policy to pass Congress this year ― a sign of Treasury’s persistence in the face of incredible gridlock.
At the center of those negotiations, and in countless meetings with lawmakers, labor unions, Puerto Rican officials and creditors, sat Weiss ― soft-spoken and stoic.
“From the beginning, we believed that the only solution was a comprehensive one through Congress ― a restructuring authority for all the debt,” Weiss recently told The Huffington Post. “We also believed that, with the safety and well-being of so many Americans at risk, Congress would ultimately act.”
But it took months to get Congress to focus on the task, and Treasury needed to convince skeptics that Puerto Rico would otherwise face devastating cuts to essential services like health care, education, transportation and law enforcement.
When Treasury first went to Congress in September, Weiss and others were met with incredulity. Democrats and Republicans alike asked why they didn’t just undertake some extraordinary palliative measure themselves. For starters: Treasury doesn’t have the unilateral authority to approve restructuring powers for the island.
In October, Treasury returned with a detailed plan, taking time to dive into the arcane elements of Puerto Rico’s multifaceted debt and the inevitable defaults to come. From there, it took nine months to get a bill to the floor of the House, and another month on top of that to get it through the Senate.
For Weiss, that meant 35 meetings on Capitol Hill, 20 meetings with Puerto Rico Gov. Alejandro Garcia Padilla, five trips to the island and three congressional hearings. According to a source within the Garcia Padilla administration, it was Weiss who first articulated the need to craft a legal framework for restructuring and take it to Congress.
He was the “architect,” the source said, clearing key hurdles in Congress that would have been impossible to manage without him.
The first obstacle, and possibly the greatest, was apathy.
“For whatever reason, Puerto Rico has very little credibility in Congress,” the Garcia Padilla administration source said. “The narrative being pushed by hedge funds, that this was just a reckless Latin American government that couldn’t get its tabs in order, was appealing to many members.”
“To talk to them about doing something for Puerto Rico, doing something for Puerto Ricans, was like talking to them in a foreign language,” the source added.
To help craft and move legislation to the floor, Treasury staffed up. Not only did it engage and meet with members, it built up a team to regularly talk to all stakeholders ― a wide array of creditors, labor interests and Puerto Rican businesses and lawmakers.
Weiss met with the Progressive Caucus, the Hispanic Caucus and every sub-caucus that would listen to him. And when Secretary Lew trekked up to Capitol Hill, Weiss was nearby, joining in on meetings with House and Senate leaders of both parties.
In the months of back-and-forth over minute details ― Treasury wanted all the debt covered, no exceptions ― Weiss remained in close contact with the House Republicans writing the bill, and with House Speaker Paul Ryan (R-Wis.) and House Minority Leader Nancy Pelosi (D-Calif.). As it became clear Congress intended to introduce a legislative option to help Puerto Rico, the hedge funds moved in.
Advertisements lambasting Congress, and Antonio Weiss specifically, blared across TVs and popped up in major newspapers and online. Full-page ads denounced Weiss for trying to bankrupt states, and others claimed the bill would be a huge cost to taxpayers. Ryan took that last one personally.
When the Center for Individual Freedom started running TV ads painting the bill as a bailout at taxpayer expense, Ryan went to the mat, telling reporters it was offensive that groups were mischaracterizing the legislation. CFIF’s donors are anonymous, but it is suspected of being a front group for hedge funds that own Puerto Rico debt.
The amount of opposition to helping Puerto Rico restructure its debt was massive. The conservative seniors’ group 60 Plus, helped by the financial backing of a few wealthy anonymous donors, formed the “Main Street Bondholders” group to run opposition. Hedge funds started suing the commonwealth before Congress even sent the final bill to the president’s desk. (As soon as the president signed the bill, an immediate stay on all litigation against the island took effect.)
Democrats, meanwhile, had their own issues with the bill. Pelosi was able to deliver a strong vote in the House, but only after many decried the increased power afforded to the oversight board, and the provisions keeping minimum wage on the island below the national standard.
“This was a difficult issue from the start and good people on both sides had passionate differences of opinion,” Rep. Nadia Velasquez (D-N.Y.) told HuffPost in an email. “The Department of Treasury and Antonio Weiss specifically were instrumental to bridging this gap and ensuring that Congress passed legislation ― even if imperfect ― to help stem the crisis in Puerto Rico.”
After the long battle in the House, the Senate took up consideration of the bill with only a month to go before its summer break. The short time frame didn’t make it an easy sell for Treasury. In the days leading up to the vote, Weiss went back and forth with senators, especially Democrats who weren’t particularly happy with the compromises that came out of the House.
On top of the minimum wage provision, Democrats were upset over the island’s exemption from new overtime rules, and wanted more pension protections for workers on the island.
Weiss again helped navigate talks with senators, offering a “degree of credibility to the compromise,” said Sen. Richard Blumenthal (D-Conn.).
For Blumenthal, Weiss’ expertise and knowledge of financial issues from his time as a former Lazard investment banker ― amounting to roughly two decades on Wall Street ― were key in assuaging Democratic concerns.
“What he added, in a sense, was a view as to what the extraordinary damage and dangers would be in the event of default and the consequences of postponing action,” Blumenthal said.
Weiss laid out what would be likely to happen in the event of cascading catastrophes. Without preventative action, he said, the island would become isolated economically; unemployment would rise and essential services would be lost.
“The [Puerto Rico] bill was simply one step with many inadequacies and downsides necessary for a compromise that would prevent chaos and catastrophe, but [it’s] not the end-all,” Blumenthal said. “The American people are very rightly frustrated about the partisan paralysis in Congress, and [the] bill reflects it, because it could have been a much more positive measure.”
The commonwealth won’t rebound with restructuring alone. Blumenthal is hopeful Congress will work on legislation before the end of the year to boost the island’s health care programs, tax provisions and other economic programs. Without incentives provided by Congress, it remains to be seen if businesses will stay in Puerto Rico.
A source within the labor movement (which never threw its support behind the bill) praised the Treasury Department and Weiss for being open throughout the entire process, but said it’s simply too soon to tell what the final outcome will be for the island and its people.
The Garcia Padilla administration is cautiously optimistic as well. The source within the administration who spoke to HuffPost said the talk on the island from local media and residents is focused on the control board established under the bill. Many are worried that the board takes too much power away from the Puerto Rican government, and that the majority of seats given to Republicans could jeopardize a restructuring vote.
Much of Weiss’ attention in the coming months will be on the oversight board, which is supposed to be formed by mid-September. Treasury hopes it happens sooner.
While the restructuring bill can be notched as a win for Treasury, it’s just one piece in a larger process. The next step is setting up the oversight board. Seeing how well the board functions will play a crucial role in determining the administration’s success.
“The strength of the restructuring tool can’t be understated. Is it perfect? No, you could probably find a technical improvement here or there,” Weiss said. “But does it work? Yes. And a year ago people were saying there’s no chance of such a tool getting adopted.”