History Is Repeating Itself and America May Not Survive

Commentary

Richard Lawless











In 2006 a financial crisis of unprecedented magnitude hit America.

Wall Street, with at least complicit support from our legislators, the DOJ and re-
gulatory agencies began to create new financial instruments to sell to the Ameri-
can people.  Unfortunately, these new investments consisted of pools of troubled
mortgages.

What made this all possible was that the three big credit rating agencies handed
out high investment grade credit ratings that allowed the complicit banks to sell
these investments to the general public. It really was that simple.  Today there is
universal agreement that Moody’s, S&P and Fitch provided fraudulent credit ra-
tings.

Could you image what would happen to a real estate appraiser that knowingly
issued home values that were hundreds of thousand higher than the value of the
property and a dishonest borrower that borrowed millions based on these phony
valuations.  The Banks would incur millions in losses and the borrower and app-
raiser would go to jail.

As of 2016, not one employee or executive at the rating agencies were ever
charged.

Our legislature is the recipient of tens of millions per year in political contribu-
tions and paid speeches.  None of that money comes without strings. Our Cong-
ressmen and Senators did what they were paid to do and protected their Wall St-
reet friends.  The DOJ and regulatory agencies are run by these very same legis-
lators and were prevented from prosecuting anyone.

Six trillion dollars in lost wealth, six million homes lost to foreclosure and mill-
ions of jobs lost.

Well, the Credit Rating Agencies are at it again and this time our country does
not have the resources to withstand another major crisis.

It has been a few years now since the start of the wholesale financial collapse of
Puerto Rico.  Sufficient time has passed allowing Individuals, companies, regul-
atory agencies and our legislators the time to understand the root causes of his
crisis.

That’s right, you guessed it!  All of the credit ratings issued on Puerto Rico debt
were either misleading or outright fraudulent.  But it does not end there, a quick
review of bond ratings from Chicago, Connecticut, California and New York re-
flect similar concerns.

The municipal bond market is $4,2 trillion dollars.  Preliminary indications sugg-
est that as much as 60% of these bonds were sold to investors with an inappropri-
ate or misleading credit rating.

Once again our regulatory agencies, the DOJ and our legislators have circled th-
eir wagons around Wall Street.  No matter how many American’s need to be thro-
wn under the bus, our government will not move against their friends.

So far tens of billions have been lost by our senior citizens who purchase these bo-
nds to supplement their modest retirement incomes.  It will not end with Puerto Ri-
co; Puerto Rico is only the beginning.


Mr. Lawless is a career Banker and CEO of Commercial Solar Power, Inc.  Mr. Lawless has been 
working with the SEC, the FBI, The U.S. Attorney’s Office and the Treasury Department to un-
cover the reasons for Puerto Rico’s $70-billion-dollar bond default.  Mr. Lawless has held Senior 
and Executive positions with Wells Fargo Bank, Home Savings and Washington Mutual Bank 
specializing in the issuance of debt instruments.  Mr. Lawless holds a BA from Pepperdine Uni-
versity and a Master’s Degree from the University of San Diego.

The opinions expressed in the preceding commentary are exclusively those of the author and
do not necessarily reflect those of The Puerto Rico Monitor, its contributors or advertisers.

The Municipal Bond Market Will Bring America To Its Knees, Once Again

Commentary

Richard Lawless


Back in 2007–2008 it was the Commercial Mortgage Backed Securities
(CMBS) and CDO’s that almost caused America’s financial markets to
fail. It cost six million jobs and millions of Americans lost their homes.
The loss of wealth was huge.

The four trillion-dollar municipal bond market is next. The municipal mar-
ket has been on fire for the last decade. Much like the CMBS and CDO
markets in 2007, the Bankers, the Rating Agencies and the Bond Sales
Organizations have been making outrageous amounts of money. Like a
drug, once Wall Street gets used to those profits, almost anything will be
done to maintain them.

I recently wrote about a utility company that was technically bankrupt but
repeatedly issued billions in bonds that couldn’t be repaid. This company
pays forty to sixty million dollars a year to the Rating Agencies and Banks
to issue these bonds. The agencies and banks wanted that money and were
willing to repeatedly commit fraud to get it.

In this case, the Senate held hearings in which the executives of the utility
made it clear that the Banks and Credit Rating Agencies knew that they
were technically bankrupt and could not repay these bonds. A clear admi-
ssion of guilt. The CPA firm that prepared the utilities financials testified
that the Credit Agencies and Banks were aware of their dire financial posi-
tion but granted false ratings and sold the bonds to their investors anyway.
To clarify this corruption further, an audit was prepared that showed clearly
that the company could never repay these bonds and that information was
clearly available in all the bond offering memorandums. Yes, the memoran-
dums that no one seemed to read.

In the case of this utility company, the bond holders (investors), mostly re-
tired Americans, lost $5 billion dollars, so far. More losses are sure to
follow.

This was all reported to the SEC, FBI and U.S. Attorney. The U.S. Attor-
ney's position is that it is unlikely that any person committed a criminal act.
True, I am not kidding, I actually recorded that call. Is it any wonder why
political outsiders are all the rage this election cycle! Maybe we have had
enough of this.

I was so put off by this whole experience that I started looking into bond
offerings across the country.  Guess what?  No surprise here, this practice
is pretty widespread.  Because of the all the money involved our political
leaders have all turned a blind eye to it.

Based on my preliminary analysis, it appears that we will be looking at the
loss of $2.2 trillion dollars in wealth, mostly held today by retied Americans.

You see, this collapse cannot be avoided.  The municipal market is a giant
Ponzi scheme.  Debt is issued as a municipal bond knowing that the munici-
pal agency can’t repay it.  Over the past decade or more these very same
agencies have been refinancing their debt with great regularity.  Paying off
the unpayable old debt with money from new investors (bond buyers).  Once
the refinancing slows or God forbid stops, the whole house of cards collapses.
Bernie Madoff was just a boy scout compared to these guys.

That day is coming soon.  The fraud is so obvious that it was idiot simple for
an old banker like me to find it.  Greed and a political system that is in large
part financed by these very same companies has put off the day of reckoning
for many years.  These municipalities are in such bad shape that even fraudu-
lent credit ratings will not be enough to draw investors.

Be prepared, the American people are going to take tremendous losses. How
much, it’s hard to be sure.  What I can be sure about is that just like the CMBS
and CDO fraud of 2007-2008, our leaders will not prosecute those responsible
because they are owned by these criminals in our broken political system.


Richard Lawless is CEO of Commercial Solar Power in Temecula, CA. The opinions expressed in the 
preceding commentary are solely his own and do not necessarily reflect the views of The Puerto Rico 
Monitor or its advertisers.