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.

Dodd-Frank Is About To Be Thoroughly Hillaried

Commentary

Richard Lawless

I can no longer sit quietly and watch this country implode from all of the Wa-
shington corruption.

Today I watched Hillary Clinton's speech, and I was appalled. I watched her 
tell the audience how she would bring Wall Street to heel and hold them acc-
ountable. I listen to her say how she would use Dodd Frank legislation to ma-
nage that process. It is all complete BS.

Hillary is fully aware of the large scale bond fraud uncovered in Puerto Rico.   
A criminal conspiracy so large that it calls into question all $70 billion dollars
of Puerto Rico debt.  Hillary is calling for a complete bailout and supports cu-
rrent legislation to do just that. She does not support prosecution.

The Puerto Rico Senate held investigative hearings in early 2015 to explore the 
financial failure of one of its largest municipal agencies. One government exe-
cutive after another testified under oath that they knew they were technically ba-
nkrupt when they issued these bonds and could not pay they back.  The witness-
es then went on to say that although the credit agencies (Moody’s, Fitch and S&
P) knew they were insolvent, they could secure good credit ratings for the bonds 
for the “right fee”. According to the same testimony, Wall Street’s biggest banks 
knew all this but for the “right sales fees” they would sell these junk bonds as sa-
fe retirement income to their retired investors.

The SEC has already performed four full audits on four bond issues and found 
the audits to be consistent with the Senate testimony.  These agencies were insol-
vent and it could not have been accidently overlooked by the Rating Agencies and 
the Banks.

We have seen this before with the 2007-2008 CMBS (mortgage bonds) crisis. The 
Rating Agencies and the Banks almost prefer to support these failing agencies be-
cause it forces them to refinance debt they can’t pay off as agreed before they have 
to admit it to their bond holders.  This “Ponzi Scheme” forces frequent and costly 
refinancing on a regular basis, generating huge fees for the Rating Agencies and 
Banks. All good, if you can continue to refinance fast enough and bring in new in-
vestors quick enough to pay off the old investors.  As in the case with Puerto Rico 
and other States and Cities, even a small hiccup causes the hold house of cards to 
collapse.

It is pretty clear that the Agencies issuing the bonds, the Rating Agencies issuing 
fraudulent ratings and the Banks selling junk bonds all broke the law and violated 
almost all of the provisions of Dodd-Frank.

All Congressman and Senators were issued this information.  Most did nothing 
but those that did, quickly stepped up to protect their Wall Street contributors. You
see, if this got out, the Rating Agencies and Banks would be held accountable for 
the tens of billions in bond losses.  Politian’s and government employees may be 
charged criminally. 

To date, there has been over $30 billion dollars in bond losses from this scam. The 
average bond holder owns less than $10,000 in bonds and that represents over 20% 
of their total savings. Not hedge funds as the Press and our Political leaders would 
have you believe.  When these bonds collapsed, after the senior citizens lost half 
their money, then the hedge funds came in to buy these bonds at 33-50 cents on the 
dollar with the hope of making money in the future.  The hedge funds are being us-
ed as a distraction to take the discussion away from the original crimes. Most Pu-
erto Rico Bonds are still held by individuals like you and I.

New York residences owned the single biggest piece of this debt at about $4 billion 
dollars, followed closely by Florida, New Jersey, Pennsylvania and Illinois. I don’t 
think any State has loss less than a few hundred million dollars. It is not a Puerto 
Rico Fraud. it is a National Fraud.

This entire thing sickens me and makes me glad that I am no longer part of the Wa-
shington two step.  The two step is a Political Dance that requires most politicians 
to add a political calculation to every vote they make.  There are three simple ques-
tions, how will this vote increase my power base, will it add to my reelection war 
chest and will it improve my personal financial statement.  There is no considerati-
on given to the masses they represent.  It is all about trading American Treasure 
and Tax Payer money for personal gain.

In this case it gets even better.  The Politicians were not happy stealing tens of bi-
llions from America’s middle class senior citizens when there is more to be taken. 
Enter the PROMESA legislation. Legislation that removes all existing legal rights 
from the innocent bond holders.  The legislation actually prevents the bond holders 
from suing. All supported by politicians that know all about this. 

Being around Washington for so long I know what most of these government offi-
cials did before securing their government jobs.

Treasury Secretary Lew and his legal counsels Weiss and Campbell worked for 
Citibank and Lazard, respectfully.  In the period that this fraud started Citibank 
and Lazard were among the first firms to sell these fraudulent bonds.  Now, using 
their position in government, all three of these gentlemen marketed congress for 
a full  bailout of Puerto Rico with Tax Payer Dollars and the innocent bond hold-
er’s money. Not once in all the committee meetings they participated in did they
site this conflict of interest while purposing solutions that benefit all their former 
employers.

Paul Ryan a professed conservative, was not supportive of any bailout or the PRO
MESA legislation.  That is until he met with Secretary Lew.  After the meeting, 
Ryan supported the legislation that violates every core principal that the Republi-
can party stands for.  What happened?  I suspect two things.  Lew reminded him
that he had a bright career and Wall Street would not forget this (contributions for 
his continued career advancement) and immediate funds for his current reelection 
campaign.  I as guessing about the former, but if you look at the contributions that 
flowed into him from Wall Street firms after the meeting, well it was impressive.  
Not surprisingly, most of the contributions came from firms directly involved with 
Puerto Rico.

It is clear that the Democrats has a strategy in place to redirect what’s left of the 
bond holders money to fund the unfunded government (union pensions).  How 
will they do this?  It is simple and the Press is going along with it.  Claim that the 
bonds were issued fraudulently and claim they shouldn’t be paid back to the bond 
holders. Float stories that the bond holders are just greedy hedge funds and not peo-
ple like you and I.  Who likes hedge funds?  Float stories that Puerto Rico is cance-
lling services from lack of money.  Kids are dying in the streets.  You have heard 
all this before.

As a debt expert, I should point out that when a family does not make its mortgage 
payment (bond payment example) that family has more cash at the end of the mon-
th, not less.  Puerto Rico has withheld hundreds of millions in payments and has mo-
re cash than you would imagine. Any cancelling of services is just another strategy 
being employed by less than honorable people.

I should mention in closing that Elizabeth Warren (claims to be anti-Wall Street) 
knew all about this but was the first to propose an amendment to an energy bill 
preventing innocent bond holders from suing.  Just follow the money for Elizabeth.

This is not just a $70 billion-dollar scam (Puerto Rico). It includes Chicago, Conn-
ecticut and many other States.  This is a Political Strategy to make up for years of 
over spending.  When legal taxes are no longer enough, steal the bond holder’s mo-
ney.  Individually the bond holders are not very powerful and they will not underst-
and what their leaders are doing to them.



Richard Lawless is a former senior banker who has specialized in evaluating and granting debt for 
over 25 years. 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. The opinions expressed in the preceding article are solely those of
Mr. Lawless and do not necessarily reflect those of The Puerto Rico Monitor, its editors, contributors
or advertisers.

Wall Street May Be Responsible For Puerto Rico’s Downfall

Commentary

Robert Williams


The major Banks and Credit Rating Agencies have been using Puerto
Rico as a private piggy bank for almost a decade.

Wall Street for almost a decade has been providing billions of dollars
in municipal debt to Puerto Rico when it was completely unjustified.
Wall Street provided Puerto Rico Government Agencies new capital
based on income that by any standard should not be included in reve-
nues. The Banks and Credit Rating Agencies knew this but push th-
rough billions in new bonds and short term lines of credit anyway.

I took a look at a number of bond offerings in Puerto Rico. Each issue
was for approximately $650,000,000. In the Offering Memorandums,
Wall Street claimed their uncollectable receivables as income, leaving
the investors with the misleading belief that Puerto Rico could make
the payments on the bonds. They couldn’t. Puerto Rico in all cases
secured more capital from other sources (lines of credit) and made up
the shortfall in revenues up by using the lines of credit.

A Ponzi Scheme is a criminal activity where a group of investors are
brought in and promised attractive returns that never really exist. To
keep the first investors blind to the fact they were misled, the compa-
ny quickly raises more money from new investors to pay the old inves-
tors.  It is a house of cards and it requires continued borrowing to keep
it going.

The question is why would these major banks and the credit rating agen-
cies participate in a Ponzi Scheme?  The answer may be the attractive
fee income they earned.


Mr. Williams is the editorial writer for Commercial Solar Power, an industry leading 
utility scale energy company. His opinions are solely his own and may not reflect those
of The Puerto Rico Monitor.