August 4, 2015

RUNNING OUT OF OTHER PEOPLE’S MONEY: Puerto Rico Has Defaulted.

It’s all over the wires: Puerto Rico has defaulted on its $58 million payment to creditors of its Public Finance Corporation, which was due by the end of day. San Juan’s treasury only managed to scrape together some $628,000 towards the total. The government had tried to argue that the PFC bonds were of a different category—and had a different legal status—than general obligation debt. Credit rating agencies rejected the argument. “Moody’s views this event as a default”, Moody’s analyst Emily Raimes said in a statement, according to Reuters. “This is a first in what we believe will be broad defaults on commonwealth debt.”

What now? A whole lot of mess, more than likely.

That’s what happens when you run out of other people’s money.