WASHINGTON -- Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) called on the federal government Thursday to curb the ongoing humanitarian crisis in Puerto Rico by cracking down on vulture fund investors.
"Wall Street should not be believing that they can get blood from a stone," Sanders said. "When people are suffering and hurting, you cannot continue to squeeze them."
Watch Sanders' and Warren's comments in the video above.
Puerto Rico has been ravaged by a decade-long recession that Sanders said has driven the childhood poverty rate to 56 percent and destroyed 20 percent of the island's jobs. Wall Street vulture funds, meanwhile, bought up huge amounts of Puerto Rican debt and have been pushing the territory's government into crippling austerity measures to meet payments. Vulture funds buy up debt at a discount when it looks like a country will have trouble paying it off, because risky bonds pay high interest rates.
"They want Puerto Rico to raise taxes, cut health care, fire teachers, cut pensions, sell off $4 billion worth of government buildings, privatize public ports, close neighborhood schools and cut support for the University of Puerto Rico, all so these vulture funds can squeeze out more profit," Warren noted.
Despite Puerto Rico's financial crunch, the federal government has resisted cutting the island any slack on its debt, even as it has driven the island economy to ruin. The Treasury Department wants Congress to pass a law giving Puerto Rico the power to wipe out some of its debt in bankruptcy, but the prospects for that proposal are slim in an era of legislative gridlock. At the hearing, Warren laid into the Treasury Department's top negotiator on the Puerto Rico crisis, Antonio Weiss, for punting the mess to Congress instead of forcing the vulture funds to cut a deal.
"Treasury needs to step up and show more leadership here," Warren said. "When the banks were in trouble, Treasury did a lot more than just bail them out. Treasury stretched the limits of its authority to make sure that the banks stayed afloat. It helped broker deals between banks. It applied pressure to get parties to accept deals they may not have liked very much."
"Now the people of Puerto Rico are calling. They understand there is no bailout on the table for them and they are not asking for one. After all, they aren't a giant bank. But they are asking the administration to do what they can do what it can to help broker deals to stand up to the vulture funds," Warren added.
Warren and Weiss have a history. She blocked his appointment to be the third-ranking official at the Treasury, objecting to his work as an investment banker at Lazard, where he worked on tax inversions -- helping corporate clients dodge U.S. taxes. After Warren's campaign, President Barack Obama named Weiss a special counselor to Treasury, where he has headed the federal response to the Puerto Rico crisis.
At the hearing, Weiss said he was being "unambiguous" about the need for debt relief in Puerto Rico, but initially said it was up to Congress to secure it.
"Administrative authorities are simply insufficient to put an end to this crisis," Weiss said. "Austerity alone is not a solution ... The debt is unsustainable, and the market knows this."
Later in the hearing, after senators took a break for votes, Weiss called the critique from Warren and Sanders "very fair" and said Treasury "will leave no stone unturned" to solve the crisis.
Much of the debacle is driven by Puerto Rico's status as a territory, rather than a state. Even though the island's inhabitants are full American citizens, they don't benefit from important federal programs that mainlanders do. Poor people in Puerto Rico do not receive the Earned Income Tax Credit -- a major federal anti-poverty program -- and they get lower Medicaid benefits than poor people in the 50 states do. That puts a heavier burden on the island's budgets during good times, and gives the territory's government almost no room to maneuver during bad times.
Wall Street investors, however, have been receiving a steady flow of funds from Puerto Rico, even on tax-free debt they purchased at a steep discount.
"They are receiving 11 percent [interest rates] and children in Puerto Rico are going hungry -- somehow that equation does not make a lot of sense to me," Sanders said. "They made risky investments. And when you make a risky investment, you should not expect to get 100 percent back on your dollar."
Sanders also noted that Puerto Rico's constitution requires the island to balance its budget -- a fact which some lawyers believe may void vulture funds' right to receive payments on it.
"If these debts were incurred in a way that was unconstitutional, then perhaps this debt does not have to be repaid," Sanders said.
Zach Carter is The Huffington Post's Senior Political Economy Reporter, and a co-host of the HuffPost politics podcast, So That Happened. Listen to the latest episode:
