Fizzle Of The Week: Puerto Rico’s Cash Crisis

29. September 2017.









Toys R Us: Might the beleaguered retailer, which recently filed for bankruptcy, have a lifeline that is enough to keep kids smiling with Mario (the video game character) and My Little Ponies? Just days after filing for bankruptcy, the toy store chain grabbed $3.1 billion in financing, which came from a group of lenders led by JPMorgan. The funding will help modernize stores and boost eCommerce efforts. Turns out the holidays might be a bit more cheerful for the company.

Amazon: Echo is getting some echoes … in terms of new Echos. Refreshing the lineup, the newest iteration of these voice-activated assistants will be able to interact and “see” smart devices in the home. There is also a voice-calling feature enabling, well, calls and text messages. Also, Amazon is expanding Alexa to BMW to be included in vehicles from that iconic automotive brand in the future.

Arbitration Clauses: Don’t call it a comeback. They’ve been here for years (to quote LL Cool J). Arbitration clauses loom again as a hot topic. The Senate seems to be gearing up to overturn the recent CFPB rule on arbitration clauses — mandates that historically have been in place for whenever customers want to open up new accounts. If the Senate passes the ban on the ban, and President Trump signs it, the CFPB may be barred from ever restoring such resolutions.


SEC Hack: The place even has Securities in the name (OK, of a different sort of security) but proves to be anything but secure. The SEC only found out about a hack months later … proof-positive that when the government moves, it moves at a glacial pace. In this case, the data breach occurred through the EDGAR website more than a year ago — and the news was only just disclosed. In the meantime, the agency has said that it is targeting those hackers who go after individuals through their brokerage accounts. A little housekeeping seems in order.

Uber: The ride-hailing firm is being sued by shareholders who are claiming fraud, due to the fact that the company — via ex-CEO Travis Kalanick — allegedly did not disclose during capital-raising efforts the fact that Uber may have broken laws. Lack of disclosure led to billions of dollars in shareholder losses, according to the suit. In addition, the firm has also lost its private hire license in London, effectively stopping operations in that city.

SMBs and Wells Fargo: The Senate is eyeing an investigation into how the Wells fake account opening imbroglio has hit SMBs, as the scandal is more widespread than had been previously believed — to the tune of 1.4 million more additional fake accounts. Wells CEO Tim Sloan has gotten a letter from the Senate Committee on Small Business and Entrepreneurship asking for information and insight into the firm’s small business lending practices.

Fizzle of the Week: Puerto Rico’s Cash Crisis

The troubles in Puerto Rico are almost too numerous to list: lack of fresh water, lack of food, lack of ability to communicate with the outside world and everyone’s least favorite lack of — power. Not only are the lights out in Puerto Rico, they are likely going to be out for quite some time. The nation’s already-weak electrical grid was hobbled by Hurricane Irma and officially declared DOA after the direct hit by Hurricane Maria.

This has all contributed to another acute shortage, one that is leading to an ever-mounting feeling of frustration on the small island protectorate of the United States.

Puerto Rico is short on cash.

We’re not talking about the various debts they owe to Wall Street. We mean that the supply of greenbacks that people can use to buy stuff is getting critically low.

Which is not great news, because Puerto Rico is, news reports have said, largely operating as a cash economy. Restaurants, stores, even large chains such as CVS all, as of Monday, had handwritten signs on their doors reading “Cash Only.” As one local business owner said, with the destruction of the electrical grid and telecommunications services, cash is the only working currency on the island right now.

Some residents don’t mind. Jenny Rivera Valentin, a 50-year-old hair dresser from Humacao, more or less told Bloomberg that things are all relative. After her town was “totally destroyed,” she was just happy to find any store open.

For other residents, however, the situation is a bit more dire, as the only cash they have is what they managed to withdraw from ATMs before the storm hit. A little over a week after Maria wreaked havoc, they are running low.

Sending in more cash isn’t all that easy. Without power, there are very few ATMs actually up and running.

When Banco Popular, Puerto Rico’s biggest bank, opened Monday morning in San Juan, the line stretched about 200 people deep for banking and ATM services. The financial institution ran out of funds before all who stood in line for hours could be served.

“I don’t know how much worse it’s going to get,” Engineer Octavio Cortes said told the CBC. “Right now it’s manageable, but I don’t know about next week or after that.”

The Federal Reserve of New York, which officially supplies Puerto Rico’s cash, has confirmed a massive upswing in demand since just before the storm hit, a spike they had, in fact, expected, sending additional reserves to counter the rise in demand.

“Demand for cash is extraordinarily high right now, and will evolve as depository institutions regain power, armored car services are able to reach branches, and ATMs are once again active,” a Sept. 27 statement from the Federal Reserve read, before emphasizing that the institution is confident they can keep up with increasing need and that they are working closely with local and national authorities to monitor the situation.

Reports are beginning to surface that electronic transactions are going back online. According to news from Reuters, First BanCorp Chief Executive Aurelio Aleman stated in a telephone interview that electronic transactions are starting to come through, adding that his bank has enough cash on hand.

But for those on the streets of San Juan and throughout Puerto Rico, the confidence is somewhat less fully felt, as the waves of shortages are raising residents’ anxiety levels.

“What are we going to do when we don’t have any cash? The little cash we have, we have to save for gas,” said Nancy Nieve, who said neither she nor her spouse were able to find a working ATM to access their paychecks that were directly deposited to their bank accounts.

“I’m out of options,” said Brandon Alexander Jones, a vacationer from London who, on Tuesday, was down to his last $85. “I don’t know how to get across the Atlantic. I don’t know how to get to the States. I’m stranded,” he told Reuters.

While everyone is working hard to get the situation put to right, it’s a fizzle on many fronts — as the good people of Puerto Rico know all too well.

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