Outgoing fiscal board member González: ‘Promesa was never meant to be a punishment for Puerto Rico’
Cites ‘changing economic circumstances’ in decision to leave panel by end of month
SAN JUAN – After almost four years serving on Puerto Rico’s Financial Oversight and Management Board (FOMB), banking executive José Ramón González announced Tuesday that he has informed the White House that he is resigning from the federally created fiscal panel effective Aug. 31, citing “changes in economic circumstances.”
González, who was appointed to the then newly created FOMB on Aug. 31, 2016, said he committed to serve for a term of three years, which transpired last year, and will not be available for re-nomination to a second term on the panel.
“Changes in economic circumstances have increased enormously the demands on my time and my regular day job, and make it really impractical to continue devoting the time and effort that participating on this board requires,” he said during the oversight board’s 20th public meeting on Tuesday, which was held via teleconference.
González is currently chief executive officer and president of the Federal Home Loan Bank of New York, which he joined in 2013 as executive vice president and chief operating officer, positions he held until 2014.
The banking executive said that being selected as a member of FOMB had been a “great honor” and serving on the board has been “an exceptional experience and privilege.”
“Working side by side with my fellow board members, who have been committed, despite all challenges, to fix Puerto Rico’s fiscal deficiencies and restore confidence among the people, businesses and capital markets, was an extraordinary opportunity to make a real difference and contribute to a better future for Puerto Rico, my home,” he said, expressing his gratitude to former President Obama and the congressional leadership for the “opportunity to serve Puerto Rico.”
Obama appointed González, along with Arthur González and Ana Matosantos, on the recommendation of the Democratic leadership in Congress.
“We have not accomplished all the oversight board needs to accomplish, or even all I was hoping to accomplish. But in those four years we have taken significant steps forward on a path toward recovery,” added González, who said he was proud of “the team of professionals at the oversight board, most of them Puerto Ricans, who have been working very hard from day one to get Puerto Rico out of bankruptcy, and to open a new and better chapter for future generations.”
He said it was time for a “new oversight board” to “continue on this path and fulfill the mandate” of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa), which created the FOMB to restructure the island’s enormous debt and troubled finances.
González is the third oversight board member to announce his exit. During a board meeting on July 1, FOMB Chairman José B. Carrión and fellow member Carlos García announced their resignations, effective on Oct. 5 and Aug. 31, respectively. After the meeting, Carrión expressed his “frustration” with local politicians’ lack of willingness to adopt the necessary government reforms that he believes would allow Puerto Rico to exit bankruptcy and chart a course to economic growth. He also said it was “extremely frustrating” to “educate” White House and officials in Congress regarding policies that could benefit the island.
Frustration with negative view
On Tuesday, González expressed a similar frustration with the negative view many Puerto Ricans have of the oversight board’s work and Promesa’s goals for the island.
“I think we lose sight of this in Puerto Rico. Promesa was never meant to be a punishment for Puerto Rico,” the bank executive said, noting that this is the impression he has received when conversing with island residents. “It really is a tool to help Puerto Rico work its way out of financial distress by granting the commonwealth, through this board, extraordinary powers to address insolvency in a matter that would not be available to other state-level entities. So it is a tool for the commonwealth to get through this difficult situation.”
González said that Promesa was created to “provide protection to the commonwealth while the debt is restructured in a fair and sustainable manner,” which he stressed is what has “driven our work throughout these four years.” He said that the board was performing in “the best interest of the people of the commonwealth, but also taking into account the reasonable fair interest of creditors that are also not to be ignored.”
After the panel’s members were announced back in August 2016, Height Securities analyst Daniel Hanson said in a note that the appointed Democrats were more moderate than expected and that González could be a “key swing vote” for creditor-friendly policies, Reuters reported, adding that Keefe Bruyette & Woods analyst Chas Tyson listed González as a potential creditor ally because of his “significant experience in Puerto Rico’s banking sector.”
“Achieving sustainable fiscal equilibrium for the commonwealth is one of the paramount goals of Promesa,” he said. “We have made very significant progress in that regard, through the mechanism of fiscal plans, to which we have devoted enormous effort to ensure that we bring the commonwealth within its resources. We need the commonwealth to sustain its operations within realistic resources. The reason we are where we are is because we broke that rule beginning in the early 2000s.”
González rejected the popular view that the oversight board is a “super-government on top of Puerto Rico’s government,” stressing that Promesa seeks “a collaborative process between the oversight board and the duly elected government of Puerto Rico.”
“Unfortunately, I have to say that the biggest obstacle in making Promesa work has in fact been the failure of Puerto Rico’s governments in the last four years to understand that this has to be a collaborative process, not a contentious, adversarial process,” he said, criticizing the government’s “penchant for unnecessary litigation” over “minor issues” that play to “local sensibilities,” but do not “achieve anything or enhance the productivity of the process.”
Disappointment over unfinished gov’t financial reports
González expressed disappointment over the commonwealth government’s inability to submit timely comprehensive annual financial reports (CAFRs). During last month’s meeting, the oversight board had given Gov. Wanda Vázquez administration’s fiscal team until Tuesday to submit a plan to complete the audited financial reports corresponding to fiscal years 2017 to 2019, but during the meeting Treasury Secretary Francisco Parés Alicea requested more time to submit the plan, citing staff and resource problems caused largely by the Covid-19 emergency.
While acknowledging the difficulty of the situation, González said the government must move “beyond those obstacles.”
“You cannot have a serious discussion about fiscal equilibrium and sustainability if you don’t have audited financial statements for the commonwealth,” he said, calling this “a major unachieved objective,” which he stressed is “a requirement to leave Promesa” and allow Puerto Rico back into the capital markets for needed financing for key infrastructure projects.
“This cannot go on forever. No government can sustain its operations and invest in infrastructure for the future without access to capital markets,” González said, noting that Puerto Rico was able to pull out of “abject poverty” in the 1930s because it gained access to capital markets beginning in the 1940s, something that has not been done in seven years as a result of the commonwealth’s bankruptcy. “It is not possible to sustain economic growth without access to the capital markets.”
In a press conference after the meeting, González noted that the commonwealth government had become beholden to pressure groups and not the “collective good.”
“When Puerto Rico grew and had its golden age of civil service, it was very clear that the rule of government was to improve everyone’s lot, to improve the economy and society for everyone. It was not to defend any particular groups’ narrow interests or priorities,” the former CEO and president of Santander BanCorp said, noting that “successor administrations in Puerto Rico have been unwilling to contemplate serious structural reforms,” including streamlining the permits process and easing labor laws, to enable economic growth.
Previously, González served as senior executive vice president of Banking and Financial Services at OFG Bancorp from 2010 to 2013. He also served as CEO and president of Credit Suisse First Boston (Puerto Rico) Inc., from 1989 to 1995, and of the Government Development Bank for Puerto Rico from 1986 to 1989. He is a past president of the Securities Industry Association of Puerto Rico and the Puerto Rico Bankers Association. González was born and raised in San Juan, and earned a bachelor’s degree from Yale College and an M.B.A. and J.D. from Harvard University.