Most Puerto Ricans haven’t had access to electricity, cell service or financial services for nearly two weeks now. And as we reported yesterday, residents who didn’t stockpile enough cash have been struggling after Hurricane Maria essentially knocked the island’s economy into the 1950s, forcing some to forgo essential supplies - or worse - resort to looting. For those who do have access to working ATMs and banks, long lines have sapped cash reserves as the country has effectively reverted to a "cash only" economy.
Those whose access to cash has been limited - or cut off entirely - are becoming desperate as they start to wonder how they will begin the process of rebuilding their trashed homes - or even where their next meal will come from. As Reuters reports, cash has become just one of many scarce resources on the island (food, medical supplies and gas are also in incredibly short supply).
With electricity and internet down in Yauco, southwestern Puerto Rico, Nancy and Caesar Nieve said they could not access paychecks directly deposited into their bank accounts.
“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.
Cash demand spiked in the first few days after the hurricane as merchants were unable to accept other modes of payment. First BanCorp, one of the island’s largest banks, said that nearly two-thirds of its 48 branches remained closed, and that electronic transactions had resumed at only 25% of its ATMs.
Apparently, word of these privations made its way back to the New York Fed, which has assured the world via the Wall Street Journal that the central bank has plenty of physical cash to keep banks on the island stocked for the forseeable future - lowering the likelihood that anybody will suffer for lack of access to cash. Notably, the WSJ didn't explain where that money was being held, how long supplies are expected to last or how it got there in the first place. Indeed, the central bank said only that it's "prepared to meet elevated currency demand following the natural disaster." Reuters noted that the central bank ships cash to a depot on the island, and that before the storm it increased the size of its shipments.
As WSJ explains, Puerto Rico is in the New York Fed’s district despite its location in the Caribbean. In times of economic stress or a natural disaster, Fed regional banks plan ahead to make sure area banks have enough cash.
Of course, none of this matters if you can't get to a bank or an ATM. But at least, if they somehow manage to find an open bank branch or working ATM, Puerto Ricans can rest assured that it will be freshly stocked with cash.
But Puerto Ricans might want to hold off before thanking Bill Dudley for his foresight. It’s worth asking exactly how long the island’s cash inventories will last. After all, the storm tore up roads and leveled buildings, potentially complicating deliveries of cash. And with authorities still focusing on search-and-rescue missions and other aspects of the preliminary response, it could take for some areas of the island to return to some semblance of normalcy.
Furthermore, looting has become increasingly common across the island, increasing the danger that deliveries of cash could be intercepted by bands of robbers.
In a statement, the New York Fed said armored-car services are able to reach banks with cash, and automated teller machines are “once again active.”
With any luck, the recovery effort will soon kick into high gear after President Donald Trump on Thursday suspended the Jones Act, which will allow more ships to assist in the international relief effort. It’s unclear why the administration hesitated to waive the law.
But is the Fed really doing all it can to alleviate the crisis in Puerto Rico? With the bankrupt island nation facing a $30 billion cleanup effort – and potentially more if it’s entire power grid needs to be upgraded – maybe the central bank could help monetize some of these expenditures.