Still reeling from damages caused by Hurricane Maria, Puerto Rico’s financial situation is in major free fall. The federal oversight board ordered Gov. Ricardo Rosselló to cut public pensions by 10 percent.

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We want to head to Puerto Rico now. The damage caused by Hurricane Maria is not the island’s only crisis. It is also in the middle of a fiscal crisis. To start turning that around, this week, a federal board with power over the island’s finances ordered the governor to cut public pensions. NPR’s Adrian Florido reports that the governor said, no, setting up a battle for control of the island’s financial future.

ADRIAN FLORIDO, BYLINE: Shortly after the governor said no, Franciso Flores was sitting on a plaza near the governor’s mansion. He’s 64, a retired mechanic for the city of San Juan. He lives on his government pension.

FRANCISO FLORES: (Speaking Spanish).

FLORIDO: He says, “Puerto Rico’s pensions allow you to survive, nothing more.” But he says his pension is 600 a month at a few hundred in Social Security, and his monthly income is about $1000. That’s right around the poverty line.

FLORES: (Speaking Spanish).

FLORIDO: On top of that, Flores says, “the price of utilities and food is going up.” He says he probably couldn’t live on less than he does now. But he may have to, and here’s why. Puerto Rico has been massively in debt for years. In 2016, Congress did two things to pull it out of its fiscal crisis. It allowed the island to seek protection from its creditors, and it created the financial oversight board with power over the island’s finances. This week, the board ordered a long list of cost-cutting measures, including cutting public pensions an average of 10 percent. To Flores, it came as no surprise. He holds a view held by many on the island.

FLORES: (Speaking Spanish).

FLORIDO: “Here in Puerto Rico,” he says, “it’s that fiscal board that has the power, not the governor.” The governor, Ricardo Rossello, has said, not so fast.

RICARDO ROSSELLO: On matters of public policy, it is the government that has the decision-making power.

FLORIDO: Rossello has said he will implement many of the board’s cost-cutting measures, but has refused to cut pensions or vacation or sick time or Christmas bonuses for workers.

ROSSELLO: And so on those matters that we oppose – those are just not going to be seen in the legislature nor in my desk.

FLORIDO: Puerto Rico is very much still recovering from Hurricane Maria as it prepares for the next hurricane. At the same time, an even larger struggle is playing out. Its governor and the federal oversight board are in a war of words over who has the power to set the island’s fiscal policy. On Thursday, Jose Carrion, the federal board’s chairman, issued a warning.

(SOUNBITE OF ARCHIVED RECORDING)

JOSE CARRION: (Through interpreter) We hope the government and the legislature will comply. We don’t want to sue the government, but we have to fulfill the duties that we understand the law gives us.

MARIELY LOPEZ-SANTANA: It’s basically a question of sovereignty, autonomy and, in the end, who is ultimately responsible for making decisions in Puerto Rico?

FLORIDO: Mariely Lopez-Santana is a political scientist at George Mason University. She says the question of who gets the last word on fiscal policy can’t be answered yet. The board’s powers haven’t been fully tested in court. Professor Lopez-Santana points out that, in fact, the board and the governor agree on many policies – tax reform, cuts to the school system, consolidating government agencies and selling off the island’s electrical grid. But politically, Lopez-Santana says the governor has to oppose the board.

LOPEZ-SANTANA: The governor cares about winning election, so even if it’s cheap talk, he’s gonna say, well, I’m gonna protect my people. I’m going to protect pensions – all that.

FLORIDO: Rossello has asked the members of the oversight board to reconsider their demands. If they don’t, the governor says he’s prepared to fight the board in court. Adrian Florido, NPR News, San Juan, Puerto Rico.

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Wells Fargo will pay a $1 billion fine to settle claims that it had taken advantage of mortgage and auto loan customers. Federal regulators also said the bank did not have adequate compliance or risk management programs.

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Wells Fargo Bank has agreed to pay up to a billion dollars to settle allegations that it overcharged people for auto and mortgage loans, among other things. The fines were imposed by the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, marking the first major action against a bank by the Trump administration. This is just the latest blow for the bank. We’re joined by NPR’s Jim Zarroli for more. Hi, Jim.

JIM ZARROLI, BYLINE: Hi, Ari.

SHAPIRO: Remind us what the bank is accused of.

ZARROLI: This has to do with allegations about the way Wells Fargo handled some of its customers’ mortgages and auto loans. It’s accused of attaching improper charges to some of them. And this comes on top of the really big scandal you may remember that happened in 2016 when the bank was found to have opened some 3.5 million accounts for its customers without their knowledge. And federal regulators say these things were happening, and senior management really didn’t do enough to stop them.

SHAPIRO: We should say that Wells Fargo is an NPR funder. What do the banks say about these charges?

ZARROLI: It has acknowledged that it did a lot of things wrong. It says it’s working to change them, to reform. The senior management of the bank was basically forced out after the scandals happened. There’s a new CEO, and he said – there was a statement today in which he said, we have more work to do, but we have the same priorities as our regulators and we are committed to working with them.

SHAPIRO: A billion dollars sounds like a really big number. How much will it actually hurt a bank the size of Wells Fargo?

ZARROLI: Well, it kind of depends on how you look at it. I mean, this is a bank with $2 trillion in assets. So, you know, compared to that, a billion isn’t very much. The bank earned nearly $6 billion in profits during the first three months of this year. You know. So how much does this hurt the bank? You know, I put that question to Lawrence White, who is a professor at New York University and an expert on banking, and here’s what he had to say.

LAWRENCE WHITE: It’s not going to cripple the bank, but nobody likes to write a check that has 10 digits on it.

ZARROLI: And then we have to keep in mind that Wells Fargo also faces lawsuits from its customers who were hurt by some of the things the bank has done and allowed to have happened. And it’s set, Wells Fargo has set aside another $4 billion for future liability. So this is not nothing.

SHAPIRO: But even if it does have to pay $4 billion in the future, as you say, that’s less than the bank makes in a single quarter. So is this really enough to force big changes?

ZARROLI: Well, that’s right. But keep in mind the fine isn’t the only thing that regulators are doing. The Federal Reserve has essentially told Wells Fargo earlier this year that they cannot grow any more until they’ve persuaded the government that they have reformed. There’s going to be a pretty heavy oversight role by regulators. Bloomberg had a really good article today that pointed out that the settlement that Wells Fargo has signed allows regulators to remove executives and board members if they see fit.

SHAPIRO: What kind of a message does a fine like this send to other big banks?

ZARROLI: Well, this was a really big and embarrassing scandal for Wells Fargo, and it really did suggest that, you know, at the very least, senior managers were sort of asleep at the switch. And Lawrence White of NYU says you really have to look at this in context.

WHITE: I think fundamentally it’s about very poor management on the part of Wells, and it really raises the question, are these big banks too big to manage effectively?

ZARROLI: And, White says, just look at some of the other big scandals that have happened at major banks, like the London Whale case. That was when a single trader at JPMorgan Chase’s London office caused $6 billion in derivatives losses. So you have these big, huge problems developing in parts of the bank, and senior managers can be unaware of them because they preside over these really huge operations, and that’s a problem.

SHAPIRO: NPR’s Jim Zarroli. Thank you.

ZARROLI: You’re welcome.

Copyright © 2018 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Recent tariffs on Canadian newsprint are hurting U.S. newspapers, potentially triggering further job cuts and consolidation. The duties of up to 32 percent come after a complaint from a single U.S. supplier, and are opposed by the domestic paper industry trade group.

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The actual paper that newspapers are printed on just got much more expensive. The Commerce Department has imposed steep tariffs on newsprint imported from Canada. On one hand, that’s boosting profits for the five remaining newsprint mills in the U.S. On the other hand, it’s pummelling the newspaper industry, which was already hurting. Frank Morris of member station KCUR has the story.

FRANK MORRIS, BYLINE: If you want to know the latest about the local hospital funding crisis, city hall or high school sports in rural Marysville, Kan., the Advocate has you covered.

SARAH KESSINGER: And this is our old press room back here. The press used to be here.

MORRIS: These days, publisher Sarah Kessinger contracts out for printing to save money. Income is down. And newsprint, the paper’s second largest operating expense, that is way up.

KESSINGER: It’s tough. It’s getting tougher especially with these newsprint tariffs coming in to the picture.

MORRIS: Over the last few months, the U.S. Commerce Department has slapped tariffs of up to 32 percent on Canadian newsprint, raising prices nationwide.

KESSINGER: If that trend continues, it will really make our profits disappear.

MORRIS: And it’s not just small papers. The Tampa Bay Times, for instance, is laying off around 50 people – responding to price hikes it claims will drive up its newsprint bill by $3 million a year. Al Cross, who heads the Institute for Rural Journalism at University of Kentucky, blames a single manufacturer.

AL CROSS: We have a complaint brought by one paper mill. It’s just crazy. The industry is being turned on its head by the manipulation of trade laws.

MORRIS: That one mill is NORPAC in Longview, Wash. And Craig Anneberg is the CEO.

CRAIG ANNEBERG: We strongly disagree with the notion that the industry requires low-priced, subsidized newsprint from Canada to sustain their business model.

MORRIS: Anneberg says canadian newsprint mills benefit from cheap hydroelectric power and state-owned forests. He claims that some sell below cost in the U.S. – taking over most of the market, depressing prices and forcing layoffs at his mill.

ANNEBERG: We have some of the largest, fastest, most technologically advanced paper machines in the world. And if we couldn’t compete – if we were having to shut down one of our machines, it looked like something wasn’t right.

MORRIS: The newsprint business has been rough. Mark Pitts with the American Forest and Paper Association says U.S. demand has cratered – falling about 80 percent in the past two decades, shuttering newsprint mills on both sides of the border.

MARK PITTS: I think it’s pretty clear that the predominant challenge out there isn’t about imports. It’s really about the declining demand.

MORRIS: Because more and more people read news on screens, not paper – and Pitts says the tariffs driving up newsprint prices will just accelerate that trend. Avis Little Eagle in the Standing Rock Indian Reservation agrees. She says tariffs are killing her paper, the Teton Times.

AVIS LITTLE EAGLE: It’s like a stranglehold. I just feel like you’re getting the life choked out of you. And it’s like little by little, more and more, the life of the newspaper is leaving.

MORRIS: Little Eagle says most of her customers don’t have internet access, so her printed paper is the only way they know what’s going on with local government. But two weeks ago, she reached an impasse.

LITTLE EAGLE: I was like, oh, my God, I can’t even print the paper this week. And so that’s pretty darn close.

MORRIS: The Commerce Department will decide whether to finalize or lift the tariffs on Canadian newsprint by late summer. Meantime, high newsprint prices will keep cutting into newspaper profits and undermining demand for the paper in newspaper. For NPR News, I’m Frank Morris.

(SOUNDBITE OF STEVE REICH’S “ELECTRIC COUNTERPOINT-FAST (MOVEMENT 3)”)

Copyright © 2018 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.