Everyone to whom Puerto Rico currently owes money knowingly gambled on the probability that, one day, the island’s leaders would simply announce—as Governor Alejandro García Padilla did last week—that their debts are “not payable.” In fact, bondholders charged higher interest rates precisely because of this potential outcome. So why is the current crisis perceived as a failure by Puerto Rico, not investors who shook off the warnings and lent the cash anyway?

For some reason, we habitually condemn the moral failings of borrowers when they break their debt obligations. But there are two sides to a debt contract. And in the case of Puerto Rico, the behavior of the lenders upends such high-minded assignments of blame.

According to the report commissioned by the Puerto Rican government and written by former International Monetary Fund and World Bank economist Anne Krueger, Puerto Rico’s economic woes have deep roots. Public sector debt has risen each of the last fifteen years, and GDP has been plummeting since 2006, when several tax breaks for the island expired. Like warm-weather states in the U.S., Puerto Rico had a housing collapse that continues unabated; median list prices are down 38 percent, and three-quarters of the decline in investment comes from reductions in residential construction. The Krueger report does indicate that unreliable government data has hid the severity of the island’s finances, but even a cursory glance would reveal significant economic stress.

In fact, the report notes, “starting in 2013, risk premia on general obligation bonds began moving up steadily.” In other words, lenders requested higher interest rates to guard against default. Credit rating agencies downgraded Puerto Rico below investment grade level by the beginning of 2014, raising rates even more. Bonds issued in 2014 initially carried a yield of 8.7 percent, much higher than the 2-3 percent available from U.S. Treasury bonds. Everybody willing to lend to Puerto Rico—the commonwealth and its public enterprises (like the state-run electric company) currently owe $72 billion, more than all but two states—knew the risks, and were paid for them accordingly.

Who are these investors? As a U.S. commonwealth, Puerto Rican bonds are considered municipal debt, with the same tax exemptions as domestic local government bonds. So Puerto Rico’s borrowing was stuffed into mutual funds and soaked up by muni bond investors. But that narrowed after the rating agency downgrades. Those who feared default got out, and distressed debt investors known as “vulture funds” swooped in, picking up the bonds at a steep discount. If they are paid back in full, they will make astronomical returns. While municipal bond funds like Oppenheimer and Franklin Templeton still own large quantities of Puerto Rican debt, hedge funds looking for a payday have been the only ones willing to lend over the past year.