Bernie Sanders (I-Vt.) said today Puerto Rico should be allowed to restructure its debt in a way that protects residents, ordinary investors and pension funds in the United States.
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Pedro Pierluisi, Puerto Rico’s representative in Congress and witness at Thursday’s hearing, told Congress the “only way to treat Puerto Rico fairly” is to make it a state.
U.S. Treasury Secretary Jack Lew and counselor Antonio Weiss met with interest groups on Monday, while Weiss will testify at Thursday’s hearing on Puerto Rico before the U.S. Senate Committee on Energy and Natural Resources.
“Without action by Congress and further fiscal discipline by Puerto Rico, the crisis will escalate”, the administration said. “There is concern about the verifiability of Puerto Rico’s financial data”.
Yet without bipartisan support in Congress, Treasury is limited in what it can achieve.
Puerto Rico’s debt is split between various holders which own a variety of paper such as General Obligation bonds, COFINA notes, which are bonds backed by sales tax; and Government Development Bond debt, as well as bonds of the Puerto Rico Infrastructure Financing Authority (PRIFA), and the Puerto Rico Aqueduct and Sewer Authority (PRASA).
While Treasury has also called on Puerto Rico to fix its traditionally opaque financial reporting practices and instill more credible fiscal oversight, the proposal is generally in line with what the island itself has said it needs from Congress and its creditors.
The administration says that without congressional action Puerto Rico will face a “long and hard recovery that could have harmful consequences for the residents on the island and beyond”.
“I’ll push on Congress, but frankly I think Treasury should step up and show more leadership”, she said. Despite these efforts, by the end of the year, Puerto Rico may have to choose between paying its creditors and providing essential services to the island’s 3.5 million American citizens.
Obama administration officials proposed a plan to assist the Commonwealth of Puerto Rico that is not a direct federal bailout, but that should be enough to give the beleaguered island nation a few breathing room.
U.S. Senator Bill Nelson, a Florida Democrat, said a bill could get passed by being attached to broader legislation, although it would be an uphill battle given the stalemate in Washington.
This was echoed by economist Joseph Stiglitz at a discussion on Puerto Rico’s debt held Wednesday night at Columbia University in New York.
Ms. Murkowski also asked about the cost to the taxpayer from the program.
ALLEN: Puerto Rico’s governor, Alejandro Garcia Padilla, is endorsing the White House proposal.
In a surprise move, Garcia Padilla admitted under pressure from Senators that a portion of the Island’s debt may actually have been issued in violation of the Commonwealth’s Constitution. The US municipal bankruptcy law now doesn’t extend to the island.
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Currently, while Puerto Ricans pay the same in healthcare and Social Security taxes as those in the USA mainland, they receive 70 percent less in Medicaid reimbursement and 40 percent less in Medicare. Such an offer, or so-called ‘superbond, ‘ could exchange just one credit for various existing bonds, possibly depending on the ranking of those credits, said a source familiar with the situation.
