U.S. Treasury Secretary Jacob J. Lew said that a failure by Congress to help Puerto Rico resolve its debts may hit the retirement portfolios of average Americans, as he stepped up his call for lawmakers to help the island, Bloomberg News reported yesterday. Lew endorsed legislation granting the commonwealth access to an orderly bankruptcy regime that’s needed to prevent a chaotic and protracted resolution of Puerto Rico’s financial troubles, an event he said would be costly both for the island and the U.S. “The continued deterioration of Puerto Rico’s economic and financial conditions has the potential to further harm retiree investment portfolios across the country,” Lew said in a letter to Republican Senator Orrin Hatch released yesterday. “A significant portion of Puerto Rico’s debt is still held directly by individual retail investors or indirectly through the municipal bond funds they own.” Lew’s statement comes as Congress prepares to take off for summer recess and as the chances of default are rising. On Aug. 1, $36.3 million of bonds sold by Puerto Rico’s Public Finance Corp. become due. The island’s legislature hasn’t appropriated the funds to settle that payment. Read more.
In related news, New York City Mayor Bill de Blasio yesterday joined calls urging the U.S government to allow Puerto Rico's public entities to file for bankruptcy protection. A bill was introduced last year by Puerto Rico's representative in Congress Pedro Pierluisi to allow the U.S. territory to use federal bankruptcy laws to restructure the debt of its public agencies, but it has not won Republican support. A companion bill was introduced by Democratic Senators Richard Blumenthal (Conn.) and Charles Schumer (N.Y.) earlier in July. "If we don't do it, Puerto Rico simply can't get back on its feet," de Blasio said. Read more.
The August ABI Journal features an exclusive commentary from Puerto Rico's representative in Congress, Resident Commissioner Pedro R. Pierluisi. He outlines Puerto Rico's problems and how his legislation, H.R. 870, works to address them by authorizing chapter 9 for the territory. Click here for more.
