A group of Hispanic members of Congress called on the Treasury secretary, Jacob J. Lew, to take a more muscular role in Puerto Rico’s debt crisis and prevent what they said could become “an economic catastrophe” on the island, the New York Times reported today. The eight lawmakers, all Democrats, said that bankruptcy was the “best hope” both for Puerto Rico and its many creditors on the U.S. mainland. They urged Lew to work with Congress to move two pending bankruptcy bills forward, and to intervene in other ways, as Treasury secretaries did during the financial crisis of 2008. Read more.
The comprehensive proposal offered by Puerto Rico Gov. Alejandro García Padilla of Puerto Rico for reversing the territory’s downward financial spiral could actually work, but only with a major assist from Congress, according to a commentary in yesterday’s New York Times. Although the Puerto Rico Fiscal and Economic Growth Plan released last week outlines a wide range of proposals, its essence lies in two key features: Puerto Rico would establish a financial control board with broad budgetary authority, and it would restructure much of its $71.1 billion debt burden, according to the commentary. Fiscal reform alone isn’t enough, since a $14 billion financing gap will remain through 2020, according to the new plan’s estimates, even if all the reforms are implemented. The simplest way for Puerto Rico to achieve its other key objective, reducing the payments on its debt, would be for its public electricity provider, PREPA, and other troubled service corporations to restructure their debt in municipal bankruptcy, according to the commentary. Read more.
