The Obama administration released its Puerto Rico plan last week to give the entire Commonwealth of Puerto Rico the ability to file for chapter 9 bankruptcy to deal with its debt crisis. Any bankruptcy bill for Puerto Rico would punish retirees whose pension funds invested in these bonds because they were tax-free, had strong security and were explicitly protected from chapter 9, according to a commentary by former governor and U.S. Senator Judd Gregg in The Hill yesterday. Conversely, it would reward Puerto Rico and its politicians for years of irresponsible spending and poor fiscal policy, according to Gregg. Equally significant is the implication of this new type of chapter 9 for American investors in the near-future. Illinois, New Jersey, Pennsylvania, Connecticut are among the states with large unfunded liabilities facing fiscal crises — and the list is growing at an alarming speed, according to Gregg. If such a protection were extended to Puerto Rico, he asks, why wouldn’t those states expect equal access to this new form of chapter 9? Read more.
For more news and analysis of Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage.
