Democrats' support for emergency Puerto Rico legislation hinges on providing bankruptcy protection to the U.S. territory, the second-ranking House Democrat warned yesterday, The Hill reported. "We don't think it can be done without bankruptcy authority because we don't believe they'll get an ability to work out, with their creditors, payment schedules," said Rep. Steny Hoyer (D-Md.), the minority whip. Puerto Rico's debt has ballooned to more than $72 billion, and Democrats in the White House and on Capitol Hill have warned of an imminent humanitarian disaster if Congress doesn't act to help the territory manage the crisis. Speaker Paul Ryan (R-Wis.) said yesterday that a group of bipartisan House lawmakers will meet to discuss a strategy. The House Natural Resources Committee, he added, will take up a bill on April 13, a day after the House returns from its 19-day spring recess. But that bill has yet to be written, and there's wide disagreement over what it should look like. Democrats want to empower Puerto Rico to dump some of its debt unilaterally while restructuring its finances to prioritize state pensions above bond liabilities owed to private investors. But the investors with stakes in Puerto Rico's enormous debt are adamantly opposed to empowering the territory with sweeping new bankruptcy protections that were not in place when the investments were made and would likely batter their bottom lines. Read more.
In related news, the Supreme Court heard oral argument today to grapple with a First Circuit opinion striking down Puerto Rico’s own municipal bankruptcy law, according to an analysis by ABI’s Bill Rochelle. The high court’s decision, expected by the end of June, might give Puerto Rico the ability to adopt laws of its own to adjust the debts of its municipalities so long as they do not violate the Contracts Clause of the federal Constitution. Depending on how the high court writes the opinion, states not opting into the federal municipal bankruptcy system might also be able to adopt their own regimes to deal with their insolvent instrumentalities. The high court’s decision could turn in two directions. The justices might tackle the case as a straightforward, although complex, question of statutory interpretation. Or, the Court could plunge into the depths of constitutional law by making a pronouncement on federalism. Click here to read the full analysis.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
