Puerto Rico took steps yesterday toward a unilateral moratorium on all government debt payments, rejecting efforts in Washington to allow it to restructure only under close federal supervision, the New York Times reported today. The Puerto Rican Senate authorized a declaration of emergency and a debt moratorium at around 3 a.m., after hours of debate. The island’s House of Representatives was debating such a measure late Tuesday but had not yet voted. Any bill would need to be signed by the governor, Alejandro García Padilla. The sudden moves seemed likely to complicate efforts in Washington, D.C., to enact a rescue package for Puerto Rico. The House Natural Resources Committee, which has been drafting the rescue in consultation with Democrats in Congress and the Treasury Department, said that it still planned to issue an updated version today, despite Puerto Rico’s action. The rescue involves sensitive constitutional issues, and the drafters have been trying to strike a balance between Democratic and Republican Party priorities. So far, the lawmakers in Congress have called for sending a federal oversight board to Puerto Rico, auditing all major branches of government there, promoting fiscal reforms and eventually providing certain restructuring tools that are normally available only in bankruptcy. Read more.
ABI Resident Scholar Prof. Melissa Jacoby speaks with Prof. Charles Tabb about his research on bankruptcy and the Fifth Amendment's "takings" clause to current legislative proposals for remedying Puerto Rico's debt crisis. Click here to listen.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
