Week’s of brutal negotiations members of the US House of Representatives have drawn up legislation that would act as a road map to help the indebted territory of Puerto Rico coup with it’s staggering $72bn in debt.
The legislation HR 4900 would put Puerto Rico’s fiscal affairs under direct federal control and establish a legal framework for reducing the nations debt load. The rules would be similar to Chapter 9 municipal bankruptcy, but with differences intended to reassure those creditors who feel chapter 9 is stacked against them.
If enacted as is, the bill would also pre-empt action by the Untied States Supreme Court, which has been called upon to interpret the laws governing Puerto Rico. Chapter 9 of the bankruptcy code explicitly bars Puerto Rico from seeking debt relief, without revealing why. In March, the justices heard oral arguments in ana expedited appeal by the island, but they expressed uncertainty about how to proceed.
The House bill would not change Puerto Rico’s exclusion but instead would give Puerto Rico and other territories a set of rules for reducing their debts outside of bankruptcy. The bill calls for young minimum-wage workers on the island to take a pay cut, as well as other shortcomings.
The bill would put Puerto Rico’s financial affairs under a powerful federal control board, despite warnings from elected officials in Puerto Rico that heavy-handed oversight from Washington would have unacceptable colonial connections. The bill bars Puerto Rio’s governor or legislature from exercising any control, supervision, oversight or review over the oversight board or its activities. HR 4900 would invalidate a bill passed by the Puerto Rico legislature in April allowing the government to default on debt payments.
The board would have seven members appointed by the President based off recommendations from Republicans and Democrats in Congress. At least one of the seven members would be from Puerto Rico.
The bill would give the board authority to investigate what went wrong on the island, to demand reforms, and to enforce credible budgets and fiscal plans. Investigations could show that some of Puerto Rico’s debt was created unlawfully, and the island could seek to have the debt voided, leaving bondholders and hedge funds empty handed.