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Congress Slow to Heed Ryan's Call to Help Puerto Rico in Crisis

Congress Slow to Heed Ryan's Call to Help Puerto Rico in Crisis

Monday, 11 January 2016 08:09 AM

U.S. lawmakers are getting off to a slow start in responding to House Speaker Paul Ryan’s call to throw a lifeline to Puerto Rico.

During the first hearing on Puerto Rico since Congress returned from its New Year break, a House panel on Tuesday will discuss the U.S. territory’s expensive and outdated electricity system. It’s not the most pressing concern for the Caribbean Island of 3.5 million, whose government defaulted on $37 million of bond payments this month and has unsuccessfully lobbied Congress for months to help it escape from its building debt crisis.

“There is no actual help for Puerto Rico coming,” said Brandon Barford, a partner at Beacon Policy Advisors in Washington and a former Senate aide. “I certainly expect there will be legislation, I just don’t think there will be a law.”

Puerto Rico Governor Alejandro Garcia Padilla, the Obama administration and Democrats in Congress have pushed for giving the island power to file for bankruptcy to have some of its debts wiped out in court. Garcia Padilla has also asked for the federal government to give it the same funding that states get for health-care programs, saying limits on the island’s access have added to its financial strains. Neither has gained headway in the Republican-controlled Congress.

In December, Senate committee chairs including Orrin Hatch, the head of the finance panel, proposed extending as much as $3 billion of aid to Puerto Rico through a newly created authority that would oversee the island’s budget and could borrow on its behalf. When Congress failed to act before the holiday recess, House Speaker Ryan said he instructed committee chairs to craft a plan by the end of March.

Promising Engagement

The push from top Republicans raised the prospect that the federal government would take on a more prominent role in Puerto Rico’s crisis, which built up over years as it borrowed to pay its bills.

Puerto Rico avoided defaulting on its direct debt this month, though it failed to cover all that was due to holders of its infrastructure authority’s bonds. Garcia Padilla’s administration now has some time because the next major round of bond payments isn’t until July, when about $2 billion of interest and principal is due.

Ryan has directed committee chiefs to meet on the issue, though he’s deferring to them as to when, said AshLee Strong, a spokeswoman from his office.

The hearing Tuesday by a panel of the House Natural Resources committee’s will focus on “energy challenges and opportunities facing Puerto Rico.” Lisa Donahue, chief restructuring officer of island’s power utility, is set to be among those testifying.

On Jan. 26, the committee plans to meet again to discuss the possibility of creating a financial oversight board for the island, according to Adam Sarvana, a spokesman for Democrats on the panel. Puerto Rico officials have shown little interest in ceding authority to the federal government.

Representative Tom Marino of Pennsylvania, the head of a House Judiciary Committee panel that handles bankruptcy law, said he may be in favor of giving the U.S. a greater role in the island’s financial affairs. The House Judiciary committee hasn’t set a date yet for a hearing on Puerto Rico.

“I have suggested the idea of an oversight board but I would have to see the specifics of any proposal before I could support it,” he said in an e-mail. “The economic situation in Puerto Rico is dire and it is an important issue. I am glad the committee may be interested in examining it further to see if an oversight board would be a responsible solution.”

Detroit’s Solution

The bill from the Senate’s Republican chairs didn’t include provisions allowing for some of Puerto Rico’s agencies to file for bankruptcy, just as cities such as Detroit and Stockton, California, did after the recession. Puerto Rico’s inability to have debt written down in federal court has weakened its negotiating power with bondholders as it seeks to persuade them to accept less than they’re owed.

Investors including Franklin Advisers Inc. and OppenheimerFunds Inc. have opposed extending bankruptcy protections to Puerto Rico.

Bondholders favor a federal control board to monitor Puerto Rico’s spending so it can put an end to its persistent budget shortfalls, said Matt Dalton, chief executive officer of Rye Brook, New York-based Belle Haven Investments, which oversees $3.7 billion of municipal bonds, including Puerto Rico securities.

“It may be reducing some benefits, it may be cutting some of the government,” Dalton said. “That is a better process for bondholders.”

© Copyright 2019 Bloomberg News. All rights reserved.

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U.S. lawmakers are getting off to a slow start in responding to House Speaker Paul Ryan's call to throw a lifeline to Puerto Rico.During the first hearing on Puerto Rico since Congress returned from its New Year break, a House panel on Tuesday will discuss the U.S....
puerto, rico, paul, ryan, plight
Monday, 11 January 2016 08:09 AM
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