U.S. Treasury Secretary Jack Lew on Wednesday said that while the Obama administration was ready to do all it could to help debt-ridden Puerto Rico, only Congress could deliver truly effective change.
Lew, speaking in San Juan where he met with the island's governor Alejandro Garcia Padilla, last week urged Congress to urgently pass legislation by the end of March to help the island, struggling with $70 billion debt. He has called for legislation to allow Puerto Rico to restructure its debts paired with independent fiscal oversight.
"We will leave no stone unturned in looking for things we can do both administratively and using our convening authority to ... help solve these problems," Lew said. "But using all the tools we have still won't be as effective as Congressional action. That's why the time for Congress to act is now."
Puerto Rico has begun to default on some of its bond issues and is negotiating with creditors to restructure its borrowings, but is facing a lawsuit from bond insurers who backed its debt.
Extending Chapter 9 to Puerto Rico, which currently does not have the ability to put its public agencies into bankruptcy, has been long debated. Democrats have been generally supportive of proposals but a number of Republicans have shown skepticism.
Lew said that there would be no "path out of insolvency and back to growth" unless creditors made sacrifices in an orderly restructuring. He reiterated oft-repeated comments that there would be "no federal bailout" for Puerto Rico.
"Restructuring is an alternative to a bailout. There needs to be a restructuring so Puerto Rico's financial affairs can be put on a sustainable course."
A legislative solution could also include introducing a control board for the island. Lew said that any oversight would have to be done in a way that is respectful of Puerto Rico's system of self-government.
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