Congress Is Ready To Act On Puerto Rico

Summary

Republican Congressman Duffy is introducing a bill in the House to create a Puerto Rico Financial Stability Council.

Republican Senators Hatch, Grassley and Murkowski are introducing a bill in the Senate to create a Puerto Rico Financial Responsibility and Management Assistance Authority.

The two bills have many similarities and should be fairly easy to reconcile; it seems unlikely the President would veto the final version.

As the first step in restoring financial stability, these bills represent a positive development for Puerto Rico's residents, businesses, current and retired employees, taxpayers and creditors.

Sean Duffy is introducing a House bill that creates a Puerto Rico Financial Stability Council. Senators Hatch, Grassley and Murkowski are introducing a Senate bill to create a Puerto Rico Financial Responsibility and Management Assistance Authority. The two bills have many similarities, including a board appointed by the President in consultation with Congressional leaders and broad powers to approve budgets, issue subpoenas, obtain financial information and develop and enforce long-term financial plans that lead to fiscal balance. Both bills benefit from Congress's experience with the District of Columbia control board.

The Senate bill goes much further than the House bill by providing significant financial and economic relief and a credible debt structure backed by revenues segregated from Commonwealth operations and controlled by the new entity to accelerate the Commonwealth's ability to regain access to credit markets.

The House bill gives Puerto Rico's subdivisions access to Chapter 9 bankruptcy; the Senate bill does not. Including Chapter 9 in the final version would be a policy mistake that would create more confusion and uncertainty. The Senate bill gives the FRMA Authority all the power necessary to restore financial stability to both the Commonwealth and its public corporations. Adding the potential for multiple bankruptcy court proceedings could turn the effort to restore financial stability into a three-ring circus. Puerto Rico has many inter-related credit structures, and the use of a single new entity empowered to sort out these complex relationships is far superior to multiple bankruptcy court actions.

Daniel Irvin

Congress Is Ready To Act On Puerto Rico