The legislation, in effect, allows Puerto Rico to take bankruptcy if voluntary agreements are not reached between Puerto Rico and its creditors. This type of financial remedy is already available to cities, counties, and other governmental entities. Detroit and Orange County, Calif., are among those that have taken this approach. Under the legislation, this type of financial restructuring would be extended to U.S. territories, including Puerto Rico.
A few hedge funds purchased Puerto Rico’s bonds, for pennies on the dollar, from the original bond holders. Now those same hedge funds are demanding payment in full and are blocking any settlement or restructuring of Puerto Rico’s debts. These “vulture funds” knew they were buying risky bonds at a discount knowing full well there was a chance of default.
In exchange for debt restructuring relief, Puerto Rico will be under the purview of a strong oversight control board that will fundamentally overhaul the island’s finances. In an effort to prevent future defaults and expensive litigation, Congress is forcing the island to take its medicine now, get its financial house in order and put Puerto Rico on strong financial footing allowing for future economic growth.
U.S. Rep. Ed Perlmutter represents Colorado’s 7th Congressional District. He is a member of the House Science, Space and Technology Committee and the Financial Services Committee.
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Ricardo Arduengo, Associated Press file
A bronze statue of San Juan Bautista stands in front of Puerto Rico’s Capitol in San Juan. On Thursday, the U.S. House of Representatives is expected to debate legislation to allow Puerto Rico to reorganize and restructure its budget and debts. 
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