The Late Night Promise of PROMESA

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eBlog II, 5/19/16

In this morning’s (egad) 2nd eBlog, we discuss last night’s late breakthrough and introduction of bipartisan legislation, the promise of PROMESA, to address the nearing insolvency of the U.S. territory of Puerto Rico:

The Promise of Promesa. House Speaker Paul Ryan (R-Wis.) and the White House reached agreement late last evening on legislation, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), H.R. 5278 [Click here to view the legislative text.]. Bill sponsor Rep. Sean Duffy (R-WI), Committee on Natural Resources Chairman Rob Bishop (R-UT), and cosponsor Rep. Jim Sensenbrenner (R-WI) issued the following statements: “Years of disastrous polices have completely wrecked Puerto Rico’s economy. As a result, the island and its millions of American citizens face a humanitarian crisis. That’s why we must allow for a responsible restructuring for Puerto Rico’s debt, and do it without using Wisconsin taxpayer dollars for a bailout,” Rep. Duffy said; Chairman Bishop: “Tonight we introduced legislation to responsibly address the crisis in Puerto Rico. The revised bill incorporates technical refinements and input from all stakeholders. Any future changes will be done in public committee meetings,” and Rep. Sensenbrenner added: “Tonight’s introduction of PROMESA is the first step toward fixing years of irresponsible budgeting and putting Puerto Rico’s economy back on track. It’s a smart and fiscally prudent bill that will positively impact millions of hardworking American citizens without wasting taxpayer dollars.” The bill is expected to have the support of the White House, House Minority Leader Nancy Pelosi (D.-Ca.), although it remains uncertain how much majority support in the House. A key, unresolved issue relates to the appointment of a seven member financial control board, but the bill achieved compromises on the earlier sticky points with regard to the U.S. territory’s constitutional priorities with regard to pension and municipal bond obligations. Notwithstanding earlier accusations that any legislative package would amount to a bailout, the legislation does not commit a single federal dollar—just as no federal dollars were involved in the resolution of Detroit’s, Stockton’s, or any other municipal bankruptcy. The bill provides for the appointment of a financial oversight board—not unlike previous boards named for New York City and the District of Columbia—but no names have yet been selected. The intent of the bill is to chart a path towards reducing the territory’s nearly overwhelming debt burden—a level of debt which today is consuming nearly 33% of Puerto Rico’s revenues—and to have President Obama sign the bill well before July 1st.

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