Warren unveils plan to restructure Puerto Rico debt
Sen. Elizabeth Warren (D-Mass.), a Democratic presidential contender, unveiled a plan Thursday to restructure Puerto Rico’s debt, as the U.S. territory struggles to rebuild its economy.
Under her proposal, territories like Puerto Rico would be allowed to “terminate” their debt under certain criteria like a natural disaster, major population loss, or if they are “staggering under overwhelming debt.”
The plan, which was unveiled in a post on Medium, would also set up a fund to compensate certain holders of Puerto Rico debt, such as pension funds, island residents, individual investors and credit unions.
{mosads}But Warren, a strong critic of Wall Street, added that “vulture funds and bond insurers would not get a penny from this fund.”
“Comprehensive debt relief is essential to Puerto Rico’s recovery. It is the only way for the island to get out from under the thumb of Wall Street speculators,” Warren wrote in her post. “It is the only way to stabilize the island and allow its people to reclaim their future.”
Warren added that under her proposal, which she plans to reintroduce in the Senate as the “U.S. Territorial Relief Act,” Puerto Rico would also need to undertake an independent audit of its debt.
Warren said her proposal was intended to give Puerto Rico the same recourse to lowering debt that is provided to companies and other U.S. cities.
“If Puerto Rico were a big company in this kind of financial trouble, it could file for bankruptcy, pay some of its debts, discharge the rest, then start rebuilding. If Puerto Rico were an American city in this kind of financial trouble, it could do the same,” she said.
But Warren avoided touching on the issue of Puerto Rico’s territorial status, focusing instead on the island’s financial woes.
Puerto Rico, in 2017, filed a form of bankruptcy codified in the Puerto Rico Oversight, Management, and Economic Stability (Promesa) Act, a law passed by Congress in 2016 that provides for federal oversight of Puerto Rico’s unmanageable debt.
The control board that manages that debt, Warren argued in her post, has “slashed basic government services throughout the island and imperiled Puerto Ricans’ pensions, while generously helping out the Wall Street firms that hold Puerto Rico’s debt.”
With a debt estimate of more than $70 billion, Puerto Rico’s was the largest government bankruptcy in U.S. history, overshadowing Detroit’s 2013 filing to restructure nearly $20 billion in debt.
“But Puerto Rico isn’t a corporation or a city,” wrote Warren. “Because of its unique status, those legal options aren’t available — and so it’s caught in a terrible position, battered by natural disasters with no clear path to recovery.”
Puerto Rico was hit by Hurricane Maria in September 2017, which devastated the island’s already teetering economy.
Warren’s plan comes as Puerto Rico Gov. Ricardo Rosselló (D) and members of the Promesa-imposed Fiscal Control Board testified Thursday before the Natural Resources Committee — the committee of jurisdiction on territorial affairs — on Promesa’s record.
Rosselló, who’s been critical of the austerity measures imposed by Promesa, pleaded with the committee to allow the local government to prioritize social programs and pension payments over debt payments.
“What we’re saying is let us define what those priorities are, and one of those priorities would be paying those pensions,” said Rosselló.
“I know that there will be differences, but if we have a limited budget, at least let us have a discussion on the policy basis of it,” he added.
But Rosselló doubled down on his core goal to achieve statehood for Puerto Rico, which he says would obviate many of the financial inequalities that have plagued the island.
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