WASHINGTON - Eight Hispanic lawmakers are pressing the Treasury Department to take a more active role in helping Puerto Rico with its worsening fiscal situation by working with Congress to advance pending Chapter 9 bankruptcy legislation.
They made their case for the department's involvement in a letter sent to Treasury Secretary Jack Lew on Monday.
Rep. Nydia Velazquez, D-N.Y., led the group of lawmakers, which also included: Sen. Robert Menendez, D-N.J.; and Reps. José Serrano, D-N.Y.; Tony Cárdenas, D-Calif.; Rubén Hinojosa, D-Tex.; Raúl Grijalva, D-Ariz.; Albio Sires, D-N.J.; and Grace Napolitano, D-Calif.
The lawmakers told Lew they are concerned that "the dire situation" on the island could quickly escalate. They asked Treasury to "move beyond its provision of technical assistance and take a leadership role to bring creditors and debtors to the table to resolve this crisis immediately," as it did during the financial crisis in 2008 when it helped automakers by providing interim financing.
A Treasury spokesman said the department is reviewing the letter and will be responding to the members of Congress.
Velazquez and the other members of Congress said Treasury is "uniquely positioned to promote a fair and efficient outcome" and its intervention would provide "the best opportunity for an orderly resolution to the island's non-public utility debt obligations."
They urged Lew to "meaningfully engage" with Rep. Bob Goodlatte, R-Va., and Sen. Chuck Grassley, R-Iowa, who chair the House and Senate Judiciary Committees where similar Chapter 9 bills currently sit, to advance the legislation. They also said "other mechanisms must be pursued to address the island's remaining outstanding debt," but did not specify what those are.
The bills pending before the committee would give Puerto Rico public entities access to Chapter 9, an option they currently are prohibited from pursuing under the U.S. Bankruptcy Code. Both bills have not moved since being referred to the committees and Goodlatte and Grassley have said they do not intend to advance them because other measures should be taken.
Puerto Rico is currently struggling with about $72 billion in debt and the Puerto Rico Public Finance Corp. recently defaulted on a $58 million bond payment. Gov. Alejandro Garcia Padilla has consistently said the island's debt is not payable without restructuring, but several mutual funds that hold the bonds of the territory and its authorities strongly oppose extending Chapter 9 powers to the commonwealth. They worry they would have to take a significant haircut in a bankruptcy proceeding and would prefer receivership.
The 60 Plus Association, which represents seniors, contends the creation of a federal financial control board is the best option to resolve Puerto Rico's financial troubles.
An internal working group of the territory recently unveiled a 77-page growth plan on Sept. 9 that includes stimulus measures, spending cuts, fiscal reforms and the creation of a local financial control board.
