WASHINGTON — The White House reiterated that the federal government won't offer bailout support to Puerto Rico after Gov. Alejandro García Padilla said the island's debt is not payable and that a debt restructuring is necessary,
White House spokesperson Josh Earnest confirmed to several outlets Monday that there won't be help, while also saying federal officials are committed to working with Puerto Rico.
"The Administration is committed to supporting the people of Puerto Rico and helping its leaders find solutions to the Commonwealth's serious challenges," a Treasury spokesman said. "Treasury, along with other agencies, has been engaged with Puerto Rico for more than three years to ensure that the Commonwealth is able to access all available and existing federal resources.
"We urge Puerto Rico to move forward on crafting a long-term economic and fiscal plan that provides a sustainable path forward for the people of the Commonwealth. The Administration will continue to work with Puerto Rico as it develops an agenda for economic revitalization. And Treasury will continue to share its expertise with the local officials who are leading the Commonwealth's economic policies."
The island is currently facing $72 billion in public debt as its legislators continue to debate a new budget that must be approved by Tuesday. In his recent comments, García Padilla praised a report by Anne Krueger, Ranjit Teja, and Andrew Wolfe released Monday that calls for fiscal adjustment, structural reforms, and debt restructuring in the commonwealth. It also proposes the federal government allow Puerto Rican corporations to be eligible for Chapter 9 bankruptcy declarations, something only states have the power to grant and the subject of a recent push in a congressional subcommittee hearing.
Last week's hearing brought voices from several sides of the Puerto Rico statehood debate together to testify in front of the House Subcommittee on Indian, Insular and Alaska Native Affairs. While it was designed to broadly look at how Puerto Rico's political status related to its economic woes, it diverged periodically into discussing how giving the commonwealth access to Chapter 9 powers, under pending H.R. 870, would aid its economic situation.
César Miranda, Puerto Rico's attorney general who attended last week's hearing in place of García Padilla, said Puerto Rico is in a "truly dire" situation and a "state of fiscal emergency," that requires the granting of bankruptcy authorization rights.
"We have the capabilities to come across and bring the island to a brighter condition," Miranda said during the hearing. "We need to have an instrument to deal with the debt that we are carrying now. That is why we support extending Chapter 9 to Puerto Rico."
The price of the island's general obligation bonds fell after the governor's remarks Monday, while the broader muni market rallied. Bond Dealers of America CEO Mike Nicholas said the situation in Puerto Rico is unique and abnormal for the bond market, which overall boasts very low default rates.
"Regardless of isolated incidents such Puerto Rico, municipal bonds remain a critical financing tool for state and local governments and a stable investment option," Nicholas said.
