WASHINGTON — A House committee will hear Treasury's Antonio Weiss discuss an analysis of Puerto Rico on Feb. 25, as lawmakers coalesce around a bill that would give the territory's authorities bankruptcy access in return for creation of a financial stability council.
The exact language of the bill, sponsored by Rep. Sean Duffy, R-Wis., may not be included in final legislation, but lawmakers think the bill could serve as the foundation for legislation that joins the Republican support for a fiscal control or oversight board with the Democrat's call to give the territory's authorities the ability to restructure their debt.
Weiss, a counselor to Treasury Secretary Jack Lew who has worked to resolve Puerto Rico's debt crisis, said at a Feb. 5 panel on the commonwealth sponsored by the Bipartisan Policy Center, that he has seen "very positive discussions taking place on both sides of the aisle" in Congress. He also pointed out that there now seems to be more agreement that any plan to help the commonwealth should include both restructuring and oversight.
Treasury unveiled a four-part plan in October that included both of those elements along with improvements to Puerto Rico's treatment under federal healthcare programs and technical assistance to modernize its accounting and disclosure practices. However, the Treasury plan called for all of Puerto Rico's debt to be restructured, not just the debt issued by its public authorities as has been proposed by Democrats arguing for a Chapter 9 solution.
The Treasury's plan for Puerto Rico has drawn criticism from some insurers of Puerto Rico bonds, which said the department's statements are hurting creditors' consensual negotiations with the commonwealth.
Weiss clarified the administration's position at the panel last week, saying Treasury still believes any solution should look at restructuring all of the debt, but that the restructuring could come through the Constitution's Territorial Clause instead of through an addition to federal bankruptcy code. The Territorial Clause says "Congress shall have power to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States."
He also noted that all debt would not have to "be treated with a broad brush equally" and that restructuring could take into account the many differences between Puerto Rico's various debts.
"A special legislative act is required, tailored to the territories, consistent with Article 4 of the Constitution and that is neither for cities nor for states," Weiss said. "It is on Congress recognizing the severity of this problem to agree in a bipartisan fashion on what those tools should be. It's emergency legislation to deal with an emergency situation."
Natural Resources Committee chair Rob Bishop, R-Utah, said his committee will "continue to work with Treasury as [the committee] moves forward on a responsible path for Puerto Rico."
The Feb. 25 hearing follows two hearings by the Natural Resources Committee's subcommittees, one in January that explored how to reform the commonwealth's energy infrastructure and the other on Feb. 2 that evaluated the need for a federal oversight authority for the territory.
Lawmakers at the Feb. 2 hearing said they planned to use the discussions that took place to begin crafting legislation to help Puerto Rico.
House committees with jurisdiction over Puerto Rico are working under a March 31 deadline that Speaker Paul Ryan, R-Wis., gave them at the end of last year to produce a responsible legislative package to help Puerto Rico. The commonwealth is currently struggling with about $70 billion in debt and has already defaulted on several bond payments.
Resident Commissioner Pedro Pierluisi, a member of the Natural Resources Committee and Puerto Rico's sole representative in Congress, responded to the hearing announcement by reiterating a concern he and Puerto Rico officials have had that an oversight authority may exert too much control over the local government.
He has said he will support an oversight authority as long as it respects Puerto Rico's local governance, something both Republicans and Democrats have agreed is important to a final bill.
"Congress continues to move in the direction of passing legislation to help Puerto Rico to overcome the crisis it faces," Pierluisi said. "The hearing before the Committee on Natural Resources … is the next step."
