For months, the House of Representatives fought back against an intense Puerto Rico-funded lobbying campaign designed to allow the fiscally irresponsible island to declare bankruptcy. Fearing that allowing the San Juan government to wash their hands of over $70 billion in debt would set a dangerous and costly precedent, the House instead passed a measure that will give a control board the ability to right the island’s wayward ship.
In hindsight, however, it appears that the reforms brought about by the House bill are not as solidly geared on conservative grounds as many originally believed. Lawyers examining the language of the legislation recently discovered wording that is troubling, to say the least. It appears that the bill gives the unelected control board the authority to unilaterally reduce the amount of debt Puerto Rico owes. In other words, if the island owes a retirement fund $1 billion, the control board could decide to cut that amount to, say, $250,000 without receiving the approval of the fund that is awaiting payment. In truth, this bill is tantamount to a bailout, which is exactly what the measure intended to avoid.
The Puerto Rico recovery bill passed amid much early skepticism. It took much clever and witty rhetorical persuasion by Congressional leadership to convince House Republicans that the bill was neither condoning bankruptcy or providing a bailout. However, the new-found language raises doubt about whether the leadership was truthful in their promises.
Section 206 of the bill allows the control board to restructure debts before Puerto Rico or any of its entities are insolvent. Under this scenario, it gives them access to bankruptcy restructuring even if they are capable of paying their bills.
If this bill goes through without the necessary changes, Barack Obama’s cronies and the Treasury Department will get everything they wanted — a bailout for Puerto Rico and the ability enrich their cronies with restructuring fees.
The Senate is now scheduled to take up the intricate measure. Should the body wish to make any changes to the legislation, they must create a conference committee to clear up differences between the House and Senate versions of the bill. It is critical that the Senate amends these provisions so that the anti-free market agenda of the dishonest House leadership will be invalidated once and for all. Failure to do so will leave the sour impression that the GOP-controlled Congress can no longer be trusted.