January 27, 2016

Reuters: Senate Democrats United on Debt Restructuring for Puerto Rico: letter

U.S. Senate Democrats, in a letter to Majority Leader Mitch McConnell, on Wednesday called for congressional action on Puerto Rico, demanding that legislation to resolve the island’s financial crisis include tools to restructure debt.

“Restructuring legislation would not cost the federal government a single penny and would instead save U.S. taxpayers from the growing cost of inaction,” said the letter to the Senate’s Republican leader, signed by all 46 Democrats and independents.

The letter is a challenge to Republicans who largely oppose letting the U.S. commonwealth restructure debt. Republican Senators Orrin Hatch of Utah, Lisa Murkowski of Alaska and Chuck Grassley of Iowa last month introduced a bill to bring Puerto Rico’s finances under federal oversight without providing for debt restructuring.

Democrats have argued that federal oversight should be conditional on allowing Puerto Rico to be governed by federal bankruptcy or debt restructuring laws. Hatch, Murkowski and Grassley are cc’d on the letter.

“Puerto Rico was included in Chapter 9 of the U.S. Bankruptcy Code until 1984, when Congress inexplicably excluded it from the nationwide approach to resolving municipal insolvency,” said the letter, a draft of which was first reported by Reuters last week.

The letter’s broad support is key because, with 44 Democrats and two independents on board, Democrats could block bills that do not include a restructuring mechanism. Still, that is no guarantee that Republicans, who control Congress, will draft a bill that includes one.

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