Call Out “False Arguments Made By Hedge Funds” & Call For “Orderly Restructuring Governed By U.S. Law”
The New York Times: The Notion That Puerto Rico Bill Is A Bailout Is “False.” “It has been clear for months that the federal government needs to give Puerto Rico a way to restructure its $72 billion debt and impose a financial control board to oversee decisions by local lawmakers. But the effort to pass legislation is facing stiff opposition from some House Republicans, who have bought into false arguments made by hedge funds and other investors that this would amount to a federal bailout or that it could open the door to bankruptcy filings by state governments.” (Editorial, “Only Congress Can Rescue Puerto Rico,” The New York Times, 4/23/16)
Puerto Rico Is Now Unable To Run Its Hospitals, Exacerbating The Risk Of The Zika Virus. “Puerto Rico, which has already defaulted on some of its debt, does not have the money to make big bond payments that are coming due in May and July. The island’s government is so short of cash that it has delayed more than $2 billion in payments to vendors and delayed tax refunds to individuals. Public hospitals have closed floors and are rationing medicine at a time when health experts fear a surge in Zika infections that can cause birth defects.” (Editorial, “Only Congress Can Rescue Puerto Rico,” The New York Times, 4/23/16)
If Congress Doesn’t Act Soon, The Problem Will Become Worse. “Done right, legislation that would help Puerto Rico through its financial crisis would not cost the federal government any money. And allowing the island to restructure its debt would not mean that Congress would have to give states like Illinois that also owe a lot of money to investors the ability to do the same. If Congress does not act now, Puerto Rico’s financial crisis could drag on for years.” (Editorial, “Only Congress Can Rescue Puerto Rico,” The New York Times, 4/23/16)
Puerto Rico Will Be Unable To Provide For Its 3.5 Million Citizens. “The commonwealth recently passed legislation authorizing a moratorium on its $72 billion in debt, signaling a default by the insolvent Government Development Bank on a $422 million payment due May 1. Barring federal intervention, public services will erode or worse as creditors race to the courthouse.” (Editorial, “Puerto Rico At The Brink,” The Wall Street Journal, 4/22/16)
Legislation Will Allow For An “Orderly Restructuring Governed By U.S. Law.” “Some Republicans – egged on by hedge-fund lobbyists – complain that the legislation would retroactively impair bond contracts, though this will occur regardless if Puerto Rico defaults. The options now are an orderly restructuring governed by U.S. law or a chaotic default dictated by the island’s politicians.” (Editorial, “Puerto Rico At The Brink,” The Wall Street Journal, 4/22/16)
Debt Restructuring Will Not Negatively Affect U.S. Borrowers. “Others putatively worry that a debt restructuring – which is now inevitable – will hurt U.S. retail investors, unnerve bond markets and raise municipal borrowing costs. But as Nuveen Asset Management director John Miller told Congress, less than 50% of municipal bond mutual funds own Puerto Rican securities … Mr. Miller also pointed out that the municipal bond market ‘has actually strengthened’ and ‘Puerto Rican bonds valuations specifically did not move down’ after the draft legislation was released.” (Editorial, “Puerto Rico At The Brink,” The Wall Street Journal, 4/22/16)