House faces uphill climb on Puerto Rico relief

House leaders are grappling with legislation to help Puerto Rico handle its debt crisis, with both parties still hesitant to embrace the bill.

At a Wednesday hearing on the legislation, there was a lot of praise for the work that has been done so far to address the island’s debt woes. But there was much less talk of concrete support for the bill.

Antonio Weiss, the top Treasury Department official on Puerto Rico, told members of the House Natural Resources Committee that the bill would provide “essential tools” to the island, where officials warn they cannot pay back all of the $72 billion they owe in financial markets. 

But Weiss said there are “vital questions of workability in the draft bill that must be resolved.”

{mosads}Weiss tried to inject urgency into the matter, arguing that policymakers have run out of time to waffle on the bill.

“Without an agreement, there’s a collapse with Puerto Rico,” he said. “The time to act is now. We have passed every deadline.” 

There were obvious signs of conservative discontent with the proposal, with many members expressing dismay over allowing the island to rework its debt obligations. 

The continued grumblings led Speaker Paul Ryan (R-Wis.) to mount an ardent defense of the bill. His office called it “conservative, commonsense legislation” that would prevent “economic carnage.”

Another clear message from Ryan’s camp: Don’t call it a bailout. 

The “no bailout” mantra was a rare area of bipartisan agreement Wednesday — Weiss emphasized the point alongside Chairman Rob Bishop (R-Utah).

But that message was not well received by some of the panel’s more conservative members.

“This is framework of a bankruptcy, whatever you want to call it, and it will ultimately require a bailout,” Rep. John Fleming (R-La.) said.

Conservative lawmakers showed little interest in granting Puerto Rico the ability to restructure its debt, arguing instead for a host of policy changes like reduced business regulations they say would jump-start the island’s economy.

Several Republicans argued that giving Puerto Rico such broad restructuring powers could set a dangerous precedent, should states look for similar treatment if they meet tough times in the future.

“My concern is that every lender to every state in this country is no longer going to trust the terms of their own loans,” Rep. Tom McClintock (R-Calif.) said. “If those terms are not stable and reliable, interest rates will rise for every state in this country.”

In an effort to assuage conservative concerns, Bishop met with members of the Republican Study Committee after Wednesday’s hearing. The RSC, which represents dozens of House Republicans, had previously said it could not back a bill that includes mandatory restructuring for the island’s creditors. 

And Democrats don’t appear to be rushing the bill either. Party leaders have expressed appreciation for the efforts so far but have refused to sign on just yet.

“This bill is on a path that might achieve its goals, but it is not there yet,” Democratic Leader Nancy Pelosi (Calif.) said Wednesday.

Other Democrats are less sanguine about the bill. Rep. Nydia Velázquez (D-N.Y.), who is Puerto Rican herself, said the bill’s call for an outside oversight board for the island’s finances is “insulting.”

“What we are representing today as the House of Representatives is that we have absolute power over the people of Puerto Rico,” she said. “Plainly, we have a colony in the Caribbean.”

House Republican leaders are hoping to quickly move the legislation, as Puerto Rico is in danger of failing to make another debt payment on May 1. The Natural Resources panel is set to quickly begin considering the bill later on Wednesday. 

The House has already missed one deadline — Ryan had previously said he wanted the House to act on Puerto Rico legislation by the end of March.

Years of economic decline and fiscal mismanagement have left Puerto Rico in dire straits. And as the island’s economy worsens, large segments of the population are emigrating to the United States. 

Weiss warned Wednesday that if Congress does not pass a bill that provides a blueprint for Puerto Rico to rework its debt obligations, it could bury the island in lawsuits for years.

“Puerto Rico faces a lost decade as these various claims are contested,” he said.

Meanwhile, some investors in Puerto Rican debt have pushed hard against allowing the island to restructure, eager to see their bets paid back in full.

Some investor groups have gone so far as to buy ad campaigns pressuring lawmakers to oppose the bill. Ryan’s office dismissed “buzzwords and special interest ad campaigns with deep pockets” in defending the bill. 

Rep. Raúl Grijalva (D-Ariz.), the Natural Resources Committee’s top Democrat, blasted efforts to stifle legislation by investors.

“Wealthy Wall Street hedge funds that hold Puerto Rican bonds are spending millions of dollars to spread information,” he said. “They are more interested in padding their profits than ensuring the well-being of American families living in Puerto Rico.”