A House Democrat is urging President Obama to take emergency steps to help Puerto Rico steer through an economic crisis.
Rep. Nydia Velazquez (D-N.Y.) wrote to the president Monday, urging him to convene a meeting of top financial regulators to help the island commonwealth find a way to deal with its insurmountable debt.
Specifically, Velazquez wants to see the president convene a meeting of his Working Group on Financial Markets, which gathers the top financial officials from the administration to tackle the biggest issues facing financial markets.
{mosads}“This situation is unprecedented and therefore requires an unprecedented approach,” wrote Velazquez, who is Puerto Rican and sits on the House Financial Services Committee. “While the technical assistance that your administration has provided Puerto Rico has been useful, it is time to move beyond such limited measures.”
Fiscal troubles in Puerto Rico have hit Washington, after the commonwealth’s governor declared that the island will not be able to completely pay back its roughly $72 billion debt load, as it faces a shrinking population and tax revenue. A technical oversight in a rewriting of the bankruptcy code over 30 years ago made it impossible for Puerto Rico to allow subsidiaries to declare bankruptcy, which is a power states currently possess. Lawmakers are pushing a statutory fix to the bankruptcy code to allow Chapter 9 bankruptcy for Puerto Rico, as it currently applies to states, but any legislative work is usually slow-going.
Further complicating matters for Puerto Rico is the fact that it is neither a state nor a sovereign nation, which also means it cannot seek assistance from global bodies like the International Monetary Fund.
Facing an “exceptionally rare predicament,” Velazquez said the best course may be for the White House, using the task force, to require Puerto Rico’s creditors to sit down with commonwealth officials to try and reach some sort of agreement.
“Bringing all parties – creditors and debtors alike to the table, as only the White House can do, is our best hope, not just for Puerto Rico, but U.S. interests as well,” she wrote.
Velazquez went on to note that the municipal debt issued by Puerto Rico and its subsidiaries can now be found in banks and financial institutions across the country, including a host of pension and retirement plans held by average Americans. A messy default by Puerto Rico could lead to turmoil in markets, and losses that could have been avoided with a proactive compromise, she said.