– Puerto Rico To Default On July 1 After Senate Passes Bailout Bill:
Moments ago, following the overwhelming passage of a Puerto Rico bailout bill by the US House of Representatives, Congress found itself on the edge of sending the PR debt relief Bill for the president signature, when the Senate, in a 68-32 vote, likewise passed the measure. This makes final passage of the legislation a virtual certainty as sixty votes were needed to clear the procedural hurdle, but only a majority vote is necessary on final passage.
The legislation allows Puerto Rico to restructure $70 billion in debt and establish an outside control board to steer the island’s troubled finances. President Obama supports the package, and is expected to quickly sign it.
Puerto Rico faces $2 billion in debt payments on Friday, creating an effective deadline for passing the legislation that the Obama administration was determined to meet. Treasury Secretary Jack Lew was on Capitol Hill on Tuesday to round up support for the legislation. The bill faced opponents across the political spectrum.
The losers in this case are a group of creditors who worry their investments in Puerto Rico’s debt will be eroded fought the bill for months.
As The Hill notes, an advertising campaign, believed to be backed by creditors, charged that the legislation was a taxpayer bailout of Puerto Rico, though no taxpayer funds would be provided through the legislation. Civil society groups in Puerto Rico also opposed the legislation, arguing an oversight board created by the measure would supersede the will of the Puerto Rican people. They received loud support on the Senate floor from Sens. Bernie Sanders (I-Vt.) and Bob Menendez (D-N.J.),
Despite the opposition, party leaders backed the package and were able to cobble together enough support to get to 60 votes, handing a victory to Senate Majority Leader Mitch McConnell (R-Ky.) and Minority Leader Harry Reid (D-Nev.).
The legislation’s advancement is also a significant victory for the Obama administration, which served as the lead negotiator for Democrats, hammering out a package with House Republicans over weeks of talks.
Intense lobbying surrounded the bill for months on Capitol Hill, as a raft of investors in Puerto Rican debt descended on the Capitol to try and carve out the most advantageous package possible. Lawmakers were bombarded with pressure from all sides, as creditors jockeyed for optimal position in the final package, which would determine who gets paid how much from what is left of Puerto Rico’s revenue.
What happens next? Some more details:
With the bill apparently set to become law, Congress will have taken steps to address a deepening economic, fiscal, and humanitarian crisis on the island. Years of economic decline had led to a mass exodus of Puerto Ricans to the American mainland, driving down its revenues and eventually leaving it without enough government funds to pay off its debt.
The island’s status as a U.S. territory left officials there with no recourse, since a quirk in the bankruptcy code leaves territories without access to the same bankruptcy protections afforded to states and municipalities. In effect, the island needed Congress to pass a law, in an election year, to get out from under its crushing debt load.
The island has had to slash public services in an effort to stay afloat, and the White House warned that even more severe steps, like the shuttering of hospitals, could come without congressional action.
But now, the bill freezes any legislation from creditors, and allows the oversight board to step in and work towards an affordable debt restructuring package for the island.
Liberal lawmakers griped about side provisions that relax labor regulations on the island. Democrats also were peeved that Republicans brought the bill straight to the floor without the opportunity to try and amend it.
The most immediate future, however, is far simpler:
- PUERTO RICO GOVERNOR SAYS COMMONWEALTH WILL DEFAULT ON JULY 1
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