Puerto Rico Debt Crisis: White House Will Not Bailout Commonwealth
Despite rumors to the contrary, the White House said there were no plans to provide a financial bailout for Puerto Rico’s massive debt crisis.
The U.S. territory defaulted on $72 billion in August. In July, Puerto Rico Gov. Alejandro García Padilla said the island's debt was simply “not payable.” As quoted in the New York Times, the governor said, “This is not politics, this is math.”
As CNBC reports, White House Press Secretary Josh Earnest informed reporters at a daily briefing, "It is inaccurate to suggest that the Treasury Department is in talks to undertake any of Puerto Rico's obligations."
"To my layman view, issuing bonds that are backed by the full faith and credit of the United States, would raise some questions about whether or not we're undertaking their financial obligations," Earnest added.
Earnest did however suggest that the U.S. government was working to help Puerto Rico come up with ways to fix its financial woes. He said, "There is not just a willingness but actually a desire to try to work effectively with Puerto Rican officials to use the expertise of the officials in the federal government to offer them advice about creating a path back to a sustainable economic picture on the island."
The Wall Street Journal had previously reported that Puerto Rico and U.S. officials were talking about perhaps issuing a “superbond” which would be administered by the Treasury Department and might help to restructure Puerto Rico’s debt.
Under the conditions of the superbond, the Treasury, or some designated third party, would administer an account holding on a portion of Puerto Rico’s tax collections. The funds collected in this account would be used to pay holders of the superbond, which would then be issued to existing Puerto Rico bondholders in exchange for outstanding debt at a newly negotiated ratio.
In an opinion piece for Reuters, Kevin Allison, a columnist who specializes in writing about global resources, writes that even is the superbond could somehow be implemented, “it would leave needed institutional reforms to Puerto Rico’s finances unaddressed.”
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