This article originally appeared in Real Clear Markets. Click here to read the full article.
By Ike Brannon
Republicans have approached the looming fiscal crisis in Puerto Rico with the goal of returning the island to solvency without costing taxpayers any money. Unfortunately, the plans being discussed by the House of Representatives of late will not achieve either goal.
Puerto Rico insists (with Treasury’s support) that any legislation to fix their plight include giving a debt haircut to all creditors, even those investors who own the just over $18 billion of secured debt that is backed by the full faith and credit of the Commonwealth. For perspective that’s slightly more than 25% of the island’s $72 billion of debt. The bill negotiated by the House Natural Resources Committee acquiesces to these demands; even though it parrots the rhetoric that this in no way constitutes a bankruptcy ,the bill incorporates over 100 line items from Chapter 9.