Puerto Rico faces defaults as Congress stalls on way to help

WASHINGTON (AP) – House Speaker Paul Ryan said Congress needs to “bring order to the chaos” in Puerto Rico and prevent U.S. taxpayers from having to eventually bail out the territory, which is facing a $70 billion debt.

A House committee canceled a Thursday vote on legislation establishing a control board as Republicans remained divided over how Congress should address the economic crisis. Gov. Alejandro Garcia Padilla has warned that a debt restructuring measure needs to be approved soon with the looming deadline next month for a $422 million bond payment.

Puerto Rico has said it will likely default on the payment, which would mark the first time the island would default on general obligation bonds protected by the island’s constitution.

At a news conference Thursday, Ryan said he believes Congress will eventually act, but that many lawmakers are still learning about the issue. He said House Republicans will have a meeting Friday morning to discuss what should be done about the territory’s financial woes.

He said a control board would help the U.S. avoid an eventual bailout of the territory.

“My number one priority as speaker of the House with respect to this issue is to keep the American taxpayer away from this,” Ryan said. “There will be no taxpayer bailout.”

Democrats have worried that a control board would be too powerful, evoking echoes of colonialism.

House Minority Leader Nancy Pelosi, D-Calif., said that the bill should include an oversight board “that is respectful of the people of Puerto Rico and does not undermine the restructuring part of the bill and does not contain extraneous provisions that harm working people.”

Obama administration officials warned at a hearing Wednesday that the island is facing total financial collapse if Congress doesn’t step in. Republicans agree on the urgency of the matter, but they have faced opposition from within their own caucus and from Democrats.

Legislation released by the Republicans on the House Natural Resources Committee this week would create a control board and allow the board to facilitate some court-ordered debt restructuring, though it does not give the island the broad bankruptcy authority that territorial officials had sought.

Some conservative Republicans had objected to the debt restructuring, saying it’s a bad precedent. In an attempt to satisfy those lawmakers, the most recent draft of the bill would give creditors more of a say on debt plans, allowing them a preliminary vote on whether they wanted to voluntarily restructure debt.

But it was not enough. Several Republicans on the panel expressed reservations about the restructuring.

The administration has also been involved in the negotiations. Treasury Department official Antonio Weiss said at the hearing that the administration is concerned that the way the bill is written, debt restructuring could take too long.

The Senate has not yet acted on the issue. Senate Finance Committee Chairman Orrin Hatch said last week that senators are waiting to see how the House moves forward until they take it up.

Puerto Rico has been mired in economic stagnation for a decade. The financial problems worsened as a result of setbacks in the broader U.S. economy, and government spending in Puerto Rico continued unchecked as borrowing covered increasing deficits.