POLITICS

Puerto Rican bankruptcy debate divides U.S. politicians down party lines

The Puerto Rican flag flies near the Capitol on July 1, 2015 in San Juan, Puerto Rico.

The Puerto Rican flag flies near the Capitol on July 1, 2015 in San Juan, Puerto Rico.  (2015 Getty Images)

The debate in the U.S. over whether or not to allow Puerto Rico's public agencies to declare bankruptcy has split down party lines, with Republican lawmakers arguing against any legislation that would allow the territory to file for Chapter 9 while Democrats are pushing for it to be allowed to do so.

House Judiciary Committee Chairman Bob Goodlatte and Tom Marino, chairman of the Subcommittee on Regulatory Reform, Commercial and Antitrust Law, both Republicans, said on Thursday that they had met with their party's counterparts to discuss the bankruptcy issue and that while no clear consensus had been reached, GOP members of the House are overall looking for other options besides permitting bankruptcy.

"Today, we met with our Republican colleagues on the Judiciary Committee to discuss the issues facing Puerto Rico," the two said in a joint statement. "While no consensus was reached, a general concern was expressed that to provide Puerto Rico's municipalities access to chapter 9 of the Bankruptcy Code would not, by itself, solve Puerto Rico's difficulties, which are associated with underlying, structural economic problems."

The White House has said it is not considering a federal bailout of Puerto Rico. Legislation allowing Puerto Rico to use Chapter 9 bankruptcy laws is pending in the House. In the Senate, Charles Schumer of New York and Richard Blumenthal of Connecticut are planning to propose companion legislation.

The Republicans control both houses of Congress and would likely thwart any attempt by Democratic lawmakers to push through the Puerto Rico Chapter 9 Uniformity Act of 2015, which gives Puerto Rico's municipalities access to chapter 9 of the Bankruptcy Code.

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Puerto Rican Gov. Alejandro García Padilla said last month the island's $72 billion public debt is unpayable given the current level of economic growth and he would seek a payment moratorium from bondholders as the commonwealth attempts to emerge from a nearly decade-long economic slump.

The Republican announcement comes only a few days after leading Democrats across the country – including frontrunner Presidential candidate Hillary Clinton – said Congress and the Obama administration should help Puerto Rico restructure its debts under a Chapter 9 bankruptcy.

In a statement, the Democratic presidential candidate stopped short of supporting a federal bailout but said Congress should give the U.S. territory the same ability to restructure its debts as U.S. municipalities and public corporations do under the bankruptcy code.

"We're not talking about a bailout, we're talking about a fair shot at success," Clinton said. She called on Congress and the White House to "partner with Puerto Rico by providing real support and tools so that Puerto Rico can do the hard work it will take to get on a path toward stability and prosperity."

Clinton's statement appeared a day before New York City Council Speaker Melissa Mark-Viverito, who is arguably becoming one of the nation's most influential Puerto Rican politicians, urged both Congress and the Obama administration to step in and help the island commonwealth.

Mark-Viverito, who was born in Puerto Rico, said Wednesday that the situation in her native land was "a fiscal crisis" that required help from the superpower that sits 1,000 miles from its shores.

"My mother still lives there, my family still lives there. I hope to retire there someday," Mark-Viverito said. "This is very personal to me to see Puerto Rico in this situation."

The Associated Press contributed to this report.

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