Obama urges Congress to pass law letting Puerto Rico declare bankruptcy, time to let Illinois do the same
If the White House wants to give Puerto Rico the right to bankruptcy, it should extend the option to all states and territories.
Puerto Rico is bankrupt. The key problem is that while municipalities can declare bankruptcy, states and territories cannot.
President Barack Obama recognizes the problem. “No federal bailout for Puerto Rico” is the White House’s position. Instead, he urges Congress to pass a bill allowing Puerto Rico to declare bankruptcy. The Associated Press gives details:
“The White House threw cold water Monday on the notion of bailing out Puerto Rico from its financial crisis, instead urging Congress to consider changing the law so the island can declare bankruptcy.
“On the heels of a dismal economic report, Puerto Rico’s governor has warned that the commonwealth can’t pay its $72 billion public debt, delivering a serious blow to Puerto Rico’s recession-addled economy. But White House spokesman Josh Earnest said the federal government would provide financial expertise and access to existing resources — but not a bailout.
“The Obama administration declined to offer Detroit a bailout, and the city declared bankruptcy under Chapter 9 of the Bankruptcy Code in 2013.
“As a U.S. territory, Puerto Rico can’t file for bankruptcy under that chapter, which is limited to municipalities such as Detroit. But Puerto Rican Gov. Alejandro Garcia Padilla has said he’s considering asking Congress to change the law so that Puerto Rico’s public agencies could declare bankruptcy under Chapter 9 — an idea that seemed to gain traction at the White House.
“Earnest said the White House was encouraging Congress to explore possibilities to allow Puerto Rico to make use of Chapter 9, which would allow the commonwealth to restructure its debt amid a nearly decade-long economic slump. Garcia is seeking to defer debt payments while Puerto Rico negotiates with its creditors.”
Idea long overdue
I welcome this action. But why limit the bill to Puerto Rico?
I say open this up to states like Illinois that will be doomed to the same fate eventually.