http://thehill.com/homenews/house/28...erto-rico-deal
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Ryan secures big win with bipartisan Puerto Rico deal
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The agreement to restructure the island’s $70 billion in debt fulfills a promise the Speaker made to Minority Leader Nancy Pelosi (D-Calif.) and Democrats during spending talks last December. And it shows that Ryan’s approach to the leadership job — empowering committee chairmen — can work, to a certain extent.
For months, Ryan deferred questions about Puerto Rico to Natural Resources Committee Chairman Rob Bishop, letting the Utah Republican spearhead talks with both Democrats and Republicans on his panel. But when negotiations got bogged down by a few sticking points, including the creation of an independent fiscal control board, Ryan stepped in to close the deal.
Ryan spoke with White House chief of staff Denis McDonough last week as the accord neared the finish line. One recent weekend, Ryan spoke by phone with Treasury Secretary Jack Lew while mowing his lawn at his home in Janesville, Wis., according to sources familiar with the discussions. Ryan and Lew, two policy wonks, had crossed paths in 2011, when Ryan was the chairman of the Budget Committee and Lew the White House’s top budget official.
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The Puerto Rico legislation still hasn’t been scheduled on the House floor. Bishop will mark up the bill in his committee on Wednesday, leaving the full chamber just one day to take it up before lawmakers leave town Thursday for the Memorial Day recess.
Some lawmakers want a quick vote on Puerto Rico this week. The longer it hangs out there, the thinking goes, the more time political foes will have to try to stir up opposition. On the left, Sen. Bernie Sanders (I-Vt.), a Democratic presidential candidate, urged his Senate colleagues Monday to oppose the legislation, ripping the oversight board as “undemocratic” because it’s comprised of “unelected” appointees.
One option would be passing the House bill on suspension, which requires a two-thirds majority. It wouldn’t be impossible given Ryan’s prediction that a majority of House Republicans will support the legislation; most Democrats have signaled they’re on board as well. Language affecting Puerto Rico’s minimum wage and keeping a wildlife reserve in federal hands helped cement Democratic support.
But GOP leadership sources said a floor vote isn’t expected until after the weeklong break. Lawmakers want to act before July 1, when the cash-strapped territory is at risk of defaulting on another $2 billion in payments.
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http://www.wsj.com/articles/puerto-r...ugh-1464044848
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Puerto Rico Breakthrough
The GOP House applies market reform principles to an urgent problem.
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The bill offers debt relief to Puerto Rico in return for a mechanism to overrule the territory’s feckless current government and impose reform. The legislation explicitly pre-empts conflicting laws and regulations passed by the commonwealth. It also stipulates that legal challenges will be heard in federal rather than commonwealth court.
The key to the reform is a seven-person control board modeled after the board that pulled the District of Columbia out of a debt spiral in the 1990s. The President would select the board from nominations by the House Speaker (two), Senate Majority Leader (two), House Minority Leader (one) and Senate Minority Leader (one). The President has sole discretion to choose the seventh. The appointments must be made by Dec. 1, and the terms last three years, so the GOP majority’s choices will steer the board’s crucial early decisions.
The board can subpoena documents, conduct audits, hold hearings, veto overspending and impose reforms to, say, pensions, taxes and worker pay. It can compel the Puerto Rican government to privatize assets. Most importantly, the board can override laws, regulations, contracts and executive orders that conflict with its fiscal plans.
Creditors and the commonwealth’s 18 debt issuers would be encouraged to cut deals with terms that could be more favorable to both parties than those that might later be imposed by a judge. But the legislation also includes a collective-action mechanism that would allow two-thirds of the principal amount of each creditor pool to bind holdouts. If voluntary negotiations fail, a supermajority of the control board could authorize a federal court-supervised restructuring similar to Chapter 11 bankruptcy.
This process would extend the nine-month automatic stay on litigation imposed by the legislation. After ensuring that financial audits and a fiscal plan have been completed, the board would propose a plan of adjustment that is fair and equitable. The legislation explicitly requires that the plan respect creditor priorities and liens and be “in the best interest of creditors.” So if Democrats later control the board, they couldn’t subordinate general obligation bondholders to pensioners.
Pensions are Puerto Rico’s single biggest liability at $46 billion. In recent years the commonwealth has raised the retirement age, increased worker contributions and shifted employees to hybrid plans similar to cash-balance accounts. But because the pension funds are nearly broke, the control board will have to further modify benefits. The legislation also requires that the fiscal plans “provide adequate funding for public pension systems,” so Puerto Rico can’t short pensions as it has in the past.
The board would remain in effect until Puerto Rico’s government has access to short- and long-term credit markets and has produced four consecutive balanced budgets. We’d prefer a longer time horizon that would keep the board in abeyance similar to New York’s financial control board if the commonwealth returns to perdition. But Washington will need Puerto Rican support to implement reforms, and promising to return complete control will encourage cooperation.
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http://economics21.org/html/two-chee...bill-1828.html
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At the heart of the House Committee on Natural Resources’ Puerto Rican Bill, introduced by Representatives Sean Duffy (R-WI), Rob Bishop (R-UT), and Jim Sensenbrenner (R-WI), is the establishment of a seven-member oversight board for the island. That board is to have exclusive control to ensure that Puerto Rico’s fiscal plans are enacted and enforced as well as to ensure that necessary reforms are undertaken to help the island regain fiscal solvency. The bill also includes a stay on debt-related litigation to create an environment for consensual negotiations with creditors. It is explicit that it will not involve taxpayer money to bail out the island.
Beyond not involving a taxpayer-financed bailout for Puerto Rico, there would seem to be main two strengths to the current bill. The first is that it would ensure very much better fiscal management than the island has experienced in recent years. It would do so by subjecting the island to the effective management of an outside technocratic control board that would among other things demand greater fiscal transparency, greater spending efficiency, and better fiscal accounting from the island than it has had in many years.
The second main strength is that it would afford the island with a temporary stay on debt principal repayments to allow more time for the voluntary restructuring of its debt mountain. That stay would forestall an otherwise disorderly Puerto Rican default as early as July 1, when some $2 billion in debt repayments come due. This must be welcomed since a legal free-for-all that would almost certainly follow a full-scale default would adversely affect an economy already in the deepest of slumps.
The main weakness of the bill is that it offers very little in the way of measures to turn Puerto Rico’s dismal economic fortunes around. To be sure, it does envisage that the oversight board will insist on regulatory reform and that it will secure a reduction in the minimum wage for those Puerto Rican workers between 20 to 25 years of age. However, it would be fanciful to think that limited measures of that sort are going to provide the Puerto Rican economy with the major shot in the arm that it desperately needs to begin growing again.
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