Good for Puerto Rico, Good for Congress
Help is on the way.
House Speaker Paul Ryan deserves credit for getting the policy right -- and a lot of the politics -- when it comes to a debt-relief plan for Puerto Rico. Now he must be willing to stand up to members of his own party.
The revised bill shows that practical bipartisanship and legislative-executive cooperation are possible even in an election year. It will make it more likely that any restructurings of Puerto Rico's $70 billion in debt are consensual. It pledges to honor the "relative lawful priorities" of the bonds issued by 17 different entities on the island, especially the general-obligation bonds whose payments are guaranteed by the island's constitution. And it strengthens the powers of a proposed fiscal control board to fix Puerto Rico's finances.
That's not enough for some die-hard Republican legislators, especially members of the House Freedom Caucus. Some of their criticisms are easily dismissed: Contrary to some misleading attack ads, the bill is not a "bailout" for Puerto Rico. No taxpayer money is involved. Moreover, because the bill's provisions apply only to territories with a federal control board, they are irrelevant to states. No dangerous precedents are being set, and there's no threat of contagion to state or municipal bond markets.
Critics have also bridled at the bill's provision to allow a two-thirds supermajority of bondholders to overrule holdouts and agree to a restructuring. And they really don't like the board's ability, under certain conditions, to allow a court-ordered restructuring.
But collective action clauses are becoming standard practice in dealing with holdouts. And even with the best of intentions and mediation, some involuntary restructurings are inevitable. That they can only happen with the approval of five of the board's seven members will make them rare exceptions.
The bill is far from perfect -- it does little, for instance, to rekindle growth in the island's economy. And the process has taken too long -- it's unlikely the bill will become law in time to avert Puerto Rico's next fiscal crisis, in July, when it is scheduled to pay about $2 billion it doesn't have.
But it's an essential first step. Ryan should bypass the so-called Hastert Rule (under which a speaker doesn't send a bill to the House floor without a majority of the majority) and move for passage as soon as possible. Maybe this bill can begin not only Puerto Rico's long road to recovery, but also Congress's path out of a hyperpartisan wilderness.
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