[Congressional Record Volume 161, Number 184 (Thursday, December 17, 2015)]
[Senate]
[Pages S8768-S8773]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PUERTO RICO
Mr. NELSON. Mr. President, a number of my colleagues will be coming
to the floor in just a while to talk about the crisis that is going on
in the island territory of Puerto Rico. Remember, Puerto Rico is a
territory. Its citizens are U.S. citizens, and we often forget that,
particularly as they are now facing economic challenges that are
growing worse by the day.
Although we just had an opportunity in the Omnibus appropriations
bill to address Puerto Rico's fiscal crisis, it appears that Congress
is going to go home without having done the bare minimum for Puerto
Rico. In the meantime, Puerto Rico is going to start the New Year on
the verge of default as the Governor faces the troubling choice of
whether to pay for essential public services or make a $1 billion debt
payment to Wall Street creditors. The public services include those for
health, fire, police, water, et cetera, versus paying the bonds that
are coming due.
Many of us have been urging our colleagues for months--Senator
Durbin, Senator Cantwell, Senator Schumer, and myself--to meaningfully
address this fiscal crisis by providing Puerto Rico with the same debt
restructuring authority that is available to any other State under
chapter 9 of the
[[Page S8769]]
Bankruptcy Code. This is the authority that Puerto Rico had until it
was taken away by Congress without any explanation 30 years ago.
That is why I have joined Senator Cantwell, who is here, and Senators
Schumer and Blumenthal, in introducing legislation that would allow
Puerto Rico's municipalities and public corporations to restructure its
debt under the watchful eye of the Federal bankruptcy judge.
This is not a bailout. Providing Puerto Rico with an opportunity to
orderly manage its debt as we do for every State under chapter 9 of the
bankruptcy laws costs the Federal Government nothing. It also prevents
Puerto Rico from having a drawn-out battle with bond holders following
a potential default. Yet nowhere in the Omnibus appropriations bill,
where we have a lot of other stuff--nowhere in the omnibus
appropriations bill--is there anything to give Puerto Rico the
legitimate orderly process of chapter 9 in bankruptcy that it needs.
There are a few provisions to help Puerto Rico's hospitals, but even
they don't go far enough.
It deeply troubles me that we will celebrate the holidays knowing
full well that there is so much more that the Congress could have done.
I would like to put this in perspective. Just a few weeks ago we met
with a group of Floridians who were here for the National Day of Action
for Puerto Rico. What they describe--and what this Senator has seen in
a visit to Puerto Rico and the government in San Juan a month ago--is a
humanitarian crisis due to the crushing government debt, a failing
economy, and a growing poverty.
What is the result? Thousands of Puerto Ricans--U.S. citizens--are
coming to my State. They are certainly welcome, but these are often the
very talented, educated people that are so desperately needed for the
well-being of the population on the island. Some that come are
fortunate to move in with relatives. Others are living in motels.
Others are even living out of their cars. A lot of them come to central
Florida to the metro Orlando area, where there is a huge Puerto Rican
population. What we see in the discrepancy and the economic despair
that is happening on the island is absolutely heartbreaking. How in the
world can we fail our fellow Americans like this?
Notice who have been the most courageous in the military? It has
often been the soldiers who are Puerto Rican. These Americans have
contributed to the diverse fabric of our country, and they proudly
serve in so many Federal responsibilities, including our military. We
should be doing all that we can to provide them with the tools they
need--the financial tools Puerto Rico needs to emerge from its current
economic challenges--and debt restructuring authority is one of those
things.
I want to urge our colleagues, since we didn't get it into the
omnibus, in the spirit of our patriotic unity to help each other and
that unity that binds all Americans, to come together and help Puerto
Rico at this critical time.
I see my colleague from the State of Washington. I appreciate the
leadership that she has taken. My State is one of the ones that is most
affected. Her State is not as affected, and yet the Senator from
Washington has stepped up and done this because she knows it is the
right thing to do.
Mr. President, I yield the floor and look forward to hearing from the
Senator.
The PRESIDING OFFICER. The Senator from Washington.
Ms. CANTWELL. Mr. President, I thank the Senator from Florida for
coming to the floor and speaking so articulately about the need for
help for Puerto Rico. His State is the most impacted State in the
United States when it comes to our policy as it relates to Puerto Rico.
He is right that there are not many Puerto Ricans in the State of
Washington. But as the Ranking Member of the Senate Committee on Energy
and Natural Resources, which has jurisdiction for the territories, I
can tell you territorial oversight is about giving people who are U.S.
citizens fair access to the law. If we are not going to help people who
are U.S. citizens have fair access to the law, I am not sure why we are
continuing to say that they are a territory of the United States of
America.
What we are talking about, and the Senator from Florida understands
this, is if you don't give them fair treatment under the law, just as
we do with individual citizens who need to reorganize their debt,
businesses who need to reorganize their debt, municipalities that need
to reorganize their debt, or even the United States of America in the
big bank bailout basically allowing a lot of people to reorganize their
debt, then we won't let the people in Puerto Rico come to a resolution
of their debt in bankruptcy. It is a hypocrisy that is unexplainable at
the moment. We should get to the bottom of this because we want to give
fair treatment to Puerto Rico so they can solve their own problems.
What my colleague mentioned is that a restructuring authority for
Puerto Rico costs the U.S. taxpayers zero. Zero dollars. That is to
say, we are not proposing, at least on our side of the aisle, that we
give them immediate funds to restructure. We are simply saying: Give
them the tools of bankruptcy so they can restructure. My colleagues
think this is important because we know that the mass exodus from
Puerto Rico, which has been about 300,000 people in the last several
years, will continue if we don't give them the tools to reorganize
their debt. What that will mean, as the Senator from Florida mentioned,
is that people will come in droves to Florida and continue to impact
that economy by asking for federal social services that are capped in
Puerto Rico. They will come to Florida and ask for those services. So
the United States, by denying Puerto Rico the bankruptcy tools,
actually will be impacted economically. Some people have estimated the
impact will be as much as $10 to $20 billion over a 10-year period of
time. I would say we have a lot of skin in the game to get people to
reorganize this debt.
Many newspapers across the United States also believe that we should
give Puerto Rico these tools to reorganize. In an editorial recently in
the New York Times, which talked about the President's proposal, it
said: ``Crucially, it asks Congress to change the law so that Puerto
Rico's territorial government and municipalities can seek bankruptcy
protection.'' They understood this issue, as did the Washington Post
when they wrote: ``. . . letting an impartial bankruptcy judge sort out
the competing claims on a failed public entity is the fairest, most
efficient approach; without that option, Puerto Rico has no leverage in
debt negotiations, and litigation could ensue.''
So there are newspapers throughout the United States of America that
are looking at this issue and saying: Give them the ability to
reorganize their debt.
Why is this so important? Because the Puerto Rican government may
default on its debt as early as January 1, when nearly $1 billion in
payments are due.
Many of us here want to see a resolution of this issue now, giving
them the tools to avoid that. Once they default, the economic impact to
the rest of us and the U.S. taxpayers will be far greater. Why do I say
that? Because if you look at the inaction that takes place, U.S.
taxpayers contribute $6.4 billion to Puerto Rico's annual budget,
funding these various programs. If you default, that means we will be
spending more than $6.4 billion.
I know some of my colleagues want to protect the hedge funds from
being a part of the bankruptcy reorganization. But, when you are
protecting the hedge funds from being a part of the bankruptcy
reorganization, you are adding costs for the U.S. taxpayers. That is
something we cannot afford.
If Puerto Rico is allowed to restructure their debt, they could make
these decisions and save us money as U.S. taxpayers. In the long run,
as I said, it would prevent the mass exodus from the island to many
other States and provide Puerto Rico with the tools they need. Yet some
in Congress are more comfortable with inaction, which basically is just
bad public policy. Why is this? Because 20 to 50 percent of the
island's debt is owned by hedge funds. These hedge funds swoop in to
buy cheap Puerto Rican debt and are using their influence here in
Washington, DC, to block Puerto Rico from access to bankruptcy
protection that is allowed in other places. It is no secret that the
solution will require sacrifice by everyone, and that is what we want
to see. If
[[Page S8770]]
Congress continues to protect these hedge funds and fails to act, it
will be at both the expense of the Puerto Rican people, who have
already suffered immensely, and of the American taxpayer.
Sitting by idly is not a solution. We should remind our colleagues
that Puerto Rico had preexisting bankruptcy authority which was taken
away in 1984, mysteriously. Nobody knows why, or how, or any
justification for it. They just know that it disappeared. Congress
should reinstate that authority that was taken away. As the Governor of
Puerto Rico said before the energy committee, quoting another leader:
``Give us the tools, and we will finish the job.''
Now is the time to act, before we see a greater mass exodus of
people.
This chart shows the migration between Puerto Rico and the United
States. You see that it continues to grow. It has grown 500 percent in
the last 10 years. The issue is that now government workers are being
cut to three days a week, patients are waiting for months without basic
medical care, hospitals are going bankrupt, and the health industry is
about to collapse.
On the other side of the aisle there is talk about the humanitarian
crisis that might occur next year and how they might want to respond to
it, but they don't want to stand up and say to the hedge funds that
they also have to take some responsibility in this issue. Forty-five
percent of the population in Puerto Rico is now living in poverty,
including 58 percent who are children. Unemployment is in double
digits, and it is, if you compare it to all our States, very high in
the ranking of States in the United States. As a result, 80,000 people
are leaving the island each year as part of a mass migration.
So what is the solution? As we said: Restructure their debt; give
them the tools to restructure their debt. It costs nothing to the U.S.
taxpayer, saves us money in the long run, prevents a mass exodus from
the island, and prevents more spending on Federal benefits to people
who might migrate to the United States.
We think this ought to be a lot of motivation to sit down and solve
this issue today. In fact, now we are hearing from different
businesses, and I will submit one letter for the Record, in the United
States that do business in Puerto Rico and that don't want to lose
their investment because they are so concerned about the level of
collapse that could happen in Puerto Rico, and the loss of
infrastructure and infrastructure investment.
So why do we need to continue to move forward? Well, inaction,
basically, is to say that the hedge funds have won in this game. Twenty
to fifty percent of the island's debt is owned by the hedge funds, and
hedge funds are using their influence in Washington to block a Puerto
Rico bill from coming to the floor. Failure to act would be at the
expense, as I said, of taxpayers and individuals.
Just yesterday, a leader who has been supportive of reorganization of
a task force in New York that was under a budget crisis said: ``The
hedge funds got their way in Congress.'' That is referring to the fact
that we were not able to get, as my colleague from Florida said, this
legislation as part of the budget omnibus bill or other bills moving
through the process.
So now is the time to act to give Puerto Rico the tools. Now is the
time for all of those who have made investments to say ``we all have to
come to the table and resolve this issue.'' The longer we wait, the
greater the risk for the United States of America--to say nothing of
the issue of a territory that we lay claim to, giving them the ability
to solve their problems.
I ask my colleagues to come to a commonsense resolution on this
issue. Stop protecting these hedge funds and start working for people
who are called U.S. citizens.
Mr. President, I ask unanimous consent to have printed in the Record
the articles and the letter I mentioned.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Washington Post, Oct. 24, 2015]
A Rescue Plan for Puerto Rico
(By Editorial Board)
There was long-overdue drama at a Capitol Hill hearing
Thursday. We are referring, of course, to Treasury Department
counselor Antonio Weiss's testimony before the Senate
Committee on Energy and Natural Resources, in which he warned
of a looming ``humanitarian crisis'' in the financially
distressed commonwealth of Puerto Rico. Mr. Weiss's words
marked a break with the Obama administration's previous low-
key approach to the island's debt crisis, and if he resorted
to hyperbole to compensate for that, it was only slightly.
Having already cut spending, jacked up taxes and postponed
various bill payments, Puerto Rico is out of cash and facing
a year-end liquidity crunch that could lead to a breakdown in
public services, or even public order.
Mr. Weiss backed up his words with the administration's
most comprehensive policy proposals yet, the most important
of which would require congressional action. Specifically, he
advocated not only permitting Puerto Rico's municipalities
and public corporations to file for bankruptcy, which would
affect about a third of its $73 billion debt, but also
extending the bankruptcy option to the commonwealth
government itself. He called for a permanent fix to the
island's Medicaid program, which faces crippling uncertainty
because of limits on federal assistance unlike those of the
50 states. And to address its lagging labor force
participation--a huge drag on economic growth--he proposed
creating an Earned Income Tax Credit to encourage low-wage
workers' return to the job market.
In short, for the first time the executive branch has put
its weight behind solutions that would cost money, billions
of dollars of it. A good benchmark would be Gov. Alejandro
Garcia-Padilla's projection of a $14 billion hole in the
island's finances over the next five years. The
administration's plans for Medicaid and an EITC would put
U.S. taxpayers on the hook. Bankruptcy would be the mechanism
through which creditors chip in; an average 40 percent
``haircut'' on their bonds is probably in order, according to
a recent study by BlackRock. As the example of Detroit shows,
letting an impartial bankruptcy judge sort out the competing
claims on a failed public entity is the fairest, most
efficient approach; without that option, Puerto Rico has no
leverage in debt negotiations, and litigation could ensue.
Which brings us to what can fairly be expected of the
commonwealth itself. Its predicament is due to many forces
beyond its control, starting with the anomalous semi-
sovereign political status that traps it--like Greece in the
European Union--in a monetary union with the far larger and
more competitive United States. Still, Puerto Rico has
squandered vast resources on mismanagement and anti-growth
policies. Therefore, it may appropriately be held to a
structural adjustment program that ensures it uses fresh cash
efficiently. For that program, in turn, to have credibility,
it must be subject to oversight by a truly independent body;
indeed, if oversight doesn't work, nothing in Mr. Weiss's
plan can work, either economically or politically, since buy-
in from Republican fiscal hawks is needed. Designing that
institution is the task to which Congress, Puerto Rico and
the administration must now turn in a spirit of cooperation,
but also urgency.
____
[From the New York Times, Oct. 24, 2015]
Save Puerto Rico Before It Goes Broke
(By the Editorial Board)
Puerto Rico's government is on the verge of running out of
money. A messy default is in nobody's interest, which is why
Congress ought to move swiftly to provide the American
territory with a way to restructure its huge debt and revive
its economy.
The Obama administration last week offered the outline of a
rescue plan to help the island and the 3.5 million American
citizens who live there. The plan would impose new oversight
on the island's finances and expand access to government
programs like Medicaid and the earned-income tax credit.
Crucially, it asks Congress to change the law so that Puerto
Rico's territorial government and its municipalities can seek
bankruptcy protection.
Political leaders in Puerto Rico and many financial and
legal experts have been saying for months that the territory
cannot repay the approximately $72 billion it owes to hedge
funds, mutual funds and other investors. Its economy is not
growing, and tens of thousands of residents are leaving every
year for the mainland to look for work. More than 300,000
have left in the last 10 years.
Its public pension plans need a cash infusion of about $44
billion. Puerto Rico has cut spending and raised taxes in the
hope of saving itself, but that hasn't worked, and it won't
work in the foreseeable future given the sorry state of the
island's economy.
Bankruptcy seems inevitable. But under federal law, Puerto
Rico's government, its municipalities and its government-
owned utilities cannot go to bankruptcy court--hence the
administration's request for a new bankruptcy process for
territorial governments and a change in the law to allow
Puerto Rican cities and public utilities to seek Chapter 9
protection, much as local governments like Detroit and Orange
County, Calif., have done.
Many investors who have lent money to Puerto Rico and stand
to lose under any debt restructuring are bitterly opposed to
the Obama plan. They say Puerto Rico can repay all of its
debt if it tightens its belt and privatizes utilities and
other government-owned businesses. Changing the law now, they
argue, is deeply unfair. But the record
[[Page S8771]]
of what has happened in troubled countries like Greece is
clear: Austerity policies have only worsened the crisis. As
for the fairness argument, legislators change laws all the
time to meet new circumstances.
What investors must realize is that an orderly
restructuring is a far better alternative than the long and
complex legal battles that would inevitably follow a sudden
default. American bankruptcy courts have a good track record
of resolving complicated debt cases. And if, in addition to
reworking the bankruptcy law, Congress also created an
oversight board, as the Obama administration recommends,
investors could have some confidence that Puerto Rico's
politicians would make needed policy changes.
There is no doubt that Puerto Rican leaders have mismanaged
the island's finances and economy. What's at issue now,
though, is not Puerto Rico's past but its future and that of
its inhabitants. If Congress doesn't like the
administration's ideas, it needs to come up with its own.
____
December 9, 2015.
Hon. Paul Ryan,
Speaker of the House, Washington, DC.
Hon. Mitch McConnell,
Senate Majority Leader, Washington, DC.
Hon. Nancy Pelosi,
House Minority Leader, Washington, DC.
Hon. Harry Reid,
Senate Minority Leader, Washington, DC.
Dear Mr. Speaker, Leader Pelosi, Leader McConnell, and
Leader Reid: As senior executives of companies that are based
in the U.S. mainland and that conduct extensive business in
the U.S. jurisdiction of Puerto Rico, we write to
respectfully urge you to swiftly enact a legislative package
that will promote economic growth and fiscal stability in the
territory.
We are extremely concerned about the situation in Puerto
Rico for both humanitarian and business reasons. The current
economic, fiscal and demographic crisis is harming the 3.5
million U.S. citizens that reside on the island, compromising
their quality of life and causing thousands to relocate to
the U.S. mainland in search of better opportunities. It is
also hurting private sector businesses that manufacture
products in Puerto Rico, depend upon Puerto Rico's consumer
base, or seek to contract with the central government of
Puerto Rico or its public corporations to provide public
services on a more cost-efficient basis.
This letter is also endorsed by the Jacksonville Port
Authority (JAXPORT), which is the U.S. mainland hub for trade
with Puerto Rico. Roughly 70% of all cargo shipped from the
U.S. mainland to Puerto Rico goes through JAXPORT. This trade
is responsible for 32,000 jobs in the State of Florida alone.
We understand that the causes of Puerto Rico's problems are
complex and multifaceted. But we also believe that action by
the federal government is essential to enable Puerto Rico to
address these problems. There are many specific steps that
Congress could take, such as (1) fully including Puerto Rico
in the earned income tax credit program and the child tax
credit program, which incentivize work and spur consumer
demand; (2) providing more equitable treatment to Puerto Rico
under federal programs like Medicaid and Medicare, which
would improve patient care, reduce migration, and relieve the
fiscal burden on the Puerto Rico government; and (3)
providing Puerto Rico with state-like treatment under Chapter
9 of the federal bankruptcy code, which would help Puerto
Rico manage its debt burden and position the island to
achieve economic growth in the future.
We thank you for your consideration of this important
request.
Sincerely,
Daniel Davis,
President & CEO, JAX Chamber.
Michael G. Roberts,
Senior Vice President & General Counsel, Crowley Maritime
Corporation.
Tim Nolan,
President, TOTE Maritime Puerto Rico.
Brian Taylor,
Chief Executive Officer, Jacksonville Port Authority
(JAXPORT).
John P. Hourihan, Jr.,
Senior Vice President & General Manager, Crowley Puerto
Rico Services.
Thomas J. Alcide,
President, Saft America.
Ms. CANTWELL. I thank my colleague, and I yield the floor to any of
my other colleagues who have come to the floor to join us.
The Senator from New Jersey probably has the second most, if not the
most, number of Puerto Ricans in his State.
The PRESIDING OFFICER. The Senator from New Jersey.
Mr. MENENDEZ. Mr. President, first, I thank the distinguished senior
Democrat on the Energy and Natural Resources Committee, which has
jurisdiction over the territories, including Puerto Rico, for her
advocacy, for her strength of passion in this effort, and for her work.
I also thank my colleague from Florida who has always joined me on
issues on Puerto Rico and who has always been a strong voice for the
island.
I would hope to prick the conscience of the Senate about the 3.5
million U.S. citizens who just happen to live on the island of Puerto
Rico and to do something before this crisis transforms into a full-
blown human catastrophe. These 3.5 million Americans who call Puerto
Rico home have a long history with the United States. Over 200,000 of
them have served in every conflict since World War I and worn the
uniform of the United States.
Over 20,000 of them currently wear the uniform of the United States
and put their lives at risk for the safety and security of all of us
here at home. They are stationed across the globe.
If you went with me--and I invite any colleague who wants to go to
the Vietnam Memorial--you would see a disproportionate number of Puerto
Ricans who served in the Vietnam war and gave their lives on behalf of
the country. Puerto Rico is an integral part of America and its people
are as American as you and I. They have full citizenship rights. The
status of where they live does not alter their rights under the
Constitution, and the fiscal timebomb that is waiting to explode in
Puerto Rico is an American problem.
In my time in the House of Representatives, I could never believe it
when I would have colleagues who asked me if they needed a passport to
visit Puerto Rico. I thought they were joking, but they were serious.
This is an American problem.
We not only have an opportunity, but more importantly I think we have
a responsibility to take immediate action to stabilize the island and
give our fellow citizens the opportunity to fix the current crisis, but
instead of deescalating the crisis, we are demagoguing those who are
facing it. Instead of providing the tools Puerto Rico needs to get on
the path to solvency, we are tying our hands behind our backs.
So let me put this plainly and simply: Puerto Rico is getting a raw
deal. While we dither here, the island is economically in flames. We
are about to spend over $600 billion in tax breaks but denied the
earned-income tax credit and child tax credit equity for American
citizens living in Puerto Rico. We are about to pass a $1.1 trillion
budget but ignored pleas on the island to receive the same chapter 9
treatment in bankruptcy to reorganize and restructure their debt that
any State has and that they had at one time and was surreptitiously
taken out. That right that they had was taken out.
As has been said by the distinguished ranking member, giving Puerto
Rico back the right they had will not cost the American taxpayer one
single dime. Those bottom feeders who ultimately went and tried to buy
enough bonds dirt cheap and now want to get paid at maximum amount,
that should not be where the focus of the Senate is when it comes to
these 3.5 million Americans. I am wondering if it was some other group
of people, whether we would feel the same way. I really have to wonder.
We are about to increase Big Oil's profits by about $170 billion over
the next decade, but we can't do anything for the 3.5 million people
who call Puerto Rico home, who are U.S. citizens, and who wear the
uniform of the United States.
I am pleased to see that the legislation will include a little piece
of my high-tech legislation to help the hospitals in Puerto Rico, but
that is not going to do anything as it relates to the crisis we are
facing. This crisis didn't develop overnight--it was over several
administrations--nor will it be fixed in a day. Governor Padilla and
the Government of Puerto Rico have done everything they can to right
the ship and restore a path to solvency. They have closed schools and
hospitals. They have laid off police and firefighters. They have raised
taxes on businesses and individuals. They have gone beyond what any
sovereign nation would consider doing to right the economic status, but
they are out of options.
All the cuts and tax hikes will not make a dent in this crisis
without the breathing room that restructuring authority provides. That
is all we are asking for, not a single cost to the American paper. This
problem is not
[[Page S8772]]
going away. Mark my words, if we don't act now, this crisis will
explode into a full-blown humanitarian catastrophe that isn't going to
take a year or months. It is going to be right around the corner.
It is pretty amazing that instead of dealing with this issue in a way
in which we can solve it, we are basically--it is the equivalent of
waiting for a malignant tumor to metastasize before we actually act on
it. That is what we are doing. The sooner you act, the higher your
chances of success are, and that is no different in the case of Puerto
Rico. They are not asking us to pull them out of this hole. They are
simply saying give us the tools so we can do it on our own.
It is the same can-do spirit of the Borinqueneers, who served our
country during the Korean war--an all-Puerto Rican division, the most
highly decorated in U.S. military history who said: Just give us the
tools and we will fight for our Nation--or NASA engineer and
Exceptional Achievement Medal winner Dr. Carlos Ortiz Longo or the
baseball great and philanthropist, Roberto Clemente. I could go on and
on about the contributions of Americans of Puerto Rican descent to this
country. Just give them the tools.
Instead, this Congress is going to go home for the holidays and say
to Puerto Rico: You get coal in your stocking, instead of giving them
the tools to help them be able to face a better day. At the end of the
day, believe me, if we do not act, more will come to Senator Nelson's
State of Florida, more of them will come to New Jersey, more of them
will come to New York, more of them will come to Ohio, and more of them
will come to Pennsylvania--which are some of the largest concentrations
in the Nation--because they are U.S. citizens. When they come, they
will have the rights to everything that every other citizen has.
That is the reality, and I cannot imagine why our friends on the
Republican side cannot get to the point of understanding that these 3.5
million residents of Puerto Rico are U.S. citizens. They fought for
their country, died for their country, shed blood for the country, have
been maimed for the country, and yet we just can't give them the tools
to get themselves into fiscal order again.
It is pretty amazing. It is pretty amazing that we will leave for the
holidays and actually have for some--not for those of us on the floor--
but for some no regret that we are leaving those 3.5 million U.S.
citizens without any options.
I don't believe in leaving any American behind. That is why I have
voted on this floor for flood damage in the Mississippi. That is why I
voted for wildfires in the West, to help them be dealt with. That is
why I voted for crop damage. I have been there because I believe there
is a reason we call this the United States of America. Puerto Ricans,
in terms of their citizenship, they are U.S. citizens. They deserve the
same rights as anyone else.
With that, I see my distinguished friend and colleague from
Connecticut, who I know feels very passionately--the way I do--about
this issue, and I yield the floor.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. BLUMENTHAL. Mr. President, I am inspired by the very eloquent
words of my colleague from New Jersey and others, from Senator Nelson
of Florida and particularly from Senator Cantwell, and thank them for
championing this cause.
I am inspired by those words to begin with a story. My visit to
Puerto Rico to the association headquarters of the Borinqueneers--
members of generations who have fought for this country, veterans of
our wars, who had visited the White House to receive the Congressional
Medal that we in this body voted to award them because of their service
to our Nation. It was awarded by the President of the United States
when they visited the White House. I visited them in Puerto Rico to say
thank you and to recognize their service. I can tell you at the White
House and in Puerto Rico what I saw in their faces and heard in their
voices was a patriotism every bit as deep and passionate as any I have
heard anywhere in this country. Puerto Ricans are not only Americans,
they are proud to be American, and we should be proud they are
Americans because they are hard-working, dedicated, and they believe in
giving back to America.
My friend from New Jersey has said that Puerto Rico is receiving a
raw deal, and he is right. It is a raw deal and an unfair deal because
the people of Puerto Rico find themselves in an untenable financial
situation in large part due to circumstances beyond their control. In
fact, in some instances, actions of this very body, in tax policies and
health care program decisions, put them at a disadvantage and
contributed to the fiscal situation that has put them and their economy
in free fall today.
So 2.5 percent of Puerto Rico's population has fled the island in
just the last year. If Puerto Rico defaults and that default is
permitted to continue, the ramification of additional people fleeing
the island and the financial markets feeling the effects of that
default will be horrendous.
The day of reckoning for Puerto Rico is inescapable. The only
question is whether it occurs in the courts with endless, costly
litigation that enriches lawyers--let's face it, the lawyers will be
better off if there is no orderly and structured process--or, when that
day of reckoning occurs, in the bankruptcy courts where it can be
orderly and structured and less costly. This body, the U.S. Senate, has
the responsibility to extend to Puerto Rico the same treatment under
Chapter 9 that any municipality and utility has around the country--
nothing more, nothing less.
The people of Puerto Rico are already suffering because of the
uncertainty of their financial situation. That uncertainty in turn is
already costing them because the borrowing costs are rising as a
disorderly default faces them. To simply provide more money is not the
answer. There has to be a structure for orderly and planned payment of
debts that are due. Right now, Puerto Rico is insolvent. It can't pay
its debts on time, and that is the definition of default. Bankruptcy is
not a safety net. It is not a bailout. It is, in fact, a reckoning.
There has been some talk here about who is responsible. There is no
question that some stand to profit if there is chaos--not just lawyers,
but some of the financial interests who are holding certain of the
financial instruments. We don't need to name names or blame them. What
we need to do here is to solve a problem and make sure that Puerto Rico
is treated fairly and that it is spared this raw deal that will have
ramifications for the entire United States of America--for our
financial markets, for our communities, and for the people of Puerto
Rico who have families here and who will come here themselves.
I hope we will do the right thing even in the hours--and there are
just hours--left before the end of this year. There is too much at
stake for either partisan differences or special interests to dictate
the result. The day of reckoning is here. It is just a question of
where it occurs--in a bankruptcy court or in endless litigation that is
costly to Puerto Rico and Puerto Ricans and all Americans.
I yield the floor.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, I am happy to join my colleagues in this
statement on the floor relative to the situation in Puerto Rico. I
commend Senator Cantwell as well as Senator Blumenthal, who is a lead
cosponsor of the bill that I am cosponsoring, as well as Senator Nelson
of Florida, who has a special interest with so many Puerto Ricans in
his State, and, of course, Senator Menendez of New Jersey with the same
interest. I share it. It is a feeling that is based on some friendships
with Members of Congress of Puerto Rican descent, particularly my
friend and colleague from Illinois, Luis Gutierrez, but many others,
such as Nydia Velazquez and Jose Serrano of New York. I have served
with all of them, and I understand the deep personal feelings they have
about the situation.
The financial crisis facing Puerto Rico and its 3.5 million residents
who are U.S. citizens demands that we not walk away but address this in
an honest way. Congress is working to complete its legislative
business, and it is deeply troubling that at this point we are
preparing to leave town without resolving Puerto Rico's urgent
situation.
The challenges facing Puerto Rico are very serious. The island has
been
[[Page S8773]]
mired in an economic recession for more than a decade. Their
unemployment rate is nearly 12 percent and the poverty rate is almost
45 percent. Tens of thousands of Puerto Ricans are leaving the island
each year and, as Senator Blumenthal said, 2.5 percent of the
population left just this last year. That is the reality of this
economic challenge. If we don't help Puerto Rico get back on its feet,
stabilize, and grow its own economy, the alternative, sadly, will be
many more people coming to the United States. If they wish to come,
that is certainly their right, but we don't want to force them to come
to this country because of dire economic circumstances in Puerto Rico
that can be avoided.
The island has over $70 billion in outstanding debt. According to
Moody's, this debt load is approximately 100 percent of Puerto Rican's
island's gross national product. Moody's also found that in fiscal year
2015, the debt service of the territory and its agencies amounted to
almost 40 percent of the revenues available to the government--compared
to an average in most States of 5 percent.
I noted an article in the Wall Street Journal not that long ago that
quarreled with this 40 percent figure. They said it was less than half
of that amount, and, therefore, it wasn't a dire situation. Yet we had
a hearing before the Judiciary Committee with experts present, and it
was very clear that 40 percent is a valid figure, not arrived at by
political figures but by Moody's, a firm that is supposed to be expert
in reaching that conclusion.
The Puerto Rican government was able to make large debt payments on
December 1 only through some very contorted fiscal determinations. But
another debt payment of $332 million looms on January 1, and a default
is a real possibility.
We had this hearing before the Senate Judiciary Committee. It was an
eye opener. One of the witnesses that I remember specifically is
Richard Carrion, the executive chairman of Puerto Rico's largest bank,
Banco Popular. He testified that, as a banker, it was truly painful for
him to ever talk about bankruptcy and not paying their debts. But Mr.
Carrion went on to say that there needs to be some kind of bankruptcy
or restructuring regime made available for Puerto Rico because the
money just isn't there.
If Puerto Rico goes into default, the ramifications are frightening.
Not only would a default threaten the island's fiscal stability, but it
would also cause a humanitarian crisis where we have such a high rate
of poverty. It would threaten access to essential services, such as
education and even basic utilities.
It is true that there are a lot of factors that contributed to this
financial situation, and there is no silver bullet to fix all of these
problems. But one step that would certainly help is to allow Puerto
Rico to use Chapter 9 of the Bankruptcy Code, and that is what Senator
Blumenthal's legislation proposes.
About $20 billion of Puerto Rico's $70 billion debt is debt issued by
municipalities and public corporations. Chapter 9 creates a mechanism
for a State to allow a municipality or public corporation to
restructure its debts in bankruptcy. This authority has been used over
and over again, but Congress passed an unusual law in 1984, which no
one has been able to explain. It contained a provision that excluded
Puerto Rico specifically from Chapter 9. No other State or territory
was excluded except Puerto Rico. There is no legislative history to
explain why Puerto Rico was singled out.
It appears that the bar on Puerto Rico using Chapter 9 bankruptcy was
either an error or it was an intentional discrimination against this
territory and its 3.5 million American citizen residents. Either way,
it is time we correct this inequity, if not for the simple fairness of
the argument, then for the point being made by Senator Blumenthal
earlier: So many of these Puerto Rican residents have literally risked
and given their lives in defense of the United States. There is
absolutely no excuse for discriminating against these people.
I am a cosponsor of Senator Blumenthal's bill that would allow Puerto
Rico to use Chapter 9. This would create a backstop to address a
significant portion of Puerto Rico's debt.
The availability of a bankruptcy process would also create an
incentive for creditors, bondholders, and others to negotiate voluntary
restructuring. The option of bankruptcy helps bring all the parties to
the negotiating table because typically it is a dose of reality.
I regret that not a single Republican has been willing to cosponsor
this bill, and I don't get it. I just don't understand it. I regret
that the Republican majority has been unwilling to bring the issue of
Puerto Rico bankruptcy reform to the Senate floor. It should have been
brought to the floor. It is timely, and it is important. Nobody wants
to encourage bankruptcy, but the Founding Fathers recognized the
importance of this legal option in giving individuals and institutions
the ability to dig out of debt in an orderly fashion. That is why
Congress's power to enact bankruptcy laws was actually written into the
Constitution.
Furthermore, the bankruptcy process is well-known and understood. It
is not a Federal bailout because it won't cost the taxpayers a dime if
Puerto Rico chooses bankruptcy. In contrast, if Puerto Rico defaults,
we will face a new, uncertain future that may well require Federal
corrective action and may cost money. These steps likely would be far
more upsetting to creditors and taxpayers in the United States than any
bankruptcy process.
We know that bankruptcy reform is not the silver bullet solution.
There are other steps that should be taken when it comes to tax laws,
health care reform, and fiscal oversight that would help Puerto Rico.
But it is clear that Congress has to act.
I want to commend my colleagues again for joining me on the floor to
raise this important issue. We cannot ignore this crisis. Puerto Ricans
are American citizens. Puerto Rico's challenges are America's
challenges. And the clock is literally ticking.
I urge my Republican colleagues to support Senator Blumenthal. This
modest bankruptcy reform bill will help us step forward to solve this
problem. We need to work with the administration and with both
political parties to chart a fair and responsible path forward for
Puerto Rico.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Utah.
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