[Congressional Record Volume 161, Number 185 (Friday, December 18, 2015)]
[Senate]
[Pages S8867-S8869]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PUERTO RICO
Mr. HATCH. Now, Mr. President, before the Senate adjourns for the
year, I want to speak once again on Puerto Rico's financial and
economic challenges. Yesterday, we heard frustration from a number of
my friends on the other side of the aisle about the fact that the end-
of-the-year legislative vehicles did not include any changes in
bankruptcy law to make Puerto Rico eligible for chapter 9 and to allow
those to protections to be retroactively applied to its debts.
Sadly, we also heard a number of misrepresentations, false claims,
and statements that effectively impugn Republican motives as we are
working to address the Puerto Rican challenges. Boiling it all down,
some of my friends on the other side of the aisle argued that
Republicans are somehow holding up retroactive chapter 9 eligibility
for Puerto Rico in order to protect interests of ``hedge funds''--of
all things. To back that claim, loose numbers, apparently drawn from
some kind of random number generator were put forward, claiming that
hedge funds hold maybe anywhere between 15 to perhaps 50 percent of
Puerto Rico's outstanding debt of over $73 billion.
Conveniently, they did not go into great lengths to define the term
``hedge funds,'' making it pretty easy to throw numbers around without
a clear link to any real discernable facts. Nonetheless, even if so-
called hedge funds held 50 percent of Puerto Rico's debt, the remaining
50 percent is held by others, including millions of retirees and near-
retirees spread across our country and in Puerto Rico itself. That
includes mom-and-pop investors in Florida, the State of Washington,
Connecticut, Illinois, Utah, and every other State, and in Puerto Rico
itself.
Of course, those complicating facts do not seem to matter to some of
my friends who claim that anyone not in favor of immediately chapter 9
eligibility for Puerto Rico must be a shill for hedge funds. That is
total bull.
They should tell that to the retiree who, once bankruptcy proceedings
result in reduced payments on bonds issued with the understanding and
expectation that current law would apply to debt being issued, would
wake up to the news that their nest egg had suddenly taken a hit. Of
course, those middle-class investors, the millions that aren't wealthy
venture capitalists, would likely not be aware that their modest
portfolio took that hit because some Senators have lumped them into
some vaguely defined category of rich fat cats who don't deserve the
protections of the law.
If we are going to have the debate about these issues, we are going
to need to specify exactly what we are talking about, not only with
regard to who will actually be impacted by the proposed bankruptcy
change, but also about what the change would actually do. Yesterday,
many of my friends on the other side suggested here on the floor that
Republicans are simply denying tools to Puerto Rico that are currently
available to municipalities in all 50 States. However, that is a
misrepresentation. My colleagues are not simply demanding that Puerto
Rico be given access to chapter 9 restructuring authority for fresh
debt offerings. They want that authority, plus an additional allowance
for Puerto Rico to retroactively apply chapter 9 to debts already
issued. That is for debts issued under current conditions that
explicitly do not allow for application of chapter 9, which lenders
took into account when formulating the terms of their contracts with
Puerto Rico.
Our friends want to change the rules after that fact--or those facts.
That is not, in the words of one of my colleagues, ``the very same
tools that are available to municipalities in all 50 States.'' That is
a post-hoc change to lending conditions which carry far more serious
rule-of-law implications
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than my friends want to acknowledge. No matter, they say; those pesky
rule-of-law concerns are almost irrelevant.
Lenders, according to my colleagues, knew perfectly well that rules
of the lending transaction can be changed by the Federal Government
after the fact. Lenders, they say, know that the Federal Government can
step in and expropriate wealth and change conditions of an agreement
after expectations have been formed and the conditions of the
transactions have been agreed upon.
Well, the Federal Government can do many things, I suppose. But that
does not ensure that what it does is good policy, nor does it mean that
anyone entering into any contract should build into the terms and
expectation that Congress, simply because it can, will step in and
change the rules midstream. Yet my friends on the other side have
casually and even flippantly suggested that all of Puerto Rico's
creditors knew, or at least should have known, that the laws governing
their debt transactions are subject to change at any time.
In any event, who cares? After all, according to my friends, we are
only talking about a bunch of rich hedge fund managers.
I think every Senator here representing every State in the Union
should care. If it is what the majority wants, we can go ahead and cast
aside expectations on credits already issued. But we should then, at
the very least, be willing to consider that such actions will alter
expectations of creditors moving forward.
That could easily mean higher costs of borrowing to every
municipality in every State of the Union, and in every territory. These
are not itty-bitty things. That would include Puerto Rico, Utah,
Florida, the State of Washington, New Jersey, Connecticut, Illinois,
and all of the rest. Even with all of these obvious yet unaddressed
considerations, my friends yesterday decried that chapter 9 authority
was not being granted to Puerto Rico this week.
Yet in discussions I have had with Democrats in Congress and with
administration officials, chapter 9 is not even what they really want,
nor is it applicable. What they really want and what they have made
clear to me is something far broader, which would not only give
municipalities in Puerto Rico access to chapter 9, but also a brand new
bankruptcy authority created out of whole cloth, which encompasses all
of Puerto Rico's $73 billion or more of debt and includes pension
obligations of well over $40 billion.
These are serious problems. You cannot flippantly think they are
solved just by passing a law. That is not chapter 9, by the way; it is
all new bankruptcy authority. That new authority, which is not what
Democratic Senators talked about on the floor yesterday, also includes
``general obligation'' debt of Puerto Rico, which enjoys special
protection under Puerto Rico's own constitution, which is apparently of
little consequence to my friends' agenda.
The question I have is, If we are going to get in the business of
ignoring rule-of-law issues and creating fresh new bankruptcy law and
provisions for a U.S. territory--which does not have that, neither do
the other territories--why would not heavily indebted States start to
believe that we should do exactly the same for them? More importantly,
why would creditors not start to believe that as well?
These moral hazard problems do not seem to be an issue for my
friends, which, in my view, is both disappointing and reflective of
some fundamental misunderstandings of the working of expectations in
credit markets. Let's be clear: I share the frustration of my dear
friends on the other side of the aisle when it comes to Puerto Rico but
probably for different reasons. I have been working to find ways to
address Puerto Rico's challenges throughout the year, not just in the
past couple of weeks. We have been working to do so in a bipartisan
way. I have come to the floor and committed on the record to working in
good faith with my colleagues toward finding a solution. I am working
and will continue to do so.
Today, I am somewhat frustrated. Since August of this year, many
others and I have been asking for audit financial statements from the
Government of Puerto Rico. Despite assurances that we would receive
them, we have not. We have been repeatedly told, and were reminded
yesterday, that there is or will be a humanitarian crisis in Puerto
Rico because of indebtedness and a health system in crisis.
Yet, despite my numerous inquiries, I have heard little from health
officials in the administration. What I have heard is that the
Department of Health and Human Services seems to be gathering data,
analyzing the facts, and may be ready to make some administrative
changes in a year or two--maybe. In the face of what we are told is a
humanitarian crisis, you would think that health officials would have
at least had an urgent meeting or two with relevant committees of
jurisdiction here in Congress. Unfortunately, to my knowledge--and I am
that relevant chairman here in the Senate--there has been no such
outreach.
Similarly, you would think that those in Congress and the
administration who are putting forward proposals to grant more health
funding for Puerto Rico would acknowledge the costs of their proposals,
particularly given the numerous inquiries I have made in that regard.
You would also think they would let us know upfront whether they want
to offset any of those costs, and if they do, how they plan to do so.
I have asked, but I have gotten no response. I have also asked
administration officials how much is needed for health system relief
and what they have in mind when they say it should be provided in a
``fiscally responsible'' way. I have not gotten an answer.
I worry that parties, including the Government of Puerto Rico, have
not made sufficient efforts to arrive at a negotiated debt
restructuring with creditors, despite encouragement from me and others
to get to work. Throughout the year, I have offered to work with anyone
who wants to help the people of Puerto Rico to find a solution. I have
worked productively and will continue to do so with administration
officials.
I have had constructive meetings with many Puerto Ricans, including
the current Governor and others. I have had gracious visits and offers
of productive collaboration from interested House Members, including
Representatives Velazquez, Serrano, Gutierrez, and Pierluisi. I want
that to continue. Many of us are intent on persevering and continuing
to arrive at solutions.
Even with incomplete information on Puerto Rico's finances and the
reluctance of administration health officials to engage, I have joined
with Senators Murkowski and Grassley to put forward tools, funding, and
tax relief to help to begin to address what we know about Puerto Rico's
challenges.
Our bill provides tax relief to workers, tools--but no mandates--to
help put pensions on a sustainable path, and oversight and assistance
in budgeting, transparent accounting, planning, and attainment of
fiscal sustainability. All told, our bill puts forward more than $7
billion of relief without costing Federal personal taxpayers a dime.
Let me repeat that--more than $7 billion of relief.
In the interest of bipartisanship, the bill was put forward without
provocation of sensitivities of my friends on the other side of the
aisle concerning things such as labor laws, shipping laws, and the
like. Nonetheless, the bill was not included in the end-of-year
legislative vehicles that we voted on today, just as the Democrats'
super chapter 9 proposal was not included.
Yet if you listened to some of my colleagues on the other side of the
aisle yesterday, you probably walked away with the notion that my
Republican colleagues and I are simply shilling for a bunch of hedge
fund speculators. You probably thought we were holding up a simple and
fair application of tools that everyone else has to adjust and
restructure debt that will not cost the Federal Government anything.
You were probably also surprised to learn that Republicans don't even
realize that Puerto Ricans are American citizens. I am not making that
up. One of my colleagues actually said that. We all know those claims
were--to be more blunt than I typically like to be--a bunch of baloney.
Speaking for myself, I can only say that if I am shilling for anyone
on this issue, it is for the people of Puerto Rico and not for
speculators, hedge funds, unions or standing in political
[[Page S8869]]
polls. I am not preventing access to tools everyone else has because
that is not even what my colleagues are asking for. Not only do I
realize that Puerto Ricans are American citizens, I believe the people
of Puerto Rico are valuable and cherished fellow Americans, not
political pawns.
In closing, while others may wish to engage in political dart-
throwing exercises, I am not interested, and I believe it is a
disservice to the people of Puerto Rico, who deserve our continued
efforts. I intend to continue working with anyone who wants to work
with me to arrive at tools, support, and assistance that will help the
people of Puerto Rico--not particular politicians or interest groups
here or on the island. My goal, and the goal of anyone who wants to
keep working with me or join me anew, is simple: help the people of
Puerto Rico and help get Puerto Rico on a path to fiscal
sustainability, economic growth and stability, and greater efficiency
in government.
We can do it. I am dedicated to doing it, and we have given them the
benefits so they can carry this over until the end of February, maybe
into March, while we try to work on what it really should be, a very
good resolution of these problems. In the meantime, I hope Puerto Rico
will get us their financials--their audited financials. That would be
of great help to us. We have given some time here now because it was
impossible to put together a major bill on this matter and have
everybody support it. So we have given time, we think we can get this
done, and I intend to get it done one way or another the best we
possibly can so Puerto Rico isn't just helped, it will be helped to go
into the future, and Puerto Ricans who have had to leave that territory
for jobs will want to return and be members of the citizenry of Puerto
Rico again.
I yield the floor.
The PRESIDING OFFICER (Mr. Perdue). The Senator from Maryland.
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