[Congressional Record Volume 163, Number 90 (Wednesday, May 24, 2017)]
[Senate]
[Pages S3115-S3116]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                      Puerto Rico's Fiscal Crisis

  Mr. GRASSLEY. Mr. President, I rise today to discuss the significance 
of the unprecedented events now occurring in Puerto Rico.
  According to the May 16 editorial in the Wall Street Journal, ``The 
legal brawl over Puerto Rico's bankruptcy begins this week, and it will 
be long and ugly.''
  As we have seen in Greece and Detroit, what is happening in Puerto 
Rico should be a wake-up call for fiscally distressed States--meaning 
our 50 States, our cities, and our territories--to get their own houses 
in order. It is the canary in the mine that ought to be available to 
everybody. At the same time, it should be a cautionary tale for those 
who seek to extend similar bankruptcy authority to our own 50 States.
  In 2015, after years of fiscal mismanagement and borrowing to finance 
their operations, Puerto Rico declared that its debt was unpayable and 
had to be restructured; however, because Puerto Rico lacked access to 
chapter 9 of the Bankruptcy Code, restructuring its complex debt 
outside of the court presented a challenge.
  I held a hearing in the Judiciary Committee to examine this issue in 
December of 2015. We learned at that hearing that while bankruptcy is 
an effective tool to restructure debt, it merely treats the symptom and 
it doesn't solve the disease. I told you so, in that vein. I shared my 
views and the views of many others that unless Puerto Rico addressed 
its fiscal mismanagement woes, extending bankruptcy authority alone 
couldn't fix the problem. I told you so that, instead, it would merely 
kick the can down the road and harm thousands of retirees in Iowa and 
elsewhere who would bear the costs of Puerto Rico's irresponsible 
fiscal behavior. The Obama administration, though, pressed Congress to 
act and to provide Puerto Rico with an orderly bankruptcy-like process 
to restructure its debt.
  According to the testimony of one Treasury official, ``Without a 
comprehensive restructuring framework, Puerto Rico will continue to 
default on its debt, and litigation will intensify. . . . As the 
cascading defaults and litigation unfold, there is real risk of another 
lost decade, this one more damaging than the last.'' So now, even with 
a comprehensive restructuring framework, there is still a real risk of 
another lost decade.
  Ultimately, this debt restructuring framework was coupled with an 
independent oversight board and adopted as the Puerto Rico Oversight, 
Management, and Economic Stability Act, referred to as PROMESA. This 
approach,

[[Page S3116]]

we were told, would tackle Puerto Rico's debt crisis in an orderly way 
and would help to remedy the years of fiscal mismanagement. 
Nevertheless, I remained concerned that PROMESA and its bankruptcy-like 
provisions would invite years of litigation and uncertainty due to the 
lack of existing court precedent.
  So it should be no surprise that a recent Bloomberg article titled 
``Puerto Rico's Bankruptcy Fight is About to Plunge Into the Unknown'' 
described the bankruptcy process as ``a circular firing'' squad with 
``no established rule book to shape what comes next.'' The article 
reports that one market analyst ``foresees a chaotic brew of lawsuits'' 
because ``nobody has any idea what is going to happen.''
  According to one news report, this is just the beginning, as 
PROMESA's bankruptcy provisions are ``more likely to face years of 
appeal than a typical case.''
  Despite assurances otherwise, what happens next in the months and 
years to follow may be far-reaching and likely will impact us all. In 
particular, prior to the enactment of PROMESA, Puerto Rico, like the 
States, couldn't declare bankruptcy. I told you this last year, and it 
is as I predicted last year--granting Puerto Rico the authority to 
restructure all of its debts, including its State-like constitutional 
obligations, would be viewed as precedent for giving States similar 
authority.
  I am not really surprised to see this is happening right now.
  Getting back to the fact that I told the Senate a year ago. This past 
September, William Isaac, the former head of the FDIC, called on 
Congress to pass a law ``giv[ing] Illinois the option of utilizing 
chapter 9, which is akin to what Congress just did for the Commonwealth 
of Puerto Rico.''
  The New York Times reported on May 3 that ``bankruptcy lawyers and 
public finance experts are watching Puerto Rico's case closely, to see 
if it shows a path that financially distressed states like Illinois 
might also one day take.''
  The Chicago Tribune's editorial board recently wrote that investors 
are growing nervous about the talk of States seeking a bankruptcy 
system after the fashion of Puerto Rico, calling Puerto Rico ``the 
frightening ghost of Illinois future.''
  The editorial wondered how much more difficult it would be for States 
to borrow money if lenders knew the States could shirk their 
obligations in bankruptcy when that debt becomes due.
  For those who weren't listening to me last year, those who dismissed 
concerns that PROMESA would set a troubling and dangerous precedent 
should take notice and make sure that a one-time piece of legislation 
does not create a new norm. I hold out hope that PROMESA might manage 
to provide some help for Puerto Rico.
  Success, though, will ultimately require strong leadership from the 
Commonwealth's leaders, which, for years, that leadership has been very 
lacking.
  There is a lesson to be learned. The fiscal crisis in Puerto Rico 
should motivate all 50 States, our cities, and territories to find the 
courage now to make tough choices, which are the foundation of 
responsible governance, rather than look to the Federal Government and 
bankruptcy as a way out. If they do not, the effect could be long-
lasting, harming the vulnerable both within their populations and 
outside of their borders.
  Obviously, what a lot of smart people told us a year ago to solve 
Puerto Rico's debt problems simply has not worked out.
  So at a time when States, citizens, and markets are all watching, we 
must stress fiscal responsibility and pay attention to what is 
happening there in Puerto Rico. Otherwise, the uncertainty and chaos we 
were assured would not come to pass may be just over the horizon.
  I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. CARDIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.