[Congressional Record (Bound Edition), Volume 161 (2015), Part 15]
[Senate]
[Pages 21584-21585]
[From the U.S. 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 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.

[[Page 21585]]

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 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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