Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable’

[Admiral Yi]

Not responding without a hard return.

Good policy.

[jimmy olsen]

Not responding without a hard return.

Fixed.

Anyways, looks like they're going to miss a $58 million dollar payment to a credit union.

[Admiral Yi]

Localities are allowed to request a waiver on federal minimum wage.  American Samoa did.

[citizen k]

Puerto Rico is now in default on the PFC bonds.

[jimmy olsen]

More defaults

http://www.nytimes.com/2015/12/31/business/dealbook/puerto-rico-says-it-will-default-on-some-bonds.html

Puerto Rico Says It Will Default on Some Bonds

By MARY WILLIAMS WALSHDEC. 30, 2015

Puerto Rico will default on nearly $174 million in principal and interest payments on bonds on Friday, the first day of 2016, the governor said on Wednesday, increasing the likelihood that the island will face lawsuits from an array of creditors.

In a briefing for journalists, Gov. Alejandro García Padilla said only some of the payments would be halted immediately. They include $35.9 million due to holders of bonds issued by its Infrastructure Financing Authority, and $1.4 million due to holders of its Public Finance Corporation's bonds.

In a stark example of the financial version of musical chairs that has been playing out on the island in recent months, the government will divert a total of $174 million from lower-grade bonds to pay holders of the legally protected general obligation bonds. That diversion, known as a "clawback," technically amounts to a default even though some of those creditors will not see a difference in their payments on Jan. 1.

General obligation bonds have a top priority under Puerto Rico's Constitution, and defaulting on them outside an official bankruptcy proceeding could set off a constitutional crisis, making the island's problems even worse than they already are.

As a result of the shuffle, the general obligation bondholders will receive on Friday the entire $328.7 million they are owed, said the governor, who referred to those top-ranked bondholders as participants in "vulture funds."

At a news conference later in the day in San Juan, the island's capital, he accused the general obligation bondholders — who have resisted efforts to cut back their payments — of caring more about their financial interests than the well-being of Puerto Rico's residents.

"We know that our creditors have spent a fortune lobbying against the people of Puerto Rico," Mr. García Padilla said, according to an unofficial English transcript of the event, which was conducted in Spanish. The bondholders, he said, were "willing and anxious to initiate costly and disruptive litigation against the commonwealth, and attempt to attach and seize the little cash left in our accounts to obstruct our ability to provide essential services to our people."

"My administration has the obligation to protect the people of Puerto Rico against the grave consequences of a disruption in essential services and a government shutdown, which would result from a wider default," he added.

Melba Acosta Febo, the head of Puerto Rico's Government Development Bank, told journalists that the clawback of certain bond money was legal in Puerto Rico. She said that the possibility of such a step had been disclosed in the marketing materials for the affected bonds.

The development bank, which orchestrates most of Puerto Rico's debt, issued a statement on Wednesday, saying that it intended to make separate principal and interest payments of about $10 million due on Friday.

In his briefing, the governor said that some of the investors whose bonds are part of the clawback would still receive the full amounts they expected on Friday. That is because Puerto Rico had previously sent enough money to bond trustees to cover the most imminent payments. Once money has been sent to a trustee, it cannot be clawed back.

Even though the bondholders in this group will not feel any immediate difference, their bonds will still be considered in default, Mr. García Padilla said, because their prepaid reserves are now being depleted and the flow of additional funds to the trustees has ceased. That means the number of bondholders who are left unpaid is likely to grow, as more payments are due in the coming months.

Investors in this group include those who hold bonds issued by the Puerto Rico Highways and Transportation Authority, and its Convention Center District Authority.

In a hint at the extremely complex structure of Puerto Rico's total debt, the governor pointed out that not all of the Infrastructure Financing Authority bonds would be in default on Jan. 1 because, much like the general obligation bonds, some of them also carry a governmental guarantee.

In effect, one group of Infrastructure Authority investors — those without the guarantee — are having their money clawed back to pay another group of Infrastructure Authority investors whose bonds are guaranteed. This is something few ordinary investors are likely to have understood when they first decided to invest in Puerto Rico's bonds.

The bonds are widely held across the United States mainland, because they offer better-than-usual tax preferences and a higher yield than most municipal bonds. In the past, Puerto Rican debt was a popular addition to mutual fund portfolios because it increased the overall yield.

When asked how he expected the rising tide of defaults to affect the broad restructuring talks that Puerto Rico has been calling for, Mr. García Padilla said he thought it would make them harder. Some investors will now be forced to make unexpected sacrifices that help other investors, a situation that the governor said could not be good for anyone in the long run.

Mr. García Padilla said that he had been forced to claw back money from the lower-ranked bondholders because the island had practically run out of cash and Congress had so far failed to respond to its pleas for help. He said he needed to save at least some money to keep paying nurses in hospitals, police officers and teachers.

At least two types of Puerto Rican bonds remained outside the line of fire, the governor said. One is a type of bond backed by dedicated sales taxes through the Puerto Rico Sales Tax Financing Corporation, known by its Spanish acronym, Cofina. The other is a type of bond issued by the Puerto Rico Electric Power Authority, or Prepa.

For months, Puerto Rican officials have been urging Congress to amend the federal bankruptcy code to eliminate an exclusion that currently bars any branch of the Puerto Rican government from restructuring in Chapter 9 municipal bankruptcy.

The Republican senators who chair the relevant committees have expressed concern for the island's predicament but have said so far that they could not consider such an amendment until more was known about why Puerto Rico had fallen into such distress and what could be done to address the systemic causes. Legislative efforts were expected to resume when Congress returns in January.

The Treasury said in a statement on Wednesday that Puerto Rico's default "demonstrates the gravity of the commonwealth's fiscal crisis and the need for Congress to act now."

The statement continued: "Puerto Rico is at a dead end, shifting funds from one creditor to pay another and diverting money from already-depleted pension funds to pay both current bills and debt service. This increasingly urgent situation demands swift congressional action to give Puerto Rico access to an orderly restructuring regime paired with independent oversight."

[MadImmortalMan]

Reading that Piketty book has taught me that these problems are only gonna get worse, and growing out of the debt is a fantasy.

[Jaron]

Puerto Rico is playing their Trump card.

[Eddie Teach]

Puerto Rico is playing their Trump card.

Congress holds a bigger Trump card. Independence. 

[jimmy olsen]

It's not looking too good.

http://www.bloomberg.com/politics/articles/2016-04-25/paul-ryan-s-biggest-test-yet-saving-puerto-rico-from-congress

Ryan's Biggest Test Yet: Saving Puerto Rico From Congress

Billy HouseBilly House
@HouseInSession
April 25, 2016 — 6:00 PM KST Updated on April 26, 2016 — 4:09 AM KST

Speaker has promised action, but a July 1 deadline is looming
House draft bill is running into opposition from all sides

Puerto Rico's complex debt crisis is shaping up as the first true test of Paul Ryan's six-month old speakership.
The Wisconsin Republican has pledged publicly that the U.S. House will find a "responsible" solution to the island's debt crisis. The issue may not factor widely in the November elections, but failure could prove disastrous -- both to Ryan's credibility and in terms of the billions of dollars Congress would need to prop up the island's finances.

Unlike many of his previous challenges, this isn't a mess he can blame on his predecessor. If he can't forge a solution, it also doesn't bode well for Ryan's ability to bring his recalcitrant conservative caucus along on other spending and tax plans, which could be a recipe for the continuing gridlock and peril that ousted John Boehner.

"To me, this is his first high hurdle. This belongs to him. This is his," said Representative Lynn Westmoreland, a Georgia Republican who briefly mulled running for speaker, but ultimately backed Ryan and later decided not to run for re-election this year.

The high stakes explain why Ryan's office has been involved -- often behind the scenes -- from the start. It could also ultimately find him having to strong-arm or bypass fellow conservatives, a move that would also break his promise for a new, bottom-up approach to running the House.

Either way, time is running short. Congress is already blowing through a May 1 debt repayment deadline and Ryan needs to get something through both chambers before July 1 to avoid a likely default by Puerto Rico and a failure that could haunt his tenure. Making matters worse, the island's economy is in tatters, with a high jobless rate, a declining population and concerns about an outbreak of the Zika virus.

Ryan's immediate decision will be how much more time to give Natural Resources Chairman Rob Bishop of Utah, who Ryan put in charge of the bill, to forge a solution before taking over.

'Bring Order'

Ryan himself has said inaction on Puerto Rico's impending fiscal crisis could have deep ramifications for the U.S. "Our primary responsibility is to protect the American taxpayer and to help bring order to the chaos that will befall Puerto Rico if the status quo continues going in the direction it's going," he told reporters on April 14.

But Ryan and his lieutenants have conceded that congressional action will slip past a May 1 deadline for a $422 million debt repayment by the territory. Next up is a $2 billion payment due on July 1, raising the specter of default on some of the territory's general obligation bonds.

When Ryan was chosen as speaker in October, Republicans had high hopes he could unite a fractured caucus. And he has largely enjoyed positive early reviews from House members, who praise him for returning more power to committees and rank-and-file members.

But Ryan has also had his share of struggles, including missing an April 15 deadline for the House to pass a fiscal 2017 budget. Ryan had said kick-starting the budget process would be part of his promised return to legislative "regular order." His efforts have instead found him wrestling with the same fiscal conservatives in the House Freedom Caucus and others that helped to usher Boehner out the door last fall.

Ryan's Mess
While he can try to pin many of those woes on Boehner, Ryan owns the Puerto Rico problem.

It was Ryan who cut the deal with Democrats last December that kept Puerto Rico out of the sweeping omnibus spending bill. In return, Ryan promised to offer a plan by March 31 to deal with the territory's $70 billion debt crisis.

The House Natural Resources Committee did produce a discussion draft, HR. 4900, before the deadline, but efforts to agree on some orderly combination of a federal financial oversight board and a framework for debt restructuring have since stalled. Republicans, Democrats and U.S. Treasury Department officials differ on details, including the scope of the board's powers, how to deal with creditors, and how long creditors should be blocked from suing the island.
This is all playing out amid intense lobbying -- not only by Puerto Rico's government, but also insurers and holders of Puerto Rico bonds, who themselves are split.

'Bailout Scheme'

Some of the loudest objections to the current draft being negotiated by Bishop are coming from House Republicans, including many on the committee itself. Some cast the proposed legislation as a "bailout scheme" -- if not an actual bailout -- something adamantly disputed by Ryan.

Others say that they have to contend with a perception back home that it's a bailout, particularly with groups taking out television ads on the issue.

"Puerto Rico's increasing fiscal problems are the result of mismanagement and unsustainable policies enacted by the local government and under no circumstance will I support a taxpayer-funded bailout of Puerto Rico," said Representative Doug Lamborn of Colorado, a member of the committee, who adds that while the latest version of the bill is not a bailout, he remains opposed because of concerns about how payments to creditors might be prioritized.

Such complaints are contributing to doubts about Ryan's ability to deliver consensus within his own conference. They're also raising questions about Ryan's efforts to restore more legislative decision-making to the committees, as opposed to the speaker imposing his will.

"The underlying governing dynamic that forced John Boehner to depart is still there -- whether on budget or Puerto Rico or any other number of issues coming up," said Representative Charlie Dent of Pennsylvania, co-chairman of a group of House Republican moderates. "That's not a criticism of Paul, by the way. That's just a statement of fact and an acceptance of reality. Face it, we have a number of members who have a very difficult time getting to 'yes,' and that is structural and it does not matter who is speaker."
But Dent said there's "an urgency" and "this one of those issues of governance you got to get done, even if we're going to need Democrats to help us pass the bill."

Bottom-Up Approach

A House leadership aide responded that Ryan's bottom-up push to let the committee do its work may not be as neat and tidy as having the speaker jam the legislation through, but Ryan remains committed to it. The aide also noted that Ryan has always said the bill would require bipartisan support in order to make it through the Senate, and he remains optimistic a bill will be passed.

To boost his cause, Ryan's office has been circulating opinions from some conservative fiscal groups in support of the bill and arguing that it is not a bailout of Puerto Rico, including one from the influential Americans for Tax Reform, founded by Grover Norquist.

"The Oversight Board has the authority to mediate voluntary restructuring between stakeholders, and if (and only if) this breaks down, the board has the authority to facilitate court supervised restructuring. This is NOT chapter 9 bankruptcy," read one statement from the group, which added that any suggestions that this is a bailout are false.
Supportive Democrats

When it comes to Puerto Rico, Ryan has won plaudits from Democrats for his approach.

Representative Luis Gutierrez of Illinois says the speaker has been approachable and collegial in the discussions. But he says that, in retrospect, Minority Leader Nancy Pelosi and Democrats should have pushed harder to include Puerto Rico language in the spending deal last year -- when they had more urgent leverage.

Now, Ryan finds himself pushing a legislative effort and trying to reach a bipartisan deal with fellow Republicans who are skeptical about the bill, which Representative Tom Cole said is gaining a "high profile" in districts in "a very volatile political year."

Advertising Blitz
Some House Republicans are being hit back home with ads from groups that describe the bill as a bailout, which Bishop said has only added to confusion among his constituents.

"All they've heard is that same stupid ad," said Bishop. "It is bizarre that the number one issue in the First District of Utah is Puerto Rico."

"We ought to just legislate and do the best we can," said Cole, who said he believes Ryan will get the bill through.
Ryan, during a news conference Thursday, sounded defensive about the bill's progress. "We made the deadline which was to get the bill introduced by the end of the first quarter," he said, referring to his March 31 promise.
"Now, the Resources committee is working on technical aspects," said Ryan. "I think they are doing very well. We just want to do it right."

[lustindarkness]

https://youtu.be/Tt-mpuR_QHQ

[Admiral Yi]

I'm coming to the conclusion that if you stripped all the laugh lines out John Oliver would be much more watchable.

[jimmy olsen]

I'm coming to the conclusion that if you stripped all the laugh lines out John Oliver would be much more watchable.

It's just personal preference. I find him a lot funnier than Stewart or Colbert ever were.

[Eddie Teach]

I'm coming to the conclusion that if you stripped all the laugh lines out John Oliver would be much more watchable.

You don't enjoy weird comparisons and country in the wrong place gags? 

[Admiral Yi]

You don't enjoy weird comparisons and country in the wrong place gags? 

I don't enjoy underwritten, oversold punch lines.  No matter how meh the line is he always delivers it at 11.

[Eddie Teach]

A fair criticism.