White House: No federal bailout for Puerto Rico
Source: AP
WASHINGTON (AP) -- The White House threw cold water Monday on the notion of bailing out Puerto Rico from its financial crisis, instead urging Congress to consider changing the law so the island can declare bankruptcy.
On the heels of a dismal economic report, Puerto Rico's governor has warned that the commonwealth can't pay its $72 billion public debt, delivering a serious blow to Puerto Rico's recession-addled economy. But White House spokesman Josh Earnest said the federal government would provide financial expertise and access to existing resources but not a bailout.
"There's no one in the administration or in D.C. that's contemplating a federal bailout of Puerto Rico," Earnest said. "But we do remain committed to working with Puerto Rico and their leaders as they address the serious challenges."
Earnest said the Treasury Department is working with Puerto Rican officials to offer advice, and that an interagency task force would help the island identify federal programs and funds it might be able to tap into. He described that assistance as similar to what the federal government offered Detroit during its crisis. The Obama administration declined to offer Detroit a bailout, and the city declared bankruptcy under Chapter 9 of the Bankruptcy Code in 2013.
Read more: https://sg.news.yahoo.com/white-house-no-federal-bailout-172916211.html
SoLeftIAmRight
(4,883 posts)give out big loans - Let them take the hits when the loans fail.
hack89
(39,171 posts)Puerto Rico was given the power by Congress to issue tax free bonds. The people that will be hurt are the people that invested in those bonds - something tells me it was not the big banks.
SoLeftIAmRight
(4,883 posts)Facts
the powers borrowed more than can be paid
the lenders were stupid
I think most of the world is in the same boat...
There will be hell to pay
We all need to have a robust sustainable food and water system.
thesquanderer
(11,996 posts)...then there would probably be a bailout.
DiverDave
(4,887 posts)The ex-employees would be tripping over themselves to get the cash to the banks.
If only they would have bribed congress...
mainer
(12,034 posts)because of investments in municipal bonds, which are generally considered pretty safe.
brooklynite
(94,807 posts)geek tragedy
(68,868 posts)Let their creditors take a hit
Recursion
(56,582 posts)hack89
(39,171 posts)Why are they they bad guys here?
Adrahil
(13,340 posts)Now, in a bankruptcy declaration, the interests of creditors are considered. But unless PR has money tree seeds, someone is gonna a hit. Now PR will find it tougher to issue bonds. That's the way it works.
Amishman
(5,559 posts)Puerto Rico's constitution has something in it that makes its debt obligations come before all other liabilities. The bond holders will get theirs and everyone else will get the scraps.
Adrahil
(13,340 posts)I would think the basic needs of running the territory and meeting the basic needs of the people would take precedence. I'm not a fan of privileging capital above all else.
geek tragedy
(68,868 posts)If the choice is "bondholders vs poor people" well, there are always going to be poor people.
And, while people generally don't shed tears for creditors not getting paid, if creditors don't get paid, loans don't get made, which means austerity. And a lot more poor people.
geek tragedy
(68,868 posts)Ergo debt holders will need to absorb some of the losses.
When one acts as a lender, one of the risks is credit risk.
Hoppy
(3,595 posts)If the law is changed, would it allow states to declare bankruptcy?
L0oniX
(31,493 posts)GeorgeGist
(25,326 posts)to General Motors.
geek tragedy
(68,868 posts)There's a guy who's had loads of practice in declaring bankruptcy
AngryAmish
(25,704 posts)Viva Puerto Rico!
Adrahil
(13,340 posts)only 3.2% of the people chose independence, and another 18% chose a "free association agreement." 46% chose the option to maintain the current relationship, and 33% chose statehood.
Seems to me your plan wouldn't be giving PR her independence, but really kicking them out the door.
happyslug
(14,779 posts)With Independence the option to inflate the debt away opens up. Thus a lot of people who want to stay in the US will give up that option in exchange for lower domestic taxes.
Remember it is NOT the Federal tax rate that will be the problem, but Puerto Rico's domestic tax rate that has to increase drastically. Are the people of Puerto Rico willing to stay in the Union when it means high domestic taxes? That is an open question.
As to extending Federal Bankruptcy to cover Puerto Rico, Chapter 9 of the Bankruptcy Code does NOT include any discharge of any debt, just a process to spread out payments on those debts. Given Puerto Rico has no money to pay those debts, Federal Bankruptcy will NOT do them any good. There best option would be independence and inflation.
Adrahil
(13,340 posts)I can't imagine they would be thrilled about that.
Plus, many PR citizens maintain an American identity. It's why even most of those wanting some independence want to maintain some sort of commonwealth relationship. You think they would want to give up U.S. passports and freedom of movement? I don;t think so.
PR needs the authority to declare bankruptcy and to write off some debt.
Historic NY
(37,457 posts)medicare, social security, no federal income tax (only certain cases) etc. its beginning to look like all their schemes to run the place aren't working. Once they default on the municipal bonds they are in the tank big time. Perhaps its time to see how their unwise investments will cost them. It has been reported each citizen on the island would owe 20k in taxes to guarantee their debt. They run on a fairly low local sales tax on things so perhaps they must raise it.
Maybe Trump can show them how to go bankrupt and become billionares....
Octafish
(55,745 posts)Austerity for the masses.
Welfare for the Banksters.
Sancho
(9,070 posts)if Puerto Rico was a state with a typical constitution requiring a balanced budget, they wouldn't dig as big a hole.
Meanwhile, I think it's a beautiful place.
happyslug
(14,779 posts)When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about by bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment.
http://www.econlib.org/library/Smith/smWN22.html
In simple terms, Adam Smith said Public Debts are NEVER paid, they are discharged, generally through inflation (Adam Smith used examples of debasement of coin, but what he meant is what we call inflation).
Puerto Rico is thus going to have to declare independence and then inflate away this debt, like all sovereign nations.
Adrahil
(13,340 posts)happyslug
(14,779 posts)Remember Adam Smith is the considered the founding father of economics. There is a tendency on three right to consider him infallible thus why I am quoting him.
The alternative is much higher taxes something the present Government is unwilling to consider. As to personal savings that was sent to the mainland years ago thus relatively safe. As to domestic savings that will be spent while before inflation eats it away. Sorry when government look at inflation to solve it's debt problem most people have long abandon money as a savings and invested in something real like land, homes, factories etc.
candelista
(1,986 posts)http://www.forbes.com/sites/robertwood/2014/07/04/hate-taxes-move-to-tax-free-puerto-rico-stay-american-avoid-irs/
Sunlei
(22,651 posts)loss.
happyslug
(14,779 posts)Last edited Sun Jul 5, 2015, 04:57 PM - Edit history (1)
The issue in a chapter nine is WHEN creditors are paid not if. Governments have the power to tax so always have access to money. The issue will be who gets what when. Employees may be screwed but not other creditors.