While Europe is trying to spin giving in to Greece’s no vote on austerity as a sudden need for “humanitarian aid” and China is ordering investment firms to buy stocks to shore up its markets, here in the States we’ve got a $72 billion debt problem with Puerto Rico. Democrats in Congress say the time has come to fix 30-year old bankruptcy legislation to cover US territories and to get the island into bankruptcy courts.
Earlier this week, Puerto Rico’s governor declared that the nation’s $72 billion pile of debt was too much for it to handle. To avoid a “death spiral,” Gov. Alejandro Garcia Padilla said the commonwealth would have to break its promise to pay back some money owed.
But a quirk in the nation’s bankruptcy code is throwing Congress into the middle of the matter, as lawmakers will need to quickly pass a new law if Puerto Rico is going to gain access to the nation’s bankruptcy courts.
Puerto Rico’s nonvoting representative, Resident Commissioner Pedro Pierlusi (D) is working to build support for legislation that has simmered in Congress for months, but has taken on new urgency following the governor’s declarations.
Sens. Chuck Schumer (D-N.Y.) and Richard Blumenthal (D-Conn.) are working to build support for similar legislation in the Senate.
A 1984 update to the nation’s bankruptcy laws left Puerto Rico out of the picture, apparently by accident. Chapter 9 of the bankruptcy code gives states the power to allow agencies or municipalities to declare bankruptcy, as happened most recently in Detroit. But the law is silent on territories like Puerto Rico, leaving it on the outside looking in when it comes to public bankruptcies.
“As best we can tell, it’s a typographical error in the bankruptcy code,” said John Pottow, a bankruptcy expert and legal professor at the University of Michigan. “It should be noncontroversial.”
Hmm, where have we heard that before?
Oh yes, Republicans literally made a Supreme Court case out of the last typographical error in the law they could have fixed with one sentence. Of course, there’s two differences this time: one, the GOP just lost that Supreme court case, and two, the people affected by this fix won’t be those people getting evil socialist health insurance, but the island’s creditors in the banking community. Somebody’s got to make money off this mess, and given the sums involved, it sure as hell isn’t going to be the people of Puerto Rico.
Somehow I’m betting that this one-sentence fix gets passed pretty quickly as a result.