Why Hillary Clinton Wants Puerto Rico to Be Protected Under U.S. Bankruptcy Law
On Tuesday, July 7, hopeful U.S. Democratic presidential candidate Hillary Clinton called for legislative changes that would allow Puerto Rico’s public entities to restructure their collective $72 billion in debt under the protection of U.S. bankruptcy law.
Currently, U.S. bankruptcy law excludes Puerto Rico, which is an unincorporated U.S. territory — nor can its public entities file bankruptcy under Chapter 9 of the U.S. Bankruptcy Code. On Capitol Hill, two Democratic senators have proposed legislation that would change this law to include Puerto Rico, allowing it to avoid financial chaos, Reuters reported.
“As a first step, Congress should provide Puerto Rico the same authority that states already have to enable severely distressed government entities, including municipalities and public corporations, to restructure their debts under Chapter 9,” Clinton told Reuters in a statement.
Late last month, Puerto Rican Gov. Alejandro Garcia Padilla shocked many by announcing his intent to restructure the territory’s debts and postpone bond payments. The island commonwealth has been in recession for almost a decade, with a 12% unemployment rate and 40% of its population living below the poverty line.
“We’re not talking about a bailout, we’re talking about a fair shot at success,” Clinton said. The former secretary of state, U.S. senator and first lady urged Congress and the White House to “partner with Puerto Rico by providing real support and tools so that Puerto Rico can do the hard work it will take to get on a path toward stability and prosperity.”
Throughout 2013, bankruptcy courts throughout the U.S. handled some 1,071,932 bankruptcy filings — but none of these would have been at nearly the size or scale of a Puerto Rican bankruptcy. After Mexicans, Puerto Ricans make up the second-largest Hispanic origin group in the nation.
Vermont Senator Bernie Sanders of Vermont and former Maryland Gov. Martin O’Malley, Clinton’s main rivals for the Democratic presidential nomination, have also endorsed laws that would bring Puerto Rico under U.S. bankruptcy protection. Sanders, in particular, blamed Puerto Rico’s crisis on Wall Street, saying its debt “has everything to do with the policies of austerity and the greed of large financial institutions.”
The White House has stated it does not plan to give Puerto Rico a federal bailout — meaning it will ultimately be up to Congress to decide whether or not the territory’s government-owned entities will be able to seek Chapter 9 bankruptcy protection.