Financial Control Board Should Take Over Debt-Laden Puerto Rico, Lawmaker Says – The New York Times

In one of the strongest bids yet for federal intervention into Puerto Rico’s fiscal woes, a member of Congress is calling for a control board to take over the island’s beleaguered government.

Representative Jeffrey D. Duncan, a South Carolina Republican, sent a letter to his fellow lawmakers on Friday, urging them for a solution to Puerto Rico’s financial problems that may result in “management changes” in the commonwealth.

Mr. Duncan said Congress had the authority to establish a control board in Puerto Rico, similar to the one it created in Washington, D.C., in the mid-1990s.

“I believe legislation to require the establishment of a financial control board, to enable the politically unpalatable changes necessary to put Puerto Rico back on the road to self-determination, may be needed,” wrote Mr. Duncan, who is chairman of the Subcommittee on the Western Hemisphere of the House Foreign Affairs Committee.

Mr. Duncan’s letter is the latest salvo in the battle between Puerto Rico and its creditors. The island is quickly running out of cash to pay its debts, leading many analysts and investors to conclude that the commonwealth may default.

Mr. Duncan’s call for a control board will most likely find favor with hedge funds and other investors that own billions of dollars of Puerto Rico municipal bonds and are seeking to head off a default or debt restructuring.

A group of Puerto Rico debt investors have been trying to thwart efforts in Congress that would allow Puerto Rico’s public corporations, which run the island’s water and electrical systems, to declare bankruptcy.

In his letter, Mr. Duncan said authorizing a bankruptcy filing “will be a financial bailout of Puerto Rican debt that will provide only temporary benefit, harm U.S. investors that have invested in Puerto Rican bonds, and not meaningfully address the entrenched issues that have created the fiscal management problems that have created the current crisis.”

via Financial Control Board Should Take Over Debt-Laden Puerto Rico, Lawmaker Says – The New York Times.

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