WASHINGTON – The House will hold two simultaneous hearings about Puerto Rico on Feb. 25 before legislators are expected to begin drafting a legislative solution for the commonwealth.
The House Financial Services Committee's Subcommittee on Oversight and Investigations recently announced it will hold a hearing on the possible effects of Puerto Rico's debt crisis on the bond market. That hearing will join one in the House Natural Resources Committee that was announced on Feb. 8 to discuss the Treasury Department's analysis of the situation in Puerto Rico. Both hearings are scheduled for 10 a.m.
Resident Commissioner Pedro Pierluisi, Puerto Rico's representative in Congress, said that once the hearings are completed, he expects "the drafting process will begin in earnest and that [he] will be involved in the negotiations."
The subcommittee hearing will feature three witnesses: Anne Krueger, a senior research professor of international economics at John Hopkins University who led a recent economic study of Puerto Rico; Juan Carlos Batlle, senior managing director of CPG Island Servicing, LLC; and William Isaac, senior managing director and global head of financial institutions for FTI Consulting.
The subcommittee chair, Rep. Sean Duffy, R-Wis., has also been a main player in Congress's consideration of how to help Puerto Rico with its debt crisis.
Duffy introduced a bill in December to give Puerto Rico's public authorities Chapter 9 bankruptcy protection in return for the creation of a five-person, presidentially appointed financial stability council. His bill, which balances the bankruptcy authority Democrats have been pushing with the oversight authority Republicans have preferred, is expected to serve as the starting point for congressional discussions about a final legislative package for the commonwealth.
Pierluisi said in his statement that Duffy "has been a tremendous leader" on addressing Puerto Rico.
The Treasury proposal the Natural Resources Committee is scheduled to discuss follows a similar idea as Duffy's bill with restructuring being contingent on the commonwealth's acceptance of an oversight authority. However, its proposal goes farther by proposing restructuring for the entire commonwealth. The idea for a "Super Chapter 9" bankruptcy solution for the territory has not gained traction in Congress because Republicans and others have said it could open up the possibility for states like Illinois and California to try to restructure their constitutionally backed general obligation debts.
The Treasury, through statements from Antonio Weiss, a counselor to Treasury Secretary Jack Lew who has worked to resolve Puerto Rico's debt crisis, has recently moved away from the idea that any restructuring would have to be granted through a change to the federal bankruptcy code. Weiss will be the sole witness at the Natural Resources Committee hearing.
The counselor made his comments on the possibility of granting restructuring power outside the federal bankruptcy code at a Feb. 5 panel in Washington D.C. about Puerto Rico. He said Treasury still believes any solution should allow restructuring for the entire commonwealth, but that the extension of restructuring could come through Congress's power under the Constitution's Territorial Clause.
The clause gives Congress the power to "dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States."
Secretary Lew, who made similar statements during recent hearings on the president's budget, has backed comprehensive restructuring legislation for the territory partially to make it easier for its officials to bring all the commonwealth's creditors to the table. Lew, speaking with Puerto Rico bondholders on Friday, reiterated the importance of having all the stakeholders participate and stressed that addressing the crisis will require shared sacrifice by all parties involved, according to a readout of the meeting.
The two future hearings follow two others, both held in the Natural Resources Committee, that have already taken place in 2016. The many hearings come as House committees with jurisdiction over Puerto Rico are working to produce a reasonable legislative package for the commonwealth by March 31, a deadline House Speaker Paul Ryan, R-Wis., set last year.
