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The Source from The House Committee on Natural Resources

Puerto Rico: 2 Truths and A Lie

April 27, 2016 | House Committee on Natural Resources Press Office
Just like the classic icebreaker game, let's get to know PROMESA: 
PROTECTING CREDITORS: The situation in Puerto Rico has already led to astounding and drastic actions by the territory's government that abuse creditors' rights. PROMESA prevents further abuses and, at its core, protects lawful creditor priorities.  
  • TRUTH: Under PROMESA, "no one group or class of creditors gains an advantage over any other class in which such advantage did not exist prior to the Oversight Board's determination." (Section 206 (a))
  • TRUTH: PROMESA will enable the "territory to fulfill its debt obligations responsibly and efficiently" and "maximize creditor recovery." 
  • LIE: PROMESA includes provisions that would change existing creditor priorities similar to previous proposals from the Obama Administration and Sen. Menendez.
    • False, PROMESA does not include such provisions. 
PROTECTING THE RULE OF LAW: Currently, the Puerto Rican government's actions are violating property rights and unilaterally impairing contracts as competing creditor lawsuits, which have already begun, intensify.
  • TRUTH: Under PROMESA, any restructuring must be "in the best interest of the creditors." (Section 314 (b) (6))
  • TRUTH: PROMESA sets up a framework to "protect valid and legal liens during any potential restructuring process."
  • LIE: PROMESA is a bailout. 
    • False, anonymous special interest groups have tried to label PROMESA a bailout. But that is "a dishonest characterization" as the "bill commits zero taxpayer dollars to pay back Puerto Rico’s obligations."
CONSEQUENCES OF INACTION: Puerto Rico is headed for a full scale financial meltdown and humanitarian crisis. A "let it burn" approach has even worse implications for U.S. Citizens on the Island and mainland.
  • TRUTH: Financial collapse on the Island “affects most people with a mutual fund invested in the municipal bond market” including citizens on the mainland "whether they know it or not."
  • TRUTH: Failing to act is "more likely to disrupt the municipal market than providing a rational, comprehensive, and territory-specific legal framework to resolve this economic and fiscal crisis." 
  • LIE:  The rule of law and U.S. taxpayers will be better off if the Island's government is left to its own devices. 
    • False. 
NO STATE CONTAGION: If Congress fails to deal carefully with the complex financial and economic mess in Puerto Rico, states will seek to avail themselves of their own irresponsible tax and spending practices.
  • TRUTH: Any suggestion that PROMESA "will create a precedent for the states is false because this bill places the relevant provisions within the section of federal law that relates to U.S. territories."
  • TRUTH: There is "no legal, budgetary or market-based reason to believe that" PROMESA "would set a precedent for even the most fiscally stressed states."
  • LIE: PROMESA will set a precedent for troubled states on the mainland. 
    • False. 
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