Democrats Urge Pause in Debt Talks

Eight Senate Democrats —including three running for president — and five House of Representatives Democrats have asked the PROMESA Financial Board (FOMB) to halt all Puerto Rico debt payments and negotiations until an independent investigation clears all Board Members of conflicts of interest.

The letter led by Senator Bernie Sanders (VT) and fomer Sanders campaign workers Representative Alexandria Ocasio-Cortez (NY)  also made a number of other demands for the Board to fulfill by October 7th.

  • An explanation of a doubling of the territorial government’s fiscal surplus “available to creditors” since the Board’s first Fiscal Plan for the territory, “despite there being few changes to the Board’s underlying economic assumptions.”  The authors asserted that “the surplus is likely to end up in the hands of hedge funds and bankers in order to pay debt that was … bought … for a fraction of their value at maturity.” They also contended that, “The terms of the deal with creditors are far more generous than what the FOMB’s own long-term estimates indicate that Puerto Rico is able to pay.”
  • The rationale for cuts to health, including Medicaid, education, including the University of Puerto Rico, and pensions to which the letter signers objected and analyses of impacts of of the spending reductions on economic growth, outmigration, and “inequality.”
  • “A full accounting of each Member’s professional and familial ties to any institutions who hold Puerto Rico’s debt or maintain contracts with the FOMB, thorough financial disclosures on all Members, and all documents related to consulting arrangements with entities who could financially benefit from a debt repayment deal.” The authors wrote that they were “deeply concerned by the apparent failure to comply with the law” regarding conflicts of interest. Board Chairman Jose Carrion, Member Carlos Garcia, and contractors McKinsey and Citigroup were singled out.

The letter also called for an “end to Board control” over Puerto Rico’s economic decisions, saying that the territory “must no longer be treated as a colony.” “At a minimum,” it added, the recent changes in the insular government’s Executive branch “must not be exploited to strengthen the unelected FOMB’s power over the day-to-day lives of the people.”

Also challenged were the Board’s spending and alleged “internal mismanagement.”

Other senators signing the letter included Elizabeth Warren (MA), Jeffrey Merkley (OR), Edward Markey (MA), Richard Blumenthal (CT), Kirsten Gillibrand (NY), Cory Booker (NJ), and Robert Menendez (NJ). All except Merkley come from States with sizable populations of people of Puerto Rican origin.

The PROMESA Board hopes to complete a debt adjustment plan for the Government of Puerto Rico by the end of this month, although its deadlines for the plan have slipped.

Read the Congressional Letter to Financial Oversight Board

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