Congress approved a rescue package Wednesday to help Puerto Rico escape a sea of debt, tossing a lifeline to the island territory just two days before it faces default on a $2 billion bond payment.
Senators approved the rescue package, 68-30, turning back vociferous objections from liberal lawmakers who said the bill imposes colonial rule on average Puerto Ricans, and from conservatives who said the legislation will end up stiffing the bondholders who bought the territorial government’s debt.
But with lobbying from President Obama and pleas from party leaders, a centrist coalition held firm, giving final OK to a bill that had already cleared the House.
“The bill isn’t perfect, but here’s why we should support it: It won’t cost taxpayers a dime, it prevents a bailout and it offers Puerto Rico the best chance to return to financial stability and economic growth over the long term so we can help prevent another financial crisis like this in the future,” said Senate Majority Leader Mitch McConnell, Kentucky Republican.
The bill imposes a seven-member oversight board to review the territorial government’s decisions and petition for debt restructuring, should voluntary negotiations with creditors fail. The package also permits changes to minimum wage and overtime rules in an attempt to spur the island’s economy.
Mr. Obama said he looks forward to signing it.
“This bill is not perfect, but it is a critical first step toward economic recovery and restored hope for millions of Americans who call Puerto Rico home,” he said in a statement from the White House.
Analysts say Puerto Rico’s troubles are the product of years of over-borrowing and spending and the steady exit of young, working-age residents who could turn its fortunes around.
States can permit their cities and utilities to seek bankruptcy protection under Chapter 9, yet Congress barred Puerto Rico from doing so decades ago because it is a territory. The Supreme Court this month said the island can’t pass its own laws to restructure its debt either, meaning any solution had to come from Congress.
The House easily passed a rescue bill, 297-127, last week after months of negotiations among GOP and Democratic leaders and the Treasury Department.
Negotiators had to contend with a hedge-fund backed ad campaign that cast the effort as a bailout, giving ammunition to conservative opponents who fear U.S. taxpayers will eventually end up on the hook for the debt.
GOP leaders insisted that wasn’t the case, and said the best way to head off a bailout was to approve this bill.
“We must act now to prevent matters from getting worse,” Mr. McConnell said.
Senate Minority Leader Harry Reid, Nevada Democrat, urged his troops to back the bill, so that Puerto Rican leaders would be shielded from hedge funds who might “sue them to death.”
Still, he criticized Mr. McConnell for refusing to allow debate on amendments. Any changes to the bill would have sent the package back to the House, which is on vacation until July 5, and would have put Puerto Rico over its July 1 deadline when $2 billion is owed.
The Puerto Rican government already defaulted in May on a $370 million payment toward its $72 billion debt.
Sen. Robert Menendez, New Jersey Democrat, accused leaders of acting hastily. He said Congress should forge the best bill possible instead of racing to meet the July 1 deadline for the next payment.
Among other things, he wanted the Senate to rein in the oversight board’s powers and include more protections for pensioners in the bill, dubbed “Promesa.”
“Put simply, Promesa exacts a price far too high for relief that is far too uncertain,” Mr. Menendez said.
Mr. Menendez and 10 other Democrats rejected the package, alongside 18 Republicans and Sen. Bernard Sanders, Vermont independent, who said residents would suffer more than the banks who loaned to the debt-addled territory.
“This is a terrible piece of legislation, setting horrific precedent and must not be passed,” said Mr. Sanders, who established himself as a progressive champion during this year’s Democratic presidential primary campaign. “The United States of America should not treat Puerto Rico like a colony.”
Some Republicans said the bill’s restructuring provisions could put pensioners before regular bondholders, or that it simply didn’t do enough to rejuvenate the island’s economy.
Republicans who supported the bill characterized their votes as an effort to reel in the island’s finances or avoid a taxpayer bailout, while Democrats said they voted “yes” to reach out to Puerto Ricans in a time of need.
Still others used the legislation to shine attention on troubles back home.
Sen. Rob Portman, Ohio Republican locked in a reelection battle, teamed with West Virginia Democrats to demand a vote on protections for miners who could lose their pensions in coal-company bankruptcies. The effort fell short.
“I can’t support this bill,” Mr. Portman said, “without helping Ohio workers and retirees at the same time.”
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