A bill to pull Puerto Rico out of a sea of bond debt advanced in the Senate Wednesday, two days before the island territory faces default on a $2 billion payment.
Senators voted to proceed, 68-32, despite vociferous objections from Democratic presidential contender Bernard Sanders of Vermont and other progressives, who said the bill imposed colonial rule through an unelected fiscal oversight board.
Members on the right objected to provisions that seemed to rewrite the rules from under creditors, though GOP leaders and the Obama administration said the measure provided the only way forward in a divided government.
Failure to act now, they said, could result in a taxpayer bailout down the road.
“This bill won’t cost taxpayers a dime, not a dime,” said Senate Majority Leader Mitch McConnell, Kentucky Republican. “What it will do is help Puerto Rico restructure its financial obligations and provide much-needed oversight to put in place needed reforms.”
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 legislation also permits changes to minimum wage and overtime rules in an attempt to spur the island’s economy.
Eighteen Republicans, 13 Democrats and Mr. Sanders, an independent, voted to block the bill, though it surpassed the 60 votes needed to proceed.
The House easily overcame similar complaints from both the left and the right to pass the bill, 297-127, on June 9 after months of negotiations between Congress and the Treasury.
Senators must vote for final passage before it reaches President Obama, who says the bill is necessary to protect the island’s 3.5 million inhabitants.
Some Democrats wanted to amend the measure and send it back to the House, which acted in early June, but Mr. McConnell headed them off, saying they had to press on before Congress’ seven-week break.
Puerto Rico has already defaulted on $370 million, and it faces a July 1 deadline to pay $2 billion, including constitutionally protected general-obligation bonds.
Treasury Secretary Jacob J. Lew warned that if Congress didn’t act by Friday, creditors would seek legal judgments that impair Puerto Rico’s chances of getting on a path to stability.
Senate Minority Leader Harry Reid, Nevada Democrat, said Congress could not afford to expose the island to aggressive hedge funds, because “they’ll sue them to death and that’s too bad.”
Sen. Robert Menendez, New Jersey Democrat, strongly disagreed in a series of floor speeches, saying Congress shouldn’t let an “arbitrary” deadline prod them into accepting a flawed bill.
“Every issue before the Senate deserves, and usually receives, a full and open debate,” he said. “But for far too long we’ve made Puerto Rico the exception.”
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