Today, the Committee held a legislative hearing on H.R. 4900, the "Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)." This is the fourth in a series of hearings to address the deepening fiscal crisis in Puerto Rico. The witnesses testified that the foundations of this bill are legally, economically and constitutionally sound.
Antonio Weiss, Counselor to the Secretary of the Treasury, said the legislation will avoid a bailout on the backs of U.S. taxpayers.
"The alternative to this legislation [ ] will in fact become a bailout over time. And so has been stated by many Members of Congress in both parties, this legislation costs taxpayers nothing and in fact what it does is precludes the likelihood that over time taxpayers would have to step in as they always do when the safety and economic prosperity of Americans are at stake. [ ] What we fear, if we are left without any framework as has been established by the Committee under leadership of the Chairman, that Puerto Rico faces a lost decade as these various claims are contested," Weiss stated.
Susheel Kirpalani, Partner at Quinn Emanuel Urquahart & Sullivan, echoed Weiss's sentiment that this bill does not grant Puerto Rico access to Chapter 9 bankruptcy, nor does it resemble a congressional bailout.
"There are two myths I'd like to dispel today. The first which I've seen on television, I'm sure some of you have seen that or your families have seen it, that "this is a bailout.' This is not a bailout. This involves no taxpayer money, this bill. The second one is "this is Super Chapter 9.' I have a lot of experience with Chapter 9, this is no Chapter 9," Kirpalani said.
Anthony Williams, Senior Advisory of Dentons US LLP and Former D.C. Mayor, voiced his strong support for the bill.
"I am most pleased about the contents of the draft legislation and I come before this Committee to endorse both its balance and the bipartisan efforts that necessarily were at the cornerstone of crafting it [This bill] offers a realistic set of provisions than can lead to a sustainable solution and a vibrant and financially healthy Puerto Rico," Williams said.
John Miller, Managing Director and Co-Head of Fixed Income at Nuveen Asset Management, commented on the effectiveness PROMESA's territorial-specific nature has in preventing a dangerous precedent for states.
"[T]he draft legislation has the potential to create a framework under which an orderly, fair and transparent resolution can be achieved for bondholders, while also fostering the conditions necessary for economic growth in Puerto Rico. [ ] If the proposed legislation were to become law, this would be a territory-specific law, and therefore not applicable to 98% of the municipal bonds in the marketplace as they are issued by entities that are on the mainland. [ ] We believe the territorial-specific nature of the legislation, the strength of an independent control board and the transparency and fairness that a more orderly process could bring would all be features welcomed by the municipal bond market," Miller stated.
Andrew Kent, Fordham University School of Law Professor, spoke on the constitutionality of the bill in relation to the Territorial Clause and the non-uniformity that it allows.
"Congress has well-established and long-exercised power under this clause to treat territories differently from each other, and to treat territories differently than it treats U.S. States. In my judgment, this clause serves as an independent and sufficient basis on which Congress may enact the contemplated legislation," Kent said.
Rep. Dan Benishek (R-MI) asked the panel what would happen if Congress didn't do anything.
"We've seen what happens. If Congress doesn't do anything, then the local legislature does, in the cover of night, pass a debt moratorium bill that denies due process and contravenes U.S. law. I think that's going to be met with constitutional challenges. I'm not blaming local legislators from doing what they need to be doing to protect the citizens living in their home jurisdiction, but it certainly does not uphold the rule of law. This Congress can do that," Kirpalani replied.