Senate passes aid bill for Puerto Rico

Senate Majority Leader Mitch McConnell takes a break from managing the Puerto Rico bailout bill Wednesday on Capitol Hill.
Senate Majority Leader Mitch McConnell takes a break from managing the Puerto Rico bailout bill Wednesday on Capitol Hill.

WASHINGTON -- The U.S. Senate on Wednesday night approved a financial-aid package for Puerto Rico, sending the measure to President Barack Obama's desk.

The Senate passed the bill in a 68-30 vote, three weeks after the House overwhelmingly backed the measure. Sens. John Boozman and Tom Cotton, both Arkansas Republicans, voted against the measure.

The vote came two days before the island is supposed to make a $2 billion payment to creditors.

Puerto Rico is in a decade-long recession and has $70 billion in debt. Thousands have fled the territory for the U.S. mainland. Businesses on the island have closed, schools have struggled with limited electricity and hospitals have asked for cash payment in advance for some medication.

The White House and Republican and Democratic leaders in Congress have warned that without help from Washington, Puerto Rico could descend into economic chaos.

Obama said after the vote that he will sign the bill, and he commended Congress for passing 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," Obama said.

The legislation would create a control board to oversee Puerto Rico's finances and supervise some debt restructuring. The legislation would not provide any direct financial aid to the territory, but leaders warned that a bailout could eventually become necessary if Congress doesn't take this step.

"If we don't act before the island misses a critical debt payment deadline this Friday, matters will only get worse -- for Puerto Rico and for taxpayers," Senate Majority Leader Mitch McConnell, R-Ky. said before the vote.

In addition to creating the board, the bill would require the territory to create a fiscal plan and fund public pensions, which the Puerto Rico government has shorted by more than $40 billion.

Puerto Rican Gov. Alejandro Garcia Padilla said that with passage of the bill, "we are starting to take the island back from creditors and giving it to Puerto Ricans." He had warned that the territory would face multiple lawsuits if the bill were not approved, especially if the territory defaults Friday on general obligation bonds.

Those bonds are backed by the island's constitution, but Garcia has said the government has no money to honor that debt despite the implementation of new taxes and recent increases in utility rates.

"The emergency measures we have taken are unsustainable, harm our economy, reduce revenue and diminish our capacity to repay our debts," he said in an editorial published Wednesday. "Puerto Rico cannot endure any more austerity."

The legislation would block creditor lawsuits from being filed until February.

Treasury Secretary Jacob Lew visited Capitol Hill on Tuesday in a bid to win over some reluctant Democrats concerned that the board would be too powerful. Democrats also opposed a provision that would allow the island's government to lower the minimum wage for some younger workers.

Lew urged senators to vote for the bill even though it isn't perfect, saying that if the island defaults, the government may be forced to shut public transit, close a hospital or send police officers home.

"This economic crisis is a humanitarian disaster," said Senate Minority Leader Harry Reid, D-Nev., who backed the bill despite frustration that Democrats were blocked from making changes. "Medical services have diminished. Hospitals are unable to pay their bills. Puerto Rico's largest hospital has closed two of its wings, reduced the number of beds by nearly 25 percent and cut pay for all employees."

Others pushed against the bill. Sen. Bob Menendez, D-N.J., spent four hours on the Senate floor Tuesday evening, arguing that the bill adopts a colonial approach. He said ordinary Puerto Ricans would have little say over the control board and that the package favors hedge-fund creditors over island pensioners.

Sen. Bernie Sanders of Vermont agreed with Menendez.

"In my view, we need austerity not for the people of Puerto Rico, but for the billionaire Wall Street hedge fund managers who have exacerbated the crisis on the island," Sanders said on the Senate floor.

The legislation is needed because Puerto Rico cannot declare bankruptcy under federal law.

In the days before the vote, some bondholder groups worked to turn senators against the bill, arguing it doesn't sufficiently protect creditors and is tantamount to a bailout for the territory. Several labor unions also lobbied against the measure, arguing that a lower minimum wage could take money out of the Puerto Rican economy.

Information for this article was contributed by Danica Coto of The Associated Press.

A Section on 06/30/2016

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