1 00:00:00,240 --> 00:00:03,239 Speaker 1: Then eventually Puerto Rico would need for Congress to actually 2 00:00:03,279 --> 00:00:05,400 Speaker 1: right out at check. So the thing that Congress is 3 00:00:05,440 --> 00:00:10,160 Speaker 1: trying desperately to avoid may happen because Congress is trying 4 00:00:10,200 --> 00:00:22,160 Speaker 1: so hard to Hi and welcome back to Bloomberg Benchmark, 5 00:00:22,280 --> 00:00:26,240 Speaker 1: a show about the global economy. It's Thursday, May five. 6 00:00:26,760 --> 00:00:30,760 Speaker 1: I'm Daniel Moss, executive editor for Global Economics in New York. 7 00:00:31,280 --> 00:00:35,880 Speaker 1: Our Benchmark editor, Akio most exciting is back from her 8 00:00:35,920 --> 00:00:40,440 Speaker 1: three months in Tokyo. Who it's good to be back. 9 00:00:40,840 --> 00:00:43,640 Speaker 1: It's great to have you back, and it almost compensates 10 00:00:43,640 --> 00:00:45,680 Speaker 1: for Tori not being with us this I am no 11 00:00:45,800 --> 00:00:50,559 Speaker 1: replacement for Tori. Well, this week, a small Caribbean island 12 00:00:50,640 --> 00:00:53,680 Speaker 1: has been making big news at least in the world 13 00:00:53,760 --> 00:00:56,440 Speaker 1: of finance and economics. And hey, that's the only world 14 00:00:56,480 --> 00:00:59,640 Speaker 1: there is right over the past decade or so, the 15 00:00:59,800 --> 00:01:03,120 Speaker 1: UST territory of Puerto Rico, that's very important. We'll come 16 00:01:03,160 --> 00:01:06,520 Speaker 1: back to a second. The US territory of Puerto Rico 17 00:01:06,640 --> 00:01:10,040 Speaker 1: has been on an absolute debt, being racking up seventy 18 00:01:10,120 --> 00:01:13,560 Speaker 1: billion dollars worth of the stuff the context. That's more 19 00:01:13,600 --> 00:01:17,440 Speaker 1: than any U. S state government except for California. In 20 00:01:17,440 --> 00:01:21,039 Speaker 1: New York both huge, yet Puerto Rico is tiny. So 21 00:01:21,080 --> 00:01:24,560 Speaker 1: what's the problem? The times arrived for Puerto Rico to 22 00:01:24,600 --> 00:01:28,920 Speaker 1: start paying those borrowings and it can't right and as 23 00:01:28,959 --> 00:01:31,600 Speaker 1: the crisis here in Puerto Rico unfolds, I think a 24 00:01:31,600 --> 00:01:34,800 Speaker 1: lot of our listeners are, you know, asking themselves, how 25 00:01:34,880 --> 00:01:38,039 Speaker 1: does a default from this tiny island in the middle 26 00:01:38,040 --> 00:01:40,960 Speaker 1: of the Caribbean affect me? But there's a pretty good 27 00:01:41,040 --> 00:01:44,520 Speaker 1: chance that it does. If you're an American taxpayer, for example, 28 00:01:44,560 --> 00:01:48,000 Speaker 1: you should definitely be paying attention. If you own mutual 29 00:01:48,040 --> 00:01:50,920 Speaker 1: funds through maybe something like You're four one K, you 30 00:01:50,920 --> 00:01:54,360 Speaker 1: should be paying attention. And if you're fascinated by these 31 00:01:54,440 --> 00:01:58,120 Speaker 1: kinds of situations where governments borrow too much money and 32 00:01:58,120 --> 00:02:01,000 Speaker 1: Wall Street kind of ended up in neighbor billing them, 33 00:02:01,280 --> 00:02:03,920 Speaker 1: enabling a kind of behavior you should be paying attention to. 34 00:02:04,280 --> 00:02:06,240 Speaker 1: I think one of the first points you made was 35 00:02:06,280 --> 00:02:08,919 Speaker 1: a good one. It's important for everyone to remember Puerto 36 00:02:09,000 --> 00:02:13,280 Speaker 1: Ricans are US citizens. It is a US territory. So 37 00:02:13,360 --> 00:02:16,200 Speaker 1: today we'll talk about how the island got itself into 38 00:02:16,200 --> 00:02:20,080 Speaker 1: this situation, but more importantly, what happens from here and 39 00:02:20,200 --> 00:02:23,840 Speaker 1: to do that, you have our Bloomberg colleague Michelle Caski 40 00:02:23,960 --> 00:02:28,280 Speaker 1: joining us. Michelle covers the municipal bond market, and for 41 00:02:28,320 --> 00:02:31,600 Speaker 1: the past couple of years she's been focusing entirely on 42 00:02:31,760 --> 00:02:34,880 Speaker 1: Puerto Rican debt. That makes her the equivalent of our 43 00:02:34,960 --> 00:02:38,080 Speaker 1: chief Puerto Rico correspondent. It's so great to have you here. 44 00:02:38,280 --> 00:02:40,880 Speaker 1: Thanks for having me, Michelle. Halften. Do you get to 45 00:02:40,919 --> 00:02:44,760 Speaker 1: go out there on expensed reporting trips every few months? 46 00:02:45,040 --> 00:02:46,720 Speaker 1: It tends to be like a couple of times a year. 47 00:02:46,800 --> 00:02:50,720 Speaker 1: I'll head down there and talk with people and meet 48 00:02:50,760 --> 00:02:55,720 Speaker 1: with local officials and lawmakers and business folks, and it's 49 00:02:55,800 --> 00:02:58,760 Speaker 1: usually it's a lot of work, but it's also such 50 00:02:58,800 --> 00:03:01,880 Speaker 1: a beautiful place and food, so it's a fun time 51 00:03:01,919 --> 00:03:05,320 Speaker 1: as well. Amazing well, Michelle, Puerto Rico is a place 52 00:03:05,400 --> 00:03:10,480 Speaker 1: that we usually associate with, you know, beautiful beaches, coral reefs, rainforests, 53 00:03:10,639 --> 00:03:15,000 Speaker 1: fors in cocktails. Now all anyone is talking about is 54 00:03:15,160 --> 00:03:17,960 Speaker 1: it's that problem. How did we get here? Do you 55 00:03:17,960 --> 00:03:22,680 Speaker 1: want to start? Sure? It started around roughly around two thousand, 56 00:03:22,840 --> 00:03:27,120 Speaker 1: where the government down there started to borrow to help 57 00:03:27,120 --> 00:03:31,520 Speaker 1: balance its annual operating budget, and over the years this 58 00:03:31,600 --> 00:03:37,360 Speaker 1: has continued. Every single year from both political parties, different administrations. 59 00:03:37,400 --> 00:03:40,120 Speaker 1: This practice just kept on going and it didn't stop. 60 00:03:40,560 --> 00:03:43,720 Speaker 1: And so what we have today is a combined seventy 61 00:03:43,760 --> 00:03:47,040 Speaker 1: billion between the central government, their director at end, and 62 00:03:47,280 --> 00:03:50,200 Speaker 1: agencies on the island. Now that in itself is something 63 00:03:50,240 --> 00:03:53,000 Speaker 1: wrong with that. I mean, state governments in the mainland 64 00:03:53,040 --> 00:03:56,160 Speaker 1: do it all the time right to cover budget shortfalls, 65 00:03:56,280 --> 00:03:59,120 Speaker 1: as does the federal government. Well on the state level. 66 00:03:59,200 --> 00:04:01,440 Speaker 1: If they do it, it tends to be temporary, maybe 67 00:04:01,480 --> 00:04:04,240 Speaker 1: for a year or two during very during a downturn. 68 00:04:04,520 --> 00:04:07,720 Speaker 1: But for Puerto Rico, they made it basically a habit 69 00:04:08,000 --> 00:04:10,720 Speaker 1: that they couldn't break. So that's what's different here. That's 70 00:04:10,720 --> 00:04:13,120 Speaker 1: what's different. And part of the reason it's had to 71 00:04:13,520 --> 00:04:16,159 Speaker 1: borrow so much is because its economy has been in 72 00:04:16,200 --> 00:04:19,599 Speaker 1: recession for such a long time, right it has um 73 00:04:19,680 --> 00:04:25,080 Speaker 1: back in Congress decided to start phasing out some federal 74 00:04:25,120 --> 00:04:29,640 Speaker 1: tax breaks that larger manufacturers on the island were receiving. 75 00:04:29,760 --> 00:04:33,720 Speaker 1: These are namely pharmaceuticals, and that phased out in roughly 76 00:04:33,760 --> 00:04:36,720 Speaker 1: around two thousand and six, and two thousand and six 77 00:04:36,800 --> 00:04:40,080 Speaker 1: is when really the downturn started. And for every year 78 00:04:40,120 --> 00:04:43,920 Speaker 1: but one uh their economy has contracted and they're now 79 00:04:43,960 --> 00:04:48,640 Speaker 1: they're they're unemployment rate is almost twelve. Well. One of 80 00:04:48,680 --> 00:04:51,760 Speaker 1: the ways also that Puerto Rico was able to rack 81 00:04:51,880 --> 00:04:54,840 Speaker 1: up this seventy billion is their debt over the years 82 00:04:54,839 --> 00:04:58,640 Speaker 1: has been very attractive to the municipal bond market. It's 83 00:04:59,240 --> 00:05:03,320 Speaker 1: tax exempt for anyone living in the US, So whether 84 00:05:03,400 --> 00:05:08,360 Speaker 1: you're a resident of Wisconsin or New York or or Colorado, 85 00:05:08,800 --> 00:05:11,279 Speaker 1: you can buy Puerto Rico bonds and they will be 86 00:05:11,320 --> 00:05:14,680 Speaker 1: tax exempt for you. And these are federal, state and 87 00:05:14,800 --> 00:05:20,760 Speaker 1: local taxes. Definitely, that's yeah the phrase that we've been hearing. Definitely, 88 00:05:20,960 --> 00:05:23,640 Speaker 1: and their yields were higher relative to what you would 89 00:05:23,680 --> 00:05:28,120 Speaker 1: see for other municipal bonds, state level municipal bonds. So yes, 90 00:05:28,200 --> 00:05:31,000 Speaker 1: people knew it was a risky or risky or bond 91 00:05:31,040 --> 00:05:34,200 Speaker 1: to buy, but they felt that they were being compensated 92 00:05:34,240 --> 00:05:37,960 Speaker 1: and they felt secure that Puerto Rico would never default 93 00:05:38,080 --> 00:05:42,000 Speaker 1: on in particular, it's direct debt um it's general obligations 94 00:05:42,400 --> 00:05:46,839 Speaker 1: which are guaranteed by the by the Islands Commonwealth for repayment. 95 00:05:47,440 --> 00:05:50,640 Speaker 1: So the muni market was there, definitely there to lend 96 00:05:50,640 --> 00:05:55,159 Speaker 1: the money and Puerto Rico, instead of learning to live 97 00:05:55,160 --> 00:05:59,080 Speaker 1: within its means continue to use Amuni market in order 98 00:05:59,120 --> 00:06:01,680 Speaker 1: to keep things afloat. So how much of this can 99 00:06:01,760 --> 00:06:06,960 Speaker 1: be traced to the fuzzy status that Puerto Rico enjoys. 100 00:06:07,000 --> 00:06:10,680 Speaker 1: And by fuzzy, I mean it's part of the United States, 101 00:06:10,680 --> 00:06:16,279 Speaker 1: it's a United States territory. It's residents are US citizens. 102 00:06:17,120 --> 00:06:19,440 Speaker 1: They don't have to stay in Puerto Rico. They can 103 00:06:19,480 --> 00:06:23,680 Speaker 1: go to California, Florida, New York, whatever. You can even 104 00:06:23,760 --> 00:06:28,400 Speaker 1: vote in a Republican and Democratic presidential primary in Puerto Rico. 105 00:06:29,120 --> 00:06:34,839 Speaker 1: But yet it has certain disadvantages because it's not treated 106 00:06:34,839 --> 00:06:39,560 Speaker 1: the same way that Indiana or Oregon or Mississippi are treated. Right, 107 00:06:39,760 --> 00:06:44,640 Speaker 1: they have no voting members of Congress, they have no senators. 108 00:06:44,680 --> 00:06:48,600 Speaker 1: So it's neither fish nor foul. To what extent has 109 00:06:48,760 --> 00:06:51,560 Speaker 1: does that lie at the root of the problems It's 110 00:06:51,560 --> 00:06:53,839 Speaker 1: got now for Puerto Rico to work its way out 111 00:06:53,839 --> 00:06:57,039 Speaker 1: of this. One tool that it doesn't have, which states have? 112 00:06:57,720 --> 00:07:01,120 Speaker 1: States have the ability to declare after nine or municipal 113 00:07:01,200 --> 00:07:05,640 Speaker 1: bankruptcy u S states. Although the states themselves cannot declare bankruptcy, 114 00:07:05,800 --> 00:07:09,520 Speaker 1: their entities can, So, for instance, Detroit declare bankruptcy, but 115 00:07:09,520 --> 00:07:12,400 Speaker 1: the state of Michigan would not be able to declare bankruptcy. 116 00:07:12,480 --> 00:07:17,080 Speaker 1: On the island of Puerto Rico, no municipality or utility 117 00:07:17,320 --> 00:07:19,880 Speaker 1: can declare bankruptcy. So they don't have a way to 118 00:07:20,040 --> 00:07:22,880 Speaker 1: work out their debt. They don't have a legal framework 119 00:07:23,360 --> 00:07:26,760 Speaker 1: to do that. They can default, but but then then, 120 00:07:26,800 --> 00:07:29,880 Speaker 1: but then it's just all these legal suits. So what 121 00:07:30,120 --> 00:07:32,120 Speaker 1: Puerto Rico is trying to do now is to get 122 00:07:32,200 --> 00:07:36,680 Speaker 1: Congress to either allowing Chapter nine, which looks like now 123 00:07:36,720 --> 00:07:39,560 Speaker 1: they're not going to get, or for Congress to create 124 00:07:39,680 --> 00:07:43,360 Speaker 1: a legal framework so Puerto Rico can restructure its debts 125 00:07:43,880 --> 00:07:47,400 Speaker 1: and move on and get past this. Well, that brings 126 00:07:47,440 --> 00:07:50,800 Speaker 1: us to where we are now. It's economy is contracting 127 00:07:50,920 --> 00:07:54,760 Speaker 1: and contracting at a very significant right. The poverty rate 128 00:07:54,960 --> 00:07:58,280 Speaker 1: is forty five percent now, that's about three times the 129 00:07:58,400 --> 00:08:02,520 Speaker 1: level on the mainland. And it's residents who are US 130 00:08:02,560 --> 00:08:06,480 Speaker 1: citizens aren't obliged to stick around Puerto Rico and they're not, 131 00:08:06,840 --> 00:08:10,120 Speaker 1: so there's an ever shrinking tax base there as well. Yeah, 132 00:08:10,120 --> 00:08:12,360 Speaker 1: and Puerto Rico has known since last year that they 133 00:08:12,360 --> 00:08:14,560 Speaker 1: were in trouble, and they turned to Washington for help. 134 00:08:14,680 --> 00:08:18,080 Speaker 1: Puerto Rico missed a four hundred million dollar payment on 135 00:08:18,280 --> 00:08:21,600 Speaker 1: debt that matured on Sunday, May one, and that could 136 00:08:21,720 --> 00:08:25,240 Speaker 1: lead to larger and more consequential defaults. We're going to 137 00:08:25,320 --> 00:08:27,920 Speaker 1: take a quick break and when we get back, we'll 138 00:08:27,960 --> 00:08:31,480 Speaker 1: talk about where we go from here, what the options are, 139 00:08:31,840 --> 00:08:51,520 Speaker 1: and what the implications could be. Puerto Rico faces a 140 00:08:51,559 --> 00:08:56,760 Speaker 1: cascade of default starting in July unless Congress passes legislation 141 00:08:56,840 --> 00:09:01,320 Speaker 1: that helps the commonwealth restructure its debt. Now that sound scary, 142 00:09:01,400 --> 00:09:05,000 Speaker 1: Michelle walk us through this. Part of the problem is 143 00:09:05,040 --> 00:09:08,360 Speaker 1: that Congress now is under a deadline because Puerto Rico 144 00:09:08,760 --> 00:09:12,000 Speaker 1: and its agencies oh two billion dollars on July one, 145 00:09:12,360 --> 00:09:15,520 Speaker 1: and of that about eight hundred million is for their 146 00:09:15,520 --> 00:09:20,600 Speaker 1: General Obligation debt. Now, the default that happened on May one, 147 00:09:20,720 --> 00:09:24,480 Speaker 1: that was the Government Development Bank that isn't direct debt 148 00:09:24,600 --> 00:09:28,160 Speaker 1: of the commonwealth, so it was their largest default so far. 149 00:09:28,559 --> 00:09:32,120 Speaker 1: But what would really change the game here is if 150 00:09:32,160 --> 00:09:35,200 Speaker 1: they were to default on their General Obligation or GEO 151 00:09:35,360 --> 00:09:41,040 Speaker 1: debt on July one. Those bonds have the strongest legal pledges, 152 00:09:41,160 --> 00:09:45,040 Speaker 1: so investors, you really could see a lot more lawsuits 153 00:09:45,120 --> 00:09:47,920 Speaker 1: come July one if there's a default on that debt right, 154 00:09:48,520 --> 00:09:50,560 Speaker 1: and I think none of us would want to rely 155 00:09:50,840 --> 00:09:54,040 Speaker 1: on Congress for a speedy solution here. But I think 156 00:09:54,080 --> 00:09:56,880 Speaker 1: a lot of our listeners are wondering why Puerto Rico 157 00:09:56,960 --> 00:10:00,559 Speaker 1: even needs Washington for this. Why can't they just declare 158 00:10:00,559 --> 00:10:02,960 Speaker 1: bankruptcy like Detroit? Why can't they go to the I 159 00:10:03,160 --> 00:10:05,720 Speaker 1: m F? UM like Grease did you went into this 160 00:10:05,800 --> 00:10:08,920 Speaker 1: a little bit earlier? But tell us now? Sure they 161 00:10:09,000 --> 00:10:11,440 Speaker 1: can't go to the I m F because they're part 162 00:10:11,440 --> 00:10:15,319 Speaker 1: of the United States government, and um, this needs to 163 00:10:15,360 --> 00:10:19,920 Speaker 1: be worked out within our own country. And unfortunately, without 164 00:10:20,000 --> 00:10:24,920 Speaker 1: access to municipal bankruptcy, Puerto Rico doesn't have a tried 165 00:10:25,000 --> 00:10:30,000 Speaker 1: and true method for working out a debt restructuring And 166 00:10:30,280 --> 00:10:33,439 Speaker 1: so now it's up to Congress, and only Congress can 167 00:10:33,679 --> 00:10:38,720 Speaker 1: can enact and pass bankruptcy type legislation. So what Congress 168 00:10:38,800 --> 00:10:42,120 Speaker 1: is doing now is a bill. The bill would actually 169 00:10:42,160 --> 00:10:45,760 Speaker 1: allow US territories to It gives it gives them a 170 00:10:45,800 --> 00:10:51,000 Speaker 1: way to negotiate with investors and reduce debtloads. And why 171 00:10:51,000 --> 00:10:53,880 Speaker 1: can't they go to that IMF because Puerto Rico is 172 00:10:53,960 --> 00:10:57,160 Speaker 1: part of the US government. So it gets worked out 173 00:10:57,200 --> 00:11:00,840 Speaker 1: within our own country. It's not its only sovereign, sovereign country. 174 00:11:01,000 --> 00:11:04,840 Speaker 1: So again we've got this neither fish nor foul status 175 00:11:04,880 --> 00:11:07,440 Speaker 1: that gets in the way. Puerto Rico is part of 176 00:11:07,480 --> 00:11:10,559 Speaker 1: the US. It's part of the country, but it is 177 00:11:10,600 --> 00:11:13,280 Speaker 1: not a state in the same way that New York 178 00:11:13,480 --> 00:11:17,480 Speaker 1: or Texas or California is. Ultimately, when this is sorted out, 179 00:11:17,520 --> 00:11:19,680 Speaker 1: when we write the history of it in twenty or 180 00:11:19,720 --> 00:11:22,960 Speaker 1: thirty years time, would this be seen as a seminal 181 00:11:23,080 --> 00:11:28,880 Speaker 1: event that pushed Puerto Rico further towards statehood or had 182 00:11:28,880 --> 00:11:31,920 Speaker 1: the opposite effect, pushed it away. That's really hard to 183 00:11:32,000 --> 00:11:34,679 Speaker 1: say now because right now people are focused on just 184 00:11:35,160 --> 00:11:40,439 Speaker 1: resolving Puerto Rico's financial mess and the idea of should 185 00:11:40,480 --> 00:11:44,480 Speaker 1: Puerto Rico become a state, should it remain a commonwealth 186 00:11:44,520 --> 00:11:48,240 Speaker 1: maybe with some tweaks and changes it That really isn't 187 00:11:48,360 --> 00:11:51,439 Speaker 1: the driving force here. What people are most focused on 188 00:11:51,600 --> 00:11:54,800 Speaker 1: is the immediate problem, which is is to get Puerto 189 00:11:54,920 --> 00:11:58,080 Speaker 1: Rico's finances back on track to get their economy growing again. 190 00:11:58,240 --> 00:12:01,200 Speaker 1: Oh sure, I mean sometimes the long time consequences of 191 00:12:01,240 --> 00:12:03,400 Speaker 1: things aren't apparent at the time and we look back 192 00:12:03,440 --> 00:12:05,920 Speaker 1: and we say, gosh, well that was a real turning point. 193 00:12:06,080 --> 00:12:08,520 Speaker 1: I think the turning point for Puerto Rico is more 194 00:12:08,559 --> 00:12:13,440 Speaker 1: of they need to make this transition to having more 195 00:12:13,440 --> 00:12:17,720 Speaker 1: more jobs created through the private sector rather than government 196 00:12:17,800 --> 00:12:19,920 Speaker 1: jobs on the island. The government as of now is 197 00:12:19,960 --> 00:12:23,440 Speaker 1: the is the largest employer on the island and so 198 00:12:23,520 --> 00:12:25,400 Speaker 1: for that to change and for there to be more 199 00:12:25,400 --> 00:12:28,320 Speaker 1: public sector jobs would really help them out a lot 200 00:12:28,440 --> 00:12:31,760 Speaker 1: and help their economy grow. And so that's sort of 201 00:12:31,800 --> 00:12:34,920 Speaker 1: the transition they need to make. And Congress is not 202 00:12:35,000 --> 00:12:39,199 Speaker 1: the only DC institution with a finger in this pie. 203 00:12:39,320 --> 00:12:42,839 Speaker 1: The Supreme Court is involved as well. Tell us about that. Yeah, 204 00:12:42,880 --> 00:12:46,480 Speaker 1: that's a whole another story within the largest story. And 205 00:12:46,760 --> 00:12:50,319 Speaker 1: about two years ago, Puerto Rico passed its own local 206 00:12:50,440 --> 00:12:56,040 Speaker 1: restructuring law which would allow the island to restructure namely 207 00:12:56,559 --> 00:13:01,120 Speaker 1: utility debt, so their electric company dead or water utility debt. 208 00:13:01,360 --> 00:13:04,440 Speaker 1: If any of those types of agencies wanted to reduce 209 00:13:04,480 --> 00:13:08,640 Speaker 1: their debtload, they could through this local law that passed. 210 00:13:08,720 --> 00:13:12,760 Speaker 1: But it was immediately challenged by some investors and a judge, 211 00:13:13,080 --> 00:13:15,240 Speaker 1: federal judge on the island did throw it out. Are 212 00:13:15,280 --> 00:13:17,800 Speaker 1: these investors mostly you know kind of people are in 213 00:13:17,800 --> 00:13:19,760 Speaker 1: Wall Street? Are they hedge funds? And things like that 214 00:13:19,840 --> 00:13:22,680 Speaker 1: it's a combo of mutual funds and also hed a 215 00:13:22,800 --> 00:13:26,920 Speaker 1: hedge fund. And Puerto Rico kept appealing this and it 216 00:13:27,000 --> 00:13:29,400 Speaker 1: made its its way all the way to the Supreme Court. 217 00:13:29,480 --> 00:13:33,000 Speaker 1: Earlier this year, the Supreme Court had a hearing on 218 00:13:33,000 --> 00:13:36,559 Speaker 1: on this case. And we're anticipating the Supreme Court to 219 00:13:36,679 --> 00:13:40,480 Speaker 1: rule by the end of June, and they could conceivably 220 00:13:40,559 --> 00:13:43,800 Speaker 1: bring back to life this local debt restructuring law, which 221 00:13:43,800 --> 00:13:47,760 Speaker 1: would put tools again in the hands of of Puerto Rico. 222 00:13:47,960 --> 00:13:50,280 Speaker 1: Do you think Congress is going to punt and white 223 00:13:50,280 --> 00:13:52,520 Speaker 1: for the court. Let's see if let's say we have 224 00:13:52,640 --> 00:13:56,959 Speaker 1: through June. If if Supreme Court makes the ruling, we're 225 00:13:56,960 --> 00:14:01,040 Speaker 1: already in May, maybe they could. But but members are 226 00:14:01,600 --> 00:14:05,200 Speaker 1: are getting back from recess on May ten, and the 227 00:14:05,200 --> 00:14:09,680 Speaker 1: there's a House Natural Resources Resources Committee, which is they're 228 00:14:09,720 --> 00:14:13,040 Speaker 1: the ones drafting the Puerto Rico bill. They say that 229 00:14:13,200 --> 00:14:15,480 Speaker 1: next week there will be a fresh version of the 230 00:14:15,520 --> 00:14:18,480 Speaker 1: bill ready to go for for folks to work on. 231 00:14:19,080 --> 00:14:21,920 Speaker 1: So it is possible that Congress is just planning to 232 00:14:22,040 --> 00:14:26,040 Speaker 1: keep moving forward regardless of of what the Supreme Court does. 233 00:14:26,600 --> 00:14:29,760 Speaker 1: Quickly walk us through the best and worst case scenarios. 234 00:14:29,800 --> 00:14:32,680 Speaker 1: For how this plays out, sure, I think worst case 235 00:14:32,720 --> 00:14:36,440 Speaker 1: scenario is that Congress is unable to pass legislation. They 236 00:14:36,560 --> 00:14:40,440 Speaker 1: can't get enough votes for a bipartisan bill to really, 237 00:14:40,520 --> 00:14:42,760 Speaker 1: you know, to get this to the President's desk for 238 00:14:42,840 --> 00:14:46,520 Speaker 1: his signature, to allow Puerto Rico to the clare bankruptcy well, 239 00:14:46,520 --> 00:14:49,160 Speaker 1: to allow them to give them that legal framework to 240 00:14:49,320 --> 00:14:52,000 Speaker 1: work through their debts. So if Puerto Rico doesn't have 241 00:14:52,040 --> 00:14:56,120 Speaker 1: that option, then they're on their own, and that means 242 00:14:56,280 --> 00:15:00,640 Speaker 1: they continue to there will be more defaults, which would 243 00:15:00,680 --> 00:15:05,840 Speaker 1: in turn means more legal suits and legal battles, which 244 00:15:05,840 --> 00:15:08,320 Speaker 1: will take a lot of time and energy away from 245 00:15:08,360 --> 00:15:12,680 Speaker 1: Puerto Rico from governing itself and and um and looking 246 00:15:12,680 --> 00:15:15,720 Speaker 1: out for the safety and welfare of its citizens. And 247 00:15:16,360 --> 00:15:20,480 Speaker 1: you know, if Puerto Rico can't declare bankruptcy, obviously its 248 00:15:20,480 --> 00:15:22,400 Speaker 1: economy is going to get a lot worse. We could 249 00:15:22,440 --> 00:15:26,720 Speaker 1: see a real decline in living conditions. It's kind of ironic, 250 00:15:27,040 --> 00:15:31,240 Speaker 1: um that this would end up probably requiring a federal 251 00:15:31,280 --> 00:15:34,640 Speaker 1: government bail out in this case, and American taxpayers would 252 00:15:34,640 --> 00:15:37,040 Speaker 1: be on the line for that. So there's some lawmakers 253 00:15:37,040 --> 00:15:39,920 Speaker 1: who are saying, look, if Congress doesn't get a bill 254 00:15:39,960 --> 00:15:43,040 Speaker 1: passed now. This bill passed now, which currently does not 255 00:15:43,280 --> 00:15:49,680 Speaker 1: specifically allocate funds to Puerto Rico, then eventually Puerto Rico 256 00:15:49,760 --> 00:15:53,320 Speaker 1: would need such such help and actually for Congress to 257 00:15:53,320 --> 00:15:55,600 Speaker 1: actually right out a check. So the thing that Congress 258 00:15:55,680 --> 00:16:00,680 Speaker 1: is trying desperately to avoid might happen be because Congress 259 00:16:00,720 --> 00:16:06,000 Speaker 1: is trying so hard to If if they're not able 260 00:16:06,040 --> 00:16:09,160 Speaker 1: to get this bill through, then then Puerto Rico is 261 00:16:09,160 --> 00:16:13,080 Speaker 1: definitely more at risk of needing actual, real cash from 262 00:16:13,120 --> 00:16:16,600 Speaker 1: from the federal government. And what's the best case scenario. 263 00:16:17,080 --> 00:16:20,120 Speaker 1: Best case scenario is that Congress actually does get a 264 00:16:20,160 --> 00:16:23,640 Speaker 1: bill passed that everyone can live with and that actually 265 00:16:23,680 --> 00:16:27,320 Speaker 1: helps Puerto Rico and the investors all come to the 266 00:16:27,360 --> 00:16:32,520 Speaker 1: table agree on certain haircuts and reduction of debt, maybe 267 00:16:32,560 --> 00:16:37,640 Speaker 1: pushing out maturities, and and that would that would allow 268 00:16:37,680 --> 00:16:41,280 Speaker 1: the Commonwealth to be able to okay, get on track 269 00:16:41,360 --> 00:16:45,320 Speaker 1: with having this a debt plan, to repay its creditors 270 00:16:45,360 --> 00:16:48,680 Speaker 1: and at the same time rebuild its economy and really 271 00:16:48,680 --> 00:16:53,200 Speaker 1: get that economy growing again. Now, that'll that'll take time. 272 00:16:54,240 --> 00:16:56,680 Speaker 1: That that would still take time, but at least they 273 00:16:56,720 --> 00:16:59,360 Speaker 1: would be moving forward instead of just staying in this 274 00:16:59,400 --> 00:17:01,520 Speaker 1: one spot which they are now. Yeah, well I have 275 00:17:01,600 --> 00:17:04,879 Speaker 1: my fingers cressed. Michelle, thanks so much for joining us today. 276 00:17:05,000 --> 00:17:07,960 Speaker 1: Thanks for having me, and if you ever need a 277 00:17:08,000 --> 00:17:12,200 Speaker 1: travel buddy for a reporting trip, I am definitely game. Louisa, 278 00:17:12,520 --> 00:17:15,280 Speaker 1: you just go back from three months in Tokyore. That 279 00:17:15,280 --> 00:17:19,000 Speaker 1: sounds great. Need this Miles Benchburg will be back again 280 00:17:19,080 --> 00:17:21,320 Speaker 1: next week and then until then. You can find us 281 00:17:21,320 --> 00:17:24,359 Speaker 1: on the Bloomberg terminal and on Bloomberg dot com, also 282 00:17:24,400 --> 00:17:27,800 Speaker 1: on iTunes, pocket cast, and Stitcher. Why are there? Please 283 00:17:27,840 --> 00:17:30,320 Speaker 1: take a minute to rate and review our show. Some 284 00:17:30,359 --> 00:17:32,639 Speaker 1: more listeners can find us and let us know what 285 00:17:32,680 --> 00:17:34,440 Speaker 1: you thought of this show. You can talk to us 286 00:17:34,480 --> 00:17:37,640 Speaker 1: and follow us on Twitter at Akito seven and at 287 00:17:37,720 --> 00:17:41,280 Speaker 1: Daniel mass TC, and our guest is on Twitter at 288 00:17:41,760 --> 00:17:45,639 Speaker 1: Michelle Caski. We'll see you next week. Thank you. I 289 00:17:45,760 --> 00:17:48,919 Speaker 1: love this conversation. Do come back. Thank you, thanks for 290 00:17:48,920 --> 00:17:49,320 Speaker 1: having me.