Disaster for Puerto Rico As First Circuit Court Invalidates Control Board

An endless crisis

Puerto Rico Hoarding Supplies

The already tortuously slow debt renegotiation process in Puerto Rico has just crashed into a wall:

A federal control board overseeing Puerto Rico’s finances says it will ask the U.S. Supreme Court to review a recent ruling that found the board’s members were illegally appointed.

The board said Thursday it also will ask for a stay of the federal appeals court ruling pending Supreme Court consideration.

The board said a majority of its board members voted to appeal the ruling and said all seven have been legally appointed.

The appeals court had said its decision would not invalidate any of the board’s actions and gives U.S. President Donald Trump and the Senate 90 days to decide whether to keep the board members or appoint new ones.

As usual, media reporting and analysis on Puerto Rico is very poor, so there has been little discussion of just what the dismissal of the control board means in the mainstream press.

The job of the control board is to either renegotiate Puerto Rico’s debt with its bondholders, or else to steer the territory through a bankruptcy process if those negotiations fail. The Puerto Rico government cannot do this by itself, as it is not legally permitted to seek bankruptcy relief. The law passed by Congress to allow Puerto Rico to seek relief, PROMESA, establishes that this process must be done by the control board.

With all the control board’s appointees being dismissed, the First Circuit Court has brought that process to a screeching halt. The control board is currently appealing the First Circuit court’s ruling to the US Supreme Court. However, any such appeal will take months to be heard. During this waiting period, the control board would not be able to function effectively. No one will talk to them seriously while their legal status remains in limbo.

The other option is to put the board through a Senate confirmation process. The chances of anyone being appointed to the board within 90 days are nonexistent. First, the Senate has been playing games for years with Trump and blacking his appointments in an effort to cripple the administration. Both Democrats and Republicans are united together on blocking Trump appointees.

Second, Puerto Rico is an “election hotspot,” because the Democrats are hoping the Puerto Rico vote will push the Democrat nominee (most likely Kamala) over the threshold of victory in Florida

Trump has done little to fight back against the perception created by the media that he “hates” Puerto Rico and is preventing aid from reaching the island due to racist hatred. Because of his weird refusal to go after Puerto Rico’s corrupt government either legally or rhetorically, he is very vulnerable on the issue. If he won’t try to persuade Puerto Ricans that their local government bears primary responsibility for the state of affairs on the island, he leaves the field to the Democrats.

It’s therefore in the Democrats interests to ensure only left-wing extremists are allowed to sit on the board, or alternatively, block any new board from being appointed at all in order to keep Puerto Rico in a perpetual state of crisis. The last thing the Democrats want are serious people on the control board who will try to actually solve the island’s problems.

If the First Circuit Court’s ruling is allowed to stand, the entire debt workout process will be at a halt for at least a year, and if the board loses its Supreme Court appeal, we can expect no action until after the 2020 election (and that’s only if Kamala Harris wins, as the Republicans and Democrats are likely to continue blocking Trump nominees).

Furthermore, while the First Circuit court said the control board’s actions weren’t invalidated by their ruling, that isn’t going to stop further lawsuits challenging whether those actions can be allowed to stand given that the First Circuit ruled the officers weren’t legally appointed.

I cannot understand what the bondholders were thinking when they brought this lawsuit against the control board. What they’ve done is paralyze the debt workout process for months, or likely, years. If a left wing government is elected in 2020, President Harris will probably forgive Puerto Rico’s debt outright, and then no one is going to get ANY money… except for the Democrats, that is.

What a mess.


Written by Doomberg

I am Doomberg, one of the original founding members of Sparta Report, and have been here since the beginning. I am an insatiable news junkie and enjoy reading and writing about the US territories, the Caribbean, video games, smartphones, and of course conservative politics in general.

I also really like pictures of gas stations and claim full responsibility for the silly gas station motif. I'm presently trapped behind enemy lines in a blue state with no hope of escape! The ride never ends.


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