President Barack Obama signed the House’s Puerto Rico debt bill that places a federally appointed control board in charge of the island’s finances Thursday– just ahead of a $2 billion debt payment the territory says it is unable to pay on July 1.
The Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) was passed in the Senate Wednesday and the House earlier this month. It gives the board the de facto authority to sell government assets, consolidate agencies, and fire government workers in order to get the country’s books in order. It also retroactively puts a stay on any litigation the island faces from bondholders until Puerto Rico is fiscally solvent.
The bill’s architects said it’s the best solution to help the country without a bailout.
Puerto Rico currently faces a $72 billion debt burden and defaulted on a major payment in May.
Secretary of the Treasury Jack Lew has warned if action was not taken, the island could have faced a full-on humanitarian crisis, potentially leading to additional school closures, ill-equipped and understaffed hospitals, and the inability to fund other necessary services.
Conservatives have attacked the bill for not fixing the deeper problems that have put Puerto Rico into debt in the first place, and progressives have criticized the bill for a instituting “colonialist” control board.
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