Home > posts > Puerto Rico: Rule of Law and Fidelity of Contract, Not Bankruptcy
August 24th, 2015 11:44 am
Puerto Rico: Rule of Law and Fidelity of Contract, Not Bankruptcy
Posted by Print

At CFIF, we stand for the rule of law and with American taxpayers, investors, savers and seniors against the destructive proposal floated by some in Washington, D.C. of changing longstanding law to allow Puerto Rico to declare bankruptcy.

Accordingly, we’re happy to see that in her weekly “The Americas” column in today’s Wall Street Journal, Mary Anastasia O’Grady highlights the way in which pro-bankruptcy advocates undermine the rule of law by disregarding contractual property rights:

The governor, and the legislature which his party controls, made a conscious decision when they approved the budget not to put the funds aside for that payment.  ‘They are explicitly legislating default because they think that puts the creditors on their knees.  Then the creditors will have to make concessions…  Creditors have protections [in bond contracts],’ he adds, ‘and a court of law is going to enforce those agreements.’  Securitized bonds provide bondholders with a property right to a designated cash-flow stream.”

As we specified previously, better alternatives exist:

For example, the Puerto Rican government could actually pay the hundreds of millions of dollars it owes to the power authority (PREPA), or Congress could impose greater oversight over Puerto Rico.  Remember, a financial control board was effective in reforming the District of Columbia’s finances 20 years ago, accomplished on a bipartisan basis by a Republican Congress and a Democratic president.  Ultimately, that might be the way to put in place comprehensive, structural reforms so that Puerto Rico never again spirals out of control.”

The solution is adherence to the rule of law and the enforcement of mutually bargained-for contract, not yet another bailout imposed upon American taxpayers.

Comments are closed.