The Obama administration has no plans to bail Puerto Rico out of its financial crisis, the White House said on Monday.
“There is no one in the administration or in D.C. that is contemplating a federal bailout of Puerto Rico,” White House spokesman Josh Earnest said.
Puerto Rico’s governor on Sunday said that the island nation couldn’t pay back $72 billion in debt. Nevertheless, Earnest said that the U.S. is only offering its Caribbean territory non-financial assistance.
Earnest said there is an intergovernmental Puerto Rico task force offering its expertise to the local government. For example, the Energy Department is helping local officials “lower their electricity costs and reform the island’s power authority.” The task force is also helping local authorities get “access to all available and existing federal resources,” he said, noting that the Transportation Department identified more than $750 million in toll credits that the island could tap to fund infrastructure projects, which would also create jobs.
The administration first used the task-force “template” to help the city of Detroit, Earnest said, adding that it is the administration’s preferred method for handling municipal and state governmental insolvencies.
Earnest did say the administration is urging Congress to consider legislation that would extend municipal bankruptcy laws to Puerto Rico, such as Chapter 9, which Detroit used for its turnaround.
“[T]here are strong merits to having an orderly mechanism for Puerto Rico to manage the financial challenges of its public corporations, if needed,” Earnest said. “And so we’ve urged Congress to take a close look at this particular issue.”
When asked about Greece’s severe economic crisis, Earnest had a similar reaction, and said the U.S. was taking no direct action. Greece is struggling to make a $1.8 billion payment on its debt by Tuesday, and may end up defaulting on that debt.
Earnest said President Obama has twice spoken to German Chancellor Angela Merkel and French President Francois Hollande about the subject, but said that it’s a situation for Europe to resolve.
“It’s important for the parties sitting around the negotiating table to develop a package of reforms and financing that would allow Greece to return to growth and debt sustainability within the Eurozone,” Earnest said.
He also said that the federal government’s exposure to Greece’s economic instability “is small” and “not a direct threat to our banking system.”
