The Obama administration has asked Congress to grant bankruptcy protection to Puerto Rico in an attempt to restructure its $72 billion debt. The proposal would allow Puerto Rico and other territories to seek financial restructuring under the supervision of a federal bankruptcy court.
The administration went a step further by asking for new oversight of Puerto Rico’s finances, restructuring the territories Medicaid funding system and extending the earned income tax credit to Puerto Rican taxpayers.
“The administration has no plans to provide a bailout to Puerto Rico,” White House press secretary Josh Earnest said.
“What we have said is that the administration has an interest in working with officials inside Puerto Rico to help them deal with the significant financial challenges that are facing the government there,” he continued.
Governor Alejandro Garcia Padilla has been trying to slash expenditures and restructure Puerto Rico’s debt since taking office three years ago. However, in July he was forced to announce that it was not enough and the government would begin defaulting on its massive debt.
The inability to repay that debt is a big threat to American investors, who may not realize how much money they have tied up in the island’s economy.
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