Key Republican: Congress will examine bankruptcy for states

A key GOP lawmaker said this weekend said that Congress will examine the possibility of bankruptcy for states, though he expressed wariness of that option.

Rep. Patrick McHenry (R-N.C.), the chairman of a key Oversight and Government Reform subcommittee examining bailouts of public and private programs, said that bankruptcy options for states would be discussed by lawmakers.

“I’m not convinced it’s the right approach, but I think that it’s something we’re going to have to discuss and better understand,” McHenry said on C-SPAN’s “Newsmakers” in an episode airing Sunday.

“I’m not convinced it’s the right answer. However, I don’t think there’s been enough research done on whether or not bankruptcy would be costly to the states, in terms of states that are in fine fiscal shape — whether or not they’re going to pay more lending costs because this is on the books,” he said.

McHenry’s comments suggest that state bankruptcy may still be a viable option under consideration by Congress, despite insistence by House Majority Leader Eric Cantor (R-Va.) earlier this week that the GOP House would not consider bankruptcy, which he derided as a “bailout” for states.

Republicans have expressed split opinions over whether to create a new chapter of bankruptcy law to allow states, saddled down by existing debts and future pension obligations, to enter court protection to reorganize their finances. Former House Speaker Newt Gingrich (R) has been a vocal proponent of this option, and wrote with former Florida Gov. Jeb Bush (R) in favor of that option earlier this week.

A state bankruptcy bill could pose difficult political hurdles for lawmakers, who are skeptical of projecting an image of doling out more bailouts, especially to states perceived of mismanaging their finances.

“I do know, and I can say this for certain, that this Congress and the majority that I have the pleasure to serve in, in the U.S. House, has no appetite for a bailout of any kind for the states,” McHenry said, mindful of those politics. “That’s the only thing, going into these hearings, we know the answer already.”