Hatch presses Lew on Puerto Rico

A top Senate Republican is calling on the Treasury Department to detail any and all federal assistance the administration is providing to Puerto Rico as it grapples with a debt crisis.

Senate Finance Committee Chairman Orrin Hatch (R-Utah) sent a detailed list of questions to Treasury Secretary Jack Lew Friday, delving into what sort of federal response the government could provide to the island commonwealth.

{mosads}Suffering an economic slowdown and a massive debt burden, Puerto Rico announced recently that it would not be able to pay back all the money it owes and is now pushing lawmakers for a helping hand. Lawmakers in both parties, as well as the Obama administration, have ruled out a direct bailout, but Democrats are exploring granting Puerto Rico the ability to declare bankruptcy.

Republicans have been slow to embrace the idea, however, as many have argued Congress should not rewrite bankruptcy laws to let Puerto Rico escape already outstanding debt, while criticizing the island for its fiscal mismanagement.

In his letter, Hatch did not take a stance but instead said he hoped that he shared two opinions with the administration: that there should be no bailout and that an orderly resolution to the problem is better than a chaotic one.

The White House has flatly rejected a bailout for Puerto Rico and instead pushed Congress to revisit the bankruptcy code for a way to provide some relief. Hatch asked in his letter if the White House support the current popular idea, which would be allowing Puerto Rico to permit its subsidiaries to declare bankruptcy under Chapter 9 of the code, just as states and municipalities currently can.

After Senate Democrats unveiled legislation to do just that, the Treasury urged lawmakers to take action. A Treasury spokesperson responded to the bill’s introduction by saying the department sees strong merits in providing an “orderly mechanism” to help Puerto Rico gets its finances in order.

“We are very pleased with the introduction of Senate legislation that would do just that, building on productive discussions in the House of Representatives,” the spokesman added. “We are encouraged by the growing bipartisan recognition that an orderly bankruptcy process is an important part of the solution for the people of Puerto Rico.”

Hatch also asked for details on what sort of advice the administration has been providing Puerto Rico and whether there are any concerns that Puerto Rico’s woes could pose a broader threat to financial markets.

Due to the unique tax treatment of Puerto Rican debt, the island’s bonds have become hugely popular in financial markets and are held by a host of pension and retirement plans.

Hatch also inquired about whether the administration was considering alternative ways to help Puerto Rico steer out of its economic skid, including whether it would exempt the commonwealth from the federal minimum wage law to drive down labor costs.

This post updated at 2:35pm.