Lew: Bankruptcy a must-have for Puerto Rico

Treasury Secretary Jack Lew said Puerto Rico’s creditors will need to give a little to help the island territory through its economic struggles.

Lew said Wednesday that it is critical that Congress give Puerto Rico the power to declare bankruptcy on some of its debt, arguing the island will never be able to recover without it.

{mosads}“The people of Puerto Rico are sacrificing, but unless that sacrifice is shared by creditors in an orderly restructuring, there is no path out of insolvency and back to growth,” he said. “Without congressional action, Puerto Rico will face a long and difficult recovery that could have harmful consequences for the American citizens who call the island home.”

Lew traveled to Puerto Rico Wednesday to meet with island officials and discuss ways to provide relief to the territory, which is struggling under years of economic woes and a massive debt burden.

Island officials have said they cannot pay back the money owed to creditors, and the Obama administration has pushed for law changes that would let Puerto Rico restructure its debt. But Republicans in Congress, as well as Wall Street investors in Puerto Rican debt, have strenuously objected to that idea.

Instead, GOP lawmakers have argued that Puerto Rico’s years of fiscal mismanagement have led to this situation and letting the island escape from under some of that debt would amount to a bailout. Republicans are pushing for heightened federal oversight and potentially control of Puerto Rican finances.

Lew vowed the Obama administration would bring “our full capabilities to bear” to help Puerto Rico but said it was up to Congress to really save the day.

“No administrative authority can put an end to this emergency,” he said. “Only Congress can enact the legislative measures necessary for Puerto Rico to resolve this problem.”