Puerto Rico disaster aid money no relief for bondholders
From Bond Buyer:
“The disaster relief money can’t legally be used to pay debt holders but it will produce greater economic activity and additional tax revenues,” said Alex J. Pollock, distinguished senior fellow in finance, insurance and trade at the R Street Institute in Washington and a former president of the Federal Home Loan Bank of Chicago.
“What does that say about how much debt service you can pay?” Pollock asked. “All those questions are not really worked out but you can see that they’re there.”
Pollock testified at House Natural Resources Committee hearing in May on the PROMESA law that created the Puerto Rico Oversight Board three years ago.
In his congressional testimony, Pollock said the New York City control board functioned for 11 years from 1975 to 1986. It took the city seven years before banks resumed purchases of its municipal bonds.
The District of Columbia control board operated for six years from 1995 to 2001.
Pollock testified that both those control boards — which had greater authority that the Puerto Rico Oversight Board has — remain in the wings capable of resuming activity if those respective cities backslide in their financial disciplines.
“The disaster relief to Puerto Rico will, as discussed in my testimony, create a transitory improvement in economic activity and government deficits,” Pollock said in an interview Tuesday.