Obama is Trying to let Puerto Rico Screw Its Creditors

If Hillary Clinton were to run for President of Puerto Rico, she would be that election’s version of Sen. Ted Cruz (R-TX) 100%. “Check out that crazy right winger,” the respectable members of the Puerto Rican media would say of her. “Think she has a chance of actually winning the nomination of her crazy right wing party?”

As you might have expected of a place run by people who are that far to the left of Hillary AND Obama, they have been busy spending themselves into oblivion, racking up an insane debt that they can’t even pay the service on anymore.

Now normally, when creditors allow an entity to rack up debt like this, I hold the creditors at least partly responsible, and don’t feel bad when they end up holding some small fraction of the bag after the borrower declares bankruptcy. Creditors are generally allowed to see a borrower’s balance sheet, and in most countries, they accept the risk that extending credit the borrower can clearly not afford will end up with them getting repaid only a fraction of what they are owed in bankruptcy.

However, creditors of Puerto Rico were entitled to believe that Puerto Rico could not file Bankruptcy, due to the fact that under the bankruptcy laws that existed when they extended credit, the Puerto Rican government was clearly not allowed to file bankruptcy under Chapter 9. This allowed these creditors to believe that worst-case possible scenario was that they would be slow-payed, rather than no-payed. This, no doubt, materially affected the terms under which creditors offered debt to Puerto Rico – and in many cases, provided the specific inducement to lend at all.

In fact, Puerto Rico was an enticing and relatively safe borrower (compared to other places in the Caribbean/Central America) for exactly this reason: as a United States territory, she could not pay the debt by printing her own valueless currency and defying the lender not to accept it, like a lot of Banana Republics do, nor could she file for bankruptcy like Detroit or other American Democrat-run hellholes have done.

Enter the Obama administration, who is trying to screw creditors out of huge sums of money by retroactively making Puerto Rico eligible for Chapter 9 bankruptcy:

Puerto Rican Governor Alejandro García Padilla made another damaging admission this week: on New Year’s Day, the island will default on nearly $174 million in principal and interest payments on debt. Even worse: six months after Padilla admitted Puerto Rico was going broke and unable to make $72 billion in bond payments, the U.S. commonwealth has no clear path to solvency.

In Washington, there are White House-backed bills in the House and Senate that would allow Puerto Rico to file for Chapter 9 bankruptcy protection, which would set up an orderly process for the island’s debtors to recoup some of what they had lent it in the first place. American cities like Detroit used Chapter 9 to emerge from bankruptcy. But because Puerto Rico is a commonwealth, not a municipality, it’s not eligible for this protection unless the new measure becomes law.

Sadly, such considerations as “should we screw these creditors out of this money just so the kleptocrats in San Juan can continue screwing over their people” will not even enter into the equation for Democrats. For Democrats, the one and only thing they want is to be seen as the savior of the Puerto Ricans in the event that some future generation of Americans unwisely decides to let Puerto Rico become a state. The only thing protecting Puerto Rico’s creditors now are the Republicans in Congress, who are (for now) refusing to participate in the Obama administration’s attempt to rewrite Chapter 9 to bail out the Puerto Ricans.

Your mileage may vary as to how much protection Congressional Republicans actually provide in any fight involving President Obama. Because of course, in the end, Obama has the option of just ignoring what the law says and doing whatever the hell he wants because neither his own party or the nominal opposition in this country will take actual measures to stop him if he does.

In the meantime, if you lent Puerto Rico money based on United States law at the time the loan was negotiated, I guess we now have to say that you assumed the risk that law might be summarily ignored when you loaned money to a territory under the jurisdiction of the United States because you should have known that America’s tin despot will just change or ignore the law whenever he feels like it.

And there’s definitely no way that sending that message could have any negative consequences for the United States, or any of her States individually.

Especially not if they are trying to borrow money in the future.

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