tv Key Capitol Hill Hearings CSPAN May 26, 2016 2:00am-4:01am EDT
better , the government of puerto rico can do better, the economy of puerto rico can get back to a growth, definitely, you should be looking at the way that puerto rico is treated under the federal health this is not pre-ordaining everything; it is simply adding the subject matter to the scope of work of this task force. task force will make its recommendations, bu the members of congress will be the ones of the last say, excluding federal health programs from this review was from the work of the task force, and it doesn't make sense if the objective of this bill is the one i just retreat. getting puerto rico back in shape, fiscally and then economically as a result. so i urge my colleagues to support the amendment offered. i yield back. >> let me yields myself are just
one second here. this is the easy stuff. and allows them to go into other areas. that is why i really to accept this, because it doesn't mandate anything, it is a study. if you want to keep talking on this we can keep talking on this. anyone else? any amendments? all those in favor say aye. opposed say nay. o rollcall. >> mr. bishop. yes. no. no. no.
>> thank you. i'm offering an amendment that i believe will address an issue within this whole debate about puerto rico that has long been overlooked, and that is the influence of private market competition. unfortunately, for far too long there has been way too much reliance on the public sector within puerto rico. in the energy and mineral resources subcommittee hearing, this past january, that was held , we saw an incredible example of why the puerto rican government has failed 3.5 million american citizens on the island. mr. chairman, instead of one of the key objectives i believe should be part of this legislation is to ensure that we promote and encourage free market competition in order to
improve the overall economy of rhetoric of across all industries. my amendment will achieve just that. i believe it is critically important that we give the oversight board the ability to promote the very private sector competition that has been so long lacking on the island. with this amendment i believe that the oversight board can andide the needed support spur the economic growth that is needed. i want to ensure that in the future the puerto rican government can serve as a facilitator of the private sector and not an inhibitor of it. mr. chairman, i would encourage all my colleagues to some art this amendment and i yield back. >> is there any discussion of this amendment? any amendments? all those in favor say aye. opposed say no. the amendment is adopted. we will now turn to 050, which
has to be passed out. there was a technical change that has been revised. take -- if the staff would pass those out. they will come out to you quickly. all those are being passed out, let me recognize you for five minutes. >> thank you, mr. chairman. this bill, i think, in its current form, does a superb job of creating structures that resolve the debt and fiscal crisis in puerto rico, and it sets the stage in the form of
this growth commission for addressing the future growth of the island. i think we can do a little bit more on that, and that is what this congress is for. if you look at a chart, which i have in front of me, of puerto rico's growth from 1969 until present, you will the island enjoyed pretty healthy growth until about 2000. there were some changes in tax policy that year, and in the subsequent five or six years you saw the growth go down and down and down. puerto rico's growth has been underwater every year. does isthis amendment try to address the need for growth -- i want to read a quote from an article last night because they quoted me. was they quoted me saying
is that it is vital we resolve the puerto rican debt crisis, but the island will not enjoy enduring prosperity until we also include growth initiatives. we have the unique opportunity to establish enterprise zones and apply other progrowth tax policies in puerto rico which will allow this island paradise to become an economic miracle. does offersendment a sense of congress that the growth commission and congress must look at progrowth policies, including the ones i just referenced. i want to add that it is supported by the puerto rico manufacturing association -- i was visited by the president last week who represents 1200 puerto rican companies that account for about half of the economy. coca-cola came up this morning and endorsed it. forbes magazine, i just read --
i introduced it and has been supported by americans for tax reform, the national taxpayer union, and citizens against government waste. it has a broad support. when the president of the puerto rico manufacturing association visited me last week, he applauded all of the things we are doing to resolve the debt crisis in puerto rico. he said this kind of amendment will do more to give hope to the puerto rican people than anything else, because it gives them a sense that we are paying attention to their future, and that this isn't just about resulting definitions. passage of the amendment. >> thank you. i am glad you got coca-cola's endorsement but if you want my support you have to have endorsed by dr pepper as well. >> i am working on dr pepper. >> ok. get these things out first. ment.evise
on behalf of the people of puerto rico i commend him for presenting this amendment and i support it. i yield back. >> any other discussion? all those in favor say aye. opposed? amended passes. we'll now go through for amendments for which i will have a point of order against all four. i will give the people the ability to speak on it if they want to. against theof order amendment, you are recognized for five minutes. >> thank you, mr. chairman. the legislation as it is currently written allows the minimum wage for workers 25 and under to be lowered to a dismal $4.25 for as long as the oversight board is in place.
my amendment will strip this provision from the bill. mr. chairman, when i first entered the workforce in the early 1980's i was paid minimum wage of $3.35. we are asking the young men and women of puerto rico to make just $.90 above that. in fact the last time the minimum wage was this low in the united states was 25 years ago. but in today's dollars, workers haven't had a minimum wage this low since 1940. the young men and women of puerto rico are american citizens, and they don't deserve to be treated like second-class citizens. the workers being affected are not high school students with a summer job. they are young people setting off their careers, many of them struggling to pay student loan payments to become
self-sufficient. i am also concerned that there is nothing in this hill that would prevent an employer from laying off older workers the first chance they get just like a good bring cheaper labor. the people of puerto rico are already dealing with an increasing challenging economic environment. lowering the wage with only an insult to this injury and sends aboutong statement whether we value puerto ricans as equal american citizens. during our hearing on this issue, one of our witnesses from the treasury department testified that one of puerto rico's biggest problems was its declining population. this provision only magnifies the problem. the island is already experiencing a mass exodus of people and lowering
wages would only compel more people to leave, having a detrimental impact on their current and future workforce. if you are a young person in puerto rico, college educated and an english speaker, what would compel you to stay on the island and build a life there? the minimum wage provisions in this bill is bad for these young workers and it is bad for the people of puerto rico. this provision does not fix puerto rico's problems and in the long run it may worsen them. there is no question that puerto rico will need to make onrifices but it can't do so the backs of 25-year-olds. i urge my colleagues to support my amendment so that puerto rico's recovery doesn't come at the expense of young, hard-working americans. >> thank you. i'm going to have to insist on
my point of order; this amendment violates rules -- i'm sorry. discussion? ok. >> i want to thank the gentlelady from california. the sole discussion on his legislation -- the major point of contention has been this particular point. say that low wages are itgrowth strategy -- well will grow the rate of departure of people from the island. .t will grow discontent it will grow family situations and domestic issues. it will grow premature deaths and illness. it will grow the wallets of corporations, but i will not, it will not, grow the economy in puerto rico. i want to thank with entering
california. regardless of what occurs it is we will have to deal with again. thank you. >> is there anyone else before i do the point of order? is not going to change. you.nk mr. chairman, i spoke on this issue as well the april 13 we are all good capitalists where we understand how the market works in the understand that if you pay people much less in one place to work in another places of the united states there going to move to the other places. i commence the representative for this amendment by associate myself with the remarks of the ranking member and i yield back. >> any other discussion? >> thank you. i realize this is going to be ruled out of order, but for the sake of discussion, the
hard-working 25-year-olds in puerto rico are no less american than the hard-working californians that are going to make $15 an hour. a question to the author of the amendment -- shouldn't puerto ricans receive $15 or more? we should take a look at how that is going to affect puerto rico's economy. >> is that a question? do you yield? >> if that is your amendment, sir, i would absolutely second juror amendment request, given the fact that these 25-year-old parents are being asked to relinquish their pension. $15 an hour i believe is a good, livable wage with the citizens of puerto rico. >> do you yield back?
there is no amendment. [laughter] ok. >> [inaudible] >> yield back. thank you. i'm sure there will be further discussion, just not in this venue, because it violates rule 10. it is out of the scope of the jurisdiction of this committee. the amendment falls. let's go to the next one, 168. once again i reserve point of order against this amendment. nothing personal. you are recognized for your amendment, even though i still have the point of order against it. >> i want to confirm that this is in regard to the fair labor standards act. i have tax treatments --
excellent. yes. this amendment is one of the many ideas that would promote economic growth on the island and i'm glad that a number of members have talked about -- including mr. macarthur -- the need for progrowth economic policies. one tool is the 1996 congress that decided to phase out the tax credits over a 10 year period, which is when the recession began. my amendment is a tax policy that seeks to bring back some of the jobs and would provide economic growth and opportunity for development on the island. it provides an incentive to repatriate and come back to the u.s. mainland by granting 85% exemptions against a second layer of u.s. tax. eliminates the lockout effect that many companies believe their income can be trapped in
puerto rico if they can invest it back on the mainland. i want to point out that this amendment is consistent with bipartisan recommendations. in order to reduce any impact to the u.s. treasury, we ensure the proposal doesn't allow companies to gain -- the proposal is only about active income and contains limited use. effectively no prevent u.s. companies against taxes paid in puerto rico to reduce taxes for other countries. i think this kind of economic growth is what the island needs to help you get the economy growing again as we indicated there was sense of congress i
hope that we can put some meat behind it for this amendment and i yield back. >> any other discussion? then point of order. this once again deals with role 10. falls.ndment i'm not picking on you but you have 169. i reserve point of order, but you are recognized for five minutes. chairman, the -- mr. one thing that has frustrated all of us and certainly frustrated me during -- i do want to highlight what other top of economic incentive that i hope the commission recommends and will look at.
this is essentially a concept of hub zones which could go beyond islanddy -- the entire qualifies as a historically underutilized business zone that would effectively give small businesses in puerto rico easier access to contracting opportunities. unfortunately only 24 businesses on the island currently enjoy the benefits of the program given a very complicated way the current hub zone formula applies to puerto rico. many severely distressed area of the island are excluded from the benefits because the way they in the wholed point of saying the entire island should be subject to these kinds of incentives. it will him anywhere businesses across the island to get the benefit of hub zones, with the proper adjustments like -- i believe it can be a more effective vehicle then lifting puerto rico up by its
bootstraps. this is the type of policy that a future needvent for a bailout or costly solution. i yield back the balance of my time. >> i understand there will be a point of order but i would like to join in support of this amendment. i hope we can find a way to do this and instead of sending more money to puerto rico, there are more ways we can encourage economic development. >> further discussion? i will insist on point of order. this is not a bad idea, but for here it is, because it is out of the scope of the jurisdiction of this committee. point of order. the amendment falls. nothing personal, 170, striking the overtime rule, i reserve a point of order.
>> thank you. i want to make sure this is a fair labor standards act amendment. amendment.final when i tried to put out was about what a proactive growth amendment might look like. hand, i think many democrats have some problems with the reduction of the minimum wage and this, which is exempting puerto rico from an overtime rule. . the rule is overdue for a fair labor standards act which says a new salary threshold of $47,000 year. we have debated this rule extensively with regard to the continental states and hawaii. i know members have varying
opinions on it. i believe it does not lead to any additional economic growth somehowo rico if workers are not compensated. know, a manager of a fast food restaurant may earn $35,000 but only works six is owner -- they deserve their overtime pay and that doesn't change just because of fiscal mismanagement on the government of puerto rico. the overtime provision coupled -- it drives productive people from the island, the exact opposite of what we want to do. they can move to florida and texas and california at the exact same fast food restaurant -- they will not get the
overtime but if they simply moved to california or florida they would get the overtime. it creates this incentive to -- i would consider my colleagues to consider this amendment. i think it is very important that puerto rico have the same policies as the rest of the country. to create this delta, between puerto rico and america with regard to items like overtime, can create some perverse incentives that leave the most productive puerto ricans to leave the island. i believe that is the opposite, i yield back the balance of my time. >> i will insist on the point of order one more time which is
once again good conversation but out of the jurisdiction of this committee. going into the next section, the some problems here. the article states, i'm quoting say theyle,, lawmakers absolutely will not bail out puerto rico. , the betterthing government already is bailing out puerto rico. it goes on to say this, the obama administration has been providing the beleaguered island with billions of dollars in aid three little noticed and convoluted tax arrangement. washingtonlp of the
law firm, puerto rico created a special corporate levee into getting money out of the u.s. treasury and refused to rule on whether it is legitimate. those are not my words, that is from politico. my amendment requires a final ruling from the irs before the rest of the bill's provisions can go into effect. the government a puerto rico enacted a new tax that took effect in january of 2011. ans was an excise tax, not and come tax on american companies with operations on puerto rico. is structure to qualify to the companies would pay the same amount. here is how it works -- u.s. tax credits toforeign keep foreign companies to be tacked on the same income. because we tax american
companies to matter with the would best operate subject to u.s. taxes and in the foreign company. they will claim a credit of the foreign taxes they pay so they won't overpay. this can create a perverse incentive for foreign countries to raise their taxes only on u.s. company so that the limitations reform create -- company to create a soak up ta x, which are not be created if not for foreign tax credits. with the assistance of the law firm, puerto rico was able to concoct an excise tax that started all these restrictions, but otherwise would not exist but for the u.s. tax credit. the result is a pass-through of u.s. tax dollars to the puerto
rican government were american companies pay this novel excise to puerto rico and there made whole by u.s. tax dollars. theummary of that, companies pay the tax, the excise tax and get fully reimbursed by the rest government. but the taxes are being paid to puerto rico, and puerto rico gets to keep those taxes. they released a preliminary ruling saying they were starting the new tax scheme and they would not challenge claims that companies could claim the tax. recently, a treasury spokesperson said as treasury and irs, and previously said come we are evaluating excise tax the provisions of which are novel. it remained under review and the not yet in a position to provide permanent guidance on the credibility of act 154. my amendment season in a ruling
from the irs before we go forward. i would be happy to yield back. >> is there any other discussion on this amendment? >> chairman, people of peurto rico are suffering in businesses, schools, are closing. people are leaving everyday. to reverseur help this trend. there is a carefully crafted compromise which seeks to quality of life for families on the island. it will significantly lengthen the time it takes for the bill provisions to take effect. it requires the treasury of secretary regarding the eligibility of companies to take a foreign tax credit in connection to taxes that are imposed on the island was the island. people of puerto rico waited long enough for some action by congress, this amendment is not necessary. all it will do is create harm,
and lengthen the process of doing some actual really. i urge my colleagues to do so as well, and yield back. >> to further discussion. exciset of all, this tax, mr. fleming is referring to, is in lieu of income taxes. it is not a typical excise tax. the treasury has taken the position that the tax, the excise tax, may be credited against income reported by american controlled foreign corporations doing business in puerto rico. it is true the treasury has been given a foreign ruling on it, but this bill is all about puerto rico's this condition. the fact of the matter is, this excise tax is generating close to $2 billion in revenues for
the government of puerto rico. so, to hold this bill hostage until treasure issues a formal ruling doesn't make any sense. notuestion this tax is also reasonable. congress has the last say in oerms of the way puerto ric is treated. right now, american corporations doing business in puerto rico do not pay taxes, federal taxes, repatriate they are earnings in puerto rico. they bring them to the states. that is congress's will. has every right to have its own tax system. these american corporations are
% inng anywhere between 2-4 income taxes taxes to the government of puerto rico. andrnment a puerto rico post this excise tax in lieu of additional income taxes from them. so tax is being credible, iss is something that critical for the fiscal health of puerto rico, and we shouldn't be questioning it here. i come of myself, believe it could be out of order. that is the chairman's ruling, not mine. we have to be very careful. as we all know, we are talking about a fiscal crisis happened? it is a function of revenues, and expenses. i tell you $2 billion are coming through this excise tax to puerto rico. huge difference. the total revenues of the
central government of puerto rico roughly amount to $9 billion. coming fromre these, and paying little. because of the tax increase, they have in and because of the way congress has decided to inputincome generated rico. i urge the gentleman to either withdraw the amendment, and in the -- i oppose it for the sake of the fiscal health of puerto rico. that is what we're all trying to deal with. i yield back. also yield myself some time on this particular one. several things very similar, originally, i thought this could have a point of order against it because it does with tax credits that could be in ways and means. as i read this carefully, you can argue this could be made in order of this committee. if this was argued on the floor,
it would be much cleaner. however, i will before to get this amendment because of the 5,ne that starts on line already mentioned, that it won't take effect until the secretary of the treasury does something. this would allow the administration to slow walk the imitation of the entire bill, waiting for them to do something. it empowers the secretary of treasury. i am not willing to go that far. i am voting no on this particular amendment. i would like to yield to the gentleman louisiana, mr. fleming. my colleagues on the other side of the aisle willingly admits out of nine or so billion dollars a year , $2 billionrto rico of that is coming from the mainland. this is clearly a tax scheme. congress had nothing to do with it. this came out of an agreement
between some lobbyists and the administration to turn a blind eye to this. beginning in 2010, this is very recent. the bailout has already begun, to say this is not a bailout is simply not true. this has nothing to do with the income tax. we know about the foreign income tax credit. this is novel. the way it works is, it is to benefit tory's increase that tax overtime. that brings more and more dollars out of the u.s. treasury at a time when we have a national debt of $19 trillion. otherield back, any discussion on this amendment? aye?hose in favor say
mr. lowenthal votes no. mr. duncan votes yes. mr. gosar votes yes. mr. labrador? mr. labrador votes now. mr. lamotta? they vote yes. single votes no. mr. dunham votes no. mr. cook? mr. cook votes yes. this cap's votes no. mr. polis votes no. mr. clay? did mr. clay votes no. mr. newhouse votes no. --chers and give votes now mr. macarthur? mr. mooney? mr. hardy? mr. hardy votes no.
uncharted waters. most glaring examples is the stay on lawsuits. this was first introduced from the minority leader, nancy pelosi just looking at the policy without consideration of the politics, it deprives american citizens of access to the judicial system with respect to defending their private property rights. you get my republican colleagues quite a chill, unlike those who advocate for socialism, we believe in private property and the american citizen should have a means to defend their property in court. to my knowledge, the automatic stay in this ability ever before been attempted. let's be clear, this would be the first ever federally imposed of ann actions outside actual bankruptcy case. if you vote for this, you're telling the bond market you, as a member of congress, are fine with changing the rules in midstream.
that is dangerous. but, let's also be clear, this is on bondholders only. the senior citizen in louisiana who financed his or her retirement with puerto rico bonds is under this day, but the union worker on a puerto rico government pension is not. that is what i am offering an amendment to strike section 405, the stay on lawsuit from bondholders. congress is not exercising due diligence on it passes legislation very likely to be ruled unconstitutional. we should carefully consider the constitutionality of a bill before we pass it, and exercise restraint when the bill runs afoul of constitutional principles for the frankly, i am surprised section 405, which provides for an automatic stay survived this long. even before the first to draft was released, there seem to be a recognition by this committee that this section had serious constitutional questions, and
needed to be tromped. in fact, it seems only that the only reason this provision survived as the democrats insisted it remain. and, the administration insisted as well. those are not good reasons to pass legislation that runs counter to the constitution. the solution is to support the fleming amendment to strike this language from the bill. i yield back. >> is there any other discussion? >> one of the main drivers behind doing this bill at all is to provide an orderly debt restructuring process that can go hopefully relatively smoothly. the opposite is a situation in which all of the creditors rush to the courthouse to fight to determine who will get the most of a limited pot of money. it is very messy, it is expensive, it is really equitable, and can drag on for years. that is exactly what it would happen this a bill. it is also exactly what we can't
have into the rico. the department of treasury said it would take 10 years to untangle the lawsuits. timey on litigation gives and tountary structuring get set up to facilitate orderly restructuring. stay, there is little point to this bill. that may be why it was introduced. if this amendment passes, it would kill the entire bill. what that reason alone, i strongly oppose it. >> for the discussion, mr. labrador? i moved to strike the last word. i have some trouble with this stake, as a lot of people do. decided to ask my staff to do some research on the constitutionality of the stay. for purposes of education, i
want to talk about that without taking a position on the amendment. first of all, this alleged taking is not a taking. you can argue about this estate based on whether it is good notcy, or not but it is unconstitutional. it is only a stay on creditor ofigation, not a deprivation substantive rights. in some long-standing supreme court precedent, a moratorium or stay on creditor lights -- rights, would not give rise to a takings claim. there are cases in the 20's and 30's where the government's enactment of legislation temporarily stayed creditors rights does not constitute a taking under the fifth amendment. there is a 1921 supreme court case, i will not bore you with
all the information about the cases. , and both, in 1934 cases the court found that as long as you had a short stay for a specific purpose, there would be no takings in place. court, in 1937, the rejected constitutional challenges to an act of 1935 which forced foreclosure actions a family farmer. the imposition of a three-year stay, as opposed to six months, of the right to foreclose on the mortgage did not deprive the creditor property without due process of law. roanoke.he case of there are other cases, and we did some extensive research on this and ask some experts to do
research on this. you can have a pretty valid on policynst a stay grounds, but i don't think we should reject a stay as a matter of constitutional law because the supreme court has made it the clear that we have the authority to do this. i yield back. >> is there for the discussion on this amendment? >> the amendment proposed by mr. aeming would dismantle corporation of the bill. section 405 should not be viewed in isolation. the reason why this bill provides for this automatic stay is precisely to encourage, incentivize, creditor negotiations. negotiations between in puerto rico. creditors, this is something that is done in every chapter nine case in america.
whatever you have to, whenever you have to reorganize a public entity in the u.s., you file a before the backup to court. there is an automatic stay. so that there was no chaos, or litigation all over the place disrupting the process. here, this bill, actually, provides for collective negotiation with creditors. it provides that if two thirds of the creditors of any pool of bonds, in any public entity agree on a potential restructuring, you can go to court and then enforce it on all the creditors. this bill should not be viewed as an anti-creditor bill. this is good for all concerned.
rico,vernment of puerto citizens at large, individual bondholders, because what the bill tries to do is to r estructure a lot of the debt that the government of puerto rico owes in an orderly, legal way. of limited duration. it basically allows to have a co ndusive environment for the negotiations to work. not having to stay is going to be chaotic. what they want is to have puerto rico back in fiscal order, with access to the financial markets, the sooner the better. i think the stay is too short. at this is the result of
negotiation between leadership on both sides of the aisle, the white house, and treasury. i urge my colleagues to leave this provision as is for the benefit of all. i oppose the amendment, i yield back. mr. mcclintock: i would remind my colleagues that it bankruptcy stay freezes both sides. creditors cannot enforce claims, but the debtor is for bid and from spending down assets. this is a one-sided freeze that forbids the creditors from enforcing their claims, but perfectlyrto rico free to spend. that is exactly what is currently going on. it provides that spending for non-debt service is actually going up about a quarter billion dollars.
this provision to spend down its resources, knowing that bondholders are legally powerless to stop them. yield the remaining time. my colleague across the aisle, interestingly enough, referred this as a bankruptcy. we were told this was anything but a bankruptcy. but we know that bankruptcy law, the chapter nine lifted right out of the code and set down into this. interestingly enough, the word , as far as i know, is seen nowhere in this document. the plain truth is, mr. mcclintock has this correctly, this is picking winners and losers, this is not a stay on all involved. it allows people to move assets, spin resources, while
highestle with the priorities are held at bay. with regards to encouraging negotiations, they were ongoing until this bill came up and set everything down. aings were actually on correct pathway to begin with. as to my good friend, mr. labrador, arguing the constitutionality, obviously this is not the supreme court. whethernot decide today this is constitutional. at best, it is a controversy. that decision cannot be made today. >> gimmick for question, and i would be happy to. >> all i want to clarify is, any payment not made by a government entity in puerto rico during the stay is a payment owed. relieving of any
debt. encouragede board is to require at least interest payments from the government issuers in puerto rico. >> this is not an easy way out for the debtors. mean?t does that right now the territory is not able to perform on this, saying he will continue to owe, they k now there will be a reduction in principle here. picking winners and losers, that is a bad precedent.
>> mr. chairman, while this provision causes me some heartburn, i want to read from bond documents. -- this was a particular paragraph out of the bond disclosure document. this could be enacted by the united states congress or the legislative assembly that would entitle the commonwealth to seek ,he protection of a statute similar laws affecting creditor's rights. this could affect the rights of the holders of general obligation bonds, and notes of the commonwealth, including these. the enforceability of the commonwealth's obligation to make payments on such general obligation bonds and notes.
these were sold with full disclosure that could happen almost anticipating this could happen. >> with the gentlelady guild for a question? were there not bondholders before 2014? >> yes, there were. >> they have all the same disclosures? >> i don't have all the documents here. >> some understand this possibility that there were plenty of others that did lend money and this would not be a likelihood, or even a possibility. >> mr. chairman, that is entirely possible. some timeyield myself here. i appreciate the comments of been made so far, especially the tutorial by mr. labrador, i appreciate that. this is some practical purposes of this particular bill, there i s reason for being there.
the oversight board can be running before the lawsuit starts. there is another provision that allows the oversight board to intervene. but without the stay, the time for that would be expired. shortay is a very duration, and that allows parties to seek relief from stay, if there is no stay, it would simply be a race to the courthouse. that is the purpose of having the oversight board in the first place. whether -- whatever the intentions of it, this simply gives the litigation the ability to do nothing more than go into court. and without the ability of organizing before that simply happens. i have to vote no on this particular amendment. i yield back to myself. is there any other discussion on this? if not, we vote on the
amendment. all those in favor say aye, those in favor say no, the no's have it. roll call again, go. >> mr. bush of votes no. mr. young votes no. is the public on a votes no -- ms. napolitano votes no. mr., lanborn votes yes. mr. whitman votes yes. mr. fleming votes yes. mr. mcclintock votes yes. votes no.on mr. huffman votes no. ms. ruiz votes no. no.lowenthal votes
introduce the people. >> what occurred on february 9, 2016's rigorous department of health issuing an order any form of a tax specifically aimed at the industry without going through the legislature or the public notice. thatbviously, it hurts industry. number -- aa burdensome register that is required by the fda. is duplicate it. it goes on to what the amendment will allow the congressional task force on economic growth to submit recommendations, if not
binding, but recommendations to congress on how best to make the reforms to this order. it should not be controversial. it is a good step. talking to a number of manufacturers, they would like to grow in puerto rico. they think this is an opportunity to manufacture. the industry itself is growing, it was somewhat arbitrary and how it was placed. again, it doesn't require anything other than a recommendation and i yield back. >> any further discussion on this amendment? that i speakto say in favor of this amendment. aye? ase in favor say post say nay, it passes most of us go back to mr. fleming,
number 79. oh, i'm sorry, we just and 79. 91. >> i would be happy to do 79 again. >> that would be worse to vote for you, i mean 91 -- look, whatever i say you are doing 91, ok? listen to what i think, not what i am saying. [laughter] >> you are recognized for 91. amendments, that will bring members attention of the past this out, it's a section 201 and has redlining and some green lining, the schroeder bill refers to the green lining, the changes in green, then i will have a second amendment in red. to sort of help you in a visual. these consummate each other, the
first is very short and requires the oversight board to give priority to bonds that have been issued with the full faith and credit of the puerto rican government through their constitution. this priority is already the stated goal of the bill. it strengthens the bill to eliminate any wiggle room by the oversight board to reinterpret the phrase "resoppect the relate lawfulness." complyquires them to with the lawful priorities. that is the difference. it is vitally important that doesn't happen here because you dre dealing with full faith an
credit of constitutional dad. he messaged owners of that debt that your contract is not valid is a message to bond markets that are not sacrosanct and can be renegotiated at the government's convenience. that will increase borrowing costs for everyone, including my home state of louisiana at a time when we can least afford it. what that means is, those doing the right thing, those who have been good citizens, and are paying their debt and have good, policies will be punished for the acts of others because they will have to pay higher rates, and over the long term that increases the risk for many others. i urge my colleagues to adopt that amendment. >> is there any other discussion?
attorney general have advocated i for strict compliance with our constitution. in fact, when this crisis began, and the government of puerto rico approve the local bankruptcy law, back in june, 2014, the first thing i did was to introduce legislation giving puerto rico access to chapter nine of the bankruptcy code. i was simply asking congress to state forto rico as a the purposes of bankruptcy. assigned to the judiciary committee. it didn't get traction. some reservations, giving puerto rico access to chapter nine. the long stort short is that
matters continued deteriorated to the point for the u.s. treasury department comes and submit a proposal to congress saying puerto rico is not a state. territory. is a under the u.s. constitution, which is supreme, because it goes over any state or territorial constitution, whether i like it or not, as the representative of puerto rico in congress, and actually i don't like it, under the u.s. narytitution we have ple powers over the territories first of over the american citizens living in the territories. legislation was introduced for the purpose of creating an oversight board for puerto rico. you cannot to do that for a state, by the way under our u.s. constitution or our national constitution.
but you can do it for a territory. embarrassed that this is happening. but this ability create an oversight board, then, instead ,f providing for chapter nine it gives the board the power to oversee the potential restructuring of debt obligations coming from puerto rico. matter is thate this is different than chapter nine, because it not only deals debt issued republicans to mentalities, it deals with the debt issued by the commonwealth of puerto rico. but we do have the power to do this. do is toe trying to put the house in order. to bring stability to the government of puerto rico. it is collapsing. it is not even paying tax refunds, it is not paying private contractors by the tune of about $2 billion right now.
it is a making contributions to the public pension systems. the result because of default. so, we don't want that chaos. we have the power to deal with it. wisdom, or opinion, i am talking about the secretary and his staff, is that we should have all bondholders and creditors at the table. all of them should be part of the solution, not part of the problem. no, the bill recognizes that there are different priorities different bondholders and respect the legal standing of them all. anticipate, and it has happened, and the you negotiations we have already taken place, the way the author seven made to the government of puerto rico, it makes a distinction between general , andolders, and others
special revenue bondholders and someone. so, don't expect or anticipate that this board, federally appointed, will do the wrong thing. it will do the right thing. >> will the gentleman yield? >> i will. >> first of all, state cannot allow to file bankruptcy either. bankruptcy,s not a but we know that it is. it is taken right out of the code. this can cram down, and they would respect is a suggestion, it is not a required word. beenam sorry, i have constituents have been burned too many times to leave things open to debate and suggestion. i think there should be from language in here. all of the priority should remain in place.
end, this isy to not chapter nine. take my word, it is not. the board is the gatekeeper, you don't have that in chapter nine. >> any further discussions? mr. macarthur? mr. macarthur: i oppose this amendment. i understand the gentleman's intent of respecting the priority of the bondholders, particularly the general obligation bond holders. every lawyer in this room would love to try a case with a can make their case and the judge would rule before they hit the other side. that is not fair way to adjudicate things. a representative of the general obligation bond holders have done a terrific job of making their case for a publicly. of there are over 20 classes bondholders, and there are questions of that issue debt,
was it all issued within the limits of the constitution prescribed? decide that and imply which group of bondholders stands at the front of the line. i fully support the idea that the general obligation bond be,ers, i suspect they will for the mark, the language of this ability i think is better in this current version to the prior version, explicitly states the following -- it says any adjustment must respect the relative lawful asorities or lawful liens may be applicable in the constitution. other laws or agreements in effect prior to the date of enactment of this act. it can't be more clear that our intention is to respect the primacy of bondholders.
i think it will be a little fires. -- ill advised. >> is there for the discussion on the amendment? let me yield to myself or just a second. i also will be opposing this amendment. not willingly, but i will oppose it for many reasons. i appreciate what you said. this would make sacrosanct these exceed theer they 50% cap are not. that changes the rules of the game. many of thesehow have come over properly were done because there have not been any financial audits done over the last couple of years. that is the purpose of the oversight board, the first job is to order the financial social this would give priority to groups that may not deserve that particular priority.
that is the biggest problem with this amendment. is there any for the discussion? i appreciate the spirit of the amendment because, this is my language in this section. i was trying to do exactly what the gentleman from louisiana is trying to do to make sure that the board and the court respect the priorities. tom open to, if you want amend your amendment. if the committee feels that the word comply with is better than respect, i am open to that. i think the rest of the arendment get into the -- we r they give a judgment, then decide to gets the priority. this committee felt that the word comply with, that phrase was better, i am open to
that amendment to the language i put in there. if there are better words, i am always willing to use them. but i am not open to the rest of the language because i think the rest of the language confuses what we're trying to accomplish. we just want the court to look at the constitution and determine what the priorities are. i don't want to prejudge what those should be. want to be changing the priorities of the bondholders from what they currently should be. voting fornot be this, but i don't think for a moment that hte j --the judge, be board, is -- can
considered as doing the right thing. happened when the obama administration got involved. they rammedbailout, through, in violation of a myriad of bankruptcy laws, a bankruptcy plan for the car manufacturers. law, itted bankruptcy violated the constitution, that is why ginsburg put a 24-hour hold on it. and, when i was speaking with th e lat ejustice scalia, i said of ginsburg, but i was so proud of for that she put the 24-hour hold on that outrages in legal bankruptcy plan regarding our automakers.
now, actually you k the white house was feeding information to the court back channels which would be unethical that if we allowed this to go more than 24 hours everybody in any way related to the auto industry would lose their job. the illegal, unconstitutional bankruptcy plan went through. even though i'm voting no, i don 't have the faith this administration will be pushing for the right thing. i know all of this confidence is being placed in this board, bu having witnessed what this administration did to the auto industry, even forcing the sale of chrysler to a foreign car manufacturer, so much damage the to the law, to constitution, to american interests. creditors, ind
violation of the bankruptcy code and the constitution to become unsecured, taking unsecured creditors and making them secured creditors, it was outrageous what happened. the constitution of the board, and have all this faith keyboard will do the right thing, the board has the power to force the cuts from 30%, bringing that sides down. will do these things. we have a board of nine people, unless it has changed. four of those will be selections asreid and pelosi recommended to the president. they will recommend 8, he will tiebreakerthen the
will be totally selected by the president. so this administration will have five of the nine, and if anybody on this side of the aisle things th --thinks that the government workers, government union workers, then i would encourage them to we look at the issue. amendmente particular itself, i cannot prepare to sit in place of judgment. with the gentleman yield for a second? just a small correction, the only seven, i believe and four are picked by republicans. three are picked by -- that is important. i think that is an important point. chair bishop: are you done?
you yield back? ok, i'm sorry. anyone else? mr. duncan? mr. duncan: thank you, mr. chairman. i agree that we probably need to tweak this amendment. following up with the gentleman from texas, the comments about the chrysler bailout, from what , theember, the pensioners pensions themselves were held harmless of the shareholders take a haircut. i think it big fear we have with the puerto rico issue is that the pensions will be held the bondholders will take the haircut. that is, in my understanding, in direct conflict with the puerto rican constitution which we don't have the power to change.
that give general obligation bonds preference over pensions. i think it is a slippery slope if we try to change that. i have had concerns about that portion of the bill all along. i like parts of this amendment. with that, i yield back. chair bishop: for the discussion? if not, any amendments? i just want to make a comment i don't think there's anybody hit it looks the auto bailout more than i did. there is a lot of misinformation out there. i can tell you my pension was impacted and things that happen. sometimes, you come together to save the country or say the place. let's be careful with misinformation with one of the biggest nightmare times i remember in my life. we saved this country from total economic collapse. we have another territory with people living in fear, not being people feget medicine,
of their future. that is what today is about. all of us have to make compromise on things we are concerned about because we care about people and there are humanitarian issues at stake. hat, mr.o say t chairman. i thank you and your leadership to bring us together on a tough, difficult issue. ok, i bought my cruiser before the bailout, so it was fine. any other discussion? the vote is on the amendment come all those in favor say aye, a pro se n -- opposed to say no. the amendment fails. we're about two thirds of the way through this sucker. graves, you mr. have an amendment which is graves number two.
does that need to be passed out? explain the mother separate list of mr. graves: this amendment very simply just states that no federal funds should be authorized for the payment of any liable territory or territorial instrument talent in. here's the deal, as you know, this bill before it was introduced was alleged to have been categorized as a bailout. look, le'st's be clear, in the anure, there could be effort to build of the territory. that is not what it is doing, it is designed to avoid a bailout. this makes it clear that this does not put federal funds on the table to address the liabilities of the territory. it does not preempt in any way of this congress and attempt to directly put federal funds on the table, which i would oppose. but this bill cannot be labeled
as a bailout. will the gentleman yield? just for a question? funds should be otherwise by this act, what this future funds, does prohibit any federal funding from going to bailout puerto rico? this, but let's be clear, pertains to this bill. the allegation before the bill was filed and any of us read the text was that this was a bailout. i am trying to prevent that from happening. in the future, we could be given an opportunity to vote up or down on it efforts that could be made in the future to appropriate funds. >> willie gentleman yield for further clarification? we have heard there would be no taxpayer dollars used to bella puerto rico. that is what you're trying to do with this.
>> i am trying to prevent this bill and make it clear that it is not a bailout. this build is not provide, to some authorized any federal funds. i can't control what people in this room may do in the future, but i want to make clear that this bill is not a bailout. >> this has changed, there was going to be thousands and thousands of acres that were owned by the department of the interior that were being sold. the money, which would be federal money come from that massive sales was going to be going to puerto rico. >> i believe that was removed. -- are, thank you, faster chair bishop: you guys know how to go to my heart, don't you? stab it many times, that is no longer part of this bill.
>> i think you're sitting in fact that this is no longer a bailout. itself, lett board me just finish if you would. the oversight board itself is, as i recall, the financial responsibility of the territory. funded, it has to be up front. the could not allow supervisory board to do it to work. >> i believe the text was changed to require that the puerto rican funds be used to fund the oversight board. i'm getting ahead chick from my good friend. a headious versions -- shake from my good friend. the board is to be paid with
territorial funds, effectively. chair bishop: is there for the discussion? if not -- do you? >> i will be brief. this couldis that ability toboard's perform its work. the truth of the matter is, this ability doesn't provide any authorization for federal spending in puerto rico. it doesn't. there is no provision assigning funds. but the board can be staffed internally, using puerto rico funds. but also, federal agencies may assist on a reimbursable or nonreimbursable basis. to discouraget that from happening. my intent is to make this work.
i see where you are coming from. i join you there, but i am concerned that i don't want this language to make the board's wo rk more difficult. sensitivertainly very , and respectful of the efforts to ensure that we get puerto rico on a sustainable treachery for different reasons. don't want louisiana tax funding to bailout puerto rico. the provision says no funds authorized for any payment of the territory, or territorial instrumentality. it doesn't talk about funds that could be used by a federal agency that could be what puerto rico is doing or not doing. if somebody offer that amendment, i would probably vote
for it, but that is not what this does. thatmakes it crystal clear this is not a bailout. if somebody wanted to offer that later, this is designed to make it crystal clear that this legislation is not a bailout. > actually, would you agree to changing or tinkering with the language so that it says, for payment on any existing bond indebtedness -- >> that is more precise. there could be future debt that is incurred, that would effectively be a bailout and would raise concerns. >> what if we strike the word existing? >> will the gentleman yield? everything you have been saying so far is correct. the board is not paid by federal funds.
liabilities. if this amendment or to the adopted and we want to refinance it i would be more than happy to pledge to work with you all if it goes to the floor. i certainly would come as well i try to convey that very clearly. in response to your last statement, bonded indebtedness is certainly the majority of the debt we are dealing with here. as the gentleman with a knowledge, there is other debt as well. i want to make sure i can go home until the folks that i represent that there dollars are not being diverted. if you can agree to adopt this. although the favor say aye? opposed say nay. the amendment passes. number 90? that has been passed out to you. mr. fleming, your recognize. would like to
submit for the record a letter a received from the former governor puerto rico. he expresses his concern that the oversight board will overrule the democratic will of the people of puerto rico. they have me, helpfully reminded this committee that the crisis come of fiscalugh decades mismanagement. in some ways, this debt crisis does reflect the will of the people of puerto rico. because, they have repeatedly voted for governors to give them liberal social policies and generous benefits which is why we are here today talking about an oversight board. amthe same time, i sympathetic to the argument about self-governance. the bill already contains the answer, it was written broadly anyhat it could apply to
territories. but they could apply only to puerto rico in this bill. to paraphrase section 101, except for puerto rico, and oversight board is established only if they adopt a resolution. rico, iase of puerto think that is a mistake. the oversight board would've much more legitimacy of the their electedh representatives, asked for the tough medicine in this bill. the people ofor puerto rico, it will not accept a balanced budget and the necessary reductions, then they should not gain access to the debt restructuring ability in title iii. that is intrinsically tied to the functions of the oversight board. i am pleased to be joined by this amendment by mr. mcclintock
as a cosponsor. i yield back. chair bishop: any more discussion to the amendment? >> the oversight board, and control boards, have a long and nasty history of opposing -- imposing extreme austerity on people. clear of my opposition to an oversight board from the beginning. this would make the establishment in puerto rico much less likely. an oversightf board, that is probably also appealing to my colleagues on this side of the aisle. but, who are concerned about the effects that i mentioned through extreme austerity. but, i strongly oppose this amendment. it is a poison pill. if this were adopted, it would remove most of the support from the majority. it would therefore kill the bill which is the sole purpose of this amendment.
to vote no.lleagues >> i, personally, am under extreme political pressure in dealing with this issue. electedwant my fellow officials in puerto rico to have to bear it as well. it is very difficult to accept government of the puerto rico. the only reason i'm doing it is because i am convinced, as so many others, that puerto rico needs a broad, debt restructuring mechanism. colleagues seems to be that the only way that we will be afforded this restructuring mechanism is
through a federal oversight board. puerto rico is in crisis. do have a responsibility here under the territory clause of the constitution to watch over you well-being of the american citizens living in puerto rico. responsibility, whether i like it or not. i would rather have puerto rico as a state. is not aecause it state, not treated like a state. part of it was caused by the current status. business, ass our provided in the u.s. constitution. the district of columbia did not have to.
so, if we look at a precedent, and that is when we have been looking at in treating the sport and providing a debt restructuring mechanism, then we should not be asking the political class in puerto rico to consent. i agree. this is simply another way of well, to dismantle or -- dismantle, or to poison the well for this bill. i will tell you, mr. fleming, let's not play with fire. >> will be gentleman yield, please? >> i will yield in a minute. i represent the people of puerto rico. i am very confident that the vast majority of people get it. they want congress to intervene in a fair way. the political class, that is a different story. because by the way in puerto rico they are saying, why are
you running for election when there is going to be a federal oversight board? i am running for governor and you know what, we have to accept this reality. we have to to take this board the way it is because we need debt relief in a orderly, leta geal way. i will yield now. >> if i understand what you are saying, you cannot even find a small group of men and women who want to do the right thing and take the test medicine and have this sort of austerity in the reforms necessary to get away from the liberal progressive policies that have damaged puerto rico? you are saying, you cannot have enough to do that? >> i will reclaim my time. i will say it is not worth the risk. we need to act. we have the power to act. it is our responsibility, as provided in the constitution. can soshould do all we that the government of puerto
rico starts to stabilize itself, does not collapse, and so, puerto rico is put back on the correct path. >> i will ask one more question. what happens after the emergency is over? will the leadership in puerto rico, will they return to the same policies that caused this problem to begin with? >> there will be elections in puerto rico in november, the same way we have the elections in the u.s. mainland in november. democracy works its way. we will see who gets elected for the governorship, for my position as resident commissioner, as well as in the legislature of puerto rico. it's total speculation to try and and his of a what future officeholders in puerto rico would do, but this crisis is unprecedented. we should not be assuming that the government of puerto rico will do the wrong thing. no, on the contrary. what i would do myself and i
promise to you that i will if i am elected governor of puerto rico, his work with this board so we get the house back in order, fiscally in order, and we get puerto rico to grow again. i yield back. chair.k you, mr. i greatly respect my friend from puerto rico. i really appreciate his sincerity and his effort on behalf of his constituents. the point continues to be made the puerto rico is not a state. not voted touhas become a state. but um, that is also the reason that puerto rico, guam, samoa, virgin islands -- actually, every american entity except for the district of columbia that
does not elect a full voting member of congress does not pay federal income tax. the bill,y i filled that the district of columbia not have to pay income tax. but one of the things i have not really hurt anybody address -- we talked about in here, the need for the minimum wage to be raised. there was an article written recently that indicated for an individual who just accepts the available federal welfare payments. we might be looking at $1700 each month, take home. whereas under the current minimum wage it is about $1200 take home. well, the incentive there is obviously, not to work. i know my friends at heritage
have encouraged as a solution, lowering the minimum wage. obviously, that would even increase the disparity between what you take home if you don't work and what you take home if you do work. if you lower the minimum wage. so, that is obviously not going to fix the problem there. but if the minimum wage is mysed in puerto rico, since friend from california has indicated, they have a higher minimum wage, the people would be tempted to go from puerto rico to california to get those higher minimum wage jobs. except for the fact that people are leaving california in droves coming to florida and texas because we don't have as much regulation. we don't have the higher minimum wage. we have less litigation. ad it is more, more of helpful environment for creating
entrepreneurism and creating jobs. thinking ofi keep the beauty of puerto rico and all that puerto rico has to offer and could not understand why in the world puerto rico has not already become the united hong kong.' until i saw that there is a 39% corporate tax. not for federal. just for local. there is a 6% to 7% sales tax from last i saw. and in addition to the corporate tax being higher than the federal corporate tax, there is also a 33% flat income taxrate. texas has not income tax. we have a sales tax. puerto rico has all of the above and a 6% excise tax.
it appears that really is going to be one of the things addressed, lowering the number of people in the government, lowering tax rates, so it becomes that attractive hong kong. and businesses want to blooflood in. i'm not hearing those things addressed, but i did not want people to think it was all disadvantaged in puerto rico by not being a state. when that was found out that none of the territories pay federal income tax, i have had many constituents ask if we could not apply texas to be a territory. i would certainly yield. >> i want to set the record straight. site waser 2012, a held in puerto rico and 54% of the voters rejected puerto rico's court political status and 61% of the voters supported statehood. four people voted for statehood
than stand for any other option. i have introduced a bill before the congress -- it already has 110 bipartisan cosponsors, providing for the admission of puerto rico as a state. once there is a vote down on statehood, like we had in hawaii and alaska before they became states. >> my time has expired. >> mr. macarthur? briefly,airman, just for my next amendment i will be asking that we remove the other territories from this bill, but as it stands now, wiping out this requirement that thg signislature the board, we would be in the position for any reason, whether they were in fiscal difficulty or not.
it seems to me, it is a complete erosion for any kind of self-determination in the territories. sign thisco will fin because they need the relief. i definitely opposed as a moment. >> thank you. let me also yield myself. amendmenthis as well because of the practicality of it. i would actually ask them to have the government of puerto rico passed a resolution of their own malfeasance, which i don't think in the reality of it is something we should actually impose on somebody to try and do. >> any amendments to this? all those in favor say aye. >> aye. opposed say nay. >> nay. >> the nays have it. >> no. no.
no. mr. lamborn? mr. lamborn votes yes. mr. sablan. mr. fleming. mr. fleming votes yes. mr. mcclintock. mr. mcclintock votes yes. mr. thompson. mr. thompson votes no. rruiz votes no. mr. lowenthal votes no. mr. duncan. mr. duncan votes no. mr. cartwright votes no. mr. meyer votes no. mr. labrador votes no. no.taras votes
ms. dingle votes no. votes no. mr. cook. mr. westermann votes no. mr. graves. mr. clay votes no. mr. newhouse votes no. votes no.hur mr. moony. mr. hardy votes no. voted.e who have not >> mr. gomer has not been recorded. mr. gomer votes yes. mr. cook votes no. mr. casta votes no. >> mr. denham. >> mr. denham votes no.
>> it is hard to hear that, i know. mr. young votes no. is there anybody else who has not voted or wishes to change? report -- vocal report. mr. chairman, the ayes are fiv 33.d the nay's are >> it is not adopted. i think we have six more minutes still to go. let's go as quickly as we possibly can, six or seven.
mr. macarthur, number 55. you have already had that passed out and you are recognized. >> thank you, mr. chairman. this amendment dresses i think an error in the bill that came from an overabundance of caution. the bill, as it stands, authorizes an oversight board with the same extraordinary powers for each of the nation's territories, except none of the others face the kind of crisis facing cour puerto rico. no territory, other than puerto rico, have asked us to get involved. the u.s. virgin islands have expressly asked not to get involved with this. i worked with representative plaskett. on this amendment. my concern is it could have the unintended consequence of eroding other territory's access to capital markets. if a control board can sadly be brought in at any time. i have the written opinion of
not one, but three constitutional lawyers that this is unnecessary language, that we can focus this entirely on puerto rico and not the others. and what my amendment does is simply restores the bill to its purpose of restoring fiscal stability to puerto rico alone, and to not apply it to the other territories. i ask for its adoption. i yield back. >> is there further discussion? >> thank you, mr. chairman. this amendment would limit the scope of the legislation to puerto rico only since it is the one facing the crisis. the bill introduced provides a process for restructuring and fiscal responsibility for all territories, should the other territories request it. the other territories quite frankly, are included because leaving them out would leave the bill to be declared unconstitutional. as well intentioned as the amendment is, all of the efforts over the past month would be
wasted and more importantly, puerto rico would be left with no solution if this amendment were to be adopted. in fact, certain creditors have artie stated publicly that they would challenge the legality of the bill if it covers only puerto rico as a violation of u.s. constitution. i oppose the amendment because it is litigation based and urge my colleagues to vote against it. any moreere discussions on the amendment? let me yield myself. this hurts. this is an amendment which i will be voting no in committee, but i want you to know i understand the premise of it. weant to still be working as go to the floor to see if we can work some of these details out to adopt it at that particular situation. but the treasury department as has been stated, took an approach thinking they could be opening it up on a
constitutional challenge which would threaten the entire bill. at the same time, there was another professor who disagreed with that. so i think there is a question there that should be explored at some time. i don't know what the correct answer is right now. and if indeed, this could threaten the constitutionality of the entire bill, the entire thiswould go down on one point. some litigants said they would go to court on this particular issue. i do think we could work that out. there has to be a way of working this out so the substance of what mr. macarthur is trying to a compass year could be done without throwing into question whether there is a constitutional issue or not. since i'm not ready to do that, i will vote no on this particular amendment, recognizing i would still like to go forward, saying if we can follow some language that will be comfortable to everybody, including the treasury, going forward.
i do understand the premise of what you are saying and i actually agree with the premise. is there any other discussion? any other amendment? recognized? i would like to yield my time to mr. macarthur. >> mr. chairman, i understand your concern. i don't agree with it. to me, it is crystal clear. that wouldly entities challenge the constitutionality of this are those that are not interested in it. i think it is a false fear. but i would be happy to work with you outside of this process and if this can be improved for a floor amendment, i would be happy to bring it up there instead, if that would be a more productive use and withdraw it at this time. yes, i think it would be. >> well, then i will withdraw
the amendment and work on it and bring it back to the floor. >> my intention is to actually get something we can bring to the floor. >> ok, i withdraw then. >> thank you for your cooperation and working that way. i understand you are involved in this issue. many are involved in this legislation and you have a lot of ideas that maybe we can still work on coming towards the floor. mr. mcclintock, you have o-94, which is the next one up. >> this amendment exempts that bt issued byhat issuede puerto rico that was backed by the full pledge. the commonwealth $72 billion of outstanding bonds, this would exempt roughly $18 billion of constitutionally protected debt. and let's not forget, 12% of puerto rico's general obligation bonds are owned by hedge funds.
40% are held by puerto rican residents. i laid out the reasons for this amendment in my remarks yesterday. i agree there is no reason to treat san juan's municipal debt and a different, the constitutional debt is very different. the reliability must be maintained and this is very important to every state that relies on credit pledges. the federal government has until now, never threatened or even considered undermining constitutional credit guarantees by allowing chapter nine provisions to be applied to sovereign debt, whether that is issued by a territory or a state. if congress is willing to undermine the commonwealth's constitutionally guaranteed bonds today, there is every reason to believe it would be willing to undermine state guarantees tomorrow. this in turn, and by its to question every constitutional guaranty. it is no secured on
constitutional bedrock. if they do, the value of those bonds is devalued and interest rates paid by taxpayers will increase. the governors of six states have already issued this morning that "granting puerto rico such unprecedented bankrupting authority would likely raise the borrowing cost of our state, producing our ability to invest in model services and eroding investor confidence in the notion of credit debt." i suspect that is by the virgin islands desperately wants out of this. economists have noted that, "there is evident that the mere introduction of this legislation is already having adverse effects on the market. is the cost of credit default swaps on illinois, general obligation debt, which essentially function against insurance against the default have gone up 100% this year,
signaling a burgeoning uncertainty over the protection supported by the full faith and credit debt." he estimates that even a minor 10 to 15 basis points will cost american taxpayers an additional $8 billion.o a billion dollar a flight nine to the remaining $54 million of debt. they are instructing the control board to, "respect the relative priorities of constitution." ,he only problem with this is among these other laws is the government's privit repudiation of this debt. it includes other contradictory instructions. the only possible interpretation of these conflicting provisions
is that the sanctity of the sovereign debt is subject to balancing and therefore, subordination to junior claims by the control board. this amendment removes any ambiguity by protecting the constitutionally issued debt. bille supporters of this are sincere in their standard objective of wanting puerto rico's constitutionally issued debt to be protected, they should have no objection to this amendment. if they are not sincere, they should oppose the amendment, but at least openly admit their true intentions and accept responsibility for the billions of dollars of increased interest costs that taxpayers across the country will have to pay on their state debt as markets adjust to this new world in dependsredit upon the whims of congress. interest of the people of puerto rico to uphold the full faith in credit clause
in the constitution because they will desperately need that credibility in order to reenter the credit market once their affairs are put back in order. >> is there further discussion? >> thank you, mr. chairman. treasury officials estimated that we can get a decade at least to untangle the claims, if puerto rico is unable to restructure its debt and the situation leads to competing litigation. years of litigation will further stifle economic growth on the island and accelerate the departure of puerto rican families. the amendment will make these things more likely bite exempting certain categories of puerto rican debt from the carefully crafted compromise. i visited the island earlier this month to witness for myself
the impact the crisis is having on the lives of our fellow citizens. as they indicated in my opening statement, this markup, this is not the bill that i, are the members on my side, would have written, but when measured in puertoe crisis rico, it is legislation that is necessary. we should not let the narrow interest that this amendment seeks to protect undo the hard work and careful consideration of competing interests that went into drafting the legislation. i urge my colleagues to oppose this amendment and yield back. >> is there further discussion? mr. gravesw. >> mr. chairman, i share the concerns with the gentleman from california. effort to potentially bail out any state and reward irresponsible financial decisions, but if the gentleman
from wyoming, i wanted to ask you a quick question. he referred to a statement in the bondage documents that said investor needed to recognize that there was the potential for t congress to come back potentially and change the law. is that accurate? >> that is accurate. >> as i recall, i think the 10th amendment of the constitution significantly distinguishes the status of a state to that of a territory. we would be prohibited by the constitution to carrying out those actions here. is that accurate? >> yes. >> further discussion? >> i rise in opposition to this amendment. first, in terms of the impact that the potential restructuring were authorizing could have in the municipal market, there's no such negative impact.
there has been testimony before this committee coming from john miller managing director of the management, mr. miller, who oversees over $113 billion of tax exempt municipal investments in america. this is one of the largest testified to he contrary. it will stabblize puerto rico itself the government but it will also have a pozz give pact elsewhere. mutual funds respected traditional mutual funds like ally ns and have also stated that there's not going to be any impact in the municipal markets at