Senate approves eleventh-hour Puerto Rico rescue

WASHINGTON—The Senate advanced a major bill on Wednesday to alleviate Puerto Rico’s $73 billion debt crisis without forking over any federal funding.

The island faces default Friday on a $2 billion payment it owes creditors. After a 68-32 vote in the Senate, the bill is headed to President Barack Obama, who likely will sign it before the default deadline.

“This bill won’t cost taxpayers a dime, not a dime,” Senate Majority Leader Mitch McConnell, R-Ky., said on the Senate floor Wednesday. “It prevents a bailout. And it offers Puerto Rico the best chance to return to financial stability and economic growth over the long term.”

Senate Minority Leader Harry Reid, D-Nev., dislikes the bill but voted for it anyway.

“At the end of the day, this legislation provides tools that allow Puerto Rico to survive, to hopefully structure a meaningful portion of its debt,” he said.

The bill doesn’t contain any federal funding but lays out a plan to mobilize the island’s finances. It establishes a seven-member board to oversee Puerto Rico’s financial affairs, allows the governor of Puerto Rico to lower the minimum wage, and grants an exemption to the Department of Labor’s overtime limits.

Puerto Rico’s debt crisis began when the government started borrowing money through municipal bonds. With the help of revenue from investors, Puerto Rico tried to avoid laying off workers and shutting down government agencies. But now the U.S. territory owes $73 billion.

Government officials already shut down more 150 schools and closed 40 rooms in the island’s largest pediatric hospital. Leaders say the island is struggling to pay for school buses, healthcare staff, and police vans. The island has suffered a long recession, with high unemployment and failing businesses.

Unlike U.S. states or cities, Puerto Rico cannot file for bankruptcy. Because it’s not a sovereign country, like Greece, it also cannot apply for help from the International Monetary Fund. So island officials are looking toward Congress for help out of their financial trouble.

“The Puerto Rican people are our fellow Americans,” said Speaker of the House Paul Ryan, R-Wis., when the House passed its version of the bill. “They pay our taxes, they fight in our wars. We cannot allow this to happen.”

With just four days before the default, Treasury Secretary Jacob Lew pressed the Senate to pass the bill. On Tuesday, the Obama administration and Senate Republicans hurried to secure enough votes for the debt-relief bill, which appeared headed for a tight vote.

But on the Senate floor Tuesday, Sen. Bernie Sanders, I-Vt., voiced his disapproval.

“Is this legislation smacking of the worst form of colonialism, in the sense that it takes away all of the important democratic rights of the American citizens of Puerto Rico?” he asked.

But even skeptical senators feared doing nothing would only make the problem worse.

“Rejecting this deal now means a sea of chaos and cost,” said Sen. Richard Blumenthal, D.-Conn. “I’m far from sympathetic for the hedge funds and the creditors but ironically they are the ones who will benefit if chaos ensues …”