It won’t matter that those bonds will carry junk ratings. What will matter is the yield — currently more than 12 percent on its present bonds that mature in 2035 — which is triple-tax-exempt to investors. It’s that enticement, with the help of bond brokers such as Stoever, that have made money available to Puerto Rico not only to fund its overly generous retirement plans for its workers, but also to roll over maturing bonds with new ones while borrowing to pay their interest along the way.
Since Senate Majority Leader Mitch McConnell said it, it must be true: The bill passed by the Senate on Wednesday to rescue Puerto Rico from its overwhelming financial troubles “won’t cost taxpayers a dime, not a dime.”
The president has said he would sign into law the dreadfully misnamed Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) immediately and would then begin to nominate the seven members of the board to oversee its implementation. That board is to become effective on September 1.
That provides no help to Puerto Rico, which will default on most of a $2 billion payment due July 1. And it does nothing to address the additional $2 billion the government owes to its various vendors, suppliers, and contractors, who have been waiting months to get paid for work already completed and services already rendered. While the focus of all the congressional debate has been on the $73 billion the little island of less than four million citizens owes to various creditors, nothing was said about the other $40 billion shortfall in the island’s pension plans for its government workers. And nothing in the bill addresses the underlying problem: a dysfunctional economy laden with regulations that not only punish small businesses but discourage the creation of new ones.