US lawmakers review control board's role in Puerto Rico

U.S. lawmakers on Thursday scrutinized the work of a federal control board created by Congress to oversee Puerto Rico's finances amid complaints from some officials that it is ineffective and has cost the bankrupt U.S. territory's government' millions of dollars in operating expenses.

The House's Natural Resources Committee heard testimony in Washington from several people, including Puerto Rico Gov. Ricardo Rossello, who asked that the control board remove itself from debt restructuring proceedings in which his administration can reach consensual deals with creditors.

Rossello also accused the board of overstepping its powers, saying it has engaged in "a crusade" to cut public pensions and denied requests for certain resources amid the island's 12-year-old recession. He criticized various austerity measures imposed by the board, saying they would stunt economic growth.

"There is ... a naive and problematic narrative that the government is not doing its job, that we refuse to make structural reforms, and that the oversight board is the solution to address said mismanagement," the governor said.

Rossello also criticized the board for filing some 230 lawsuits this week against a variety of companies that have provided services to Puerto Rico's government. The suits allege the payments were unlawful under a bankruptcy code and Puerto Rico law.

"How is the Puerto Rican government supposed to receive goods and services if everyone must fear litigious harassment?" Rossello said.

He spoke just hours after the board announced it also had filed lawsuits against more than 20 banks, law firms and others seeking to recover fees they earned for helping issue nearly $9 billion in Puerto Rico bonds. The board said it aims to recover more than $1 billion from holders of bonds issued in excess of Puerto Rico's debt limit.

The control board's executive director, Natalie Jaresko, said at the hearing that the board has restructured about 30 percent of Puerto Rico's more than $70 billion public debt load. She said the board's work will be done only when the government achieves four years of balanced budgets and regains access to capital markets.

She criticized Rossello's administration for not implementing critical reforms included in a fiscal plan aimed at reviving the island's economy.

"The fiscal plans are not a selective menu from which options can be selected, rejected, or ignored," she said.

"I understand that many in Congress expected Puerto Rico's mismanagement to be fixed and the island to be turned around immediately, but 40 years of fiscal mismanagement cannot be fixed in three years," Jaresko said later.

Martín Guzmán, an economist at Columbia University, testified that the board's policies have been more aligned with bondholder groups than with Puerto Ricans. It is "leaving a legacy of debt and risk that may undermine the future of Puerto Rico's economy," he said.

Guzmán said investors who bought Puerto Rico bonds backed by a local sales tax in the months after Hurricane Maria have made "massive profits."

The hearing was led by Rep. Raul Grijalva, an Arizona Democrat who said Congress has not done enough to help Puerto Rico overcome its economic crisis and recover from Maria.

"This present administration has been out of sight and out of mind," he said.

Earlier this week, the Senate's Republican majority offered a new proposal for a long-stalled disaster aid bill under which Puerto Rico would gain an additional $304 million from an overall $431 million for 2017 storms. Democrats have been demanding more funds to help repair Puerto Rico's water systems and provide disaster aid to the island on more generous terms.