Supreme Court passes the ball to Congress on bankruptcy

Last week the Supreme Court insulted Puerto Rico by saying its people aren’t sovereign. This week the court added injury to the insult, denying Puerto Rico access to federal bankruptcy laws that would have created a path to recovery for its struggling utilities. The decision on Monday passed the ball to Congress to change the law or arrange a bailout. At the same time, it underscored the outrageousness of Puerto Rico’s distinct legal status as a quasi-colony: the Commonwealth will have to lobby a Congress in which its residents, U.S. citizens all, have no representation. The underlying legal situation always posed a high hurdle for Puerto Rico, which in 2014 passed a Recovery Act to enable municipalities and utilities associated with the Commonwealth to declare bankruptcy. A federal district court and then the U.S. Court of Appeals for the First Circuit both struck down the Puerto Rico law as invalid under the federal bankruptcy code. Federal bankruptcy is available to municipalities within the 50 states. Puerto Rico had the same capacity between 1933 and 1984. But that year, Congress amended the law to exclude Puerto Rico from using chapter 9, part of the code that authorizes states to let their municipalities go bankrupt.

Source: Supreme Court Affirms That Puerto Rico Is Really a U.S. Colony – Bloomberg View

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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