THE BURNED OVER DISTRICT

Or is it a hidden bailout for the hedge funds who recklessly poured $Billions into the island when they had a favorable tax treatment? One thing is certain, the people of Puerto Rico are going to be squeezed to within an inch of their lives by the upcoming austerity that will be imposed on them.

The Senate passed the bill on a bipartisan 68-30 vote, three weeks after the House overwhelmingly backed the measure. The vote came two days before the island is supposed to make a $2bn payment to creditors. Obama is expected to move quickly and sign the legislation.

Puerto Rico is in a decade-long recession and has $70bn in debt. Thousands have fled the territory for the US mainland. Businesses on the island have closed, schools have struggled with limited electricity, and hospitals have asked for cash payment in advance for some medication.

The legislation would create a control board to oversee the US territory’s finances and supervise some debt restructuring. It would not provide any direct financial aid to the territory, but leaders warned that a bailout could eventually become necessary if Congress doesn’t take this step.

“If we don’t act before the island misses a critical debt payment deadline this Friday, matters will only get worse for Puerto Rico and for taxpayers,” warned Senate majority leader Mitch McConnell.

Governor Alejandro Garcia Padilla has warned the US territory would face multiple lawsuits if the bill is not approved, especially following Friday’s anticipated default on $1bn in general obligation bonds. The legislation would temporarily block creditor lawsuits from being filed until February 2017.

Treasury Secretary Jacob Lew visited Capitol Hill on Tuesday in a bid to persuade some reluctant Democrats concerned that the board would be too powerful. Democrats have also opposed a provision that would allow the island’s government to lower the minimum wage for some younger workers.

Lew urged senators to vote for the bill even though it isn’t perfect, saying that if the island defaults, the government may be forced to shut public transit, close a hospital, or send police officers home.

In the old days of honest financial dealings, lenders would accept the risk they took and take whatever could be salvaged. Nowadays, the Big Swinging Dicks on Wall St expect their "victims" to make them whole regardless of the circumstances. Congress will never suggest, much less require, that the BSD take a haircut on their investments.