Puerto Rico is a financial mess.
Gov. Alejandro García Padilla called Puerto Rico’s debt, around $73 billion, “not payable.” The island has already defaulted on small debt payments three times. Hundreds of thousands have left the island as poverty and unemployment skyrockets. It is very likely that the US territory will also default on a July 1 debt payment of $1.9 billion.
Because of its status as a territory, Puerto Rico cannot use U.S. bankruptcy laws, and the island cannot seek help from the IMF or the World Bank as a sovereign country might.
Congress has come up with a shaky (and probably shady) solution.
House negotiators released the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) after bipartisan talks. PROMESA would institute a seven-member fiscal oversight board, the majority of whom would be selected by Congressional leaders Paul Ryan and Mitch McConnell. Puerto Ricans have no say in the board; members must have bond market and financial experience but cannot be a current or former elected official from the island. The oversight board would be able to institute more cuts, supersede local laws, lower the island’s minimum wage, and as a last resort institute a court-approved debt restructuring, as long as it is “in the best interest of creditors.”
Got that? "In the best interest of creditors,” means the money players have control and they will, for starters, squeeze the juice out of every chironja on the island.
The Puerto Rican government should reject the plan and just continue to say, "To hell with them all." and continue to default.
Meanwhile, Bernie Sanders sees the injustice of the chironja squeeze, but his solution is to squeeze the mainlanders (That's us Americans) so that the Puerto Rican government can pay the creditors, albeit at a discount.
His desired method of the squeeze is to call for the Federal Reserve to loan money to Puerto Rico. He does not explain where the Fed is going to get the money to make the loans, presumably by just printing it up, à la TARP.
As I note, PROMESA is shady enough, though it does appear that there will be no chironja squeeze of Americans under PROMESA.
Bernie's plan is on the other hand positively (coco)nuts, it is oppressive (to mainlanders) and keeps the incompetent Puerto Rican government and laws alive and in place.