Representatives of Puerto Rico's cooperativas have blasted a House plan to place the financial institutions in the hands of a fiscal control board.
And an island attorney and local politician said that the bill — approved by the House Natural Resources Committee in May — could jeopardize the island's government's efforts to protect the institutions.
H.R. 5278, known as PROMESA, creates a fiscal board to oversee the island government's finances, which are on the verge of collapse. The island government is tens of billions of dollars in debt.
Congress has been expected to enact legislation to establish a process by which the island government could manage that debt. A markup of the House legislation had been delayed, as members of both parties and the Obama Administration hammered out details. The Senate has yet to weigh in on a plan to help Puerto Rico manage the crisis.
Cooperativas are financial institutions insured by a territory government agency, the Corporation for the Supervision and Insurance of Cooperatives. There are more than 100 cooperativas in Puerto Rico in addition to 11 credit unions that are insured by the NCUA. The cooperativas currently have more than 966,000 members and total assets of $8.47 billion.
Attorney Jose Sosa-Llorens, who represents several of the major cooperativas, has said Congress should consider granting the NCUA the authority to guarantee the cooperativas' deposit insurance.
H.R. 5278 does not do that.
The cooperativas issued a statement condemning the legislation.
“Adoption of the proposed federal fiscal board for Puerto Rico raises serious questions regarding the breadth of Congress' territorial powers over Puerto Rico and the resulting voidance of self-rule,” the cooperativas said in a statement. “Moreover, if the burden of paying and solving the current crisis will be borne by Puerto Rican taxpayers, it is for us to make the final decisions of how to better solve these problems.”
The cooperativas may have another reason to dislike the legislation. It could call into question legislation passed by the island legislature that protects the cooperativas.
As explained by Sosa-Llorens, Act 40 was signed into law on May 5, 2016.
“It requires the government to preserve the safety, soundness and stability of depository institutions, which includes credit unions,” he said in a statement to CU Times. “These provisions are in line with public policy mandates of the Dodd Frank Act of 2010.”
The House committee legislation states that the provisions of “PROMESA control if any territorial, or state law or regulation is inconsistent with the Act,” according to a summary of the bill, released by the House Interior Committee.
That essentially could void Act 40, according to Luis Gallardo, an attorney and a city council member in Aguas Buenas, Puerto Rico, who has written extensively on the Puerto Rican debacle.
“Act 40 creates preference and protections for cooperatives,” he said. “H.R. 5278, on the other hand, benefits most vulture funds.”
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