"It Will Be A Disaster": Puerto Rico To Run Out Of Cash On October 31

While Puerto Rico is way beyond a simple solvency crisis, having already filed for bankruptcy earlier this summer - and courtesy of Donald Trump there is now debate whether or not the island's $74 billion in debt will be forgiven outright - it is now also on the verge of a full-blown liquidity collapse. According to Treasury Secretary Raul Maldonado, Puerto Rico faces a government shutdown on Oct. 31, at which point it will run out of cash, resulting in a halt to its hurricane recovery, unless of course the US doesn’t provide billions in emergency funds.

Indeed, while the muni bond market freaked out today after Trump said on Tuesday night that Puerto Rico's debt may need to be "wiped out", focusing attention on the commonwealth’s staggering $74 billion debt, Puerto Rico faces a more immediate crisis in the wake of the storm: it is about to run short of money for fuel, salaries of recovery workers and food aid.

Meanwhile, only 8.6% of customers have electricity, mobile-phone service is sharply curtailed and many mountainous rural areas remain inaccessible.

According to Bloomberg, the U.S. commonwealth’s bankrupt government is burning through the $1.6 billion it had on hand before Hurricane Maria devastated the island. Furthermore, with widespread damage to telecommunications systems and the electricity grid, the Treasurer said he be unable to begin collecting sales tax for at least another month.

“I don’t have any collections, and we are spending a lot of money providing direct assistance for the emergency,” he said in an interview in San Juan. “Without the assistance from Congress, Puerto Rico’s government will not be able to operate next month.”

“You have conservatively over 100,000 homes that are destroyed here,” Governor Ricardo Rossello said an interview Wednesday.


“Essentially you’re looking at zero revenue for the next couple of months,” he said. “While you have zero revenue, you still have expenditures, plus emergency expenditures. That means the money is going to run out very quickly."

Hence the need for Uncle Sam to step in: Maldonado said he has requested between $6 billion and $8 billion in aid from Congress to keep the government running for “a few months.”

And unless Congress does step in, Puerto Rico will go dark in just under a month. Literally.

The treasurer said he has set aside funds to make payroll and pension payments in October. But if Congress fails to act, he said the island is facing a "total shutdown” on Nov. 1 that would curtail essential services and the distribution of aid.

The good news for Puerto Rico is that, at least at first glance, Congress is willing to cooperate:

Senate Majority Leader Mitch McConnell said in a press statement that the Senate stands ready to help. House Speaker Paul Ryan’s office didn’t respond to a request to discuss the Oct. 31 run-dry date. Nancy Pelosi, the Democratic House minority leader, said earlier Wednesday that the Treasury Department should extend a loan to help Puerto Rico in the short term.

That said, Congressional enthusiasm may be dampened once the broke island comes asking for tens of billions more for its long-term recovery efforts.

Destroyed PR homes sit surrounded by debris from Hurricane Maria

Also on Wednesday, the Trump administration was finalizing a $29 billion disaster-aid request covering a series of major storms in the U.S. But Puerto Rico’s control board, created by the law that allowed the commonwealth to enter bankruptcy, has said Maria may have caused as much as $95 billion in damages, more than the island’s annual gross domestic product.

Meanwhile, perhaps sensing that Congressional, and Trumpian generosity, may soon reach its limits, Puerto Rico control board, which has broad oversight over the island’s finances, requested for immediate aid Tuesday. "In a letter the panel sent congressional leaders, the officials asked the federal government to make low-interest loans available to ease the impending liquidity crisis."

And, in a deja vu moments from Hank Paulson's request for a blank check from Congress ahead of the TARP bailout of US banks, Puerto Rico did its best imitation of requesting the "greatest amount of federal aid", or else:

“Failure to provide the greatest amount of federal aid and the emergency liquidity program will be potentially ruinous," chairman Jose Carrion wrote. "We must do all that we can to help Puerto Rico avert a tragedy of historic proportions."

The panel also asked that the federal government waive cost-sharing limits, disaster spending caps and grants for long-term relief. Then, for his final Hank Paulson rendition, Maldonado said that If Congress doesn’t act, “it will be a disaster.”


Keyser Golden Showers Wed, 10/04/2017 - 23:12 Permalink

And of course, as usual, this entire fiasco is being blamed on the white house... Never mind that Puerto Rico went bankrupt before Trump took office and the cards had already been dealt before hurricane Maria destroyed the infrastructure on the island... The failure to make Puerto Rico whole again with a $95 billion gift will be viewed as dirty old white men failing to take care of the latins... Perhaps Congressman Guttierez will cry on CNN again... 

In reply to by Golden Showers

Elliott Eldrich FreeShitter Wed, 10/04/2017 - 21:17 Permalink

So let's call it $100 Billion. That's a lot of money. It's nearly 2.5% of what was spent to bail out Wall Street, that's if you only consider the $4.2 TRILLION dollar expansion of the Fed's balance sheet, from $300 Billion in 2008 to $4.5 Trillion today. Puerto Rico was hit by an actual hurricane, whereas Wall Street only suffered from the excesses of greed. So you're telling me that we can't afford to spend 2.5% of what we spent bailing out Wall Street to provide for the human needs of people who live in a U.S. Territory that was just pulverized by a natural disaster?Fun bonus question: At what point does a government simply lose all legitimacy?

In reply to by FreeShitter

oDumbo Elliott Eldrich Wed, 10/04/2017 - 21:47 Permalink

I'm sorry, but that's simply a retarded point of view.  If we had $100 billion just laying around, we could probably find other worthy causes that are also really important.  We throw debt around these days like it's spaghetti at a kids' party.   News flash:  we don't really have $100 billion to bail out an island that will never pay it back, will only need more and that is destined for failure.  Here's a better plan... PR's all go to Miami for free oDumbocare, grubermint pensions and EBT cards.  At least this way, they will slowly bleed the US to death like the rest of the dums.  Then we can turn PR into a resort or other for-profit enterprise and allow private investment to replace the floating welfare turd that won't sink even after it sunk.     

In reply to by Elliott Eldrich

Elliott Eldrich oDumbo Wed, 10/04/2017 - 21:54 Permalink

" Then we can turn PR into a resort or other for-profit enterprise and allow private investment to replace the floating welfare turd that won't sink even after it sunk. "Then, when it goes bankrupt from whatever Wall Street Ponzi scheme gets run on it, the ostensible "owners" will come, hat in hand, to the US Government for a bailout, and they'll get trillions on demand because that's just how that ball bounces. By the way, the whole "free market rah rah rah" argument has gotten about as stale as ten-year old bread. Yes, there are some things the "free market" does well. There are also a lot of things the free market does very poorly, you need go no further than the history of private fire departments to see how badly wrong that can go.

In reply to by oDumbo

MoreFreedom Elliott Eldrich Wed, 10/04/2017 - 23:04 Permalink

Are you feeling nice by spending our money that was taken from us by force?   PR residents don't pay federal income tax.  They should be taking care of their own island.Going bankrupt is probably the best thing for the island.  It puts an end to the corruption and ends payments to government workers who mostly don't work.  Given that 1 out of every 4 employees on the island is paid by the government what do they do?  The island is crime ridden with poorly maintained infrastructure and is loaded with corruption.    Those government workers are enough people to put to work to rebuld the island.  Oh wait, they don't have the skills, and their salary and benefits drain money so it can't be spent on things like maintaining the power lines and roads. Now consider what happens when they stop getting paid.  The politicians get voted out, and a new set gets to start all over.  And they'll have a choice to be corrupt, or ethical.  But the right people get their haircut - the ones who ran it into the ground.   That's an incentive to do things right.  If Trump lets them continue, the misery will continue there. 

In reply to by Elliott Eldrich

Buck Johnson MoreFreedom Thu, 10/05/2017 - 09:43 Permalink

Oh wo is me, wo is me.  The PR's are all over the place saying we are in trouble and unless we get hundreds of billions of dollars (and our debt forgiven) we won't make it.  I bet anyhting that the congress won't give them what they want.  Because you can see the states salivating right now, if you can bail out a non-state because of fiscal mismanagement and storm damage then you can bail out our state and our pension etc. etc. etc..  They won't give PR any of that money except maybe a few billion.  

In reply to by MoreFreedom