In a Wednesday press briefing, New York Federal Reserve President William Dudley spoke on various economic issues, including endorsing Congressional action in response to Puerto Rico's financial crisis.
Addressing a question regarding how the Fed can help the situation in Puerto Rico, Dudley suggested that Congress would be more fit to act on the issue.
"The most important thing," Dudley said, "would be [...] if Congress could actually pass legislation granting the authority to do Chapter 9 bankruptcy filings for Puerto Rico, which they do not have today."
The New York Fed President continued, “I think that would be helpful, because it could help facilitate an orderly restructuring of their debt which is probably going to turn out to be necessary.”
Currently there are two bills, one in the House and one in the Senate, proposing that some of the island's entities - such as its beleaguered public utility - be allowed to restructure its debts under Chapter 9 the way Detroit has done. While states can allow their municipalities to file for Chapter 9, this is not the case with Puerto Rico, which is a U.S. territory.
On August 3rd, Puerto Rico defaulted on its full payment of its bonds for the first time in the commonwealth government's history. On top of a deepening economic crisis, Puerto Rico is also experiencing one of the worst droughts in the territory's history.