U.S. Treasury Sec. Jack Lew wrote a letter to Speaker Paul Ryan and warned that a taxpayer bailout for Puerto Rico will end up being the only option if Congress cannot pass legislation allowing Puerto Rico to restructure its debt before July 1.
Lew last wrote a letter in January to press Ryan and Congress to pass legislation allowing the island to restructure its $72 billion debt. Now that Puerto Rico has missed the critical May 1 payment deadline, Lew wrote Monday that "a series cascading defaults" could, and would, intensify.
"Going forward, Puerto Rico's $70 billion of debt is unsustainable by any measure," Lew writes. "It simply cannot afford to pay its debt. And, with a shrinking economy because of people leaving Puerto Rico, further reductions in government spending will be difficult to implement."
RELATED: 'Hanging on the Cliff': Puerto Rico to Default on $422 Million Debt Payment
Puerto Rico Gov. Alejandro García Padilla announced the island would not be able to pay the full $400 million debt payment that was due Monday. While the Puerto Rican government attempts to finance the first loans, the island is bracing for the looming $2 billion payment due July 1.
A recent bill proposed by House Republicans has stalled and Congress went on recess without a vote on Puerto Rico.
Lew warns that a taxpayer bailout may be the only option for Congress if legislation lags on the House floor.
"The people of Puerto Rico will be forced to endure additional suffering," Lew writes. "And, unless Congress passes legislation that includes appropriate restructuring and oversight tools, a taxpayer-funded bailout may become the only legislative course available to address an escalating crisis."