Puerto Rico is facing a deadline for a multimillion-dollar bond payment next month as House Republicans struggle to find a way to help the island deal with its $70 billion debt.
A House committee canceled a Thursday vote on the issue as Republicans were divided on how Congress should weigh in. Gov. Alejandro Garcia Padilla has warned that a debt restructuring measure needs to be approved soon as the deadline for a $422 million bond payment looms in May.
Puerto Rico has said it will likely default on the payment, which would mark the first time the island would default on general obligation bonds protected by the island's constitution.
Obama administration officials warned at a hearing Wednesday that the island is facing total financial collapse if Congress doesn't step in. Republicans agree on the urgency of the matter, but they have faced opposition from within their own caucus and from Democrats.
Legislation released by the panel this week would create a control board and allow the board to facilitate some court-ordered debt restructuring, though it does not give the island the broad bankruptcy authority that territorial officials had sought.
Democrats worried that the control board would be too powerful, prompting echoes of colonialism.
Some conservative Republicans had objected to the debt restructuring, saying it's a bad precedent. In an attempt to satisfy those lawmakers, the most recent draft of the bill would give creditors more of a say on debt plans, allowing them a preliminary vote on whether they wanted to voluntarily restructure debt.
But it was not enough.
At Wednesday's hearing, several Republicans on the panel expressed reservations about the restructuring. Joining them was Treasury Department official Antonio Weiss, who said the Obama administration is concerned that allowing creditors to vote on debt restructuring could delay the process.
House Speaker Paul Ryan, R-Wis., endorsed the legislation and encouraged his colleagues to sign on.
"Congress has a constitutional and financial responsibility to bring order to the chaos that is unfolding in the U.S. territory — chaos that could soon wreak havoc on the American bond market," Ryan said.
Puerto Rico has been mired in economic stagnation for a decade. The financial problems worsened as a result of setbacks in the wider U.S. economy, and government spending in Puerto Rico continued unchecked as borrowing covered increasing deficits.