WASHINGTON — President Trump on Tuesday suggested that the government debt accumulated by bankrupt Puerto Rico would need to be wiped clean to help the island recover from the devastation caused by Hurricane Maria.
“We are going to work something out. We have to look at their whole debt structure,” Trump said during an interview on Fox News. “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out. That’s gonna have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave goodbye to that.”
Puerto Rico is dealing with an immediate humanitarian disaster made worse by the long-term debt crisis that led it to declare a form of bankruptcy this year. The island’s government for decades had been plagued by budget deficits caused by wasteful spending, and borrowed $74 billion. Much of that went to operations.
The commonwealth’s budget is under the control of a federally appointed oversight board, a panel that Congress created to wield broad sway over the territory’s finances. The panel approves the island’s budget and is meant to help make unpalatable decisions such as closing schools and cracking down on tax evasion.
Trump paid a 4½-hour visit to the island earlier Tuesday, greeting local officials and offering consolation to residents who have been without power and, in many cases, drinking water since the storm struck on Sept. 20. Some in Puerto Rico’s government already are estimating reconstruction costs will be as high as $60 billion.
Prices of the Puerto Rico’s bonds have plunged to record lows, signaling investors expect that there will be even less money available to repay its $74 billion of debt.
Puerto Rico has little financial ability to navigate the disaster on its own, leaving the recovery heavily dependent on how much aid comes from Washington. It began defaulting on its debts two years ago, seeking to avoid draconian budget cuts officials said would deal another blow to an already shrinking economy. With nearly half of its 3.4 million residents living in poverty, the government filed for bankruptcy protection in May.