Listen To The Story

Puerto Rico’s billions of dollars in outstanding debt involves a complicated mix of obligations: general government bonds sold by Puerto Rico, sales tax-backed bonds, electric power revenue bonds … it’s a long list. Bond insurers are on the hook for a portion of the debt if the government agencies that issued the bonds fail to pay interest and principal. Mutual funds and hedge funds stand to lose in the debt restructuring, but so do small investors. About 40 percent of the territory’s outstanding bonds are held by Puerto Ricans in individual retirement accounts and local banks. And as for President Donald Trump’s power to intervene in some way in the debts owed to Wall Street firms and “wipe that out”? There’s no legal precedent for unilateral executive branch action given that Congress has already passed a law governing Puerto Rico’s bankruptcy and a federal judge is now adjudicating the complicated debt restructuring case.

Click the audio player above to hear the full story.

As a nonprofit news organization, Marketplace is on a mission that drives what we do every day: to increase economic intelligence across the country. But we can’t do it alone. Become a Marketplace Investor today, in whatever amount you choose, and your donation will go twice as far, thanks to a dollar-for-dollar match from The Kendeda Fund.

Become a Marketplace Investor today – in whatever amount is right for you – and keep public service journalism strong. We’re grateful for your support.

Follow Mitchell Hartman at @entrepreneurguy