The Trump administration relieved five of the seven PROMESA Financial Management and Oversight Board members of their duties last week. The PROMESA Board, established under President Obama in 2016, consists of seven members appointed by the President of the United States with input from Congress. The president can fire these members “for cause.” The White House said the Board had been “run inefficiently and ineffectively…for far too long, and it’s time to restore common sense leadership.”
The five members who were dismissed — Arthur J. González, Cameron McKenzie, Betty A. Rosa, Juan A. Sabater and Luis A. Ubiñas — are all from Puerto Rico. It has been reported that all are Democrats, while the remaining two are Republicans.
According to the PROMESA Act, the Board requires a quorum of four to conduct business. They are therefore unable to continue their work until at least two of the five fired members are replaced.
What’s the Board?
The Board was established with the goal of reorganizing Puerto Rico’s debt, which the then-governor had declared “unpayable.” It was also supposed to help Puerto Rico improve its accounting practices and achieve a balanced budget. Governor Gonzalez-Colon has produced a balanced budget, and the Board has certified it. Most of the debt has been reorganized, with one remaining group of bondholders holding out for payment of more than $12 billion dollars, while the board wants to pay $2.6 billion.
Some observers suggest that the firing of the Board members is intended to favor the bondholders over the best interests of Puerto Rico. “This sudden purge by Donald Trump is not about justice or reform,” said Rep. Nydia Velazquez. “It doesn’t dismantle the Board or change PROMESA. It simply creates an opening to stack the Board with even more extreme, pro-bondholder appointees who will continue to put the needs of hedge funds over the Puerto Rican people. If Trump appoints creditor lobbyists to the Board, as he did in his first term, Puerto Ricans will end up paying higher energy bills for decades and facing deeper service cuts, all to boost profits on Wall Street.”
Over the years, the Board has been harshly criticized by many different people from various political persuasions. One of the core criticisms is that the Board is colonial and anti-democracy, since it takes precedence over the elected officials of the territory. “The Financial Oversight and Management Board represents a cardinal sin against the sovereignty and self-determination of Puerto Rico. It is the single most egregious example of modern-day colonialism in Puerto Rico and must be disbanded,” said Rep. Ritchie Torres.
Another area of criticism is the austerity measures the Board has required. Many observers have claimed that the Board serves the creditors rather than the people of Puerto Rico, who pay for the Board. “Puerto Rico was in a terrible financial squeeze even before Hurricane Maria. Now, with the island devastated, the Oversight Board surely recognizes there is no way Puerto Rico can service its debt,” said Senator Elizabeth Warren in 2017. “Puerto Rico’s budget should go to rebuilding the island and addressing its ongoing humanitarian crisis, not paying Wall Street vulture funds.”
The Board has also been criticized for disrupting the free market, for taking excessive salaries and paying too much to consultants, and for simply taking too long to accomplish its objectives. Resident Commissioner Pablo Hernandez said, “How is it possible that a Board that promised to cost less than $400 million has ended up spending over $2 billion? How can it preach austerity while spending freely on consultants who are unaccountable and, in many cases, have no incentive to end their contracts?” In a recent hearing, he described the Board’s record as a “big failure.”
What next?
There are several possible next steps. President trump could appoint new members to the Board. Governor Gonzalez-Colon has expressed her willingness to continue working with the Board, whoever the members may be.
There has been talk about the Board appealing the firings. Legal experts suggest that the Board may not have standing to make a legal complaint, but the individual Board members who were fired could claim wrongful termination.
One thing we know: there could be no such Board under statehood. Congress has been using the Board’s existence as an excuse for not considering the territory’s status. Reach out to your representatives and let them know that you expect them to do their duty and resolve Puerto Rico’s political status.
No responses yet