Earlier this month, President Trump dismissed five of the seven members of the PROMESA Fiscal Management and Oversight Board (FOMB). Last week, he fired Andrew Biggs as well, leaving just one member on the board. John Nixon is the remaining board member. Under the PROMESA Act, four members are required for a quorum and any group smaller than that can’t take action. However, a task force alert at law firm McConnell Valdés claims that “under the FOMB Bylaws, a majority of the members constitutes a quorum…Accordingly, the remaining member may constitute a quorum.” However, the McV task force agrees that the quorum of four would be required for substantive action such as approving a budget or a fiscal plan.
Presumably this would include taking further action on the PREPA debt. While most of Puerto Rico’s debt has been reorganized or eliminated, a group of bondholders, many of whom bought their shares after the Governor of Puerto Rico at the time had declared the debt “unpayable,” are demanding $12 billion in payments while the Board was offering $2.65 billion.
Several members of Congress spoke up at the recent hearing on the FOMB, saying that while they had been critical of the Board in the past, they believed that it needed to finish the job by settling with PREPA. These representatives expressed concern that removing the Board too soon would leave the people of Puerto Rico in jeopardy. In a statement after the first round of firings of board members, Rep. Nydia Velasquez wrote, “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.”
Rep. Ritchie Torres said that “the Board might be the one institution that’s protecting the people of Puerto Rico from a highway robbery.” Following the firings, he released a statement saying, “Donald Trump has fired all of the Democratic appointees to the Fiscal Oversight and Management Board and is expected to replace them with partisan loyalists—political hacks willing to sell out Puerto Rico to predatory bondholders. If those bondholders secure their sweetheart deal, Puerto Rico will be locked into paying the highest electricity rates in the country (second only to Hawaii), all while relying on a failing, unreliable electric grid. Paying the highest electricity rates for the worst electric grid is not ‘efficiency.’ It’s exploitation.”
Is PREPA the biggest issue now?
The most recently fired member of the board, Andrew Biggs, focused on the same issue in his remarks to journalists at his local paper after his dismissal.
“If you stack the board that represents the government with people who actually favor the bondholders, then what it means is that the government and the people of Puerto Rico are not represented in this process,” Biggs said. “It’s just a basic issue of fairness.”
“The reason they fired some of the board members is because lobbyists for these bondholders were arguing for it,” Biggs continued. “I don’t begrudge people representing their interests. The bondholders should be represented in this legal case, of course; but both sides have to be represented.”
Could this happen in a state?
While many express concerns that the firings could be part of a strategic plan to prioritize bondholders at the expense of the people of Puerto Rico and others see the change as an opportunity to increase efficiency, it is clear that the firings could not happen in a state. The board itself is a colonial institution, since it has power to override the democratically elected leaders of the territory. The wholesale firing of Board members is equally colonial in nature.
As long as Puerto Rico remains a territory in an essentially colonial relationship with the federal government, this kind of action can take place. Are you ready for change? Tell your representatives that you want equality and justice through statehood now.
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