Puerto Rico rescue falters under attack by conservatives, investors

WASHINGTON An aggressive advertising and lobbying campaign by conservative activists and financial interests this week stalled a plan in the U.S. Congress to rescue Puerto Rico from crippling debt, while lawmakers adjourned on Friday with no clear path forward.

As its economy reels and basic services are threatened, the U.S. island territory is pleading for help from Washington, but lawmakers have been unable to formulate a response, or even estimate when they might be able to advance a legislative fix.

Puerto Rico is staring down a May 1 deadline for paying about $422 million to Government Development Bank bondholders.

With that as a backdrop, the Republicans who control the U.S. House of Representatives huddled privately for 90 minutes on Friday to hear ideas, then decided to go home.

“There may be different ways to fix a problem that may include doing nothing and allow it to work through the court system,” conservative Republican Representative Mick Mulvaney, of South Carolina, told reporters following the meeting.

In the face of an election-year wave of radio, television and print advertisements warning of a federal “bailout” for Puerto Rico, House Republicans had already put off planned committee votes on a rescue package earlier this week.

The Center for Individual Freedom, a conservative activist group, has spent $200,000 on television advertisements around Washington, D.C., this month, according to the Sunlight Foundation, a lobbying watchdog.

The center’s ads call for a halt to “the Washington bailout of Puerto Rico.” Another group that opposes a Puerto Rico rescue, Main Street Bondholders, has run newspaper ads.

Radio spots have reached Utah voters warning of a “radical plan” to usher Puerto Rico into bankruptcy and urging local Representative Rob Bishop to protect investors. Bishop chairs the House committee overseeing Puerto Rico legislation.

With a 45 percent poverty rate and $72 billion in debt, Puerto Rico needs an orderly way to shed some of its debt, leading Republicans agree, though compromise on details remains elusive.

House Speaker Paul Ryan, the Obama administration and congressional Democrats support a rescue effort to help Puerto Rico. A proposal backed by Ryan and Bishop would lead investors towards a voluntary reduction of loans and a compulsory write-down if no compromise were possible.

Democrats have pressed for changes to a draft bill, knowing their votes likely will be needed to win passage in the House.

Ryan has insisted that there is no “bailout” under development, while scurrying to figure out how he can please conservative Republicans without alienating too many Democrats.

Representative Mo Brooks of Alabama, a conservative stalwart, told reporters: “The liberal, financially irresponsible members of the Republican conference will cozy up to the Democrats and they will work out an agreement.”

Anti-rescue ads are also running in Louisiana, whose Representative Garret Graves said on Friday: “The campaign has been effective in distorting reality.”

(Additional reporting by Susan Cornwell; Editing by Kevin Drawbaugh, Bernard Orr)

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