The White House on Wednesday has named seven members of the oversight board that Congress established to help Puerto Rico control its spending and restructure its massive debt load.
The members include a retired New York bankruptcy judge, a Puerto Rican banker, a former director of the California finance department, a private equity manager and former bank president, an insurance expert who has been a bankruptcy trustee, a Social Security expert from the American Enterprise Institute, and a conservative corporate law professor at the University of Pennsylvania.
Four of them have Puerto Rican backgrounds, and most have worked in Puerto Rico before, a factor that the White House hopes will soothe anxiety on the island. Some critics there have alleged that the board would be a colonial-style overseer with more power than the territory’s elected officials.
Puerto Rico’s elected officials must still draw up their own fiscal plan, which will be reviewed by the oversight board under the Puerto Rico Oversight, Management, and Economic Stability Act, known as PROMESA.
The new oversight board would also play a role in negotiations with creditors aimed at easing the burden of about $72 billion in debt and dealing with a more than $40 billion shortfall in the commonwealth’s pension funds. If there is a deadlock between the island and its creditors, the oversight board can submit a plan to a court with the power to impose a settlement. Half of the 18 agencies that have issued government debt in Puerto Rico already have missed payments, putting them in default.
“While PROMESA is just a first step, it presents an important opportunity for Puerto Rico to chart a new course and make a fresh start,” said Jeffrey Zients, director of President Obama’s National Economic Council.
Under legislation passed by Congress over the summer, the members of the board were chosen by Obama from lists provided by congressional leaders — three from Democratic leaders’ list and four from Republicans’. The board members will not be paid, and they had to be vetted to make sure they have no conflicts of interest. The governor of Puerto Rico also sits on the board as an ex-officio member.
The members from the Democratic list include Arthur J. Gonzalez, a senior fellow at New York University law school and former chief judge of the United States Bankruptcy Court for the southern district of New York. Gonzalez is a former New York City school teacher who later graduated from Fordham University law school. As chief bankruptcy judge, he presided over the reorganization of corporate giants such as Enron, WorldCom and Chrysler.
Jose Ramon Gonzalez, also from the Democratic list, is the chief executive of the Federal Home Loan Bank of New York. Earlier, he was the chief executive of the Puerto Rico subsidiary of Santander Bank, the leading Spanish bank. He also served as president of the Puerto Rico Government Development Bank, a key institution that has already defaulted on some of its debt obligations. He started his career at Credit Suisse First Boston.
Ana J. Matosantos, a budget consultant at the Public Policy Institute of California, served from 2009 to 2013 as director of California’s Department of Finance. She has served in a variety of other legislative areas for the state of California.
The Republican list included Carlos Garcia, the chief executive of a private equity firm called BayBoston Managers. Garcia also worked at Santander Bank’s Puerto Rico unit, and was president and chief operating officer there from 1997 to 2008. In addition, Garcia ran the Government Development Bank and chaired a fiscal restructuring board from 2009 to 2011 that eliminated most of what had been a $3.3 billion government deficit.
Also named were:
• Jose R. Carrion, an executive at an insurance brokerage firm Hub International, who has served as a trustee of bankruptcy.
• Andrew G. Biggs, a resident scholar at the AEI, where he studies Social Security reform, state and local government pensions, and public sector pay and benefits.
• David Skeel, the S. Samuel Arsht professor of corporate law at the University of Pennsylvania. When not writing about bankruptcy and corporate law, Skeel also writes on sovereign debt, Christianity and law, and poetry and the law.
House Speaker Paul D. Ryan (R-Wis.) called the appointments “the next step toward reform in Puerto Rico.”
“Drawing from a wide variety of practical experiences and policy prowess, the members have what it takes to serve Puerto Rico and help get the territory on a path to fiscal health,” he said in a statement.