President Trump’s vow Tuesday to wipe out Puerto Rico’s massive debt issues was quickly dismissed by White House budget director Mick Mulvaney, revealing how senior administration officials continue to struggle for ways to respond to the U.S. territory’s financial problems.
Puerto Rico has more than $70 billion in debt, and it recently filed for bankruptcy protection. The island was hit by a giant hurricane on Sept. 20 that destroyed much of its infrastructure, and Trump visited the territory on Tuesday.
During that visit, Trump remarked on the island’s debt problems and said in an interview with Fox News that “They owe a lot of money to your friends on Wall Street and we're going to have to wipe that out. You're going to say goodbye to that, I don't know if it's Goldman Sachs, but whoever it is you can wave goodbye to that.”
Those comments would have sweeping implications, as it could wipe out the holdings of numerous investors who hold Puerto Rican debt.
Bloomberg reported that Trump's comments sent the value of Puerto Rico debt plunging, with a key general obligation bond due in 2035 falling to a record low of 32 cents on the dollar, a roughly 25 percent drop in one day.
On Wednesday morning, Mulvaney said he had discussed the issue with Trump on the flight back to Washington late Tuesday and that the debt would not be wiped out after all.
“I wouldn’t take it word for word with that,” Mulvaney said on CNN.
Congress last year passed a law called the Puerto Rico Oversight, Management, and Economic Stability Act, known as PROMESA, which was meant to help Puerto Rico restructure its debt. Mulvaney said that process would continue, and that the Trump administration was focused on helping the island recover from the hurricane in the near term.
“The status of the bonds that you heard the president talk about … are actually inside the bounds of the PROMESA proceedings right now,” Mulvaney said. “Those bonds are being dealt with, were being dealt with before the storm, will be dealt with after the storm through the PROMESA process. Our focus will be entirely on rebuilding the island, making sure people are safe, and that Puerto Rico can get back on its feet.”