Trump s Remarks About Erasing Puerto Rico s Debt Jolt The Markets: NPR, what is

Trump’s Remarks About Erasing Puerto Rico’s Debt Jolt The Markets

What is debt

What is debt

President Trump tosses paper towels into a crowd as he hands out supplies Tuesday in Guaynabo, Puerto Rico, where he went to survey hurricane damage. Evan Vucci/AP hide caption

President Trump tosses paper towels into a crowd as he hands out supplies Tuesday in Guaynabo, Puerto Rico, where he went to survey hurricane damage.

President Trump sent shivers through the municipal bond market by suggesting that Puerto Rico’s $73 billion debt should be wiped away, but administration officials quickly walked back the remarks Wednesday morning, saying they weren’t meant to be taken literally.

The trouble started Tuesday evening when Trump was interviewed on Fox News. “We’re going to work something out. We have to look at their whole debt structure. They owe a lot of money to your friends on Wall Street, and we’re going to have to wipe that out,” Trump said. “That’s going to have to be — you can say goodbye to that. I don’t know if it’s Goldman Sachs, but whoever it is, you can wave goodbye to that.”

Trump’s comments were taken by some to mean that the federal government would force bondholders to forgive the island’s debt, which would be a drastic and highly unusual intrusion of the government into the debt markets.

“It may possibly be the end of the municipal bond market as we know it,” Harry Fong, an analyst at MKM Partners, wrote in a note quoted by Bloomberg News.

What is debt

The Two-Way

Puerto Rico Makes Unprecedented Move To Restructure Billions In Debt

The price of Puerto Rico’s bonds, already down in the wake of Hurricane Maria, fell another 31 percent. But they soon began to recover, after White House Budget Director Mick Mulvaney took steps to reassure the markets.

“I wouldn’t take it word for word with that. I talked to the president about this at some length yesterday as we flew home on Air Force One,” he told CNN. “The primary focus of the federal effort is to make sure the island is safe and that we’re rebuilding the island.” Mulvaney also insisted that the government would not pay off debts or bail out bondholders.

“I think what you heard the president say is that Puerto Rico is going to have to figure out a way to solve its debt problem,” Mulvaney said.

With its economy in recession and its population declining, Puerto Rico has been unable to pay much of what it owes, leading to a protracted legal fight between the government and its bondholders.

What is debt


Trump Touts Relief Efforts In Puerto Rico: ‘We’ve Saved A Lot Of Lives’

The damage from Hurricane Maria has only worsened the island’s fiscal plight, and Congress is expected to step in with financial assistance to help rebuild its infrastructure.

Congress has appointed a federal oversight board to represent the island’s government. With the dispute now being heard in federal court, it’s not clear Trump would have the authority to intervene in the dispute, even if he wanted to.

“As far as the comment made about wiping the debt clean, that is the opinion of the president,” said Puerto Rico Gov. Ricardo Rossello at a news conference. He also said he could not comment further because of the ongoing legal proceedings.

During last year’s campaign, Trump suggested the U.S. government could address its own debt problems by renegotiating its bonds and paying less than their face value, remarks that also raised alarms in the markets.

What is debt

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