The Specter of Puerto Rico’s Debt
Summary
In this episode, Felix Salmon interviews bankruptcy expert David Skeel, who shares his firsthand experience chairing the Puerto Rico Oversight Board. They discuss the massive $120 billion debt crisis, the passage of the PROMESA law, and the complex political negotiations between Democrats and Republicans. Skeel reflects on the ongoing PREPA utility restructuring, the high costs of the oversight process, and the inevitable tension between democratic governance and financial restructuring. The conversation concludes with lessons for future state and municipal bankruptcies in the United States.
Topics discussed
Introduction and host welcome
Guest bio and book introduction
Scale of Puerto Rico's debt crisis
Puerto Rico as a cautionary tale
The legislative history of PROMESA
Lessons for future state bankruptcies
Arguments for a state bankruptcy law
Why default is considered unthinkable
Impact of bankruptcy on borrowing costs
Political divides on creditor recovery
Republican support for bondholders
The myth of the debt audit
Skeel's role and restructuring strategy
Grading the restructuring outcome
The ongoing PREPA electricity crisis
Why PREPA is failing in bankruptcy
Cost of the oversight board
Incentives and board capacity building
Future outlook for PREPA resolution
Expectations for future state bankruptcies
Democracy and oversight boards
Who the board represents
Judicial and political constraints
Closing remarks
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