The White House’s budget director cautioned on Wednesday that President Trump may have been speaking out of turn when he declared that Puerto Rico’s massive debts will have to be forgiven as part of a post-hurricane recovery effort.
‘I wouldn’t take it word-for-word with that,’ Mick Mulvaney said on CNN’s ‘New day’ program. ‘I talked with the president about that at some length yesterday as we flew home on Air Force One.’
Trump had said before boarding the presidential plane, speaking with Fox News on the ground in San Juan, that the Puerto Rican government owes ‘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.’
White House budget director Mick Mulvaney said Wednesday that people shouldn’t take President Donald Trump ‘word-for-word’ when he says Puerto Rico’s massive debts will have to be forgiven as part of hurricane relief efforts
‘They owe a lot of money to your friends on Wall Street and we’re going to have to wipe that out,’ Trump told Geraldo Rivera of Fox News on Tuesday in San Juan
‘I don’t know if it’s Goldman Sachs but whoever it is you can wave goodbye to that.’
‘We have to look at their whole debt structure,’ he said.
Bondholders reacted overnight, sparking a massive selloff.
Prior to Trump’s remarks, Puerto Rico’s long-term municipal bonds scheduled to mature in 2035 were selling at 44 cents on the dollar, already a pessimistic view of their value.
By Wednesday morning they had shed 20 per cent of their value, dropping to an all-time low of 35 cents.
Mulvaney said Wednesday that an oversight board established by a 2016 law is already restructuring Puerto Rico’s debts in much the same way a judge presides over bankruptcies
Puerto Rico, which earlier this year filed the biggest bankruptcy in US municipal history, is struggling to regain economic stability in the face of a $72 billion debt load and near-insolvent public health and pension systems.
Mulvaney insisted Wednesday on CNN that the federal government is ‘not going to deal right now with those fundamental difficulties that Puerto Rico had before the storm.’
He noted that a 2016 law called the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) has already established an oversight board to manage the island’s debt load, similar to how a judge presides over bankruptcy proceedings.
SELLOFF: Traders dumped Puerto Rican municipal bonds overnight after Trump said their value could be wiped off the books, resulting in a 20 per cent loss in value
‘The status of the bonds that you heard the president mention … are actually inside the bounds of the PROMESA proceedings right now,’ Mulvaney explained.
‘So those bounds are being dealt with, were being dealt with before the storm, will be dealt with after the storm, through the PROMESA process.’
Larry McDonald, head of the U.S. macro strategies at ACG Analytics, told CNBC that wiping private bondholders’ assets off the books ‘is not something a president should be doing, or can do.’
‘It’s just noise and it’s pretty far removed from reality,’ he said.
‘This is not a dictatorship. We have bankruptcy judges and the rule of law, but it is scaring the bond market.’
The president was upset on Wednesday morning that so much of the news coverage about his Puerto Rico visit focused on his gaffes instead of his relief efforts
During his visit to Puerto Rico on Tuesday, President Trump touted his administration’s response to the humanitarian crisis and said it was not ‘a real catastrophe’ like Hurricane Katrina, which ravaged the Gulf Coast and destroyed much of New Orleans in 2005.
He told reporters that ‘every death is a horror. But if you look at a real catastrophe like Katrina, and you look at the tremendous hundreds and hundreds and hundreds of people that died – and you look at what happened here with, really, a storm that was just totally overpowering – nobody has ever seen anything like this.’
Trump complained Wednesday morning on Twitter that much of the news coverage had focused on his gaffes, including a joke that responding to Hurricane Maria had thrown the federal budget ‘out of whack.’
‘A great day in Puerto Rico yesterday. While some of the news coverage is Fake, most showed great warmth and friendship,’ he tweeted.
‘Wow, so many Fake News stories today. No matter what I do or say, they will not write or speak truth. The Fake News Media is out of control!’ Trump added.
Trump is pictured greeting members of the U.S. military as he prepares to board Air Force One in Carolina, Puerto Rico
A handful of demonstrators gathered outside the Convention Center in San Juan on Tuesday to protest Trump’s visit and demand the forgiveness of Puerto Rico’s debts
On the plane back to Washington DC, he told reporters that he had heard no criticism of his response to aiding the island US territory.
He said: ‘I think it has been a great day. We only heard thank-yous from the people of Puerto Rico. They are great people, and it was really something that I enjoyed very much.’
Trump flew to Puerto Rico in a bid to reassure citizens that the government would support them – then tried to wipe away complaints about inaction by tossing rolls of paper towel into a crowd.
Trump met with responders and toured a damaged street in a whirlwind tour of the island.
His visit to a local chapel brought a vigorous response from a local crowd.
First, the president handed out packages of ‘Arroz Rico’ branded rice to people who came to see him and collect supplies.
Then, in a display that drew an immediate outcry online, the president began tossing rolls of paper towels into the crowd, basketball style.
One by one, the president shot a succession of rolls toward the back of the crowd, sending them aloft with his fingertips.
Trump met with military, homeland, and local government officials to assess the response. The storm has wrecked the island’s infrastructure and has resulted in the deaths of 34 people so far.
After meeting with responders, Trump walked on a storm-wrecked street in Guaynabo, viewing damaged homes and snapping photos with residents.
After meeting one family, Trump said: ‘Great looking family and they said thank you, Mr. President.’
The family hadn’t had power since Hurricane Irma hit weeks ago.