Republicans Talk Puerto Rico, But Leave Out Debt Woes

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By Daniel Gill

July 19 — The Republican Party set forth its ideas to handle large financial institutions, student debt and financial regulation in its 2016 Platform, indicating online that it was adopted by delegates to the Republican National Convention on July 18.

The 66-page document covers a broad spectrum of social, economic and political matters, some of which relate to bankruptcy and insolvency considerations.

Although the platform ostensibly purports to speak for the party at large, it notably contains a disclaimer on the third page that it is “Not Authorized By Any Candidate Or Candidate's Committee.”

Too Big to Fail

The Republican platform cites to a policy objective of “freeing financial markets.” Among the statements it makes in this section, the party expresses its distaste for legislation that treats large financial institutions differently.

“Republicans believe that no financial institution is too big to fail. We support legislation to ensure that the problems of any financial institution can be resolved through the Bankruptcy Code. We endorse prudent regulation of the banking system to ensure that FDIC-regulated banks are properly capitalized and taxpayers are protected against bailouts. We will end the government’s use of disparate impact theory in enforcing anti-discrimination laws with regard to lending,” the platform states.

Puerto Rico Statehood

“We support the right of the United States citizens of Puerto Rico to be admitted to the Union as a fully sovereign state,” the platform reads, without substantial analysis. The platform does not discuss Puerto Rico's well-publicized debt crisis, which only recently led to bipartisan legislation designed to give the territory the ability to fashion emergency debt relief to prevent its default on billions of dollars of debt coming due on July 1 (28 BBLR 837, 7/7/16).

Instead, the platform cites to a 2012 local referendum wherein Puerto Rico voted in favor of statehood over its own sovereignty.

The platform discusses the U.S. territories in general and recommends creating a “commonwealth and territories advisory committee” and for “the appointment of a Special Assistant to the President responsible for day-to-day interaction with the territories and commonwealths.

Abolish the CFPB

The platform assails the relatively young Consumer Financial Protection Bureau, which it calls the “worst of Dodd-Frank,” referring to the Wall Street Reform and Consumer Protection Act under its commonly used name, the Dodd-Frank Act.

The platform says that the CFPB's director has “dictatorial powers unique in the American Republic,” and refers to its services as “regulatory harassment of local and regional banks.” The party says that the effect of the CFPB (and the Dodd-Frank Act) is to diminish the amount of smaller financial institutions on which much of U.S. commerce ordinarily relies for small business, farm and mortgage lending.

The platform states that even if it is not abolished, the CFPB should at least be made subject to congressional oversight.

Student Debt

The platform acknowledges a mounting problem of the accumulation of student debt in this country, and says that “the cost of a college education has long been on an unsustainable trajectory, rising year by year far ahead of inflation.” The platform notes that “student debt now exceeds credit card debt with average debt levels” of around $27,000 per student.

Stating its policy to address this growing debt crisis, the party does not discuss some of the commonly debated proposed solutions, such as allowing for more liberal refinancing of student debt or making the discharge of student loans a more readily available remedy for debtors in bankruptcy. Instead, the platform offers the following proposals:

  •  Create new systems of learning to compete with traditional four-year schools, such as technical schools, online universities, “life-long learning” (a concept that is not defined in the platform), and “work-based learning”;
  •  Stop the federal government from originating student loans; instead restore “private sector participation” in student financing;
  •  “Decouple” accreditation of schools from federal financing in favor of state accrediting and credentialing. “This model would foster innovation ... and give students the ability to customize their college experience,” the platform explains.

A draft Democratic Party platform released July 1 said the Democrats plan to protect the sovereignty of Puerto Rico and help it restructure its debt so it can stabilize its economy (28 BBLR 844, 7/7/16). The Democratic party also seeks to protect student loan borrowers and make it easier to discharge student loan debts in bankruptcy.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at jhorowitz@bna.com

For More Information

The Republican platform is available at https://www.gop.com/the-2016-republican-party-platform/

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