UPDATE 2-U.S. Sen. Hatch says no help for Puerto Rico unless better disclosure

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By Megan Davies and Jessica DiNapoli
NEW YORK, Sept 29 (Reuters) - Powerful Senate Finance
Committee Chairman Orrin Hatch on Tuesday warned there could be
no help for Puerto Rico without better financial disclosure,
while expressing doubts about extending bankruptcy protection
for the indebted island and questioning the idea of imposing a
financial control board.
Puerto Rico, in recession for nearly a decade, has grown its
debt to $72 billion, while the number of taxpayers shouldering
the burden has dwindled, with thousands moving to the U.S.
mainland each year.
The U.S. territory defaulted on debt in August by paying
only a fraction of what was due on some bonds. The Caribbean
island is not a U.S. state but as a U.S. territory its financial
stability is a concern for U.S. lawmakers.
A turnaround plan unveiled in September by a working group
appointed by Governor Alejandro Garcia Padilla asked the U.S.
government for help, including access to court-sanctioned
restructuring laws, an exemption from the Jones Act which
protects U.S. shipping, and what it would call equitable
treatment under Medicaid and Medicare funding schemes.
"If we don't get really well-audited figures, it's going to
be pretty hard to help you," Hatch, a Republican, told the head
of the Government Development Bank Melba Acosta, at a hearing on
the island's problems. "I don't think Puerto Rico is treated
fairly, for the most part. But we need really good information
from you in order to help you."
Puerto Rico's last annual financial statement on the GDB's
website is for the year ending June 2013. Acosta said while she
agreed that the information was "not the best," the territory
was making improvements.
"Unless you get that to us, I don't see how we can solve
anything," said Hatch. "We ... better have the right tools and
information or nothing is going to be done."
A bailout from Washington is not expected, and while some on
Capitol Hill are pushing laws or reforms related to Puerto Rico,
their prospects are uncertain.
Hatch questioned one witness, a budget expert from the
American Action Forum (AAF) think tank, about extending Chapter
9 bankruptcy protection, which allows a state's municipalities
and public agencies to seek bankruptcy protection, but does not
apply to Puerto Rico, which is a territory.
Douglas Holtz-Eakin, president of the AAF, said he had "deep
reservations" about the focus on Chapter 9 and Hatch said he
shared some of that skepticism.
Holtz-Eakin also expressed doubts about using a control
board to manage Puerto Rico through its financial crisis, one
idea which has been raised by members of U.S. Congress as well
as officials on the island.
"A control board independent enough would have to be
basically imposed on Puerto Rico and infringe on its sovereignty
and I think that's a problematic thing for the federal
government to do," said Holtz-Eakin. Hatch said that if there is
a board, "it probably should have to be independent".
Iowa Senator Chuck Grassley, a Republican member of the
Senate Finance Committee and chairman of the Senate Judiciary
Committee, said a local control board "if ever created will be
ineffective due to local politics and pressure."
"Perhaps then a federal financial control board should be
part of a comprehensive approach to remove obstacles to certain
fiscal reform," Grassley said.
The discussion means that debate on a "federal control board
(could) grow louder over the next few months," said Daniel
Hanson, analyst at Height Securities.
Grassley also was skeptical about allowing Chapter 9
bankruptcy, saying that alone would not solve the U.S.
territory's problems.
However, he said Congress should consider exempting Puerto
Rico from the Jones Act and the federal minimum wage.
Senator Ron Wyden, the top Democrat on the Senate Finance
Committee, urged witnesses to propose bipartisan solutions
which could succeed. He said a better funding system for
Medicaid and improvements to Medicare ought to be on the table.
Senate democrats in August introduced a bill proposing
eliminating a cap on the funding the federal government provides
to support Medicaid in U.S. territories including Puerto Rico.
That was referred to the Finance Committee.
Hatch, however, said solving healthcare was not "as simple
as deciding to give more health funds to Puerto Rico, because
doing so would necessarily mean reduced funding for other
priorities, increased taxes or even more federal debt."