President Donald Trump signaled Tuesday night that he wanted to “wipe out” Puerto Rico’s debt.
“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. “You’re going to say goodbye to that. I don’t know if it’s Goldman Sachs, but whoever it is, you can wave goodbye to that.”
Trump has been criticized for repeatedly bringing up the U.S. territory’s debt while addressing the humanitarian crisis the island now faces in the wake of Hurricane Maria.
“Texas & Florida are doing great but Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble,” Trump tweeted on Sept. 25.
Puerto Rico has over $70 billion in public debt. It was restructured by Congress last year in a bill that also created an control board with oversight over the island’s finances.
Trump offered no details Tuesday on how he would “wipe out” that debt.
“We are going to work something out,” Trump told Fox News. “We have to look at their whole debt structure.”
Trump has little power over Puerto Rico’s debt, which is held by investors, but his comments affected the bond market nonetheless, Larry McDonald, head of the U.S. macro strategies at ACG Analytics, told CNBC.
“This is not a dictatorship. We have bankruptcy judges and the rule of law,” McDonald said. “But it is scaring the bond market.”
Puerto Rican bonds fell to 32.75 cents from roughly 44 cents on the dollar following Trump’s remarks, according to The Wall Street Journal.
White House Budget Director Mick Mulvaney on Wednesday attempted to walk back Trump’s comments, saying “the primary focus of the federal effort is to make sure the island is safe.”
“I wouldn’t take it word for word,” Mulvaney said, when asked by CNN’s Chris Cuomo whether Trump intended to “wipe out” Puerto Rico’s debt. “We are not going to deal right now with those fundamental difficulties that Puerto Rico had before the storm.”
This article has been updated to include Mulvaney’s comment and bond market reaction.
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