Senator Tom Cotton (R-AR) accused Fiscal Control Board Chairman Jose M. Carrión of approving a fiscal plan without respecting the bondholder payment priorities as provided in PROMESA, and demanded an answer on behalf of the thousands of retirees in Arkansas who have invested their savings in government bonds.

Cotton also notified that he will ask Mick Mulvaney, director of the US Office of Management and Budget, for an outline of all federal transfers payments to Puerto Rico and an analysis of the per capita cost, compared to other states and territories.

Cotton and his North Carolina colleague, Thom Tillis, had sent Carrión a letter earlier this year.

'I thank you for your April 25 letter on the Fiscal Plan adopted by the Financial Oversight and Management Board of Puerto Rico. But I must be frank: I found your answers vague and unresponsive,' Cotton said in the letter, where he stressed that the Board has not yet defined what does and does not constitute an 'essential expense' in the Fiscal Plan.

Section 201(b)(1)(N) of PROMESA requires that the fiscal plan respect the payment priorities to service the debt, as stated in the constitution and through other laws covering the territory's instrumentalities.

'The Oversight Board claims that Congress, in using the word ‘respect,' actually gave the board ‘flexibility' to decide which legal obligations to meet—which, in my book, is the exact opposite of what the word 'respect' means,' the Republican senator questioned.

Cotton reprimanded Carrión III in the letter, where he demands clear answers about the Fiscal Control Board's 'accommodating' interpretation, achieved by leaving out the explicit requirement contained in PROMESA to respect the bond payment priorities.

Cotton cites a publication from The Wall Street Journal that estimates that retail investors in mutual funds in the United States have lost $5.4 billion as a result of the Board's 'bizarre' interpretation. He stresses that these retirees, many of whom are Puerto Rican, put their savings into these funds because of their constitutional guarantee, which is also explicitly respected in PROMESA.

'The Board's decision to subordinate the lawful priorities of bondholders has jeopardized the retirement savings of many Arkansans. This decision creates a precedent,' the US senator states in the letter, which has been posted in its entirety at the end of this story.

Cotton addressed Carrión III, demanding that he comply with PROMESA by respecting the Puerto Rican government's obligation to pay the debt service.

The Republican asked Carrión to answer several questions, including whether the Board believes that the debt service payments are non-essential expenses, and if the Board's interpretation could raise the cost of borrowing for all states and municipalities in the United States.

Cotton's Letter _25552