PROMESA's New Board
Published on October 15, 2020
During the past couple of weeks plenty has been inferred over the future composition of Puerto Rico’s new Financial Management and Oversight Board (FOMB). Below we shed some color on the appointments process and what is before the U.S. government at this time.
In general, the Puerto Rico Oversight Board consists of seven members serving three-year terms and any vacancy must be filled in the same manner as originally appointed. Though there is no official documentation on who proposed each of the Board’s seven original members, the selection reportedly happened as follows:
- President Barack Obama: Judge Arthur J. González
- House Speaker Paul Ryan: José B. Carrión III and Carlos M. García
- House Democratic Leader Nancy Pelosi: José R. González
- Senate Leader Mitch McConnell: Andrew G. Biggs and David A. Skeel
- Senate Democratic Leader Harry Reid: Ana J. Matosantos
Three members of the 2016 board (Chairman José B. Carrión III, Carlos M. García, and José Ramón González) have recently stepped down from their positions, affording the President and the 116th Congress an opportunity to reconfigure the board’s composition. On top of that, last week President Trump announced his nomination of Justin Peterson to serve on the Board and replace Judge Arthur J. González. This action provoked strong opposition from residents on island given his previous role with the Ad Hoc Group of General Obligation Bondholders. The appointment process for the three other vacancies of the FOMB can be fulfilled in two ways: the President can choose from the lists submitted by Congressional leaders (as was done in 2016) or disregard the lists altogether and make his own nominations, subject to the Senate’s advice and consent.
In the first process, the President has the ability to nominate one member at his or her own discretion. The other six board members are appointed by the President from lists as follows:
- The U.S. Senate Majority Leader Mitch McConnell submits two lists from which the President selects two members.
- Senator Chuck Schumer submits a list of his nominees from which the President selects one member.
- Speaker Pelosi submits two non-overlapping lists with at least three individuals each from which the President selects two members. One of those lists must include three individuals that have a primary residence or primary place of business in Puerto Rico.
- House Minority Leader Kevin O. McCarthy submits a list from which the President selects one member.
The second option, whereby the President submits his own list of nominees, could prove to be a powerful tool for President Trump and the Republican-led Senate to pack the board with their nominees. Regardless of what appointment process takes place, the departure of four Board members is problematic, mostly because it takes time to learn the ins and outs of a novel law such as PROMESA, as well as getting acquainted with Puerto Rico’s longstanding economic issues.
As of now, the Board is comprised of three members, David A. Skeel (recently voted as the new Board Chairman), Ana J. Matosantos and Andrew J. Biggs. We have yet to see the lists from congressional leaders for the replacements of José B. Carrión III, Carlos M. García, and José Ramón González (if such have been provided).
Given all of the board members have effectively fulfilled their three-year term mandate, Congress can opt to keep the remaining board members as holdovers until their replacements are nominated, or alternatively, replace the entire board. In any case, the only criteria required for eligibility is for individuals to have “knowledge and expertise in finance, municipal bond markets, management, law, or the organization or operation of business or government; and prior to appointment, an individual is not an officer, elected official, or employee of the territorial government, a candidate for elected office of the territorial government, or a former elected official of the territorial government.”
After four years, public support for the Oversight Board remains dismal and the island’s future is still uncertain. Quite the opposite. Puerto Rico continues to be embroiled in lengthy and costly legal battles and the government is still reluctant to work with the fiscal body. What’s worse, the multiple layers of authority seem to monopolize success. CNE will continue to actively monitor the appointments process and keep you informed of related actions.
Director, Washington DC Office
Center for a New Economy