The Jubilee Blog

United Nations Votes for Global Bankruptcy Principles

By Sophia Har 

A United Nations committee adopted nine principles to create a global bankruptcy process for countries. Nobel Laureate Joseph Stiglitz addressed the final session of "The UN Ad Hoc Committee on Sovereign Debt Restructuring" that the UN General Assembly established last fall. Countries currently cannot access bankruptcy protection when they face economic crisis. The World Bank notes that 49 countries face worrying levels of debt distress and the International Monetary Fund notes debt is the root cause of inequality. In recent months, governments across the Caribbean, Greece and Argentina expressed an immediate need for a global bankruptcy process.

"With so many countries facing debt crises, we urgently need solutions to protect investors and poor people," noted Eric LeCompte, who is participating in the UN meetings. LeCompte is the executive director of the religious development organization Jubilee USA Network. "The UN's work is a step in the right direction, but we still have a lot of work to do if we want a legally binding process."

The principles aim to enhance "predictability and stability" in the global financial system. Similar to US Bankruptcy Chapter 9 or 11 laws, the UN principles include good faith engagement by borrowers and lenders, transparency, impartiality and equitable treatment for all investors. The International Monetary Fund is also discussing aspects of a bankruptcy system and laid out an agenda in 2013.

Consumer Financial Protection Bureau Fines Predatory Student Lending Practices; Churches and Synagogues Pray for Students Trapped in Debt‎

By Sophia Har 

Synagogues and churches held prayer services for students as the Consumer Financial Protection Bureau fined Discover Bank $18.5 million for illegal student lending practices. The bank must repay students $16 million, pay a $2.5 million civil penalty and reform its lending practices. The Bureau accused Discover of overstating the minimum amount due in billing statements, misrepresenting students' total interest payments and engaging in illegal debt collection practices. The penalty is the first of its kind by the Bureau against a student loan company.

"This fine sends a strong message to companies that take advantage of students," said Eric LeCompte, executive director of the religious anti-poverty coalition Jubilee USA Network, which advocates for responsible student lending policies. "Predatory lending traps students in debt."

This past weekend, 64 faith communities from 26 states prayed and acted for fair student lending policies as part of Jubilee USA's national interfaith "Jubilee for Students" prayer event. In 2012 and 2013, the event pushed congressional legislation to stop federal student loan interest rate increases. 

Jubilee USA in TIME Magazine

By Sophia Har

The Archbishop of San Juan, Puerto Rico, calls for Congress to grant the island bankruptcy protection. In the following op-ed from TIME Magazine, he applauds Jubilee USA for our debt relief efforts and calls for a global bankruptcy process.

Archbishop: Congress Should Allow Puerto Rico To Declare Bankruptcy

By Roberto González Nieves

Roberto González Nieves is the Catholic Archbishop of San Juan, Puerto Rico.

My people need a jubilee

Puerto Rico, the island where I serve as Archbishop of San Juan, is $72 billion in debt. That $72 billion represents about $20,000 of debt for every man, woman, and child on our island. Governor Alejandro García Padilla announced last month that the island cannot pay its debts, and that a solution is needed. Many bad scenarios now loom, including default.

The victims of this crisis are not any government—they are my people.

Puerto Rico’s debt comes from a combination of mismanagement, bad luck, and its unique colonial status as neither a sovereign country nor a U.S. state. In recent years, Puerto Rico’s debt has become a death spiral. Debt payments prevent the island from providing critical services to its people, so many Puerto Ricans who can afford a plane ticket leave the island for the U.S. mainland in search of a better life. Their absence means less tax revenue for a government that already struggles to collect taxes. Less revenue means more loans and more debt.

The consequences are tragic. About 80% of children in Puerto Rico live in high-poverty areas, compared to about 11% of children in the U.S. The island’s poverty rate is about 44%, and unemployment is almost 13%. Already the island is feeling the impact of austerity—last fall, the Department of Health cancelled emergency helicopter service due to lack of funds. Debt is bringing death and increased hardship to our people.

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World Leaders Reach Development Agreement at UN Summit

By Sophia Har 

Heads of state and high-level government officials reached a global development agreement during the Third Annual Financing for Development Conference. Negotiations reached a sticking point over a global tax body that would propose global tax policies to assist the developing world in raising new revenues. The agreement does focus on significantly curbing corruption and tax evasion by 2030. Governments finally negotiated a deal Wednesday after three days of marathon meetings to approve the agreement text. The agreement will be formally adopted on Thursday in a vote at the UN Economic Commission for Africa.‎

"The final negotiations were challenging," said Eric LeCompte, who participated in the summit as the Executive Director of the religious development group Jubilee USA Network. "But now we have an agreement and we need to keep working together because people's lives hang in the balance."

The ten paragraphs focused on debt reached Addis Ababa already agreed upon by the negotiators. These issues were also central to past Financing for Development agreements, as negotiators argue that strengthening these polices can raise billions of dollars a year for the developing world. Central debt issues include improving debt restructuring, promoting transparency in lending and borrowing and stopping so-called "vulture funds." 

Pope Francis Calls for Global Bankruptcy Process

By Sophia Har 

Pope Francis called for an international bankruptcy process in a news conference as he left Latin America on Monday. According to the Associated Press, when asked about the Greek debt crisis, Francis stated, "if a company can declare bankruptcy, why can't a country do so and we go to the aid of others?" Francis offered further comments noting that too many countries are struggling with high debts and he suggested a United Nations bankruptcy proposal could be the solution.‎

“Pope Francis knows that heavy debt loads cause poverty and inequality,” said Eric LeCompte, who consulted the Vatican on its position. LeCompte is the head of the religious development organization Jubilee USA Network. “The Pope's statement is a logical extension of the Catholic Church's strong support of debt relief for struggling countries."

Last year, LeCompte led a delegation of global Jubilee organizations to advise Vatican Secretary of State Cardinal Pietro Parolin on the need for a bankruptcy process to address inequality. The Catholic Church is a founder of Jubilee USA and supports its efforts to win debt relief for struggling countries.

Puerto Rico Public Utility Reaches Debt Deal; Congress Could Provide Bankruptcy Protection

By Sophia Har 

Puerto Rico's public utility company, the Puerto Rico Electric Power Authority (PREPA), reached a deal Wednesday with investors to extend debt negotiations. PREPA will pay $416 million immediately and then will have until September 15 to reach a long-term deal. PREPA owes a total of $9 billion in debt. Puerto Rican Governor Alejandro Garcia Padilla announced this week that the island cannot pay its $72 billion debt burden and asked to extend payment terms. 

"Without access to US bankruptcy law or emergency financing, Puerto Rico has few options," said Eric LeCompte, executive director of the religious development organization Jubilee USA Network. ‎It's good news that Puerto Rico won't default in the short term, but we need a long term solution."

Meanwhile, Senator Charles Schumer (D-NY) announced Tuesday he will introduce a bill to allow PREPA to access US Chapter 9 bankruptcy protection. Puerto Rico's representative in the US House introduced a similar bill (HR 870) in February. Puerto Rico is currently unable to access bankruptcy protection because it is a territory and not a US state.