×

Trump says Puerto Rico's debt will have to be wiped out

  • Trump's comments were made in an interview with Geraldo Rivera, of the Fox News network, while in Puerto Rico
  • Trump visited the island on Tuesday, two weeks after Maria destroyed Puerto Rico's entire infrastructure system

In an interview with Fox News, President Donald Trump said that Puerto Rico's debt will have to wiped out.

"They owe a lot of money to your friends on Wall Street and we're going to have to wipe that out. 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 said on Tuesday in an interview with Fox News, according to a Reuters report.

The White House didn't immediately return CNBC's emailed request for further details of Trump's proposal. Goldman Sachs didn't immediately return CNBC's request for a response on the president's comment.

Trump visited the island on Tuesday, two weeks after Maria destroyed Puerto Rico's entire infrastructure system, leaving nearly 3.5 million residents without power, and tens of thousands without clean water.

The official death toll more than doubled to 34, a spokesman for Governor Ricardo Rosello said on Tuesday, Reuters reported.

Even before the storm brought Puerto Rico to a near standstill, the government there already struggled with an economy in shambles and a default on billions of dollars of public debt.

Today, the U.S. territory has nearly $70 billion in debt, an unemployment rate 2.5 times the U.S. average, a 45 percent poverty rate, nearly insolvent pension systems and a chronically underfunded Medicaid insurance program for the poor.

Puerto Rico's job base continues to shrink, taking its economy along with it. Since the recession ended, a lack of job prospects has sent many Puerto Ricans fleeing to the mainland, where the job market is much stronger.

During Trump's visit on Tuesday he said that responding to the hurricane's devastation had thrown the federal budget "out of whack," but he praised officials and first responders for preventing the storm from becoming a "real catastrophe" like Hurricane Katrina.

In a note published last week, Moody's Investors Service said widespread damage has reduced the economic capacity of the island to pay, changing whatever assumptions were previously made in the bankruptcy proceeding. The island, with $74 billion of bond indebtedness, filed for a form of bankruptcy in May.

New York-based hedge fund Blue Mountain Capital, which has invested in Puerto Rican debt for several years, didn't return CNBC's emailed request for comment, which was sent outside of office hours.

Global fund manager Franklin Templeton, which said as of the end of August it holds Puerto Rican debt through several of its mutual funds, didn't immediately return CNBC's emailed request for comment.

Franklin Advisers and OppenheimerFunds held a combined $10.3 billion in Puerto Rican debt as of July, making them among the island's largest creditors, Reuters reported.

OppenheimerFunds did not immediately return CNBC's emailed request for comment, which was sent outside of office hours.

Steven Tananbaum, chief investment officer at GoldenTree Asset Management, said recently at a conference that he was looking at Puerto Rican bonds related to the Puerto Rico Sales Tax Financing Corporation (also known as Cofina).

GoldenTree Asset Management, which manages over $25 billion, didn't immediately return CNBC's emailed request for comment, which was sent outside of office hours.

—Reuters and CNBC's Christina Wilke, John W. Schoen, Steve Liesman and Dawn Giel contributed to this article.