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Hatch Appointed Chairman of Congressional Task Force on Puerto Rico

The House on Monday appointed Sen. Orrin Hatch (R-Utah) to serve as chairman of a bicameral task force charged with investigating the causes and possible solutions to Puerto Rico’s debt crisis, the Morning Consult reported yesterday. The House also formalized the appointments of Reps. Sean Duffy (R-Wis.) and Tom MacArthur (R-N.J.) as the House Republican appointees to the task force. Rep. Nydia Velázquez of New York and Pedro Pierluisi, Puerto Rico’s nonvoting representative in Congress, are the two House Democratic appointees. In addition to Hatch, who is chairman of the Senate Finance Committee, Sens. Marco Rubio (R-Fla.), Robert Menendez (D-N.J.) and Bill Nelson (D-Fla.) are members of the task force. The Puerto Rico bill that Congress passed in June lets Speaker Paul Ryan (R-Wis.) decide who gets appointed as the task force’s chairman.

How Many Mayors Can Puerto Rico Afford? Tradition and Budgets Collide

With Puerto Rico carrying $72 billion in debt, and an independent, federally appointed control board poised to take charge of its finances, the island’s 78 municipalities — with their mayors, employees and government offices — represent one of the island’s most intractable problems, The New York Times reported today. What was once a venerable tradition has become a symbol of government bloat and deficit spending. There are renewed calls to do away with a sizable number of municipalities, most of which are ailing financially, by folding smaller ones into larger ones and creating regional hubs. The debate pivots on a simple question: Does an island with a footprint slightly bigger than Delaware’s really need 78 municipalities to serve its citizens? Each municipality has a mayor, many of them well paid. Then there are assistants and a string of administrative offices. Most also have their own municipal police (in addition to the state police), who deal with complaints and low-level crimes. With jobs hard to find in Puerto Rico, smaller municipalities are often the biggest employers in town.

Sports Authority Top-Executive Bonuses Draw Fire in Bankruptcy

Sports Authority's creditors and the Justice Department have challenged the fading retailer's plans to pay top executives as much as $2.85 million in bankruptcy bonuses, Dow Jones Business News reported yesterday. As the liquidation entered its final weeks, Sports Authority unveiled plans for bonuses to four top executives — people that the company doesn't want to name. U.S. Trustee Andrew Vara and lawyers for the official committee of unsecured creditors protested the bonuses and the secrecy surrounding the rewards to top executives. The company contends that bonus money is needed to encourage the executives to do their best in the company's final days, confidentiality is appropriate to protect morale, and prevent competitors from using the pay data to lure Sports Authority's leaders away. Unsecured creditors called Sports Authority's argument about the need to protect morale "ridiculous." In Sports Authority's case, the federal bankruptcy watchdog and the company's own creditors are taking a stand against the confidential treatment of top executive bonuses. Vara cited the presumption of public access to judicial records in arguing that Sports Authority be denied confidential treatment. Creditors earlier moved to have Sports Authority's case converted from a chapter 11 proceeding to a chapter 7 proceeding, and that motion is set for hearing on Aug. 2.

Why the Federal Reserve Is Rethinking Everything

The Federal Reserve is being forced to reevaluate its most basic assumptions about the economy after trillions of dollars of stimulus and years of ultralow interest rates have failed to generate a more robust recovery, The Washington Post reported today. For years, the central bank’s top officials pointed to “persistent headwinds” emanating from the Great Recession as the culprit for the tepid pace of the economy’s expansion: Government spending cuts were depressing growth. Seven years after the recession officially ended, many of the headwinds have indeed dissipated — yet normal remains elusive. In its place is a gnawing fear that the economy has permanently downshifted into an era of weak growth that policymakers have little power to reverse. Fed officials have all but given up hope of the 3 percent rate of expansion once considered the baseline for a healthy economy. Instead, they are coming to grips with the possibility that lackluster growth is the best this recovery can offer. The Fed’s most recent economic projections show growth leveling off this year at 2 percent and remaining there for the foreseeable future. That, in turn, has pushed down the central bank’s estimates of how high it will raise interest rates and how quickly it will do so. Speaking to reporters last month, Fed Chair Janet Yellen acknowledged that slow growth and low interest rates might be the U.S.’s “new normal.”

Kleen Inc. Files for Bankruptcy

Kleen Laundry has filed for bankruptcy production, citing a “challenging time” with its primary commercial customer base — hospitals to which it provides linen and uniform cleaning services, Valley News (N.H.) reported today. Kleen said the chapter 11 reorganization would allow it to continue operating while it renegotiated its debt. No details were available as to the size of its debt or the amount of its debt payments. But the company has gone through two major transactions in the past 10 years — the first in a 2006 sale to a private investor and the second in a merger with a Manchester laundry service company in 2012. The cleaner was quickly granted permission by the bankruptcy court judge to use $52,000 in cash collateral to pay wages and state and federal taxes, in addition to $20,000 to pay for liquefied natural gas to power its equipment. Kleen provides linen and laundry service to 26 northern New England hospitals and operates laundromats and retail dry-cleaning services at outlets. Kleen submitted to the bankruptcy court a budget of about $1.9 million in operating expenses through Oct. 21. The company’s payroll is estimated to run about $58,000 per week. The bankruptcy filing also listed a total of approximately $2.3 million in unsecured claims held by the 20 largest creditors.

Alpha Natural Resources Emerges from Bankruptcy

Coal producer Alpha Natural Resources and its affiliates announced that the company has successfully emerged from chapter 11 protection, the Richmond Times-Dispatch reported yesterday. The reorganized company is a smaller, privately held company operating 18 mines and eight plants in West Virginia and Kentucky. Alpha Natural Resources filed for chapter 11 last August. It bought Massey Energy Co. for $7.1 billion in 2011, making it the biggest U.S. producer of metallurgical coal, used in steelmaking — and steeped it in debt — before prices began to plunge.