Representatives of Puerto Rico's cooperativas have blasted aHouse plan to place the financial institutions in the hands of afiscal control board.

And an island attorney and local politician said that the bill —approved by the House Natural Resources Committee last week — couldjeopardize the island's government's efforts to protect theinstitutions.

H.R. 5278, known as PROMESA, creates a fiscal board to overseethe island government's finances, which are on the verge ofcollapse. The island government is tens of billions of dollars indebt.

Congress has been expected to enact legislation to establish aprocess by which the island government could manage that debt. Amarkup of the House legislation had been delayed, as members ofboth parties and the Obama Administration hammered out details. TheSenate has yet to weigh in on a plan to help Puerto Rico manage thecrisis.

Cooperativas are financial institutions insured by a territorygovernment agency, the Corporation for the Supervision andInsurance of Cooperatives. There are more than 100 cooperativas inPuerto Rico in addition to 11 credit unions that are insured by theNCUA. The cooperativas currently have more than 966,000 members andtotal assets of $8.47 billion.

Attorney Jose Sosa-Llorens, who represents several of the majorcooperativas, has said Congress should consider granting the NCUAthe authority to guarantee the cooperativas' deposit insurance.

H.R. 5278 does not do that.

The cooperativas issued a statement condemning thelegislation.

“Adoption of the proposed federal fiscal board for Puerto Ricoraises serious questions regarding the breadth of Congress'territorial powers over Puerto Rico and the resulting voidance ofself-rule,” the cooperativas said in a statement. “Moreover, if theburden of paying and solving the current crisis will be borne byPuerto Rican taxpayers, it is for us to make the final decisions ofhow to better solve these problems.”

The cooperativas may have another reason to dislike thelegislation. It could call into question legislation passed by theisland legislature that protects the cooperativas.

As explained by Sosa-Llorens, Act 40 was signed into law on May5, 2016.

“It requires the government to preserve the safety, soundnessand stability of depository institutions, which includes creditunions,” he said, in a statement to CU Times. “Theseprovisions are in line with public policy mandates of the DoddFrank Act of 2010.”

The House committee legislation states that the provisions of“PROMESA control if any territorial, or state law or regulation isinconsistent with the Act,” according to a summary of the bill,released by the House Interior Committee.

That essentially could void Act 40, according to Luis Gallardo, an attorney and a city council member in AguasBuenas, Puerto Rico, who has written extensively on the PuertoRican debacle

“Act 40 creates preference and protections for cooperatives,” hesaid. “H.R. 5278, on the other hand, benefits most vulturefunds.”