The Latest From Puerto Rico

Officials in the Treasury Department are discussing a radical and aggressive response to the fiscal chaos engulfing Puerto Rico that could involve a broad debt exchange assisted by the federal government.

The proposal calls for the federal government to help Puerto Rico collect and account for local tax revenues from the island’s businesses and residents, according to people briefed on the matter who spoke on the condition of anonymity because they were not authorized to publicly discuss the proposal. An inability to collect all the taxes owed is widely seen as contributing to Puerto Rico’s debt crisis.

The tax proceeds would be placed in a “lockbox” overseen by the Treasury and eventually paid out by the Treasury to the holders of the new bonds that Puerto Rico would issue in the proposed exchange. Since the Treasury would effectively become the paying agent for the new bonds, they would be more attractive than the bonds that creditors now hold.

That would make it easier for Puerto Rico to exchange the new debt with creditors who hold bonds that have been devastated in value since the island warned this summer that it could not pay its debts.

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