Treasury Considers Radical Plan to Help Puerto Rico

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.''

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[But] ... "Right now, Puerto Ricans don't even like to pay taxes to their own government," said one person with knowledge of the discussions. If the I.R.S. were to suddenly replace the local tax authorities and try to gather up the money for debt service, "people would say, `Go to hell. I'm not paying the U.S. government.' "

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[Further, an anonymous Puerto Rican official who commented] believed that a deal of this type would raise complex legal questions about whether Treasury's involvement changed the priority of the creditors. Those that felt they had lost their places at the front of the line might sue, and their lawsuits might prompt others to pile on.