KAZUHIRO NOGI/AFP/Getty Images(NEW YORK) -- Takata's airbag recall could more than double in size.
A source familiar with the planned expansion confirms to ABC News that on Wednesday, the National Highway Traffic Safety Administration will announce an expansion of the Takata airbag recall, adding 35 to 40 million passengers and driver side inflators to the recall.
The expanded recall for the Japanese automotive parts company would more than double the current recall of 28.8 million, which is already the largest auto recall in history.
The source told ABC News the recall would not happen immediately, but would be phased in through 2019.
News of the expanded recall comes as NHTSA will announce they are confirming a root cause for the airbag problem-- the combination of time, temperature, and humidity causing the ammonium nitrate propellant to explode with shrapnel.
iStock/Thinkstock(NEW YORK) -- Wall Street lost its gains from the day before as oil prices tumbled and investors worried about China's slow growth.
The Dow dropped 140.25 (0.78 percent) to close at 17,750.91.
The Nasdaq fell 54.37 (1.13 percent) to finish at 4,763.22, while the S&P gave up 18.06 (0.87 percent) to close at 2,063.37.
Crude oil tumbled over 2 percent with prices hitting about $43 a barrel.
China: A private gauge of China's manufacturing industry fell in April, despite a government stimulus, reviving fears that the world's second-largest economy is not rebounding. According to Caixin Media Co., factory activity levels in China fell to 49.4 for the month from 49.7 in March. Anything above 50 would indicate growth and anything below the 50 level means contraction. According to the China National Bureau of Statistics, China's official purchasing manager’s index (PMI) reading released Sunday said the PMI in April fell to 50.1 compared to 50.2 in March.
Google: Google and Fiat Chrysler have signed a deal to make 100 self-driving minivans. According to a statement, Google hopes the 2017 Chrysler Pacifica Hybrid minivans will be on the road by the end of the year.
"This collaboration with Fiat Chrysler Automobiles (FCA) is the first time we’ve worked directly with an automaker to create our vehicles," Google said. "FCA will design the minivans so it’s easy for us to install our self-driving systems, including the computers that hold our self-driving software, and the sensors that enable our software to see what’s on the road around the vehicle."
The statement said the self-driving car could "take you from A to B with the touch of a button."
Martin Shkreli: "Pharma Bro" Martin Shkreli could face additional fraud charges, prosecutors said Tuesday in a New York court. Shkreli first came under fire as "The Most Hated Man in America" when he significantly raised the price of a drug called Daraprim. The drug treats a parasitic infection called toxoplasmosis, which most often occurs in those with compromised immune systems due to cancer treatments or HIV infection. The former pharmaceutical CEO was arrested in December on multiple charges of securities and wire fraud related to a different company he founded.
Thomas Trutschel/Photothek via Getty Images(NEW YORK) -- Google Chrome has become the top browser in the world, beating out rival Internet Explorer, according to new data.
Net Market Share, an analytics firm, said Google's browser had 41.71 percent of the market share in April compared to Microsoft Internet Explorer's 41.33 percent. In third place was Firefox at 10.06 percent, followed by Apple's Safari at 4.47 percent.
Chrome was already crowned the winner back in 2012 according to another measure by the tracking group StatCounter. At the time, Firefox came in second and Internet Explorer was third.
The reason for the different results is that the two companies measure web traffic differently. Net Market Share counts unique visitors, instead of page views, per day. Another huge difference is that Net Market Share analyzes more than 40,000 websites, according to a description of its methodology. StatCounter says that it tracks more than 3 million sites around the world.
While the war of the browsers has been competitive over the years, it hasn't been cutthroat.
Internet Explorer and Mozilla teams have sent cakes to one another to celebrate various achievements.
"We started this tradition when we sent them a cake for Firefox 2. It was probably the best damn cake I've eaten," Internet Explorer engineer Jacob Rossi said of one marble chocolate vanilla confection, according to a Reddit AMA forum in 2014.
Justin Sullivan/Getty Images(NEW YORK) -- Some lotto players are scrambling to get tickets ahead of Wednesday's Powerball drawing now that the jackpot has swelled to an estimated $348 million.
It's the biggest Powerball jackpot since the record $1.586 billion jackpot in January was split three ways. Never mind that the chances of winning the grand prize are 1 in 292,201,338, according to the New York Lottery.
If there's no winner for Wednesday's pot, the prize will grow for the next drawing this Saturday. Powerball drawings take place on Wednesday and Saturday nights at 10:59 p.m. ET.
The last winning numbers on April 30 were: 3, 12, 16, 32, 34 plus the Powerball of 14. The cash value of Wednesday's prize is $226.1 million.
The jackpot has grown over the last 17 drawings since the last Powerball winner claimed the prize on March 2.
January's winners included a couple in Florida and a couple in Tennessee. There was a winner in California, but that ticket holder has not yet been identified. Each winning ticket was allotted roughly $528 million.
If you buy a ticket, there are a few things you should remember to do, including making sure you keep it in a safe place and sign the back.
WFAA-TV(DALLAS) -- A pizza chain in Texas is turning lemons into lemonade after it was forced to change its name.
Black Jack Pizza in South Dallas and Pleasant Grove has been serving pies and burgers for more than 30 years. But the family that owns the small business said they received a cease-and-desist letter from an unrelated chain in Colorado that trademarked the name. That larger business demanded that the Texas restaurant change its name and logo.
“They say we cannot have anything saying 'Black Jack Pizza,'” the Texas business owner Terry Jones told ABC's Dallas affiliate WFAA-TV.
Jones told WFAA that he has known about the other business’ name for years. “It just came to a head," he said.
Though Jones said he might lose a few customers over the name change, they don't plan to fight the issue in court. Instead, they are sponsoring a contest that invites customers to submit suggestions for a new name. The winner will receive a free large pizza and a sweet tea every month for a year, from this coming August to July of next year. The contest ends on May 23.
"It's a bump in the road,” Jones told WFAA. “You've got to go over the road. You've got to go over that bump and keep on rolling."
Contest forms are at Black Jack locations around the Dallas area.
Blackjack Pizza in Colorado did not respond to a request for comment.
iStock/Thinkstock(STOCKHOLM) -- When it comes to mobile gaming, the Candy Crush games have proven to be sweetly addictive for hundreds of millions of active users around the world.
Sebastian Knutsson, co-founder and chief creative officer of King, the company behind Candy Crush, took ABC News on a tour of the company's Stockholm office Tuesday and offered an inside look at what life is like at one of the world's most popular gaming companies.
King became an independent unit of Activision Blizzard in February after a $5.9 billion acquisition. However, it seemed to be business as usual at the company's Stockholm office.
Before starting the tour of the office, Knutsson met ABC News in the pavilion area of the King office in Stockholm, a cartoonish open meeting area that evokes the same whimsy as King's portfolio of 200 games.
One item on Tuesday's agenda: Closing in on creating the 2,000th level of Candy Crush.
"We are getting close to producing level 2,000 on the original Candy Crush and the other games are still producing levels as well," Knutsson said. "There are some [players] at the end waiting for more content."
Surprisingly, Knutsson said about half of those power players who have made it to the end never made a single in-app purchase.
Many Candy Crush players know the feeling of getting hooked -- and then frustrated after being stuck on a certain level for too long. It's something Knutsson said the King team listens to feedback about and evaluates whether they need to make some tweaks at a certain level.
"It really comes down to making a game people can enjoy and not turning them off," Knutsson said. "Keep trying. That's the secret. I think in some cases you find that really hard level and if sometimes players complain about a level too much, we will sometimes tweak it and make sure it's still fun to play."
iStock/Thinkstock(NEW YORK) -- New York-based grocery chain Fairway announced on Monday it has filed for Chapter 11 bankruptcy protection.
The company said it reached an agreement with its senior lenders on a reorganization plan that will eliminate roughly $140 million in debt and help restructure its balance sheet.
"We believe that implementing this Prepackaged Plan is the best opportunity for Fairway to restructure its balance sheet on an expedited basis, strengthen its operations, retain jobs and create long-term value, while continuing to provide customers with the best food experience in the greater New York area," Fairway CEO Jack Murphy said in a statement.
Fairway says it does not expect customer service to be interrupted during its reorganization process.
"Consumers can continue to purchase Fairway's products at one of their 15 stores, 4 Wine and Spirits stores or Manhattan residents can shop online," the company said.
iStock/Thinkstock(NEW YORK) -- Former pharmaceutical CEO Martin Shkreli may face additional fraud charges, prosecutors said Tuesday in a New York court.
Shkreli initially came under fire for significantly raising the price of a drug called Daraprim that treats a parasitic infection called toxoplasmosis, which most often occurs in those with compromised immune systems due to cancer treatments or HIV infection. He was arrested last December on multiple charges of securities and wire fraud related to a different company he founded.
Shkreli appeared in U.S. District Court in Brooklyn Tuesday alongside his attorneys. He sat in the court with his arms folded as prosecutors said they would decide within a month whether or not to issue a superseding indictment, which would lead to additional charges.
Shkreli will be back in court on June 6.
Shkreli's lawyer, Ben Brafman, told reporters he thought the hearing was a "good day" for his client.
"We do not believe this indictment will...affect Martin Shkreli in a negative fashion and we still believe the charges in this case are very defensible," said Brafman. "We plead not guilty and we intend to proceed to trial."
The former CEO of Turning Pharmaceuticals took to Twitter in recent weeks to thank supporters and proclaim his innocence.
Robert Capers, U.S. attorney for the Eastern District of New York, told reporters in December that Shkreli allegedly defrauded investors in two hedge funds, MSMB Capital and MSMB Healthcare, and also plundered Retrophin, the biopharmaceutical company he ran as its CEO, in an effort to pay back debts related to the now-defunct hedge funds.
Prosecutors allege that Shkreli lost all of the investments in MSMB Capital but continued to provide inflated and false performance updates to its investors.
Walt Disney Imagineering(ORLANDO, Fla.) -- When park-goers swarm Walt Disney World's Animal Kingdom later this month, Joe Rhode will be paying close attention.
The executive designer and vice president of Walt Disney Imagineering Creative has spent the last eight years overseeing the expansion of Disney's Animal Kingdom park, including its soon-to-be unveiled evening spectacle, "Rivers of Light."
Rhode, a Disney veteran who said he started “at the bottom of the design ladder” in 1980, has also been leading the charge on Disney's Avatar-themed land, based on James Cameron's 2009 top-grossing film, which is slated to debut in 2017. The first of four planned sequels to Cameron's movie based on the fantastical world of Pandora will hit theaters a year later.
Rhode likened the process of developing and constructing a major attraction to filming a major blockbuster film. The whole investment -- from "the morning of conceptualization to opening day" can take anywhere from four to five years, Rhode told ABC News. And in the case of Animal Kingdom, incorporating live animals can lead to other challenges.
"The inclusion of live animals changes design standards ... but it brings realism to design," he said in a phone interview. "Nature is a supreme, immutable value."
The millions of visitors who travel to Disney’s theme parks around the world -- more than 134 million in 2014, according to the Themed Entertainment Association (TEA), an industry trade group -- are not privy to the trials and tribulations of what it takes to bring an idea to fruition at Disney. Imagineers, as they're referred to at Disney, prefer it that way.
"We try to be invisible," Theron Skees, executive creative director for Walt Disney Imagineering, said in an interview.
Skees started his Disney career painting artificial grottos and tunnels at Disneyland Paris' Pirates of the Caribbean attraction. Skees, who previously worked as a sculptor and set designer in film and commercials, has lived on three continents as a Disney imagineer, tasked with bringing the visions and interpretations of Disney characters and stories to life.
The imagineering division, one of the most competitive and challenging practices within the Disney universe, has the sole responsibility of delivering "the magic" that visitors seek year after year. There are at least 1,500 imagineers currently in the company, according to a Disney spokesperson, with 140 disciplines within the group.
"There's the technical know-how, the creative vision, the planners and the operators," Skees said. "Imagineering is a pretty specialized group that requires a specialized mindset."
And loners need not apply.
"You have to communicate and get an idea out there, whether that's painting, building or drawing models," Rhode added. "The ability to collaborate as a group is a must."
Skees reiterates that every imagineer is encouraged to submit ideas -- whether that’s for a new roller coaster, a live performance or costume design at one of the theme parks, hotels or Disney cruises.
“All ideas go through a process and it’s not exclusive to one person,” he noted.
Ideas can come from anywhere. Rhode immerses himself in books -- non-fiction, art history, neurology -- and vows to plow through the 35 stacked next to his bed, soon-to-be additions to his personal library of 5,000 books.
To be successful in this career “you need to find smart people to work under you and to read a lot,” he explained. Traveling the world? A necessity.
“We’re not making two-dimensional products. You need to know what places are really like,” he added.
John Pendygraft-Pool/Getty Images(ST. PETERSBURG, Fla.) -- Hulk Hogan is suing Gawker Media again.
In paperwork filed in Florida state court on Monday, the former wrestler, whose real name is Terry Bollea, accused the media company of intentional infliction of emotional distress and maliciously destroying his business relationships by allegedly "leaking a sealed transcript of surreptitiously recorded private oral communications in a bedroom to the media."
Hogan claimed that in July 2015, the National Enquirer published a transcript from a 2007 video in which he used a racial slur, and that the information was at least in part furnished by Gawker.
As a result of the publication, Hogan was fired by his employer, the World Wrestling Entertainment and, he claimed, "his global brand was forever tarnished."
"This is getting ridiculous. Hulk Hogan is a litigious celebrity abusing the court system to control his public image and media coverage. It was absurd enough that Hulk Hogan claimed $100 million for emotional distress and economic damage for a story about a sex life that he'd already made public. Now Hulk Hogan is blaming Gawker for racist remarks he made on another sex tape, which Gawker never had," an attorney for the media company told ABC News in a statement. "As we've said before and are happy to say again: Gawker did not leak the information. It's time for Hulk Hogan to take responsibility for his own words, because the only person who got Hulk Hogan fired from the WWE is Hulk Hogan."
The lawsuit also names a talent agent, two deejays, a radio company, and an attorney, among others, in conjunction with the alleged attempted extortion.
Earlier this year, Hogan, 62, was awarded $140 million in compensatory and punitive damages after he sued Gawker for invasion of privacy. In 2012, the website published a portion of a sex tape that was made without Hogan's knowledge.
“I knew we were doing what was right.... And if we would have lost, it would have been good, because everybody would have known what Gawker was all about. Because I exposed them. I exposed them a million times over, and what they do, and then how they, you know, treat people, and how they look at the world. Which, to me, is very, very scary,” he told ABC News afterward.
On Monday, his legal team told ABC News in a statement that this latest lawsuit is in keeping with that mindset.
"Mr. Bollea said from the beginning that he would seek to hold all persons and entities fully responsible for their wrongful actions. This lawsuit seeks to do just that," they said in a statement.
iStock/Thinkstock(WASHINGTON) -- On Mnday, the Supreme Court said it would not take up the challenge to Seattle’s minimum wage increase. The lower court upheld a Seattle law that requires business with five hundred or more employees to raise their minimum wage to $15 per hour by 2018.
The International Franchise Association (IFA), along with other franchise business, brought the challenge to the court. They argued they should have the same phase-in requirements as independent local business. Under Seattle's minimum wage law, which took effect last April, business with more than five hundred employees must raise the minimum wage to $15 per hour over the three year period. Smaller businesses have up to seven years in which to phase in the increase. The franchise owners claim they are being treated differently because of their affiliation with national chains.
The IFA released a statement Monday decrying the Court's decision.
“Today’s decision from the Supreme Court is clearly a disappointment," said the president and CEO of IFA, Robert Cresanti, Monday. "Our appeal has always focused solely on the discriminatory treatment of franchisees under Seattle’s wage law and the motivation to discriminate against interstate commerce.”
“Seattle’s ordinance is blatantly discriminatory and affirmatively harms Seattle hard-working franchise small business owners every day since it has gone into effect,” he added.
Seattle officials said the wage increase will help close the gap on income inequality. The terms of the $15 per hour minimum wage initiative were endorsed by the Service Employees International Union (SEIU), which believes that franchises should not be considered typical small business. The union argues that franchises have many more resources available to them than typical small businesses.
A representative from SEIU did not immediately respond to ABC News' request for comment.
Seattle has more than 600 franchise businesses affected by the ordinance.
iStock/Thinkstock(NEW YORK) -- Wall Street closed higher for the first trading day of May, putting a stop to a seven-day slump.
The Dow jumped 117.52 (0.66 percent) to close at 17,891.16.
The Nasdaq gained 42.24 (0.88 percent) to finish at 4,817.59, while the S&P pushed up 16.13 (0.78 percent) to close at 2,081.43.
Crude oil tumbled over 2 percent with prices hitting about $44 a barrel.
Airline Profits: The airline industry made a record $25.6 billion in net profits last year, according to the Transportation Department, compared to $7.5 billion in net profits in 2014. Fuller planes, low fuel costs, and a decent economy have helped the industry more than triple its net profits for 2015. Analysts say, however, that the positive profits will not necessarily translate into lower fares for passengers.
Amazon.com: Amazon's stock soared over 3 percent Monday after billionaire Warren Buffett praised the company's retail success at Berkshire Hathaway's annual meeting on Saturday. Buffett said what Amazon had accomplished was "remarkable."
“The effect of Amazon and others that I would say are playing the same game…is far from having been seen," he said according to MarketWatch. "It is a big, big force and it already has disrupted plenty of people and it will disrupt more."
He also praised CEO Jeff Bezos and said he couldn't imagine the company without him.
"Really outstanding managers, they're invaluable," Buffett said according to MarketWatch.
Minimum Wage: The U.S. Supreme Court refused to hear a challenge by businesses who didn't want to pay the $15 minimum wage adopted by Seattle. Seattle officials said the wage increase would help close the gap on income inequality. The terms of the $15 per hour by 2018 minimum wage initiative were endorsed by the Service Employees International Union (SEIU), which believes that franchises should not be considered typical small business. The International Franchise Association (IFA), along with other franchise business, argued they should have the same phase-in requirements as independent local business.
Chip Somodevilla/Getty Images(OMAHA, Neb.) -- Billionaire Warren Buffett, widely regarded as one of the most successful investors in the world, didn't hold back his opinions at Berkshire Hathaway’s annual meeting over the weekend.
Berkshire Hathaway's chairman hosted investors at the yearly gathering in Omaha, Nebraska, on Saturday, following a "Shareholder Shopping Day" on Friday at the company's exhibit booths.
The 85-year-old investor discussed everything from politics to soda.
Here are some of the top takeaways from the "Oracle of Omaha" over the weekend:
Warren rails on Wall Street
Buffett said on Saturday that hedge funds and investment consultants are usually a "huge minus" to those who follow their advice, the Wall Street Journal reported. Buffett pointed to a bet he had with hedge fund Protege Partners since 2006. The hedge fund bet that its cumulative returns of five funds it chose would outperform the Vanguard S&P 500 index fund, including fees. But at the end of 2015, the index fund had a return of 65.7 percent, beating the hedge fund's 21.9 percent return. The S&P outperformed the hedge fund in six of the eight individual years of the bet also, the Journal reported.
Blaming obesity on soda is 'spurious'
Buffett, who has a stake in Coca-Cola, called the blame for obesity and diabetes on soda "quite spurious." Buffett, who famously drinks Cherry Coke, said he hasn't seen evidence that has convinced him that consuming "water and broccoli" instead of soda will help him reach 100 years old.
“You have a choice of consuming more than you use,” he said. “I make a choice to get 700 calories from Coke, I like fudge a lot, too, and peanut brittle and I am a very happy guy. If you were happy every day -- and it may be hard to measure -- you are going to live longer as well, so that may be a compensating factor," Buffett said, according to the Financial Times.
Why he doesn't prioritize diversity
Berkshire Hathaway was criticized for its lack of diversity among its 12 board members.
"You've explicitly stated you do not consider diversity when hiring for leadership positions and board members," asked reporter Andrew Ross Sorkin. "Does that need to change, and are we missing any investment opportunities as a result?"
Buffett answered, "No."
"We will select board members -- and we lay it out and have done so for years, and I think we've been much more explicit than most companies -- we are looking for people who are business-savvy, shareholder-oriented, and have a special interest in Berkshire," Buffett said, according to Yahoo. "And we've found people like that. And as a result, I think we've got the best board that we could have."
Valeant Pharmaceutical's business model 'enormously flawed'
“The business model of Valeant was enormously flawed,” Buffett said. “I watched the Senate hearings a couple days ago when Senator Collins and Senator McCaskill interrogated three people from Valeant, and it was not a pretty picture.”
Last week, Valeant executives admitted that it spiked drug prices and promised to lower the price of some hospital drugs.
Courtesy Sean Berthiaume/Vinnie's Pizzeria(NEW YORK) -- One Brooklyn pizza parlor is making delivery a whole lot tastier.
Vinnie's Pizzeria, located in Brooklyn, New York, is the home of the wildly popular "Pizza Box Pizza," which, as the title suggests, replaces the traditional cardboard delivery box with an actual pizza.
Partners Jacob Petrera, Sean Berthiaume and Henrik Toncic, who have run Vinnie's since 2007, spoke with ABC News about how their crazy creation came to be.
Petrera revealed that the idea for the pizza boxes started out as a joke. The owners kept noticing cardboard boxes out on the street, and began to brainstorm ways to reduce waste at their pizzeria.
Petrera credits Berthiaume for coming up with the winning idea.
"He was like, let's just make the box out of pizza," Petrera said. "It’s all him, he’s the man."
Introducing The PIZZA BOX PIZZA! A pizza box made entirely out of pizza! No waste, 100% pizza and 100% delicious. pic.twitter.com/2KxxndlK4Z
After debuting their Pizza Box Pizza on Twitter last week, customers have flocked to the store to try out the creative invention. For customers who want to take the pizza to-go, the entire pizza is wrapped in foil.
"We're selling out every day," Petrera said.
Berthiaume explained that his team often comes up with inventive ideas for new recipes, such as their hit from last year, the "Pizza on Pizza Slice," which is a pizza covered with mini pizzas.
"We still make a lot of those for people today," Berthiaume said. "We pride ourselves on not being the run of the mill pizzeria."
As for the Pizza Box Pizza, Petrera said they'll keeping making them "until the demand is gone."
iStock/Thinkstock(SAN JUAN, Puerto Rico) -- Puerto Rico’s government failed to make a large debt payment Monday – a default that could intensify the island’s financial crisis.
The U.S. island territory did not pay the nearly $370 million in bond payments that were due.
Instead, Gov. Alejandro Garcia Padilla announced Sunday night that the commonwealth will first focus on making payments for crucial health and public-safety services, while declaring a moratorium on millions of dollars due on bonds issued by the Government Development Bank (GDB), which is the island’s lender of last resort.
"Faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice," Garcia Padilla said in a televised address. "I decided that essential services for the 3.5 million American citizens in Puerto Rico came first."
A law enacted by Puerto Rico’s government in April empowers the governor to suspend debt payments to pay for essential services.
Puerto Rico is facing an increasingly dire financial crisis as it tries to deal with a mounting $70 billion pile of debt.
The default this week is considered an ominous sign but most of the focus in on July 1, when the government has to make payments on several general obligation bonds it issued. A failure to make these payments is considered more serious by financial markets than a default on the GDB payments due Monday.
The issue now is whether Washington will step in to help Puerto Rico before July 1.
Legislation that would allow the commonwealth to restructure its debt is currently bogged down in the House, with some conservatives calling it a government bailout. House Speaker Paul Ryan and other supporters of the legislation say it would not put any taxpayer money at risk.
Both the House and Senate are in recess this week, so further negotiations will have to wait.
White House Press Secretary Josh Earnest said Monday he hopes Puerto Rico's default will create "a new sense of urgency" for Republican lawmakers who “have been dragging their feet for too long."
He tallied that it's now been 194 days since the Obama administration put forward a legislative proposal for addressing the situation.
"So I think that should be an indication to you and to the people of Puerto Rico that the administration has been focused on this for more than six months,” Earnest told reporters. “And unfortunately we haven't seen the kind of movement in the Republican-led Congress that we need to see to make a bailout of Puerto Rico less likely."
Why does Puerto Rico have so much debt?
The island ended up with so much debt in the aftermath of a recession that began hitting Puerto Rico in 2006. As tax revenues fell, the government borrowed more and more to balance its budget.
Creditors fault the island’s political problems for failing to collect taxes and for allowing the island’s economic problems to go unsolved.
Can this financial crisis turn into a humanitarian crisis?
Puerto Rico’s public services are mainly still functioning but some are concerned about a humanitarian crisis, including the Obama administration. Officials at the U.S. Treasury Department are urging Congress to provide aid in the form of debt relief.
One concern: what happens to local hospitals on the island if they cannot pay their bills? The Centers for Disease Control and Prevention (CDC) expects the island's hospitals to be bombarded with Zika-related cases this summer.
What is Congress going to do?
The chairman of the House Resources Committee has drafted a bill that is intended to address the island’s fiscal crisis.
It would create a financial oversight authority that would approve budgets submitted by Puerto Rico’s governor and subsequently passed by the local legislature. In exchange, Puerto Rico would be allowed to take advantage of court-enforced debt restructuring, similar to the system U.S. states and cities can utilize.
But a group of conservative House Republicans say this amounts to a bailout and they want more controls put in place for the island. Ryan and other GOP leaders argue the bill is not a bailout because no U.S. taxpayer money would be at a stake.
Some Democrats have expressed concerns with how much power the control board would have over Puerto Rico’s government.
A group of hedge funds that hold Puerto Rico bonds is lobbying to derail the House bill under the belief they could get a better deal by suing the government or striking a separate deal with it.
Some critics of allowing Puerto Rico to restructure its debt argue it would change the rules for the investments and possibly undermine market confidence in the island’s bonds.
But in a sign that the House bill may be well received by investors, PIMCO said last week that it supports the legislation, arguing a failure to address Puerto Rico’s debt crisis is a far bigger concern than some of the issues raised with the committee proposal.
"A successful resolution to the unique crisis in Puerto Rico can only be achieved with a strong federal oversight board empowered to both enforce fiscal discipline and adjust the Territory’s public debt in a fair and equitable manner designed to achieve debt sustainability," the company said in a blog post endorsing the House bill.