Financial Oversight Boards in the U.S. Federal System: Insights from the Puerto Rican Debt Crisis

Abstract

AbstractRecent fiscal crises in Detroit and Puerto Rico have brought Financial Oversight Boards (FOBs) to the forefront. In spite of these developments, there is a notable gap in the literature as social scientists have barely studied this type of oversight organization and its implications. This article highlights intergovernmental and political dynamics that arise with the imposition of FOBs in localities facing fiscal distress by studying the case of the Puerto Rican FOB, commonly known as la junta. By focusing on the governance of the largest debt restructuring in the history of the U.S. bond market, in the context of a newly established territorial bankruptcy regime, this article explores how the presence of the Puerto Rican FOB has been linked to contentious dynamics that challenge local autonomy and democratic principles. By analyzing a variety of legal cases, this article shows how the creation of the Puerto Rican FOB has also put into question the foundations of the unincorporated territory’s self-governance status.