“Although there are many ways this crisis could escalate further, it is clear that Puerto Rico is already in the midst of an economic collapse,” Lew said in the letter, addressed to Speaker of the House of Representatives Paul Ryan.
He noted that Puerto Rico’s government is now shifting funds away from one creditor to pay another, and has stopped payments altogether on some of its bonds.
After it missed $37 million in payments early this month, and pulled another $163 million from escrow for some bonds to service government debt, creditors have filed suit, complicating the situation.
Meanwhile, Lew said, the island’s government is cutting back spending and raiding pension and other assets to keep going, exacerbating both its financial and economic problems.