(Reuters) - Three days before Puerto Rico's Democratic presidential primary, Bernie Sanders leveled a blistering attack on a restructuring bill moving through the U.S. Congress and offered a radically different approach to fixing the territory's $70 billion debt problem.
Sanders, a U.S. senator from Vermont who is giving front-runner Hillary Clinton a tougher-than-expected challenge for the Democratic Party's presidential nomination, will formally introduce his legislation next week, a spokesman said on Thursday.
Unlike a bipartisan House of Representatives bill that would establish a federal oversight board to renegotiate the massive debt with investors, Sanders' bill would create a "Reconstruction Finance Corporation of Puerto Rico" that would protect public pensioners from cutbacks and "concentrate losses among vulture funds," according to a summary.
"It is morally reprehensible that Wall Street vulture funds are demanding that Puerto Rico fire even more teachers, close more schools, cut pensions and slash the minimum wage so that they can reap huge profits off the misery of the people of Puerto Rico," Sanders said in a statement.
The term vulture funds is a derogatory reference to specialized investing in deeply discounted or distressed assets, typically bonds, by buying them up on the cheap in hopes of profiting on the expectation of a credit restructuring
Clinton has backed the House bill.
Last week, a House committee with oversight of Puerto Rico approved a debt restructuring measure that backers hope will be enacted into law before July 1, when the island is faced with making good on $1.9 billion in debt payments.
Sanders' proposal comes as the nominating contests for the presidential election are winding down. Along with Puerto Rico, California and a handful of other states are holding their nominating contests in the coming days.
Sanders' bill sets out to strip the ability of hedge funds to profit off their investments in an attempt to protect pensions ahead of creditors.
The Reconstruction Finance Corporation would consist of seven members, all full-time residents of Puerto Rico and mainly chosen by the Puerto Rican legislature and governor.
The House bill, by contrast, would give Republicans in the U.S. Congress a say in recommending the majority of the proposed oversight board members.
While the House bill boasts no cost to U.S. taxpayers, Sanders wants $10.8 billion for infrastructure improvements in Puerto Rico. He proposes raising federal reimbursements for the Medicare and Medicaid healthcare programs for the poor, elderly and disabled.
Sanders also wants elections by Jan. 31, 2018, in Puerto Rico to decide whether it should become a state, an independent country or reform its current status.
(Reporting by Richard Cowan in Washington and Nick Brown in San Juan; Editing by Daniel Bases and Leslie Adler)