Mixed signals on CDA relief bill

As far as the House leadership is concerned, the vetoed Commonwealth Development Authority credit relief bill would no longer be revived.

“There is no intention to resurrect it,” said House leadership spokesman Charles Reyes Jr. yesterday.

Besides, he said the House is preoccupied these days with dealing with budget issues.

The Senate, however, has not retreated on its plan to override the relief bill.

Senate president Joaquin Adriano said senators will tackle the issue as soon as they are done with the 2005 budget.

“We’re doing that [override] but the budget must come first. That [relief bill] would be the second [issue] we need to address,” said Adriano.

The senator insists that the measure, Senate Bill 14-48, is not unconstitutional.

“There’s no constitutional issue here. The bill only wants three things: to reduce interest rates from 9 percent to 4 percent; reduce monthly payment; and relieve the interests of those who defaulted for the last five years,” he said.

These efforts, he said, can be termed as refinancing, which actually can be done by the CDA board alone.

“They could do it. In fact they have been doing refinancing but because of the high rate of delinquency rate, we introduced this bill to recover arrears with these loans. You can even call it ‘a recovery bill,’” he said.

CDA earlier reported an 83-percent delinquency rate in its commercial loan program, amounting to some $8 million. The Executive Branch, however, said that using commercial banking procedure, the rate would only be 38 percent.

Acting Gov. Diego T. Benavente vetoed the bill Wednesday, citing that it is unconstitutional, violates the doctrine of separation of powers, and would seriously impact the fiscal integrity of CDA.

He said the bill is unconstitutional because it impairs the obligation of contracts. He said the contracts entered into between CDA and the borrowers that were valid at the time of their execution cannot be abrogated or impaired by a subsequent act of the Legislature.

Benavente also said that the bill infringes upon and interfere with the powers and duties of the Judicial Branch because it would set aside judgments entered by courts.

Further, Benavente said that the measure, if passed, would “seriously” undermine the fiscal integrity of CDA. Insolvency, he said, would be the likely scenario as borrowers, by defaulting, would come under the financial jurisdiction of CDA and can take advantage of the relief provisions.

He said the relief would essentially wipe out CDA’s ability to make future loans to stimulate economic development

He said such scenario would also affect the flow of federal funds to the CNMI. CDA currently receives, holds, and invests all Covenant 702 funds.

“Any significant erosion of the fiscal integrity of CDA will reduce credibility in our fiscal responsibility that we have worked so hard to achieve and may affect the amount of funding the CNMI receives in the future,” he said.

CDA which acts as guarantor to a variety of commercial loans held by private banks, guarantees $13 million and holds only $7 million in reserve.