Puerto Rico faces historic default as rescue bill approved

SAN JUAN, Puerto Rico (AP) — Puerto Rico faced a historic default Friday as the U.S. territory prepared to enter unchartered waters under the guidance of a newly enacted federal control board to oversee the island's finances amid a dire economic crisis.

The anticipated missed payment of $2 billion in debt payments would be the biggest ever for Puerto Rico and includes $1 billion worth of general obligation bonds that are given top priority by the island's constitution.

A rescue package signed Thursday by President Barack Obama will temporarily protect Puerto Rico from creditor lawsuits seeking to recover millions of dollars invested in Puerto Rico bonds, which attracted investors because of their triple tax-exempt status.

Garcia defended the debt moratorium as well as the state of emergency he implemented Thursday at four government agencies, including the island's largest public university and a retirement system that has been shorted by $40 billion.

Obama said the debt crisis has been a heavy burden for the territory, with basic services shutting down and government workers not being paid.