Simple Pattern Recognition From Historical Debt Crisis Reveal Common Drivers (Leverage & Entitlements) + Triggers Yearof Debt Restructured Long-Term Short-Term Key Crisis amount % of GDP Drivers Triggers Stakeholders Rising Underfunded ; , a International Bond Greece 2010 $374B 113% ; : Financial Crisis Entitlement Spending Investors , Leveraged Construction / ; , a International Bond Dubai 2009 26B 32 Financial Crisis Real Estate Bubble Investors Rising Underfunded . : ‘ . ; : _ International Bond Argentina 2001 132B 130 Entitlement Spending + Financial Crisis Investors Currency Peg ; Declining Productivity + , ; a International Bond Russia 1998 73B 27 Financial Crisis Currency Peg Investors _ Bond Investors + New York Rising Underfunded : ; 1975 14B! on ; ; Recession Federal City Entitlement Spending — Government Note: 1) NYC government and subsidiaries had $14B debt outstanding in 1975. Adjusting for inflation, $14B of 1975 dollars would have been ~$50B in today’s dollars. Source: sovereign data points per IMF and World Bank. NYC data KP point per California Research Bureau “Overview of New York City’s Fiscal Crisis,” 3/1/1995. i USA Inc. | Consequences of Inaction 423 Lessons Learned: Historical Debt Crisis e Rising Unfunded Entitlement Spending = Often a Long-Term Driver of Debt Crisis — Countries such as Greece / Argentina and cities such as New York all nearly brought down by unfunded entitlement spending. e Financial Crisis / Economic Downturn = Often the Short-Term Trigger of Debt Crisis — All cases had similar short-term triggers. e External Forces = Often Key Stakeholders in Crisis & Driving Ensuing Changes — Most sovereign credit crises + ensuing reforms were driven by loss of confidence of international bond investors. — New York City’s near default was driven by demands from bond holders + refusal of bailout from federal government. (@)E) www.kpcb.com USA Inc. | Consequences of Inaction 424 HOUSE_OVERSIGHT_021053