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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 ; ; . International Bond Greece 2010 $374B 113% ; ; Financial Crisis Entitlement Spending Investors ; Leveraged Construction / ; . . International Bond Dubai 2009 26B 32 Financial Crisis Real Estate Bubble Investors Rising Underfunded Argentina 2001 132B 130 Entitlement Spending + Financial Crisis International Bond Investors Currency Peg ; Declining Productivity + . ; . 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 point per California Research Bureau “Overview of New York City’s Fiscal Crisis,” 3/1/1995. (@ 4 www.kpcb.com 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. KP www.kpcb.com USA Inc. | Consequences of Inaction 424 HOUSE_OVERSIGHT_021053