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Social Unrest Can Shake Investor Confidence And Contagion Can Spread 10-Year Sovereign Yield Spread (over German Bonds) for Greece / Portugal / Spain / lreland, April 1 -— May 10, 2010 10% xs 5/6 — Greek parliament z formally approves austerity ——> a 8% package agreed w/ EU & IMF ——Greece S E 4/22 — Greek civil servants 10) stage a 24-hour strike g 6% =— Portugal 4 | 3S - - o 5/5 — Violent protests in 5 Fy 4% Athens against proposed —spain 3 2 austerity measures 2 2 =] ” s 2% =—Ireland = = ty] a > o_O 2 0% T T T T T T T T T T T T T 41 4/4 477 4110 413 4/16 4/19 4/22 4/25 4/28 5/1 5/4 5/7 p Source: FactSet BSF owe poo com USA Inc. | Consequences of Inaction 429 Government Deficits and Changes in Sovereign Credit Default Swap Rates = Positively Correlated Cumulative Government Deficits as % of GDP vs. Change in Sovereign CDS between 2007 and 2011E B00 -- nn nn nt ® Greece N = = 500 --------- ~~ == 5-5 5 nn no oo a8 aaa oa aa ao oz) i=] o N ra 400 © © ie) A BBY a ee eee ee eam ene © eng one nS Se a A go Portugal . z¢€ R? = 0.1996 oo gw 2000 fale. 32S aes re = a pem o= Ye = 5 e Ireland o - Y TOD) << re sn oe 5 i an Frante~—S—=<CSCS See a Germany —®- Japan ,, @ UK —_ £ Py ——”~ @e Netherlands USA 5 0% 10% 20% 30% 40% 50% 60% = o 100 ~~~ - ~~ ~~ = 8 nn nn nna ann ao a a Cumulative Government Deficits as % of GDP for 2007-2011 (10-11 Projections) K i) Sources: OECD; Markit; National Data a USA Inc. | Consequences of Inaction 430 HOUSE_OVERSIGHT_021056