>> you go first. you won the case. >> thank you for saying that. i will say the question to you that i said backstage which is now that we have won the case and the country has signaled a signal that it's time to end the exclusion would you be willing to join with me and their

colleagues in some dialogue with your people, your flock and so on so that together we can help people move forward together and get to the country and even if we disagree to get to what's important and not be constantly divided. >> we do need to be in dialogue with one another. that's one of the things i've been doing for several years and hope to do more if we had to do that coming to the table as who we are without either of us putting our convictions into a blind trust on these issues. if we are going to have a good reasonable conversation where we can understand one another and agree to disagree it is good and healthy for the american democracy. >> i would say argued now in this new world that we have in terms of marriage to the understanding that roman catholic evangelical muslim institutions who do not believe that marriage can be defined in all of the ways of the court.

will you use the power of the state not to be true to their own convictions? >> one thing that i would say is that marriage isn't defined by who denied it. now that gay have won the freedom to marry nothing has changed in the definition of marriage. yours is the same with your life as it was three days ago. my marriage with my husband is now respected by the law. you're entitled to think whatever you want and i can defend absolutely that the law should treat us both equally which now happily it has moved to doing. the other point i would make is you talk about religious institutions but of course the vast majority of people in faith within those institutions many of them have come to support the freedom to marry. 63% for example of catholics in the united states -- >> not once you start looking at who goes to church. if you do the polling polling date polling data this way do you consider yourself republican

but you never vote come, you're not going to get accurate polling. >> we would be better off if each of us tended to our own well-being and spend less time telling other people that they are bad at their religion let alone bad as americans. but to get to where i think you were going with your question i believe the the law should absolutely defend the first amendment freedom of relation and freedom of belief and freedom to preach. you and of course others like me are free to say him to preach and put forward whatever we believe. but we are not free to use the government as a weapon to impose our beliefs on others and i believe that our country decade after decade has gotten the balance right. we've figured out how to support and guard religious freedom while also supporting civil rights and nondiscrimination and the opportunity of every person to participate and that's a wonderful thing we have in our

democracy and we shouldn't be undermining them. >> thank you so much for coming. congratulations and happy birthday. [applause] >> thank you so much. i really appreciate it. we had breakfast at couple of weeks ago here and i was struck by the practical approach you take and that's why we invited you here. you are not someone that just asks us to spin. you've been instructing the convention about what to say and what to do. this must have been a dark sunday for some of them. what did you tell them to say? >> we have been working for years to say this is not something that is simply relegated to the coastal elites. so there are many in the country that assume if they live in a

red state that this was somehow beyond them and that it could be dealt with with a presidential election so what several of us have been saying for years is that you have to be able to minister in a very changed context around you and what that means for us is a longtime evangelicals particularly could assume that most people in the culture aspire to what we mean when we say marriage and family. so, we can assume that if we you don't have to articulate and spell it out. >> now the church is undeniably a minority into various something clarifying that. >> absolutely. what happened is american christianity in the bible belt was too comfortable with being american, and as a christian i believe that we can be america's

best when we are not america's first. when we have a sense of understanding of who we are in our distinctiveness now that's time is here. for a long time i think that there were a lot of american christians who idealized some golden age in the past come in the 1950s were the 1980s which is end a christian vision of the reality. i mean our vision into reality says that everything fell apart not with the counterculture of the 1960s but with the garden of even so we have a more clarified understanding of who we are. >> the formal position as president of the ethics and religious liberty commission of the southern baptist convention. a lot of you know richard lamm in the southern convention of the evangelical christianity's ambassador to washington. >> he put out a one-page messaging point for his allies and number four was the pro-life

model can be a model for the way forward. >> if you were to go back in a time machine to 1973 and the national abortion rights action league what's with the pro-life movement look like in 2015? most of them probably would have said there won't be a pro-life movement and 2015. this issue is over and it has been provided by the supreme court. what happened coming you have coming to be vibrant, active movement every january the march for life is filled with younger and younger people energized and engaged in the pro-life movement. the other part is the pro-life movement could not be an angry reactionary movement because we are trying to work not only politically but culturally in order to persuade women not to abort and to persuade men not to pressure, to have the administrative women in crisis,

so it had to be the sort of movement that was persuasive and other directives. and i know the same thing has to happen with marriage. we have to have a long-term view. this isn't going to be settled by a presidential election. this is a generation long argument that we have to make and we have to have the sort of people that understand why the people that disagree with us disagree with us. we can't just send outrage of them. >> you had a piece in the "washington post" that says the church should neither pay or panic as a result of the ruling. let's start with panic. why shouldn't the church panic? >> you were clear about what the supreme court was up to. you said it was between battery and catastrophic. catastrophic even in the constitutional way. that's what you got. >> we got catastrophic but, you know, i keep falling back on the old grateful dead leader at.

it's even worse than it appears but it's all right. what i mean by that is i think the implications are going to be far reaching. i think it is good to have implications many people are not even seeing right now. but as a christian, i have a long-term view of history and i think that it is resilient. i think marriage is something that god god embedded in the natural order and it can't simply be expanded away or redefined so i think it will be back. >> go on. >> the way this is working, think about the way that justice kennedy is arguing in his majority opinion this is a matter of individual autonomy, a matter of individual dignity. how do you keep the valve on that and the way the court is or is this going to be what happened with griswold, where

you unleash a previously unknown constitutional right that it's going to have almost endless permutations. >> what do you mean specifically when you say that marriage will be back? >> what we are going to see is a booming expansion of the american society in the short term with kind of the exuberance of it, but if we can look at what has happened in europe, you see a decline in marriage culture and i think that has bad consequences just as the divorce revolution did for children, for families and for society and for civilization's. they are going to believe that this is going to fix all of their problems and they are going to at the end of the day say what is there other than this. and i think that we need to have a church that still has the lights went to the old path to be able to say there is another way. >> been fascinating that you pointed out in your "washington

post" piece is that if you look over the millennia the church has thrived in the minority. >> when the church sees itself as a majority were silent majority what happens is we stop emphasizing the things that are distinctively christian in order to attempt to become more normal in whatever society in which we accessed. that is the reason why so much of the political activism over the last generation really hasn't been defined at all. it's been in terms of the values in terms of traditional family values and principles. we don't need mayberry in order to thrive. it started in a very hostile empire into this gives us the opportunity to reclaim the new testament tells us is what causes christianity to thrive. i was talking to a lesbian

activist a few years ago and we had a conversation talking about a few minutes ago. she was asking a series of questions in the set you just have to know that what you're saying about marriage and sexuality sounds so strange to me. but if she knew someone that has done more than two or three dates without having sex should assume there's a psychological abuse in the past and not someone with moral convictions. she said i don't know anybody that believes things that you believe it sounds strange to me. i said i think i get that i want you to know we believe even stranger things than that. we believe someone is going to show up in the sky on a force. that's the strange and freakish from the natural mindset and it was strange and freakish in 1840 and so we need to reclaim that and maintain our confidence as we go forward.

i think there are a lot of people that assume especially the secular progressives assume that if we just apply some pressure here, some cultural pressure some political pressure on event catholic church is going to cave, evangelicals are going to cave and they are just going to say forget about what we said before about marriage and sexuality. that's not going to happen because it can't have been. >> this isn't something that is incidental to what we believe. we believe that marriage and sexuality are a conference picture of the unit of christ in the and the church and we believe that it has eternal consequences for the well-being and bustle of the soul of the people that participated those things. we are not going to be able to get rid of those things without getting rid of the biblical text and ultimately. >> the ministers you've worked with and edited see the christians and the church need to work on their own marriages.

it's been absolutely. >> one of the most controversial things i ever see anywhere isn't anything that i say here in washington. it's when i tell you couple who come to me and they want me to officiate and i won't let them write their own vows and they become very pouty and upset. why won't you let us write our own vows. it's because this isn't about you. it isn't about you. you don't even know yet what to make than about. you're not keeping in mind what it means to stay with one another through alzheimer's disease and to be with one another through the death of a child. you need the rest of the community of the church that is gathering witnesses to do that for you. so the church for a long time has developed a cultural understanding that really sees marriage as being about semantic fulfillment principally rather than in the bigger sense of what it is.

>> a question for doctor moore and over to the piece written by jeffrey toobin in the new yorker. why don't you think that the parallel drawn by the groups between interracial marriage bans and marriage bans is apt? >> i don't think that you have a gay ban. you have a state recognizing that there is something distinctive about the union of a man and woman. the state has an interest to guard this particular union and the latest tape doesn't have an interest in gardening all sorts of other relationships. so i don't think it's a band. with the interracial issue the reason these things are different, no one in these bands that came into place because of slavery and jim crow in the united states of america no one is arguing that these are not marriages. they were arguing that we want to stop them from happening. people who object are not saying

we wish ill will towards gay are lesbian people, they say there's something unique about a man and woman that we can see through the millennia of human history that if we simply undo it expand to the point that it becomes a relevant, we will have lost something. >> talk about christians engaging in the culture and yesterday you had a tweet at doctor maurer that said, and this is the tweet, due to the nashville airport saying in the voice of bob dylan -- >> bless his heart is kind of a southern way of saying it can be in different context. bless his heart could be a complement usually it's not. usually it means man, you're an idiot but it's a nice polite way to save. >> said he has a book coming out

august 1 and it kind of gives a sneak peak. it's engaging the culture without losing the gospel. the cover is by johnny cash and there's something very unusual about this book. >> on the inside of the publisher did kind of a poster with different quotes. >> it has the goal of the reconciliation. >> you have written about adoption and you have four children. >> five. >> five children. tell us about the adoption. >> we adopted the first two benjamin and kennedy when they were a year old. they just turned 14. and it's kind of been a priority and a concern for me because we have children all over the

foster care system in the united states of america and in orphanages in group homes around the world who need families come and we have families in the united states but have room for another stocking on them. >> i'm calling on people to really consider is god calling us to welcome. >> what is your number one? >> it's not to panic. it's to recognize children are going to do stupid things sometimes and it doesn't mean disobedience necessarily. and so, learn to have kind of a tranquility about that and to spend time with them one-on-one the best thing that i can do especially if multiple kids to take each one of them with you on a trip where you are able to talk to them and then find out what is going on in your lives.

>> you're a mississippi native and a confederate veteran. two days after the church in charleston is time to take down the confederate flag. it is a symbol to enslave the brothers and sisters. why does it take so long? >> because you had this argument going on for a long time that this isn't a matter of hate. this is a matter of heritage. and i think people are starting to recognize now as they are having genuine conversations about racial and ethnic categories that it is part of the problem. and beyond that you have a flag that is being used by the terrorist groups and the state sponsors throughout the 20th century in order to tear arise african-american people to burn crosses on the front lawns and i think that it's time for us to

recognize that. i was expecting a lot of blowback from my fellow southerners and i received almost none. all of the hate mail i received came from yankees. people in idaho and montana and alaska but almost none of them from south carolina because the southerners black-and-white -- i think it is going to take a while in mississippi. i think it is dead in south carolina. >> we are going to do early fireworks on july 3 because i have to be on a plane on july 4 so i will probably see the real fireworks from the plane when it. >> i think the chief of staff for making this possible. thank you for coming in and for a great conversation. [applause]

>> thank you so much for coming. jim has been there from the beginning it was in chicago and was the manager of the 2012 reelection in the white house as a deputy chief of staff. what do you think? >> i thought that it was a a cold and a coma nation and an amazing moment in history. i think that we will look back at this and historians will 50 years from now realize what an important cultural moment this was and how our politics changed and president obama in many ways has helped start this revolution that ronald reagan did 30 years ago and you can see all of that move in the politics and definitely change in the past week. to continue the point about reagan -- >> if you look at the moment in time we were just in a nicer to

working in politics gay writes with a huge is a huge issue in which the electorate george bush turned out a bunch of voters in 2004 on that issue and he might have won the white house because of it. immigration was an issue in spite of the pretty, climate change is an issue people used to separate. use all the same entrée. use all the same on a whole bunch of issues and all of those things in the democratic party is inside of the majority of americans. >> there's a little bit still to go. we have a pretty good sense of what it might look like. what did it look like as you'd you would imagine eight years from now? >> i remember coming into the white house and you can see the economy falling off the table whether or not we are going to have a second great depression in the end. both president bush and

president obama took huge steps to avoid that and begin the recovery. i remember very early on we had day after day and finally david axelrod leans over and says is a too it too late to ask for a recount? into the brutal time and i think that if you were to look forward, and said in the seven years you can have all these things we would have taken that in a heartbeat. the biggest piece of business that you think would be done? >> the preeminent issue of our time is going to be income inequality. the president talked about that the other day. the democratic likely nominee secretary clinton talking about every single day. wouldn't you call secretary clinton the likely democratic

nominee? what do you think is the percentage? >> 99. >> i can never assume. what can still be done and learned about how to get more action on afghan people have helped? >> if you look at it yesterday, there was the agreement there was a kind of bilateral agreement that is going to continue to change the country in november and december which is an absolutely crucial moments to getting the worldwide climate accord that could be another mammoth step the president has already taken several huge steps in the rules that will be finalized this summer. all of those things are nature major defining moments to combat climate change but i think paris

is going to be an absolute crucial moment this fall. >> now you've seen the president in all states and all places. is it because he's figured it out or he has experience or why is he suddenly in stride now? >> let me tell you i the first week in the white house be set down and have this fight internally about which issues to work on and it's an easy win et cetera. he stood up and said every single one of you knows that kerry is the right thing to do. but you are all afraid of it politically because it was a very problems first term. then he looked around the room and said some of you in as some of you in the room didn't even think that i could win so we are

going to do whatever we think is right and start with healthcare and figured it out and he stood up and walked out. he looks at all of us and says i guess we are doing healthcare. >> do you sense of the freedom now? >> i think that he knows exactly what he wants to do with his remaining time to move the country forward. i think that he feels absolutely focused on using every single moment the next month or told his successor comes in. really proud of the work that he does this week with all these things in the memo that he is still launching a minimum wage increase for over 5 million americans. he's wrapping up the bilateral view with brazil. this is a guy that's going to work every single moment in the usual basketball and and allergies can never stop shooting until the clock runs out. >> what you sense from what you hear and what you see?

thefloridachannel.org doesn't really get upward down that much he showed that a little bit at the press conference that i've been with him in them in the toughest times and the best of times and he's still recalled cool and collected guy. i told you this before but five times we walked into the oval office and told him the healthcare bill was dead, five times in all five times he looked at us and said that is unacceptable to everyone in the room and i will fix it again and he could have easily given up or made it smaller and he continued to swing for the fences and the way that you do that and take on the historical challenges challenges is by just focusing on the jobs and that's what he's telling a.

democrats have carried 442 electoral votes in the last five presidential elections. they carried 191. >> that was in 253 and in 191. if you look at the states that are most likely to tip us to 270, colorado and virginia are the states that you would look at and i'm not saying that he would look at florida and ohio but it would be great to have in virginia and colorado and ohio and if you look virginia and colorado are coming to us

because of the democratic changes in the way that ohio just isn't. >> and what is your emerging battleground what are you going to be watching for 2020? hispanic arizona is coming very fast. it doesn't make sense if you and i agree that the mexico moved five or ten years ago remember george bush tied both times basically in new times basically in new mexico and barack obama won both times in the battleground state for us. and nevada is doing the same thing. so what is the state right in the middle of the two states as arizona and the demographic changes 15 years ago changed california and went to new mexico and nevada. >> you want head daydreams about georgia. >> i still do and it's another state like north carolina that's going to come back on the map. >> how is this shaping up? would you rather be our wordy

>> it's called the republican primary for president. [laughter] every single day it's like they send me gift baskets of crazy stuff that they say. you think of the primaries and you could argue they probably lost the presidential race where he came out against immigration reform and came out in the way that made it impossible to get the electoral votes. if you are a young voter in this country and watching republicans every single day campaign against issues that you feel strongly about against climate change and education reform and against marriage, against health-care reform those are going to really damage them. think about one other way. ronald reagan groups young voters to the republican side and now they are still leaning

republican. that's what you're seeing with barack obama and young voters and the democratic party. and republicans are making that works. we currently need legislation in the battleground state with about 35 points and that stays true in the next 20 years. >> of the 14 republicans to more coming next month who do you think is playing their cards the smartest? >> i have to say that he's often a good start and you have to look at governor bush and say that he wasted the first three months. it's not a good sign when you are on the second campaign manager before you even an ounce. but it's a good start to the campaign. we will see. >> "new york times" did a story capturing that the most dangerous republican nominee for second rate clinton and because of the contrast would be rubio. do you agree? spinnaker think it is too early.

>> i think that you would interview whoever you have in the seat and say it's no question he's having a terrible summer and wasn't going to be the democratic president and six months later he was. so they haven't had a date yet. let's give more time to say crazy stuff. [laughter] >> so what is he doing right? >> he's can't call it dating himself to talk about the bigger issues and not making mistakes which is a big deal but we will see. and there's a lot of time. >> at what has governor bush done wrong? >> i can't tell you the reason for his candidacy and that is a pretty dangerous place to be. and i think that he has continued to move around to very it as a second campaign manager who is the smartest operative

working today? >> i battled him every single day for 18 months although he ran a very good campaign here and we got to do something on the olympic bid together and i was really wowed by how smart he is. >> and who working directly in 16 what you fear of going up against? >> on the republican side are democratic side? i'm really glad mac is not coming back. we will have to see. >> what demographic group is going to matter the most? >> whichever group continues -- bush got 44% of the latino vote in 2000 and got 42. now romney got 28% in the

battleground state. if they can't move that number there is no college that works for them. it would be absolutely crucial part of the democratic electorate that they have challenges too. we are getting a historically small amount of voters and we have to fix in 2016. >> i would think after 2012 the idea of targeting the swing voters would sort of be at a fashion you still here even though democrats talking about you are down to swing voters. >> what i believe is the american electorate is the most polarized and there are historic small amounts of the swing voters. i think in the old days now you have to do two things especially democrats. you have to turn the boat out and you have to risk swing voters and i think that there have been a lot of articles in your wonderful paper about a choice between those two.

i don't think it's a choice. you have to do both but you can't just focus on turning out the base. so both of those are important. >> as you are helping secretary clinton spending time raising money for the super passage you are a validator that they cover so than barack obama. i don't agree with that. >> i think that she is a great leader with an incredible track record for moving this country forward and i think that we will do very, very well in the battleground state. i said this in the past that single most important thing is a definition of both who can define the future and if you look at the republican party right now they do not have in any ability a plan to do that. it is the one thing that defines the party today? >> at their opposition if you look at every single day what they are saying on the topic it is just about how.

you cannot win the presidential campaign in opposition to a person or an idea. >> agreeing with `t. you think that it's smart to be doing that? >> i don't. they've got to figure out a way to plan for the future and you have seen in the campaigns you and i were tested and you know how i am if you wanted to pay me i couldn't tell you three ideas that they laid out having that as a problem. >> if we could get a microphone to tell us about an event they are doing this afternoon that we have a twitter question. she said can you address questions about the authenticity of hillary clinton and her cause is? >> she's had a lifetime of support. she was campaigning for universal access to health care 30 years ago. she spent her life advocating for the betterment of children around the world and made it a centerpiece of her life and does the secretary of state she did a

bunch of things to move forward on the progress of issues. i think that her record is second to none and going forward i think that progressives can be extremely proud of her as i am. >> how worried is the clinton camp about success and excitement around senator sanders? >> there will be ups and downs around every campaign. >> that's great but nothing has changed. we saw hillary clinton in the 70s and the democrat party nationally she is going to be the democratic nominee and is going to win the white house. >> why is there an excitement

turnaround? board and we expected and even expected. >> i think that is a great track record. i worked on the senate for a long time and i love watching bernie sanders speak to me that it doesn't mean i want to vote for him in the primary. >> question about 2016 as you look ahead to the fall as part of the team what do you worry about? >> president bush spent 180 million. we had $1.1 billion to stop the onslaught of the negative ads. i think that is going to probably allow them to drastically outspent hillary and that is a challenge. and i continue to want to make sure that we focus on both swing voters and turning out the base. >> tell me one thing about the 2016 environment landscape.

>> technology will continue to change everything in this unless the majority of the young voters communicate on the snap chat more than texting or e-mail that's evolution in how people communicate and how people watch news and how people validate their political and consumer decisions is changing by the second and it's going to be an amazingly different campaign than even 2012. >> what do you think of snap chat? to >> i use everyday and i every day and i think it is a wonderful way for me to curse a lot and not get in trouble. but how. but how does it apply to the campaigns? >> i spent a lot of time trying to figure this out and i certainly am not going to talk to republicans. one of the things you do is help

corporations know how you use the data analytics and 2012 for customer outreach. what is the biggest thing the american businesses can learn from the obama 2012? >> that you can individually target consumers in a smart way. one of the clients legendary pictures and they've been a real leader on taking some of those things and building the ability to roll out the unprecedented way more than hollywood expected them to do because they are using the social media in a way that no one else is. >> do they give advice on how to run themselves? >> one of the passions is holding the first five years and bill to create a pre- k. education and we spent a lot of time working on that. and i think that you're seeing that campaign run by this amazing hero. she's now running that campaign and is doing a believable job.

>> you are a different person when you are in montana. what are you looking forward to? 's connect my wife and i are going to spend the entire month of august fishing. she is a much better fischer fan i am. i hope to catch a bunch of fish and be in the most wonderful place in the world. >> but you catch? >> big trout. >> what is the fishing tip? hispanic told them not to come to montana. you don't need to tackle committed in the end it's a very simple about trying to read the water is the most common thing and the most calm your liberty is when you watch the water and other is a trout right behind it and that is the moment of calm.

>> and what are your priorities? >> we hope that you'll join us for the political event about the whole character of the discussion. if you could tell us about that event real quick. >> thank you for the great conversations and twitter really loves your socks. [laughter] >> a great entrepreneur. >> thank you for this great event. we have another one coming out at 1:00 there will be live streamed looking out of the fallout and the next potential battle around the affordable care act and obamacare will be and that will be at the museum of the eighth floor of the doors of enough overtime to of:35 and also lifestream and it is a pro- health-care event, hash tag is

#prohc. we will have policy experts from both the conservatives and the liberal side. >> thank you all of you for watching this event and our political colleagues. thank all of you for coming out and for making these amazing conversations possible, and happy fourth. [applause] >> looking at live coverage on c-span this afternoon in about 15 minutes the presidential candidates will be at the national press club.

talking about the ongoing debt crisis in puerto rico and greece

congress's role in the puerto rican financial matters. in [inaudible conversations] we are going to take a seat and began. i am alex pollock and it's my pleasure to welcome you all to the conference on the tail of

today's crisis porter rico americas greece. as many of you have told us it seems the timing for the conference was pretty good and current events and headlines and debates make us quite timely. we have the twin defaults as the line from the "washington post" is running of course closing the banks and the run on the atm into the new kind of photos of the bank grandstanding in front of the atm. the governor of puerto rico saying the government debt are not payable in speaking on the debt moratorium, lots of debates about possible bankruptcy for the government and these were the financial control board to be in post of the new depreciated currency for greece were as my friend desmond has

called it an exodus from the further credit downgrades and all enough to keep us busy thinking about this. there is some entertainment and comic relief as part of this since the agencies and officials have announced that the default by grace on the debt to government wouldn't be in the default. at least it wouldn't be called a default come and we have the president of the united states and the secretary of the treasury urging them to find an agreement. i'm sure they really appreciated those. then there is the sober truth which is troubled borrowers can keep paying as long as the lenders keep making new loans and they go to pay the interest on the old ones even though

nothing is changing except it is getting bigger. when they stop lending more it is the end of the extent. in my view both greece and puerto rico are fine examples of the government centric monde competitive economies which in margaret thatcher's wonderful phrase have run out of other people's money. let me share a quotation with you all. the history is to live constantly beyond its resources and continues beyond the capacity but for a long time they found that it could pay the interest on the old debts. however this came to an end and the greek government depended

the negotiations would be only 30% of the interest on its debt. for four years the creditors committees and the government engaged in the stubborn the gucci nation without asian without issue and finally on the initiative of the german government on the provisions were written into agreements the agreement whereby greece entrusted to the international financial commission the duty of controlling the revenues it aside for the debt service. the opinion was completely hostile to this arrangement. the subsequent record of the borrowing since there is a repetition of the earlier history, and this was all in 1930 describing the events in the 1890s but of course they were remarkably appropriate for june 30 dot 2015. both greece and puerto rico in the government accounts have

shown a notable ability to accumulate debt. but if you get a chance to look at it on the website it shows the biggest ten u.s. states by debt including such notables as illinois and compares it to puerto rico and then converts this to the per capita product and we find that the average of 21 state and municipal debt to the gross product whereas puerto rico has 69% from a remarkable three times a day to burden of illinois and i want to show these numbers to the colleague who said they don't have to pay federal income taxes, so they can pay more. nonetheless, there is a huge level of government debt in puerto rico.

as of today, something the government have in common are a standard and pours so using their ratings they share with a negative outlook for the government of greece and a negative outline for the puerto rican government. of course when you have a negative outlook there is one step down as default and it's important to remember that although people talk loosely about the death of greece and puerto rico in all cases we are talking about the debt of the government and all boils down to the law in finance which cannot be paid and will not be paid.

so it is about how to divide the inevitable losses among the parties and in particular it is about how to obscure the losses which are being taken. our expert panelists are going to enlighten us about the past, present and perhaps the future of these two big-time government borrowers. but he introduced in the order they will speak. first will be dave hitchcock who is a senior director of standard and pours into the partner analyst for the major states and from the accountability for the rico. he's been with standard and pours for 35 years which means that you've seen a lot of debt crisis in that time as have i. he was the chairman of the group

of new york and served on the board of the national federation of the municipal analysts and the comptroller general's advisory council on government auditing standards and received the first for the credit analysis of states in 2014. next john has over 30 years of investment management experience and is the executive vice president director of fixed income portfolio manager for the municipal bond investments in cumberland advisors. he's a member of the national federation of the municipal analysts in the new york society and his writing has appeared in "the wall street journal" of "the new york times" among others and he was last with us on this panel to discuss the bankruptcy then looming in the city of detroit and we welcome him back to discuss some more issues. the third panelist is my colleague and co- organizer who

specializes in the economy in the policy the u.s. housing market and the multilateral institutions previously the managing director in the international monetary fund he's written extensively on the global economic crisis and in particular he's been an unrelenting and correct pessimist. and next will be burt who's been a consultant and a prominent commentator on the banking issues since establishing his own consulting practice 40 years ago. he especially analyzes conditions in the banking sector coming and we've come and we asked him today to include his views of the banking systems of greece and puerto rico in his remarks. byrd has often testified before the committees and is interviewed by the media on a regular basis, and he often

attends conferences at aei and is a prominent questioner of the panel. but today has to answer your questions. the final panelist will be with me. it's hard for me not to say that the french way who's a senior partner he joined in 2010 having served as the u.s. executive director of the world bank in 2007. the experience includes the brady plan to restructure things at the end of the 1980s global debt crisis and restructurings innumerate privatizations. we should have some of these coming along in our debt problems as well as your bond financing. he's written extensively on the security regulation debt restructuring in the international banking and

sovereign anybody. we are delighted to have this truly knowledgeable and outstanding panel with us today. now each of our panelists are going to speak from 12 to 15 minutes. after that we will give them a chance to react with each other or to clarify the points that they have made and after that we will open the floor to your questions and we will adjourn promptly at 11:00. dave coming you have the floor. thanks for being with us. >> so, as it turns out, when you talk about greece you have to be quick on your feet. i supplied booze slides yesterday afternoon to the panel updating greece.

but i could not access point updates the slides for puerto rico, so already one of the slides is out of date having passed about 12 hours. so, let me start. i just want to make a disclaimer i am a puerto rican analyst so i'm not an in-depth expert on greece that i would be happy to connect you with our team but i am passing on the comments from the group. i've been asked to talk about similarities between puerto rico and greece and the differences so the first thing is we look at the different criteria so i just want to have a disclaimer we are not using the same criteria so it's not necessarily weighted the same or evaluated the same from one to the other. one of the territory of the u.s. and others in the sovereign nation. however, we also have additional

criteria in our triple c. category with short-term factors and the equity and they both come under that. the triple c- prominently reflects the timeframe that we are looking at over six months for the potential restructuring and also points to some other longer-term trends. so this is still accurate because the criteria doesn't change. you can see within the criteria we have different accreditations for the plus or the minors or without either. so although it was pretty much negative until yesterday basically it reflects that we do not have a clear path identified

for the data default or the restructuring. the triple c- indicates that we feel that it is eventually going to happen in the next six months. we are looking over 12 months or longer for the potential restructuring. the triple c. we see likely to fall in 12 months to six months, particularly with some of the governor's comments and puerto rico. ..

it was commissioned by puerto rico. people referred to to as the kruger report against the formal title. the embrace of that by the administration in puerto rico indicates an rv that they will pursue some sort of debt restructuring. the governor said something to that effect last night in his address to the commonwealth on television. and so it is our understanding that puerto rico has adequate money to pay it back today and

on july 1st it intends to do so and we are not aware of a particular default that is being planned. however, we do believe that they will pursue a restructuring of some sort shortly. in fact under current projections we believe that they will have to peer typically puerto rico has needed to sell about 1.2 billion of the external cash flow within the fiscal year which ends june 30th they typically can't most of their revenue towards the end of the year when the income tax comes than in any cash flow financing in the fall. so while they may use various measures to boost their liquidity in the short run ,-com-com ma bills have been introduced to tap the retirement funds or state insurance funds for liquidity purposes.

they might sell trends, for example for liquidity. we believe that even those will be relatively temporary and in our opinion come this fall or perhaps earlier they'll have a severe liquidity problem. which is within our six month timeframe. so that is puerto rico. the side i updated yesterday is still accurate. and it's got some pretty small type, but basically we feel that grief is going to for political reasons prioritize payments other than to debt holders and that it is relatively inevitable they will be restructuring in the short run. at one point greece was rated lower than puerto rico but we feel with the six month

timeframe encompasses both ratings at this point. so let me talk a little bit about puerto rico's pressure points. so first, liquidity. they really need to market access as i just talked about particularly in the fall to carry them through the fiscal year. without that, they will have severe issues on liquidity. and then there's some longer run issues. the background that will get to at the end of the economy. recent puerto rico share declining economic trend which brings these issues to the fore. we should all bear in mind that the short-term issues are the result of a long-term trend which is underpinned primarily by economic weakness. in particular, the pension systems are puerto rico are at risk. they been underfunding them for years. they can afford to fund them on an actuarial basis.

i same commentators point out the fact on an actuarial basis they have no access and the retirement fund mixed at the payments to boost. that is not quite true because the pension funds a few years ago can use the cash for that. they can pay on a cash flow basis pensioners of negative actuarial asset which is what we would expect in the short run. that can only last so long. we do expect when that is excised that it will go to a pay-as-you-go system and substantially boosts payments into the retirement system if they pay promised benefits to pensioners. the health care system has very large projected deficits. in the next few years that is driving the biggest part of the out year gaps. they were projected in a report

that came out monday but we have been aware about for some time. some of that is they are frontloading some of the payments they got from the federal government under the aca and they will exhaust those in the short run when we start getting into fiscal 2018 out years is the very large gaps that approach the size of the revenues they are projecting. that would appear unsustainable. the data service does increase perhaps not as rapidly as other things i point you in the out years. increasing general fund debt service and before they get to the general fund a lot of press reports don't take into account that the increase in general fund. not various the sales tax financing corporation which takes money off the top you forget to the general fund. that goes up about 3% to 4% a year.

although they have lower operating deficits, they still have ongoing operating deficits. they project this year in the last disclosure statement 191 million for fiscal 2015 even though the 2015 budget was balanced on paper we feel that there's operating implementation risks even if the 2016 balanced budget is enacted on paper we feel there's still implementation risks. i can go into the details but that the panel discussion fits into it. a number of reasons on certain things they did admit the deficit a little bit worse. as i alluded to before, underlying all this is the economic reform and that has been stagnate. the last couple years there hasn't been much decline but there hasn't been much growth. small decline in real gdp basis.

before that there was bigger declines after federal tax breaks phaseout 2006. the operating deficits in the budget started around 2000. this predates some of that and that is because the federal tax rate started to phase out before 2006. maybe i should clarify the federal tax breaks for manufacturers from the mainland that located on puerto rico and those primarily pharmaceutical manufacturers are very high value wage industries. so to the extent that those decline, even though they are a small amount of employment is a big impact on the gross domestic product. so here are some quick points in comparison with greece. first of all, puerto rico is a territory within the u.s. government. they have a nonvoting

representative but they can even vote in the u.s. congress. grace is a full member of the euro area. puerto ricans have labor mobility within the u.s. there's been a brain drain out of puerto rico to come to america for employment. various labor mobility for greece within the e.u. in terms of currency, puerto rico, puerto rico doesn't have control of its own currency. they use the u.s. dollar. by their grace has control or not, at least they have the bank. but we feel the greek economy is in very well synchronized with europe as a whole. fiscal transfers is a big point of difference. about 24% 25% of personal income and puerto rico comes

from fiscal transfers from the u.s. government. the biggest fiscal transfers social security but there's also medicaid, medicare food stamps, veterans benefits, many things in there. that provides some support. furthermore if you think about it within the u.s. federal system, u.s. citizens don't care if new jersey pays more than alabama into the federal government. there is not a huge groundswell of opposition necessarily for making payment into puerto rico. greece on the other hand it's very limited fiscal transfers and custom transfers from europe. in terms of economic growth or decline, puerto rico has had some periods of decline but not nearly as much for them 2014 probably had double the decline

of puerto rico. in terms of debt it is really hard to look at. we look at debt ratios generally not including underlying municipalities electric systems, enterprise systems unless they are supported by the state general fund. some of the numbers we saw on the earlier slide i might take issue with. different ways to make a comparable with greece would be of little tough. if you look at the overall electric system it's about 69% of gdp. if you look at similar to state that i view it would be closer to 40%. for greece, while this is the end of 14, i have 172% over 180% now. incomes in puerto rico a lot higher but still low by u.s. standards.

lastly, we look at the impact of the default. why there might be more dead increase. you could say it's government how they may be less impact on the debt markets as a whole were puerto rico.as held. hedge funds are on a major share to give the negotiations they are going to have to negotiate if there is a restructuring. perhaps there could be a greater impact on the u.s. market. so i think my time just ran out. i will pass the baton. >> thank you very much. john. >> thank you alex. good morning.

my role at cumberland in terms of managing bond portfolios is really driven by two things, returns on investment and preservation of capital. so when i view things in puerto rico and censored as impacts across all bond interest rates as we saw yesterday, i am doing it from the dead of risk reward capital preservation. if you go back basically a year and three quarters to go to the end of august 2013 and this area and cover really started the run on puerto rico -- and the uplifted yields that we have seen tens. it isn't that the problems were known before that. they were. most of the bond market need that. what you had and gave mentioned at the end of his piece there

was that you had in the tax-exempt bond market in the u.s. broad participation by retail investors in puerto rico that because of the double exemption not only from federal taxes for state taxes in all 50 states. not only do you have direct retail ownership, you have large retail ownership across the many number of municipal bond funds that own puerto rico. when the article hit immediately you started to see how often the puerto rico bond market and that lasted right through the following january and march and it's cap coincidence. you start to see selling of on funds into a market that lost liquidity. we will look at the bond yield in a second. this was the match that lit the

fire. we are looking not cofina debt here. you can see it has jumped up even higher now. we will see some charts. one of the great things alex mentioned at the beginning of this is coming on board on this day when both puerto rico and greece hit the fan over the weekend you had the cards and presentations in the what you've got left. cofina debt traded at low levels for many years. even after the first piece head. the reason for that was the cofina debt was seen -- >> is that the green line? >> the green line. yes. you can see the timeline.net as you go into january of last year it jumped and of course this may

and june if this were updated you would see at even higher in the 14% level. the fear and we quite think this will happen is puerto rico is going to try to essentially grab sales tax revenue and quiet back to the common law whereas bondholders get first claim on the sales tax. we will see whether this happens but there is certainly the fear factor that protection you have is a bondholder with a lien on the sales tax is going to be attacked. here is the geo-debt. it is important to look at the comparison here. in our view, where we have exposure to puerto rico is only insured puerto rico debt.

that is by two would be ensured guarantee and mbia. we actually own it specifically bear and started doing that for some select client in march march 2014. so this is after yields had risen. the interesting part is that the news got worse in puerto rico through the fall, you can see that all three, both insurers as well as the uninsured debt grows. one is the actual line for triple-a securities. that is the great line. the blue line is the ensured puerto rico bond. everything goes up in a vacuum. and then you see the markets start to discern the difference between uninsured bond and an uninsured bond.

and there they diverge. you can see the ensured yields which we started getting involved in at the 6.5% to 7% level has worked all the way down to about five. they jumped a little bit yesterday to where you saw a few pieces built around six but there weren't enough trade to hang your hat on. it is interesting how the market starts to dissect things. by the way, if you look at a pattern of chicago's geo-data -- go debt it ensures the same pattern and they all go in an upper deal draft right now i'm a fully expect that to be sorted out. one of the things we look at and the reason we are involved there as we believe the insurers have plenty of capacity to pay any puerto rico claims. remember the bond insurers obligation is to pay principal

and interest when due. the fact is you may have a bond in 2035 where there is possibility of default or nonpayment. the present value is much lower and they would pay debt service. the insurers were originally offered 15 cents or 20 cents on the dollar. they ended up settling for 80 cents on the dollar. they have lots of clout in getting restructurings done and we believe this is ongoing in puerto rico also. sales tax to show you the senior versus subordinate. a subordinate that really got clobbered yesterday because obviously if they think there's callbacks that is the first. the electric authority. dave mentioned possibilities of restructuring.

again, insured versus uninsured pay the cap is hugely wide. we expect to see some restructuring in the highway authority. the markets estimation is 70 cents on the dollar will be the new power. that hasn't started yet. to my knowledge the july 1st payments are in the bank and can be made so tomorrow everybody should be getting paid. the governor goes on tv and says we cannot pay our debt. a big difference between saying we cannot pay our debt but we don't want to. one of the real issues and this will be the crux of not only insurers, but also the hedge funds involved. you saw hedge fund involvement come around last spring. most have signed a nondisclosure agreement with puerto rico so they can get access to data and

basically bargaining chips in return for the owning more money. a nondisclosure agreement means they have more information and they cannot trade with anybody else other than themselves. i'm not sure that is helping them because they want to say we will find you more money if you doa, b. and c. puerto rico once ... and that includes cutting benefits, et cetera and they don't want to do that. puerto rico doesn't have access to chapter nine bankruptcy. either directly grant access to chapter nine for fast-track to statehood in the eligible and that's not happening. the interesting part is even if they had chapter nine, they would be required to show they have taken steps and all steps necessary to pay the debt and they wouldn't even be close they

are. this long way to play out. a little bit here on the crisis. government debt equals 90% of gross product. weak internal liquidity, economic weakness, declining population. david touched on this pension liabilities relative to revenues. here is the reason why we like to puerto rico insured that. what we do is compare on the higher underlying rating but not much. it's a u.s. territory. we have puerto rico insured. they are treating this graph 200 basis points apart. if you saw some trades it would be closer to 250 today after yesterday. when you look at the insurance agreement in both bond it reads exactly the same. so why is one trading 2% cheaper

than the other? the answer is simple. the market discounts headline risk by giving you higher yield and this is true in this case. what we think is eventually most of this is because you don't have the retail participation. right now you would think the major brokerage firms and investors could go when and by om insured paper. as soon as everything had not too many more months most of them threw down the barn door and said we will not let her clients have anymore paper after yields have risen 200, 300, 400 basis points or more. after they left the barn you can't buy anymore. we actually think puerto rico is close to getting the petroleum tax deal done. if they had gotten that done,

you would've seen the insurers take a piece of that because the way the tax would be dedicated. if the brokerage firms like the morgan stanley is in merrill's of the world have gotten involved in the deal, it would be hard to tell clients they can't buy the ensured deal when they are underwriting it. our thought is when retailers allowed to buy you will see them come back and decline. right here kind of gives you an idea of the go debt versus population. detroit would've been a a very similar looking graph. clearly one of the things they need to do is have cutbacks on the budget level. we haven't seen that yet. this is the puerto rico bellwether bond. a year ago march they came at a discount and 93 cents on the

dollar to yield 875. the price of the bond has declined and it's really declined in the last few days whereas it has been trading 76 on the dollar as a week ago. now down to 64 cents on the dollar 65 cents well over 12%. the real question is we know the electric and highway authority will most likely have to restructure. the question is the common law going to have to restructure. when they brought this deal together, $3.5 billion in march of 2014, all you heard from the government was that go pledge was sacrosanct and will make good and keep you out dated on progress on reforms. you haven't seen any of that and

the problem without of course is the lack of communications is reflected in the dollar price of this bond. personally and i'm not speaking for the firm here. i find it hard to imagine the united states leading the u.s. territory go under. it is not like detroit. or you have puerto rico reporting into the united states. if i'm the holder of u.s. dead and i am billions and billions of dollars of treasuries agencies mortgages, i will wonder if you let a territory go under what's next? banning that freddie mac -- i think the united states needs to get involved a little more. quickly to run through this some of the other yield fund debt you can see have skyrocketed. this will sort itself out over

the next few days, but it is clearly gotten very wide. credit rating dave touched on this have been clobbered. with the cuts yesterday at the next stop will be a default. we are talking about greece as well. you can see this as greece and puerto rico are treating multi-digit yields. the interesting part is the yield curves themselves. here you have a very flat yield curve but actually negative that tells you in the beginning years people are wanting bigger yields may want in the far years which tells you even that's a huge discount are expecting a solution down the road at opposed to a default which never stops. when you restructure you start

paying once again. this is puerto rico spring last year versus now. you can see the huge uptick in yield. greece now versus follow 14. again, a few months ago greek paper was trading at 6% and in a heartbeat it was back at 11. markets adjust quickly both up and down. >> thank you. desmond. >> thank you very much, alex for arranging mass. what i want to do as i want to talk a little bit about the similarities and differences between the greek and the puerto rican situation.

i thought i might start with a quote from the great russian economist leo tolstoy who sat all happy families are alike but each unhappy family is unhappy in its own way. i think we've got to unhappy dysfunctional economies that iran cannot be in their own ways. to sum up the similarities, to look at the debt numbers and the gdp outlooks you've got to come to the conclusion that both have unsustainable debt paid -- levels. they might've gotten there in a different way and i will get into that in a moment. both an economic down spirals but there is a difference between the greek and puerto

rican down spiral. the puerto rican down spirals looks more like a secular problem with structural issues already driving it down too high. labor costs are too high a comic electricity prices are not really competitive markets. whereas the situation of a cyclical move because they try to do too much budget adjustment within a fixed exchange rate and if you do that what tends to happen is the economy collapses. of course, neither of the two economies, greek or puerto rico have bankruptcy provisions. i think this'll be about more serious in the case of puerto rico considering the difference in the structure of the debt that i will get to in a moment. and of course the question of the systemic fallout than in the case of greece the systemic fallout could be a lot more

serious because with the greek events could do in time is to spread contagion to other troubled countries in the european periphery like ireland portugal spain italy and then we could have a systemic problem. i don't think that is the case in puerto rico but if you get a problem in puerto rico it is going to be upsetting for the municipal bond markets, but i don't think it goes much beyond that. the trouble is that it looks like where we are headed that we look at a greek event and the puerto rican event in close proximity. it might not be easy to sort the two out. then they talk now briefly about the unsustainable debt position that if we just look at the numbers greece is already quite

alarming the debt to gdp ratio has gone from 100% to 180. i might just remind people that is after a massive write-down in the privately owned that, that there was a 75% value of $15,200,000,000000 of greek to in 2012. he really is quite an achievement to get a debt to gdp level that high. puerto rico's dad which is the better match or for that i've mentioned before it's gone up close to 100% what really strikes me is how this progressively goes up on something that is not sustainable and constantly rising like that. the deficits and the government corporations coupled with low

growth keeps pushing the debt ratio up and that is the party they really has to come to an end. now there are similar underlying causes to the two problems, but of course the difference is greece was budget profligacy that was made possible by low interest rates when they join the euro interest rates joined two levels and german tanks fell over themselves to lend to the greeks. there is no budget discipline. greece manages to run up a budget deficit around 15% of gdp by 2010 and that comes to a crashing end. puerto rico the situation is a little different that i think what has facilitated this has been the fact you have tax-free status on the bond that makes it really very attractive in the markets in their wisdom finance

and unsustainable position until it ends. what is really impacting both debt levels is the fact that the economies are declining in a big time way in the case of greece is really impressive. if you take a look at this chart, what this chart is doing is comparing the trajectory of decreased gdp since the crisis began around 2092 and have been in the united states during the great depression. you can see by this time in the great depression and in the united states were already in a significant upturn. greece brought it down to where we were at the low point in the great depression and given the events in greece right now i don't think you've got to be a

phd economist about the economy economy is taking another blow in the debt decline is going to continue going forward and obviously that makes it difficult in terms of getting the debt dynamics table. if we look now which i think the chart is rather enlightening is this compares puerto rico to grace and we are lucky not to from roundabout 2005. that is where they start. greece is the blue line. puerto rico doesn't look too good here. puerto rico is down over a ten-year period. talking about something like a 15% contraction in gdp doesn't make good for the way in which are able to repay your debt. obvious they they've got up at the gdp had quite a different tree.

what is occurring in puerto rico which already has to be disconcerting in terms of whether or not puerto rico is going to turn around and revive it, the greek economy if they get out of the euro have more flexibility and policies to pump the economy to some degree. puerto rico is having a problem that everybody is leaving commanders and puerto ricans in mainland united states than on the island and they keep leaving 48,000 per year and who is leaving after 25 to 44-year-old and the elderly people and not that i've got anything against old people, that the young people need to support the people from a demographic point of view. that might be of concern to the united states.

when they talk about the challenges to both economies. i think that is really important lessons that we've learned from the great crisis. the truth sat before us both of them are stuck in a currency union. so what this means as we learned in greece, if you try to do a lot of budget adjustment a lot of belt-tightening, whichever way you do it but that tends to do is reduces aggregate demand and you can't offset with a cheap current day with your own monetary policy. so greece as a source economy collapsing. the reason i'm not too optimistic on puerto rico and the reason i would share the view this country because of the sustainability problem is if they are trying to raise taxes and cut spending to quickly embrace electricity prices and do the rest they will tank the

economy even further to get people to emigrate to mainland and then it's not a viable proposition to have it repaired. if i could talk briefly on the data structure because this really has relevance in terms of how this will get resolved. if you look at the greek debt structure, some 315 billion euros now work at one euro b. equals 1 dollar. you've got a huge amount of debt, but it's basically all officially owned. a lot of it isn't the europeans, chunk to the ecb the imf and really depends on what the official creditors are going to do. the creditors what they are doing is pushing out the

charities, reducing the interest rate, but you can bring down the effect of debt to gdp ratio because if you push it out to 50 years, 100 years in the chart than no interest that is equivalent to writing the debt off and that is the way it will go. puerto rico is a different kettle of fish. the chart kind of gives you a notion that there is very many pieces and they've got different claims they are in a whole lot of different interests. i wish the governor a lot of good luck in trying to restructure the debt. you know of course you don't have the bankruptcy court so that makes it very difficult. my take on now but we want you can't look at who's on

individual pieces because if you do something on the electricity prices, that might have an impact on the other bondholders. they have other bondholders and impact the way in which the economy works. black point is what i mentioned before is the fallout from the debt default i think you could have very serious effects long term. i am relatively optimistic short-term and not this time around as opposed to 2012 europe is in a very much better position to support the other countries in the periphery. the stability mechanism has $500 billion bid more importantly a european central

bank of the printing press that now seems to be happy using the press was 60 billion euros of long-term month. i would expect if there is contagion of any serious means mr. shaw v. ball back it up with action that will stabilize it. long-term, different story. if greece plays the aero we aero we've already changed the picture of the way in which europe works is that the belief that your membership was a proper cabal is no longer in play. so when italy comes under attack it's got a debt to gdp of 135%. it's got no growth to speak of. it's got political problems that will come under attack. that is a lot more difficult but that is down the road.

as i've said just to conclude puerto rico i don't want to minimize the fact that it's got $73 billion in debt. if you put that into it, understand the detroit group c. with something like 7 billion. you are talking about 10 times the size. this may be a wake-up call that there are risks when the fed starts raising interest rates and not look so pretty. thank you. >> thanks very much desmond. bert. >> thank you alex. i'm very glad to be here with you today to discuss a troubling situation. let me move to my side. you know the big question is puerto rico america's greece and to this i would say both yes and no and i will talk about that more as i proceed. first of all, it is important as

others have talked about to differentiate what their political status is. greece of course is an independent nationstate, but still highly dependent financially on the e.u. and also it is important to keep in mind that there is a possibility that greece could exit the european union and this i think increases and would be likely to have been in the euro. there is a real close tie between greece's continued use of the euro as its currency and continuation in the e.u. in puerto rico we have a limbo like situation here for puerto rico has some broad and hard to break ties with the u.s. they are u.s. citizens. puerto rico has the dollar and of course enjoys subsidies in

terms of cash flowing to puerto rico from the pedro government but the tax exemption talked about. puerto rico citizens don't pay u.s. personal income tax. the options are statehood, full independence for maintenance of the status quo. over the years there's been a lot of debate in puerto rico about what the long-term status should be come upon all of that is unresolved at this time. i think again coming back to a point made earlier the situations are different because of their current political status and u.s. problems in a way that greece could leave the e.u. puerto rico is hard to imagine that leaving the united states. it is kind of wish i is whether

we like it or not. in terms of the similarities and differences, first of all neither one has a really competitive economy in a global sense and in both cases they have to operate with an overvalued economy. sluggish economy, high unemployment and burdensome regulations. puerto rico has been losing population but i don't know what the population situation is increased but it's hard to imagine it is attracting any folks these days given its problems. both are heavily subsidized in different ways by what i will call their parents the u.s. and e.u. and again finally high debt to gdp levels. here of course we see a chart as to how the greek government debt to gdp has risen up now close to 180% not only by increasing

debt, but also declining gdp and that is likely to continue to be the case in greece. it is interesting to note the european union establish an upper limit of debt to gdp ratio is 60%. not that it's honored very often but the establish some time ago, greece is that three times the level which gives you a sense of how far out of sync their debt to gdp ratio is relative to the e.u. objective is. you see in the chart already. i apologize for the background. we have to attribute this to the "financial times" about a month ago. it doesn't show the inner connections. one thing that is interesting for a relatively small economy it has an incredibly complicated, convoluted that structure, which greatly

magnifies its problems. in terms of differences, greece is receiving lots of subsidies. a lot of it is an ad hoc nature and politically contentious. the subsidies are really hardwired through statute. as someone said earlier there doesn't seem to be much controversy such as with all the tax exemption that are enjoyed. arguably the very favorable tax rate for puerto rico gets in terms of being by federal statute exempts on the part of the recipients exempt from federal commerce and local income taxes across the country. this was seen as a benefit for puerto rico, but arguably has worked against puerto rico because it made it so cheap to finance their debt relatively

speaking that it incentivizes puerto rico to take on more debt. it is now a burden for it. i will talk a little bit about banking systems. one of the things that is important to keep in mind and what kind of shape that thinks iran to reflect what is going on in the economies in which they are operating. the greek banks and will have a list of those in a minute, they've largely been kept afloat in recent months by the e.u. known as the emergency liquidity at already which has basically lent a lot of money to the greek banks to find the deposit outflows that have been occurring. the deposit outflows i would argue have longer-term negative effects on the greek banks and therefore the greek economy as it tries to recover.

here's the numbers on the banks headquartered in greece. all of these things -- these are for the banking group that includes the external operations. essentially deposits. one thing if i could point out we see this total on the bottom of 207 million euros as at the end of last year. the funds supplied under the emergency liquidity authority by my calculation have essentially some dead and outflow of 45% to 50% of those deposits. about 93 billion euros have been in dance and this gives you an idea of the magnitude in which confidence in greece and the greek banks has been lost. i didn't put up now for numbers. they reported positive capital positions at the end of 2014.

as a practical matter, all of these banks are insolvent and that will be a longer-term challenge for greece going forward having a busted banking system. what is interesting about the puerto rico banks if they are part of the deposit and shared by the fdic in the same way mainland bank are. the fdic is funded by deposit insurance premiums that all banks pay. we look either at the banking system in puerto rico. it breaks into two pieces. for banks listed here and then we have numbers on non-puerto rican banks operating there with citibank of course been a major participate. spanish and on scotia bank, which is a canadian parent. you will notice number one after

doral bank, these are numbers as june 30 last year. terrel bank failed in january this year. in fact, puerto rico has had a substantial number of failures over the last four years. i want to point out the number in the lower right-hand corner. six dollars is the amount of estimated last the fdic has taken in those failures. this is a subsidy essentially from u.s. banks that pay deposit insurance premiums to protect depositors in these banks and not insignificant amount of money. terms of looking at puerto rican banks in addition to have the fdic insurance protection which meant no run on the banks puerto rican banks can borrow if they need to from the home loan bank of new york. consequent to the puerto rican

economy is not held back by a weak banking system as is the case in greece that likely will continue in greece. pardon my voice. in my opinion muddling through is not an option. the approach has been taken up to this point in time because the debt burdens have become intolerable. you can only go so high and that something has to happen. consequently creditors will take haircuts. the only question is when how much and what the mechanism is and taxpayers are going to bear some losses, too. what are greece is realistic options? one is abandon the euro and that might lead to the e.u. but if it keeps the hero has to dramatically reformed its economy. just no option other than doing that. let me just had a touch of bad

on who wins and who loses. first about coming huge balance sheet gainer losses and businesses depending within that your position is. anybody in greece who had been ducking out every possible euro they could and put it in the mattress or bank account in another country was rather foolish economically. his greece goes out the euro those folks in terms of purchasing power will enjoy a substantial gain. not the banks are closed and it's too late for that option. that is why we will gain if and when greece abandons the euro. greek debtors will gain if debt denominated is great denominated in darkness. this is a huge legal issue. some interesting parallels with the u.s. abandoning the gold standard in 1933 and we might

learn some lessons from that. the big question is which euro denominated debts for the great for the greek courts enforce or not enforce its various and exit. this is an issue i have not heard any discussion about, but it will become very controversial his greece in fact does drop the euro and go back. the big losers will be non-greek creditors and that will include taxpayers. puerto rico very different situation. it's much less likely puerto rico will sever ties to the u.s. and abandon the u.s. dollar. therefore what are the options for puerto rico since the valuation by abandoning the dollars not an option. basically it has to make itself much more attractive economically and with her discussion about that. there has to be a substantial wave of privatization.

puerto rico is a socialist economy compared to the mainland u.s. a key candidate for privatization is the electric utility, which is inefficiently operated need substantial capital investment. classic situation where privatization with the appropriate data just as good make sense. the other thing that is interesting is puerto rico is stuck with the u.s. minimum wage. that is a major negative impact on competitive ability of puerto rican labor. unfortunately that is an action congress would have to take. just as a side for those of us who are not fans of the minimum wage, the puerto rican situation provides an excellent illustration of why higher minimum wages are negative for an economy and particularly on

the list employable workforce. so finally, puerto rican debt is unavoidable. the question is what is the mechanism and this is very the bankruptcy debate comes into play. puerto rico ought to be able to do the same name that u.s. municipalities can under chapter nine of the u.s. bankruptcy code. there are some unique aspects of the issue which raise big questions about whether or not puerto rico should be allowed to adjust its debt under chapter nine of the bankruptcy code. make a 10th as it's not going to happen. order rico has to find out other ways through negotiation with its creditors. think argentina. with that thank you and look forward to our discussion. >> thanks bert.

whitney. >> thank you very much. it is a pleasure to be here and talk about this comparison between greece and puerto rico. we have heard by now pretty well but the nature of the problem is. in each case we have a large debtor in a currency union without economic growth and a noncompetitive economy and with lots of structural impediment in the economy and the fiscal deficit and many structural issues in the public sector finances. basically in a currency union as i once heard sir eddie george explain why england would never join the euro. with my fiscal policy in frankfurt my only adjustment tool is unemployment and that is politically unacceptable. so here we have situation where

the economies confront an internal evaluation which basically means unemployment wage depression and so forth. so they have to confront this situation. it didn't mention is also made an adjustment by immigration which seems to be happening in those cases. the previous speakers have talked about the dimension of the problem so i won't carry there. that is not my competitive advantage. when the debt to gdp ratios get to the size they are something is not right. mention has been made of the question of the composition of the debt. the composition of the dead as transcendent indicated is a very key question going forward. why is that the case? we see here a situation where we

do not have a classic central government debt and one or two publicly owned agencies. we have a very complicated system of theoretical seniority created by pledges of various revenue strains. -- streams. the legal question which we may end up getting an answer to is going to be the modern version of the question asked of allen dulles when he testified in the house of representatives being examined in the 1930s about the bolivian tobacco revenue bonds issued in many teen 20s. and u.s. asked about the enforceability of the covenant pledging tobacco revenues any

sort of spider to boilerplate boilerplate. wow, there is perhaps a potential difference and this is what we will see. in the case of the bolivian tobacco revenue bonds there was no shares when the bondholders could call upon to go collect those tax revenues and save it they are house. i mean 30 or 40 years before that, it was still considered good form to send the gun votes down and you put your men in the customs booth and collect the duties until the bonds were paid and you went home. ..