Upcoming super bowl. [ laughter ] no, were all here on friday morning to discuss an issue thats incredibly important to millions of americans, both on the island and commonwealth of puerto rico, and throughout america. And its a great privilege here at bpc, we are committed to advancing the common conversation that involves principled compromise on complicated issues. And i can think of no issue that is more complicated, more important, or more in need of principled compromise than how to deal with the problems going on in the finances of the commonwealth of puerto rico. So what we tried to do here is to assemble a allstar panel of folks with varying perspectives, differing lenses and experiences to come together to have this conversation. I think its incredibly important for everybody here to understand that the Treasury Department ably led by secretary lew and the point person on that who is here, tony weiss, has put out a thoughtful and detailed proposal on what to do. Speaker ryan from the house of representatives has committed that the house will come out with a proposal, which he hopes to move through the chamber sometime next month and as well hear from our panelists, there are some real and important deadlines, that will require tough choices and action necessary to turn the situation around. So with that as the backdrop, let me introduce the panelists and then im going to join them on stage to begin the conversation where we will then eventually turn to the audience for questions. Im going to start to the left, as you mentioned, antonio weiss, counsellor to the secretary at the department of treasury. Antonio advises on domestic and International Issues related to financial markets, job creation, and broadbased economic growth. I can tell you from having served for four years in the Obama Administration the role of counsellor is key to providing insight, analysis and solutions to the secretary. Antonio is distinguished in many ways. He has a bachelors from yale, mba from the Harvard Business school, a member of the council on foreign relations, thank you very much for being here today, antonio. Seated next to antonio is tony williams. For those of you like myself who grew up in the washington area, you know tony because he was the mayor. Mayor williams served from 1999 to 2007. Hes currently the ceo of federal city council. All of us who are in washington owe a great debt of gratitude to tony. Hes widely credited with leading the comeback of washington, d. C. During his two terms as mayor. He restored the finances of our nationas capital, improved the performance of Government Agencies all by lowering taxes, investing in infrastructure and services. Sounds like a Bipartisan Group of outcomes. Before his election, he importantly served as chief Financial Officer of the districts financial control board. Youll be hearing more about those thoughts from 1995 to 1998. Like antonio, williams is a graduate of yale, with a masters in Public Policy and a jd from harvard. Seated next to mayor williams is hector negroni. Hector is the cofounder, coceo and chief Investment Officer of fundamental credit opportunities. Hectors been a pioneer in the Municipal Market of the last three days, leading innovation and prioritizing trading, Public Private financing securitiesation. Before that, he had a career on wall street, working at Goldman Sachs, citigroup in a variety of leadership roles. Hes from the island and has a distinguished history on the island of puerto rico. In addition, he earned his bs from the Wharton School at the university of pennsylvania. And before this turns into a university of pennsylvania love fest, ill turn to david skeel, who is the professor of corporate law. He authored numerous publications. And also a history of Bankruptcy Law in america. Skeel is a leading thinker, frequently quoted in the press. And as important to his contributions to Public Policy, hes distinguished in the classroom as well. Winning several teaching awards, including the harvey levin award, and the Robert Gorman award for excellent in upper level teaching. So hopefully well all learn something today. So with that, its my pleasure to join this great panel. I thought wed kick it off, antonio, with you. You and the secretary were down on the island last week. Youve been at the forefront of this issue for quite some time. Set the table for us. Whats going on today in puerto rico . And where do things stand here in washington . Well, aaron, first, thank you, and thank you the bpc for organizing this event today and bringing greater attention to this crisis. Very simply and this is a question of 3. 5 million americans. This is an american crisis. This is also a puerto rican crisis. And it is one which started as an economic recession, developed into a fiscal crisis, and is today a liquidity crisis, which shows signs of becoming a humanitarian one. Let me give you just a few elements of that. The commonwealth ran out of cash in june, approximately, of this year. The only way in which they have been able to fund essential operations has been to delay payments to suppliers, to take funds out of insurance funds, including Workers Compensation funds, to borrow from the already depleted Pension Funds of 46 billion. Virtually unfunded. And not to send out tax refunds. Taxes with respect to 2014. What does this mean . The revenue forecasts have already fallen short. These actions which are necessary to provide liquidity are forcing the economy into deeper recession, and this is a fragile case. I should remind everyone that 58 of puerto rican children today live in poverty. Thats more than 40 of Puerto Ricans live in poverty. There is no room for error in this economy. And i think what has changed in the many months we have been traveling to puerto rico and receiving Puerto Ricans and puerto rican officials in washington, is that there is a palpable sense of fear, and a justifiable expectation on the part of our fellow citizens in puerto rico, that we, collectively and by we, i mean not those of us gathered at the bpc, but the administration and congress will act as we have always acted when theres a crisis that faces americans, which is to do whats necessary to stem the crisis to, protect the people and to allow the economy to continue on the path towards growth. So we are encouraged by speaker ryans commitment to introduce legislation by the end of march. There are very positive discussions taking place on both sides of the aisle. There is a broad and generally accepted recognition that this crisis needs to be addressed now. And we look forward to working with both chambers of congress in designing the appropriate response. So theres an urgency, it sounds like and a note of progress being made . Is that fair . There is undeniable urgency and a need for action immediately. And there are promising discussions that are taking place in congress and theres a fullblown effort by the broader administration, and this is not just treasury. I should mention this comes from the white house. This comes from all agencies of government. And but the proof will be in the action we take together and that has yet to happen. So, antonio laid out kind of a dire situation, and many folks in the room may not remember as i do that washington, d. C. Faced a pretty dire situation, not at the humanitarian levels that were described, but mayor williams, youve been part of a turnaround, where youve come into a situation that had a problem, and left a city that was just booming. From your experience, what can the local government do when theyre facing this type of situation, what cant they do, and what are the pros and cons of structures that enable them to do that, particularly the one that you were a part of, which was the d. C. Control board . Well, i think there are a lot of similarities between all the experience we had in washington, d. C. , and philadelphia under its control authority and our mayor rendell, new york, and the control authority in ed koch. Talked to both of them as i started here in d. C. Then senator governor, but then mayor, his highest job, winnow vich, in cleveland with their issues, and a lot of similarities between them. But i think the differences and ill start out with the differences in terms of truth in lending. When i dealt in washington, d. C. , like now, you had a Treasury Department now under jack lew, very, very able. Economic counsel, very, very able, focused on d. C. But despite the acrimony in the 1990s, and there was political acrimony, you had a consensus, basically a bipartisan consensus between republicans and the Clinton White house, that we had to do something for d. C. D. C. Had to be successful. I hope that that is the case now. Then, you know, financial experience, financial expertise throughout the country was valued. Im not sure it is now. Like today, Goldman Sachs is evil. Thats hard to deal with all those issues and people suffer from going through all that commotion and shenanigans. We had in fairness, lets not try to be superman, we did have a booming economy in the 90s. Here the global economys not really cranking on all cylinders, and you have real Economic Issues in the commonwealth. But with all that said, i do believe that there are some similarities. While i believe theres always moral hazard in any kind of financial crisis, you know, to use antonios example of an urgency, if somebody builds their house on a shore and the hurricane comes and threatens the people in that house, you dont tell them, were not going to rescue you, because you shouldnt be living on the shore. No, you go and you take care of the immediate problem, then you take care of the longer issue. Certainly the immediate issues have to be taken care of, because peoples lives are at risk. But i think, this is my point, i do think it has to be done in a context of improving accountability, improving systems, settling expectations for citizens and investors, on which you can address the issues of a bad relationship with the federal government in terms of programs, in terms of fiscal relationship, address the issues of economic recovery, in the context of greater accountability, i do believe that. So what is the mechanism . Youre both a student and a graduate of the program of control. Controlled boards. What is the mechanism that youve seen have worked well that you think could work well in puerto rico . I think the control, like in puerto rico, like here in washington, d. C. , we have issues with the dominance and we believe subjugation by the federal government, we dont have full representation, and on the island, there are ways to address it. But everybody recognizes this unfair relationship with the federal government. My only point was, look, while were dealing with longer term relationship, we can reset the table, deal with all the shortterm, medium term, longer term issues and do it in a way thats politically defensible. You know ive worked under the authority of the control board and i was later elected mayor. So when people say the control board is the end of democracy and people hate control boards and forever and ever, thats just not true. I think if you use the control board setting, again, with leadership on the ground, with elected officials in puerto rico i dont know where my voice is going and very, very importantly, you use this important to do good Public Education of where we are, explain to the people in puerto rico, here is where we are. Here are the steps we have to take. Very importantly, were going to take these steps, some of these steps may be tough, but i think all of us would agree were taking these steps toward a better future. I think all of us would agree, and this is certainly the case in d. C. , you dont say were going to take these tough steps and then were falling off a cliff. No, were taking these tough steps to get to a better place. And that is, i think, this is really underestimated in these fiscal situations, the role of leadership on the ground, the role of good Public Education, the ability to explain the financial situation in laymans terms to your constituency, its so very, very important. A great example of explaining financial distress in laymans terms, i say this as a financial person and im not as smart, but i would highly recommend to you tim gardners book, it really lays out, explains to the layman, a financial crisis and how you approach it. Always a pleasure to have a former boss compliment it. He understood the issue and guided america in a way that was to all of our benefit. But im pretty biased on that one. Hector, there are a lot of conversations about tough choices. You advised many bondholders both on and off the island, who are thinking deeply about this. What is the outcome that they think is the best way to solve these problems . What does it include that will work and what should we exclude that wont work . Thank you very much for having this terribly important topic, both as a serious matter for our country and intimately important to me personally. Family from puerto rico for a very long time. I think one of the greatest challenges we face, and hopefully this is helpful to resolving it, theres a fair amount of confusion around the facts. A healthy dose of conflation of what is the crisis and what is the catalyst for the crisis. The challenges that puerto rico faces on the social front, in the size and scope of its obese government and its, you know, not particularly great governance, have been around for some time. I dont take great pride in saying that. Puerto rico has not run itself particularly great. But what has not happened is that overnight something has changed radically so that we have to have some huge response from the federal government to kind of set aside rule of law in order to slice a knot that cant otherwise be untied. The truth is, puerto rico has not done a good job of collecting taxes and addressing an underground economy. Its not done a particularly good job of rightsizing its government. Government need to decide what business business theyre in, and what businesses theyre not in. Its like having 78 dmvs, doesnt sound particularly efficient. And 60,000plus issuers contend with this decision all day long. Thats what governing entails, making the difficult decisions about revenues you can collect and governing and living within that context. And lastly, we do have near term issues with respect to getting equitable treatment under the federal programs. Puerto rico does have some challenges with respect to the head winds of lack of harmony within the federal programs its under. So the most important thing is to separate fact from fiction. Puerto ricos not some sovereign country. When i go down to visit my family, i dont see rows of strife on the streets. My family is not well off. We go down there and i see hardworking americans deeply proud of being part of this united states, but theyre facing an immediate challenge with liquidity concerns. This is resolved in my view by a couple of things. We have to think about being very transparent in the financials. Thats been a very big challenge. Theres no recent financials. On one look, you can look at the commonwealth financials and say they raised revenues 20 this year, took down their cost of borrowing, because they defaulted and miraculously theyre out of cash. And thats an oversimp livification, but without the facts its hard to separate the truth from fiction. What we know about puerto rico is not all expenses are necessary. Not all revenues are collected and not all debt is subservient to all those consequences. And so thats what drives the liquidi itity crisis. They choose to pay for something versus something else. The decision made about puerto rico is all expenses are senior to all debt. So we have to consider all consequences and consider restructuring debt. I also look at this from the perspective of a municipal industry participant. One of the most Dangerous Things we can do is create precedence that create risks for the financial marketplace. Setting aside special rules that flout the rule of law and create politically expedient solution says, upset the fragile equilibrium of the 3. 7 trillion marketplace, which finances nearly 70 of the necessary infrastructure of these united states. We cant set that aside to solve this in a rush to hopefully make something politically appealing. So in our view, the ultimate solution hinges on three points. You know, clearly theres a need for fiscal oversight. I think the mayors experience on this is incredibly important, and the effort made in d. C. Can be a good example around a control board. Clearly there has to be some package of equitable treatment under a suite of programs in the federal government that allows Puerto Ricans to enjoy some stimulus to federal growth. This has to be a vision to the future. And lastly, puerto rico has a rack of debt. Not all of it is insolvent. But we have to honor the constitutional obligations, honor the rule of law, service the senior depositions so we keep the Municipal Market functioning. We can come up with a lot of ideas that theres a tool in the marketplace that exists and it serves lots of other issues as well and thats the framework of chapter nine. Packaging those together in some framework seems to be an elegant way of solving this liquidity crisis so we can build a future for puerto rico. So hector, i have to say, since were all talking about personal connections in this space, i grew up here with my mother as a leading maritime lawyer and i will say this with some pride, i think she was the worlds expert on the application of the jones act to u. S. Territories. Unbeknownst, i didnt understand what it meant as a small child, but the island of puerto rico owned a steamship company. That makes sense. You pointed out all these things that municipality, that commonwealth owns, parts of industry and municipality its in, its very hard for 78d municipalities to be the leader and say, ill be the one that gets sub sumd. What kind of structure do you see and whats the role, if any of the federal government, in providing that framework to make those tough choices that you describe need to be