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Wilmers warns of U.S. debt calamity; M&T's CEO cites rash of fiscal mistakes like those plaguing Europe

The United States "may be on the same calamitous path" toward an economic and government debt crisis akin to that of Ireland, Greece and Portugal if it doesn't rein it its ballooning spending and debt, M&T Bank Corp. CEO Robert G. Wilmers warned Tuesday.

Speaking to more than 260 shareholders at the bank's annual meeting, Wilmers argued that the United States is making "many, if not all the mistakes that we find in those countries."

Specifically, that means combining a financial crisis with "pension promises that overwhelm our state budgets and public education systems that fail to graduate hundreds of thousands of our next generation."

The nation is also spending too much on health care, Social Security, defense and interest payments, which combined will total $2.6 trillion, or 70 percent of 2012 spending -- already exceeding projected revenues of $2.5 trillion before the rest of the budget is even included.

Health care is on pace to reach one-third of the national gross domestic product by 2040 -- double its current level. Social Security "is on track to be completely exhausted" by 2037.

Interest on national debt is poised to hit $4 trillion, or 35 percent of the federal budget, by 2040. Nearly half of U.S. debt is held by foreign creditors. States face $112 billion of budget shortfalls, not including $3.6 trillion in unfunded pension liabilities.

And there is less and less money available for other spending, such as on education or economic and business growth, Wilmers said. Private-sector employment has still not returned to its peak in 2001, unemployment and underemployment stand at 15.7 percent, and tax revenues are at the lowest level since 1950.

"Our fiscal problems reflect not only the fact that we are spending so much, but that our engine of growth and prosperity, the ultimate source of the money on which government relies, has stalled," Wilmers said.

As a result, the national debt has risen by $5 trillion in just four years and is now hitting the federal debt ceiling. And total government debt, including that for the Social Security trust fund, now equals 100 percent of this year's projected economic output -- worse than Portugal and fast approaching that of Ireland and Greece.

All three of those countries have been overburdened by debt and promises they could not keep, forcing them to turn to the European Union for bailouts to prevent defaults. Wilmers said the United States is now "in the very same economically bad neighborhood."

"I don't know whether we're going to default or not, but we're going to have another crisis, and it could be worse than the one we just had," Wilmers cautioned in an interview after the meeting.

But he said in response to a question that, while such a crisis would affect M&T, the bank would come out fine.

"I wouldn't like it to happen to the U.S., to the banking industry or to M&T," he said. "But M&T will do better than other banks, as we've proved through the last economic cycle."

Wilmers' remarks came a day after Standard & Poor's warned that it might lower the nation's financial ratings, citing many of the same concerns. Wilmers praised President Obama and Republican leaders in Congress for talking publicly about the "extent of our looming deficit and debt."

"In my own view, they are right to be addressing it, and it's about time that they're doing so," Wilmers said.

Specifically, he noted that Obama, House Budget Committee Chairman Paul D. Ryan Jr., R-Wis., and the bipartisan National Commission on Fiscal Responsibility and Reform, commonly known as the Simpson-Bowles Commission, have all agreed on the need to cut the federal deficit by $4 trillion by 2020.

"The only good news in all this is that at least we have started what appears to be a serious national dialogue about how to do so," Wilmers said. "Let us hope they can put partisanship aside. Working together is, quite simply, our only hope."

Wilmers did not recommend particular steps, but in an interview, he endorsed the Simpson-Bowles Commission's proposal as "very sensible," even though "I didn't agree with all parts of it."

"I would vote for it in a heartbeat," Wilmers said. "We all have to make sacrifices. We all have to suffer one way or another."

During the 50-minute meeting, shareholders re-elected the bank's directors and approved the bank's executive compensation for Wilmers and four other officers. The votes were all over 87 percent in favor except for one director, Moog CEO Robert T. Brady, who received only 68 percent of the vote after an institutional shareholder advisory firm recommended against him because he's on too many boards.


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