IOU: The Debt Threat and Why We Must Defuse It

‘Great ideas have a lot in common with great melodies,’ recalls Bono. ‘They have a certain clarity, a certain inevitability, and an instant memorability. And I couldn’t get this one out of my head. I knew it was right, and that the time was right for this and I couldn’t let it go.’

But while the pierced and sunglasses-wearing rock star might have been able to fill giant stadiums, Bono was a nobody as far as American politics was concerned. If he was to play a part in putting debt relief on the US political agenda, he needed help. So he phoned a woman he thought might be able to do just that. Bono knew Eunice Shriver – the founder of the Special Olympics, and daughter of Rose and Joseph Kennedy – from a charity recording project, describing her as a ‘Hibernophile’, a person who knows more about Irish culture and politics than most Irish people. She told him that she’d love to help, and suggested that he get in touch with her son: ‘I think Bobby would be good at this,’ Bono recalls her saying. ‘And I knew Bobby, but hadn’t thought to ring him. And he was good. He was more than good.’

For while Bono had passion, Bobby had political savvy. Shriver immediately knew that in order to get the United States to really commit to debt cancellation, it was essential that not just the Democrats, but also the Republicans, right-wing journalists and, most importantly, Wall Street blessed their proposal. With this in mind, one of the first things Bobby did was set up the meeting between Bono and the well-connected Gelb.

But Bobby also knew that Bono couldn’t just go and meet the men on Gelb’s list until they both knew their subject back-to-front. ‘I had been minding my own business,’ Bobby recalls, ‘making records, producing movies, when I got Bono’s call. I knew nothing about debt, but I did know I wasn’t going to Washington with him, or to see anyone at all, unless we really knew what we were doing. We really had to know what we were doing.’ So Shriver picked up the phone to ‘a guy I knew who was doing a lot of work on this subject.’ That guy was Jeffrey Sachs, one of Harvard’s most famous economics professors.

‘I called Jeff up and I said, “I have this friend that I did the Christmas record with, a musician called Bono, and if he comes over to Cambridge, will you spend a couple of days with him and try to get him up to speed on the actual numbers?”’

Sachs was forthcoming. ‘Sure I wanted to meet Bono,’ he recalls. But debt cancellation had been something he had been advocating for years, to little avail and he was sceptical of the impact the musician could have. ‘It’s never going to work,’ Bobby remembers him saying. ‘No one in Washington will pay any attention to you. We can’t get anyone to pay attention to this issue.’

But by the end of their two-day crammer session Sachs felt differently. Shriver recalls Sachs’ palpable excitement: ‘He said, “This guy is a very persuasive guy you know, maybe something can be done.”’

With Bono thoroughly briefed, it was time for Shriver to start spinning his Rolodex.

His first call was to James Wolfensohn, the head of the World Bank, a man who Bono had been trying to meet ever since Jamie Drummond had first approached him, but with no luck. Shriver, however, had worked for Wolfensohn some 10 years back, in between leaving law school and entering the music business. ‘So I called Jim and his office put me through to him in London and I said, “I’m sure you’ve heard of this Jubilee debt relief thing?” And he said, “Of course.” And I said, “I have this friend who’s a singer, who is a sort of activist on this debt thing – and he’d like to meet you.” And he said, “Oh no, I don’t have time for that.” And I said, “Jim, he’s in Dublin. You’re in London. Why doesn’t he come over tomorrow? It’s Sunday. You have nothing to do on Sunday.” And he said, “Okay, tell him if he can be at the Berkeley Hotel at noon, I’ll have lunch with him.” I called Bono, and said, “If you can be at the Berkeley at noon tomorrow, Wolfensohn will have lunch with you.” And Bono said, “Wow, can I bring Geldof?” [the knighted lead singer of the Boomtown Rats and founder of Live Aid], and I said, “It’s up to you, man. It’s your lunch. Whatever you want.” And I called Wolfensohn back and said that Bono would be there at 12 and was going to bring this other guy.’

The lunch was a disaster. ‘Afterwards Wolfensohn called me,’ recounts Bobby, ‘and he was furious because Geldof had yelled at him the whole time.’ Bono confirms it. ‘Yeah, Bob was like, you fucking this and you fucking that, and how can you fucking sit here in your fucking seat, you prick. And Jim Wolfensohn is a real debonair sort of gentleman, and he looked over at me with that look of “help” on his face. But we got on.’

‘He liked Bono,’ says Shriver. ‘He thought he was bright. And said that if he wanted to work on trying to get money for debt relief he would do what he could to help.’

Game on.

Next up was the highly influential central banker and former Chairman of the Federal Reserve, Paul Volcker. ‘Volker laughed at me when I first raised the idea of debt cancellation,’ recounts Bono. ‘Just laughed out loud – ha ha! He said, “I hate this idea. I hated it in 1968, I hated it in 1972, I hated it in 1985, and I hate it now. You’re from Ireland, aren’t you? You should stick to fishing.”’ But Bono would not rise to the bait. He patiently explained that the Jubilee campaign was different. It wasn’t just about cancelling the debt, he told Volcker, it was a one-off opportunity to level the playing field, to put right the relationship between North and South, a relationship that had been wrong for far too long. His patience paid off. ‘At the end of a very long meeting,’ Bono recalls, ‘Volcker said “Give me your phone number.” And he not only made a few calls on my behalf. He helped. It may have been behind the scenes, but he actually helped.’

After Volcker came Rockefeller, the wise old man of Wall Street, and former Chairman of Chase Manhattan Bank. ‘That meeting went really well,’ Bobby remembers. ‘We discussed then-current initiatives, and the problems with these. We corresponded back and forth for several months.’ And after Rockefeller came Holbrooke and after Holbrooke, Bob Hormats, Vice Chairman of Goldman Sachs.

Bono and Bobby were ready to hit DC.

Robert Rubin, the US Treasury Secretary at the time, was evasive. ‘I just couldn’t get to him,’ recounts Bono. ‘I even said I would swim to wherever he was at one point.’ Rubin was a devotee of Alexander Hamilton, America’s first Treasury Secretary, who famously insisted after the War of Independence that the individual states repay all their debt. Rubin, not surprisingly, was dead set against debt cancellation. But when they did eventually meet, thanks to Hillary Clinton’s intervention, Rubin, although clearly never going to be an advocate, indicated that he would not stand in their way.

Word got to Bono and Shriver that Larry Summers, the Treasury Secretary-in-waiting might be more proactive. Summers had formerly been the Chief Economist at the World Bank, and development was a known passion of his. But, again, just getting the meeting wasn’t easy.

‘I didn’t particularly see why I had to hang out with a singer I’d never heard of,’ Summers recounts. ‘But the young women on my staff told me I had to see him.’

‘It’s true. Larry had no idea who Bono was, nor had he heard of U2,’ confirms Sheryl Sandberg, Summers’ Chief of Staff at the time. ‘It was a cause of great hilarity in the office. But I was his Chief of Staff, which meant that requests came through me, and I would then make recommendations as to who the Secretary should or should not see. As a cabinet member, your time is the only commodity you have, so we took the scheduling process very seriously. And when this request came in, I was like, we’re doing this meeting, we’re not going to have a normal conversation.’

But Summers wanted to lie low. About to be sworn in as Treasury Secretary, the last thing he needed was a gossip item about him meeting a pop star, perfect ammunition for his political enemies already labelling him a liberal flake. The meeting could not take place in his office. Instead, it was set up in the White House offices of Gene Sperling, the Head of the National Economic Council, across the street from the Treasury.

‘There were about six of us round the table when Bono walked in, wearing jeans and sunglasses, which is not what you’d expect in the White House,’ recounts Sandberg, ‘especially as Larry didn’t really get that he’s, like, a rock star.’

‘I didn’t feel I had a very good meeting with Larry,’ says Bono now. ‘I didn’t think the pitch went very well. It wasn’t one of my better days, and he was drumming on the table with his fingers while I was talking, distracted.’

But those at the meeting remember it differently. Stephanie Flanders, Summers’ former speech writer was impressed. ‘He was massively informed on the subject,’ she recalls of Bono. ‘He was referring to a lot of turgid studies – documents on the debt issue, reports for Congress. Everyone was really impressed.’

Sandberg agrees: ‘He knew what all the acronyms were, he knew how the debt flows worked, he knew about capital risk.’ Summers himself sums it up: ‘He turned out to actually know a ton about debt.’

Finally, when the meeting was winding down, Bono, looking Summers straight in the eye, said: ‘I’ve been all over the world, and every single person says if I can get Larry Summers, I can get this done. Because if he wants this done, it’ll be done. So I’m here to get you.’

Sandberg remembers the surprise on the faces around the table. ‘It was kind of just like, whoa,’ she recalls. ‘Very few people come in with that much force and speak to the Secretary of the Treasury in that way. And it was very inspirational. I think we all wanted to believe that something like this could happen, that it was worth fighting for.’

‘Bono had an effect on me,’ admits Summers. ‘His presence suggested there was a big constituency out there who cared about debt.’ So although his response at the meeting was a non-committal – ‘let me think about it’ – Summers turned to Flanders when Bono had left the room, and said: ‘I think the Administration has just had its consciousness raised. This guy’s right. We have to fix this.’

The first step was getting then President Bill Clinton to pledge to cancel 100 per cent of the debts owed to the US by the world’s poorest countries – a goal that Professor Sachs had persuaded Bono to push for. Although various debt-relief programmes had been in place for the past few years, thanks largely to the British Treasury’s championing of the cause, they had only required that creditors cancel a percentage of what they were owed, rather than the whole amount. Debtor countries, therefore, never actually received what they needed to become solvent.

One hundred per cent debt cancellation would send a clear signal to the international community that the to-ing and fro-ing on debt relief wasn’t working. It would also set the standard for other creditors to follow suit.

‘Cancellation,’ not ‘relief of the debt was a distinction that had been made explicit a few months before, after Bono met with Sandy Berger, Clinton’s National Security Adviser, the morning the US had gone into Kosovo. ‘He hadn’t been to bed,’ Bono remembers. ‘He’d been up all night, he was bleary-eyed, and Clinton had sent me down to meet him, you know talk to him about it. So I’m sitting there and he was scrunching his red eyes, saying, “Run that by me again? Debt relief, debt relief. God, that just sounds so wrong in this environment. You’re a songwriter – can’t you come up with something better than that?” And I said, “Debt Cancellation,” and he said, “That’s better. Relief sounds like a handout. Cancellation sounds like justice.”’

Selling the idea of cancelling debt to Clinton wasn’t hard. The President had just come back from the G8 meeting of the richest developed nations in Cologne, where debt relief had been high on the agenda. He had already pledged to contribute to funding the IMF and World Bank’s debt relief efforts, and also to increase the amount of American debt that would be cancelled. But cancelling all the debts owed to the US was another matter. Could the United States really afford it?

It was up to Summers to convince the President.

‘I remember a frantic weekend in which Larry, Gene [Sperling who’d facilitated the first meeting with Summers] and Gene’s niece who he was minding, had come in on the Saturday to do the numbers and try to make it happen,’ recounts Bono. ‘Busy, busy people coming in on a Saturday to get shouted at and reasoned with. Trying to work out what it’d actually cost to cancel these debts. The extent to which they could be written down so that we could meet the 100 per cent cancellation objective.’ (For, given that there was no real possibility of their ever being repaid in full, these debts could be discounted so as to reflect a realistic market value.)

‘And we did it,’ says Summers with a smile. ‘In the last 36 hours we worked out that we could afford to do this.’ By writing down the value of their loans by approximately 90 per cent, the real cost to the United States of cancelling the $6 billion debts owed would only amount to around $600 million.

On September 29, 1999, at a speech at the World Bank, with Summers’ numbers in his back pocket, President Clinton announced that the United States would cancel 100 per cent of the $6 billion debt owed it by the world’s poorest 33 countries – the first country in the world to make such a huge commitment.

Bono was in France when he heard the news of Clinton’s announcement. ‘I got a phone call from Bobby and it felt like, you know, just the biggest thing ever. We had been working so hard, I was jumping up and down. It was a real break-through. One hundred per cent, no nonsense, no games. The United States were stepping out in front. Okay, it was only 33 countries [Jubilee had been calling for the cancellation of the debts of 52 poor countries] but it was a clear melody, a clear cut idea.’

It seemed as though they were on track. But when Bono started to hear the critics say that Clinton was only doing this because he knew it wouldn’t get past Congress, that Congress would never fund the scheme, he was reminded of just how complicated his mission was. Because in the United States, it is Congress and not the Administration that holds the purse strings. And Congress was controlled by the Republicans. If the money to fund Clinton’s 100 per cent debt cancellation pledge, as well as meet the commitment he had made at Cologne to contribute to bailing out the IMF and World Bank – $545 million in the first instance – was to be found, it was Republicans who were going to have to vote for that amount to be released.

Getting $545 million dollars allocated to what is essentially foreign aid was, in a Republican-controlled Congress, never going to be easy. Money to poor countries doesn’t tend to poll well for American politicians. ‘It was very hard even for people who wanted to be for this, to be for this,’ explains Sandberg. ‘Debt relief for Africa? The United States just doesn’t do this.’

It was time to get the Terminator involved.

Bobby Shriver, who had done such a majestic job in getting the bankers, liberals and cognoscenti on board, wasn’t the man when it came to bringing the Republicans on side: his Kennedy lineage got in the way. His sister Maria, however, was married to someone who helped him get over that problem. Arnold Schwarzenegger, the movie star and Bobby’s brother-in-law, was already, five years before becoming Governor of California, moving in Republican circles.

‘Bono and I explained the idea to Arnold,’ remembers Bobby, ‘and Arnold thought about it and said, “I know a guy who might help you. A friend of mine who’s the Congressman from Columbus, Ohio, John Kasich.”’

Kasich, who Schwarzenegger knew through the ‘Arnold Classic Body Building Contest’ which is held in Columbus each year, was, at the time, the Chairman of the Budget Committee in the House of Representatives, a very influential position. He was no nambypamby liberal. ‘John was a hard, right-wing guy,’ says Shriver, ‘and someone who was very smart. Not book smart like Larry. But, you know, street smart. Smarter than most people in Congress. And he got what we were talking about. He had travelled overseas, and could see that people did not like Americans. This was before 9/11. And he didn’t like that. And he saw that cancelling their debts, for what, in his view, was a relatively small amount of money, was a way to say to people, “Look we’re not just a bunch of pricks flying B1 Bombers over your country.”’

Kasich came on board, and his-support was key. Not only did he bring with him other important members of the Republican leadership including House Speaker Denis Hastert, and House Majority Leader Dick Armey, but also lower-profile but equally essential Republican politicians from both House and Senate.

And, in November 1999, two months after Clinton’s historic pledge, Congress agreed to appropriate $110 million.

Although this was a start, the $110 million was far less than the $545 million the campaigners had been after. This would only cover the first year of America’s own debt cancellation schedule, and it didn’t cover any financing for the participation of the regional development banks in the debt cancellation initiative, nor provide for the IMF and World Bank, the poor world’s major creditors, to cancel any of their debts. If the international Cologne initiative was not to crumble, an additional $435 million had to be found.

‘I called Bono,’ recalls Sandberg, ‘and said, “If you want to help get this through, you’ve got to come back to town.” We needed him. Bono could get in to see any member of Congress and we needed to rally support. He said that he was recording his new album, and making a documentary and couldn’t come to town over the next few weeks because they were filming. And I said if you can’t come now it’ll be too late. Two days later, he was here. And once he landed in DC he was a machine. He went round from member to member telling them that they could change the world if they got behind us. He would get up early in the morning, and would walk the halls and work it all day. And then we would have dinner late at night and he would still bring a Member of Congress or some staffer. He was tireless. And when you think of the combination of a rock star who can get in to see anyone and someone who knows as much as some staffer who works on it full time and can speak with the kind of passion that he speaks with, well, the world had never seen anything like it.’

But although politicians from every end of the political spectrum were falling under the Bono spell, one key man continued to hold out. Sonny Callahan, the libertarian conservative Congressman from Alabama, was Chairman of the Foreign Operations Subcommittee of the House Appropriations Committee, and he held the cheque book. It was up to him to recommend how much money to allocate to debt cancellation. And Callahan wasn’t having any of it. He believed that the additional monies being asked for ‘would encourage the World Bank and others to continue to make bad loans and leave poor countries to have to borrow and get into debt all over again.’ As far as Callahan was concerned, debt cancellation was ‘money down a rathole’.

Shriver got his feelers out and tried to influence Callahan through an old fishing friend, but to no avail. And, in June 2000, Callahan’s committee recommended to the House of Representatives that Congress fund only $69 million of debt relief that year even less than Congress had agreed in November, a sixth of what the campaigners had been gunning for, and an amount, effectively, that meant Clinton would have to renege on both what he had pledged at Cologne and the 100 per cent debt cancellation he had announced at the World Bank in September.

‘We had basically failed,’ says Shriver. ‘With the Committee reporting that, it was basically over. It’s almost never the case that Congress overrides a Committee recommendation.’

There was one last avenue available. If they could stage, and then win, what is colloquially known as ‘a floor fight’ in Congress, a challenge on the floor of the full House of Representatives against what the Committee had recommended, the recommendation could be stopped from going through.