but they can get the grades in science. but you are drawn by -- >> my father and both of my parents early on ,-com,-com ma

it's a jewish immigrant family and you have to have one background. and i am the guy. there is no chance realm is going to middle school and no chance i was going to medical school so they were very insistent and i was good at science. i just liked it and i was very good at it at amherst. on the other hand it didn't inspire me so i did a lot of lab research to try to find out and my father, he had this ideal career. it wasn't the career he followed because he had to make money so we could follow a career which was he wanted me to be a basically classic academic doctor research scientist with a little clinical care and follow that life. that was the life you really wanted for himself. i never really took to doing the lab stuff so after college i went to oxford for two years to see if i could work in the lab and they would sort of catch me

and it just turned me off. reluctantly i started medical school and i really really really did not like it. i try to avoid it and the summer summer between my first-year and second-year which was the only summer you can get offered to medical school i came down to intern at the republic to see if they would get new journalism. i liked it except there were two problems. problem number one is i'm a pretty bad writer. it's true coming out of college i was not a very good writer. that's a whole nother story. problem number two is i didn't want to report on the events. i wanted to actually partake in the events and by this time i didn't have a plan so i returned to medical school that i in did end up teaching at harvard college while i was a second-year medical student. they have a pretty famous major there called social studies that michael walter started with

marty parents and he got me a teaching job fair. i discovered discovered in fact they really likes to teach and i really like to do philosophy in this way in that's how i ended up stopping medical school after three years and getting of ph.d. and bioethics. it was a sore disappointment to my father that i practiced a little that i did not become the doctor of the family that he wanted. a pretty big failure. >> where all failures in different ways in the eyes of our parents. following the emanuel family practice you said there was no ill will and my technique and in fact if someone said you are full of it professor emanuel and here is why i gave them an a. so have you maintain that attitude towards your students? >> yes, of course. i know what i believe. i want to hear them articulate their own views and i would

prefer students who had strong views and good reasons and arguments for their view. when i came to that and my first real job was here at the nih. i was was asked to start a department of bioethics and we have a visiting scholar in the department. she said that the culture of the department was collegiality. everyone was always friendly. >> you didn't happened to create this culture did you? >> yeah i was the first chairman so it was just re-creating my family there. >> now they don't live in the same city. i don't think there is a city big enough to accommodate more than one emanuel at a a time. our force fields would have collided and god only knows how many casualties there would be. so in and you do distill some secret sauce. the idea that it is both nature and nurture. it's the cultural identity and

the moral identity that you absorb and that you grow up with. >> yeah so i would like to start with the g's for a good reason. they want to know what could they do to raise three successful children which i say somewhere in the book don't try this at home. it's likely to backfire but i do think it's important to recognize. my father is incredibly energetic so when people talk about the emanuel brothers always moving around, we get that from our dad. i'm sure that is genetic. my brothers rise early at some ungodly hour and my youngest brother at 4:30 and my brother rahm at 5:00. >> yeah that you are up at 6:00. >> there is built-in, when you see a threat the biologist call it the fight or flight reflex.

and we definitely got the fight gene and not the flight gene. i think that's probably heavily genetic. we also all have this dyslexia what i'm pretty sure comes from my mom who is absolutely atrocious. she is a great reader but in atrocious speller. and she passed it on. so i think there is genetics and genetic centers clearly the sense of protests, the sense of social justice that my mom infused early on. the sense that you don't accept authority just because its authority. and then there's this tremendous freedom to figure out what is right on your own. she had firm convictions but she was really of the theory we had other ideas and to support a lot of these endeavors or cries he he -- crazy ideas whatever they happen to be. and i too think one of the things which is overlooked is the fact that we were three brothers and we live together.

we stayed in the same bedroom until i was 10 and we spent although summers after 10 together in israel sleeping in the same room on top of each other frequently. and you know we are fiercely fiercely competitive of each other, fiercely critical of each other and fiercely loyal to each other. and i think part of that competitiveness is you know, part of the excelling is you don't want the other guy to outshine you. >> yeah that is going to keep you going for a long time. and also, you also say that you learn from your parents that no matter how well you do one day you woke up the next day and you probably had to do better that day so is never enough. it was never enough for them and it's never going to be enough.

[inaudible] >> so do we have questions from the audience and if we do please come up to the microphones for c-span2 which is streaming this, so they can hear you. >> hi. >> hi. >> i am just curious, in your bioit says you are one of the worlds leading bioethicists but also oncologisoncologis t. >> i'm not a leading oncologist. i am trained at the con -- cancer institute where i was for seven years. >> but you didn't have to go back for an m.d.? >> actually completed my mba. >> that is what i was curious about. seeing by the time you finish three years it turns out the great thing about harvard medical school is you only need 15 months of treating patients and then if you paid for the

last year they will give you the degree. [laughter] >> thank you. >> i got the degree. it's one of the reasons i believe you can do medical school in three years and yeah then i tried to shave off as much time as possible to finish my college training. >> jeremy piven plays her mother on entourage. bradley whitford played at character-based on rahm on the west wing. who would you want to play you in the movie of the emanuel brothers? >> you're asking the wrong guy. i don't have the tv. i am not a movie fanatic and i couldn't name a whole lot of movie stars. i will say though i did actually play myself once. one of the stories in the book is in 1981, my second year at oxford the bbc launched a reality show.

it was a daily show called now get out of debt. the first reality survivor type show. reality tv came in in the late 70's and the bbc decides to have a competition between oxford and cambridge. there was one woman undergraduate from oxford and cambridge and they wanted one mail graduate from oxford and cambridge a farmer and businessman. they were having a hard time finding a graduate student to be on there. it happened that the producer who was looking for this had dined with my mentor for dinner actually in college i think and was relating while he was there. he says that i have someone for you. he happens to be a yankee. the guy interviewed me so i joined and they videoed us doing all sorts of crazy, crazy things

skinning rabbits, swimming in lakes, getting land rover's out of boggs and i was roundly attacked in 1981 as that loudmouth yankee. i was the american they could all rally around to hate. this was the early days of margaret thatcher and yes, so i was on bbc for four nights in a row and became somewhat of an antihero. >> you were self elected as the most disliked man in england. >> something like that. it's easy if you're an american though. >> this is short and simple. where did you live in chicago? >> where did you live when you are young man when you went to the lake etc. etc.? >> okay we initially when my parents moved back we had an apartment on broadway.

then we moved to buena terrace and then we moved to a no-no which is one block south of foster if you know the geography in uptown and then we moved to will. will. >> okay, thank you. >> when you are raising your own children was there anything that you thought while my parents did it this way but i think i'm going to do it a different way? >> which usually leads to you are doing it just the same way. [laughter] first of all, i have three daughters so you are in a completely different world when you have three daughters then three sons. they are nowhere near as you read rambunctious. they are nice, they are polite so it's a very different scenario. i would say that also lets be frank, i raise my daughters in the 1980s, 1984 my first one was born where the safety level

was very different but here is one thing that was extremely different. my kids -- i was for the first number of years i was the primary parent. i stopped medical school and became a graduate student and i was the primary parent raising my kids. my father would never, never in a million years have been the primary parent raising the kids so i think that was a major difference. but a lot of the other stuff we did, travel with my kids. my oldest was six months before we took him -- them to israel. we took them all over the world and travel a lot so i would say more similar, more similarities. >> you say that you are astonished that your mother let you roam the lake and just let you out and you came home at night. this wasn't in the woods. this was in the middle of chicago and that you are much more protective so you thought with your daughters and you

found out they took enormous risks they told you about afterwards. >> it is true, you are much more protective with daughters and they did not wander the city at that time. boston was where he lived, and without supervision and i was a one other thing. on saturday nights when they were teenagers i would pick them up. i would not let them drive the cassette was just in my view too dangerous. my wife at that time was much more risk-averse than i was. i took risks but she was much more risk-averse. later in life two oldest daughters go to uganda. they are about 18 at that time and 21. they are spending a prolonged period of time in uganda doing work and one day i get a call from them. they tell me that they had

returned safely. i said where did you go? that you returned safely and you think you needed to tell me. well they went up to the border of sudan which was at that time in the middle of a war. really? i'm glad you let me know. [laughter] but yes they do a lot of crazy things. my middle one spent a year in molly. >> they are just as committed to social justice. >> much more than -- yes. >> i was just wondering, you talk about nature versus nurture but malcolm gladwell wrote a book and he wrote a lot of books and frankly i can't remember which book this was. >> outliers? >> pardon me? >> outliers i think. >> yes, where he talks, i remember one specific example of a father and son who were both attorneys in different generations and they were

equally smart and equally energetic and equally everything but the father was just your standard local lawyer that everybody came to with your variety general practice issues and the sun was like mr. zillionaire lawyer. he talked about all the reasons in the outer society that this was the particularly great time for the sun to rise and it would have mattered what the father would have done in terms of his generation and his surroundings. he could never have risen and it just struck me when you said that rahm went to sarah lawrence after being an undistinguished student. when i was getting ready to go to college i didn't have the money and even if i had it could have gotten into sierra lawrence anyway and i would have had to have been on this club in that club and done this volunteer and gone to molly and i was 12 and there would have been no way that i could've done that. not that is a reason for not being rahm. [laughter]

>> we all have our reasons. >> exactly. i'm about as foulmouthed but that's my only compares in. my question is do you see anything between nurture and nature that allowed all three of you guys to rise to the levels that you have in the outer society is malcolm brett -- gladwell would have talked about? >> the answer is of course yes and i think it's dairy very important and i say this and it said this to my kid, it's very important but we all have to recognize that first of all our particular parents at a particular moment in history where the were becoming much more accepted in society and the barriers were not completely gone but there was a hell of a lot of prejudice in chicago.

but they were going away. that is definitely true. nonetheless i do think that there is still something a little different because the three of us face very different career paths and hurtles. i would say one of the really characteristic things that corby was hinting at is the sort of never stopping. i used to tell my kids of this all the time. it's not like your father have this all on a plate and succeeded in it was all -- the same. we failed a lot of times and we had, my mom was very good about not letting us sort of well on the failure. you have to pick yourself up and do it again and do it right now.

none of this moping. so i think one of the things that is certainly true of us is whenever the failures are, all three of us have had a lot of failures, you didn't let it rest. also in this gets back to relatively big risktakers personally. so i said on my fathers birthday i gave him a -- and i said you know i became a doctor because they wanted me to but i told them i want to go into bioethics. are you crazy? who does bioethics? there is no career then you will never make it and i didn't listen to them. in 1991 when bill clinton approached rahm to join his cabinet, whoever heard of bill clinton? he can't be president. why are you doing this? it's a career dead-end. when my brother was at one

agency and said look i want to become a partner, they said no you are not ready to be a partner appeared he said all right i'm leaving. my dad went ballistic. just wait and be patient. so my brother and free -- 3 friends in the middle of the night take their their three clients and they leave. they maxed out their credit cards and then he gobbles up another agency. i concluded that my father's 75th birthday. it's good we didn't listen to your advice. [laughter] the only advice would ever listen to is don't play golf on wednesdays. but i do think that we were always willing again to do the unconventional and to not listen to what everyone is doing. that is something that my mom certainly encouraged. whatever everyone else is doing, think about yourself and come to the right conclusion and defend yourself. we will protect you.

that i do think allowed us to take a lot more risks that he was able to take psychologically because he came came to the united states with nothing. he had no safety net under him and he didn't have this confidence that he could conquer the world the way we had because that is the way the race this. so you know it is partially the lock but i do think and again i recognize i had great teachers. i was lucky enough to go what i think is the best public high school in america. it had fed up with teachers. i had great peers but the great great -- the fact is we also had this background that we could take those risks and opportunities to make the most of them. >> last question. >> yes, my question has to do with the writing of the book and with ethics. did you have to have ethical discussions with yourself as to how much you are going to reveal about the family, say your

mother's emotional neediness and are there stories that you left out for ethical reasons and perhaps could you talk a little bit about your brother's response? >> tell us all the stories you left out. [laughter] >> of course there are stories we left out because you can include everything and what is remarkable i think is that my brothers and i agreed on four or five stories that are never going to be in their, never be public. but there are, you are constantly making choices how much you are going to reveal and how much you are not going to reveal and what's going to remain private. you will notice there are no names of any children in the book. there will not be names of children in the book. we don't talk about them and i try to keep to a minimum the spouses because it's really not related to them.

but i also have an obligation to be truthful. i think one of the things which i was told early on, i'm not exactly sure who told me but you know readers can sniff out bs better than anything and you won't be able to sell a book if you bs it. the greatest compliment i've gotten so far in the book is from my youngest daughter who says all the characters ring true but it needed a better editing job. [laughter] i don't know how many people have seen the book there is a quote at the start which i thin. an autobiography is to choose -- truth book. it consists mainly of distinctions of the truth, shirking so the truth partial repeal mance of the truth but hardly any sense of plane straight truth.

the remorseless truth is there between the lines and then he goes on and you can read the rest of the quote. i think that turns out to be for me amazingly true. if you are really getting the characters right, ari and i still were argue about the details of the stories in the book. of course they are wrong and i got to write the book. but trying to get the characters right is i think the most important thing and look, i started this book for two reasons. one the maureen dowd question and the second reason was i had begin jotting down stories i wanted to pass onto my kids. they are getting older and i'm getting older and i wanted to make sure they had the family book. you get partly through thinking about this and writing stories and you realize yes it's to pass

on and also to understand where you have come from so you have to be truthful with them. otherwise you get it wrong. i have learned a lot about my families and there are some stories i didn't even know about my father for example fighting in the 1948 war and the sinai peninsula. he never told us and after i got the story i said you are going to go to your grave and never tell us the story? so that also turns out to be a very important part of the book to get the stories right for the next generation to make sure they have enough knowledge from their grandparents and their great grandparents. >> i urge you all to come up and buy this book. even if he says to himself he was not a very good writer he has turned himself into a very good writer now and it's full of not just inside the stories like

ari planting his mother in the trashcan. there are many delights and insights waiting for all of you. >> thank you. [applause] sees so for those of you staying for the book signing if you can head to the back of the room to enter the line it's going to wrap around the side well. we have some stands up front here so please do not attempt to climb over those and he will be with you shortly. >> to confirm a story that is

already out there, it's been out there. we are going to be able to reduce and delay these furloughs but not eliminate furloughs and that right now looks as though they will be able to go from an original estimate of 22 days to 14. that we think will save the department anywhere from i think the original estimates were around 4 billion we can probably plan on about 2.5 million. these numbers are floating as you well know but it's good news.

it's good news from where we were two weeks ago, the chiefs and others are still working these numbers and i understand that there is going to be a more in-depth briefing after we are finished here on that. let me also kind of hit the current budget situation in a little bit of detail and then marty may have some thoughts on this as well. but the continuing resolution has done for us, it did fix some of our urgent problems. in particular it put some of the dollars back into the right accounts. we still don't have the flexibility that we had hoped to

get but having money and the right accounts is particularly important. what that does too is it reduces a shortfall at least in the operations budget. you also know that we came out better than when we came in under the sequester where it looks like our number is $41 billion now versus the 46. it gives us a program authority to start programs which in military construction which is significant. some of the things that we are still looking at and still working through and will continue to work through is isaiah 41 billion is the number that we are having to adjust to.

the overseas contingency operations in the budget, that in itself is about $7 billion higher than we had estimated. there are a lot of costs in that. it's more expensive to start bringing in troops and equipment out of afghanistan and there are other contingencies as well. in the operation and maintenance account, we are going to be short at least $22 billion for fy13. we are going to have to deal with that reality and that means we are going to have to prioritize and make some cuts and do what we have got to do. let me list some of the specific things that we are going to have to do and are in the process of

doing and we anticipated we would have to do. cutting back sharply our base operating support, reducing training for non-deployed units. i have already mentioned the furloughs. it is better news but we are not going to be able to eliminate furloughs. >> defense secretary chuck hagel talking about a new measure that lets the military reduce furlough days from 22 to 14. you can watch this entire pentagon briefing at c-span.org. >> coming up on c-span2 booktv we will hear from business leaders starting with the former head of at&t ed whitacre who also served as the chairman of general motors.

>> what do you do about the israeli palestinians? it took the president until june to develop an answer and his answer was two states for two peoples, the jewish state and a palestinian state but only when that palestinian state will be a decent, stable, peaceful, democratic non-corrupt government. first that means arafat has got to go.

next on "after words" ed whitacre talks about his memoirs "american turnaround" reinventing at&t and gm and the way we do business in the u.s.. he spoke with fortune magazines stephanie mehta to discuss his time leaving at&t and becoming chairman of general motors. this is an hour. >> host: ed whitacre has run two iconic american companies, at&t and general motors. he is also the author of the new memoir "american turnaround" reinventing at&t and gm and the way we do business in the u.s.. it is a candid and unflinching look at american business at a particularly difficult time in the period that we recently went through and yet the book is ultimately very optimistic about corporate america and america in general.

welcome. >> thank you stephanie. it's nice to be here. >> host: you became chairman of general motors immediately after the company filed for bankruptcy. he came out of retirement to take the job. why did you do it? >> guest: i became chairman when it came out of bankruptcy. the day came out of bankruptcy. it's a good question why i'm here. at first i said no, no nothing about the car business. i can draft one and i can start one and i was retired from at&t and sorted in the late 60's but i kept talking to steve rattner who was the car czar. he kept talking about public service. i kept thinking about how my family had owned general motors all of my life. i drove one. what a great part of america general motors was in my ultimately said okay and if you can do this let's give it a shot. so i finally said okay. >> host: before you accepted the chairmanship did you have a

point of view about the government they'll out of general motors? >> i just knew general motors shouldn't go away and frankly i have been following closely the news but i knew in my heart the general motors couldn't go away. it's too important to this country. >> , to be her decision was based on something that was more visceral and emotional, the idea that general motors shouldn't go way and the economics of it,, the jobs and the suppliers in the entire ecosystem around the auto industry? >> i had the emotional feeling that general motors couldn't go way. once you got beyond that feeling you could think about the impact it would have on jobs, suppliers and all that sort of stuff so one really followed another. >> host: the bailout triggered a lot of emotional reaction among the american public. why do you think that people reacted so strongly to the idea of the government stepping in to save general motors? >> guest: well i think it was

a lot of money for a starter. i think too there were a lot of people that said you know that shouldn't happen with taxpayer money all though it had already happened with some other companies. i think it was just the idea of using taxpayer money to bail out of company but a lot of people felt just the opposite, that should be saved so i guess it was a mixed emotion. >> host: i still hear people criticizing the government for the bailout and i'm sure you do as well. have you been able to change anybody's mind who perhaps was opposed to the bailout and upon seeing the results felt that in retrospect it was a good idea? >> guest: you know we became known as government -- to a lot of people and no question it hurt gm and continues to hurt it today. we did pay back the loan to the government and we paid back a lot of the equity investment the government made and yes i think people want gm to succeed. the government motors label is

still there to some extent and it still affects some people but i think it's less now. i think once the indebtedness is totally paid i think it will go away. >> host: in the book you talk a lot about what you found when you are right that general motors. a lot of it was not necessarily apparent to the public. but what you found he found when he started looking underneath the hood. it was revealed very much for the first time in the book. share with us a little bit about to you as a seasoned executive when he arrived in detroit. >> guest: i expected certain things and i saw some of them and others i didn't. the morale was quite low as you might imagine but i saw a confused company that had a clear direction on what it was to do and what its mission in life was if you don't mind me

saying that. it was very bureaucratic. it was not well organized. it was matrix management and i just thought in general it was a real mess. >> host: and what was your approach in untangling the mass? what were the methodically the first, second and third things that you did quest. >> guest: to shorten that i will do my best but the first thing is we had to determine what we are in business for. what your objective was, what your name is and what you are trying to accomplish. over a short period of time nobody could tell me that incident late. i found that very interesting. with the senior management in the room i asked the question, what do we do with this company? and we hash that out and finally it didn't take long, that we would design and sell still the worlds best vehicle. pretty simple.

that is their only mission and that is what we set out to do so we had to find her mission and what we wanted to do. anything that didn't pertain to that was sort of superfluous. so we define their mission and then we cleaned up the organization. gm had a matrix management group which meant a person or individual had several bosses and we fixed that because when you have several bosses you really don't have a boss at all. so we sort of streamlined management and made it a more direct line reporting. that was very important. we organize, had an organization chart one could understand. we streamlined, we preach design build and sell to everybody in that company from the very start. we spent a lot of time on the assembly plant, the senior management it and i think the most important thing is we make people responsible for the job

and we gave them the authority to do it and we held them accountable. only then did we start to make real progress. that was really the key. >> host: based on your experiences there and talking to the employees and management teams, how was it that gm came to lose its way not just on the financial and the product side but the sense of mission in terms of its belief in the company? how did they get from where they were when you arrived? >> guest: i heard a lot and i saw some of the. i have several top-level people when i got there. i said how did we get into this mess? what went wrong here? and i got the answer from some that we didn't do anything wrong. the economy got us which begs the question, well why didn't

they get the other automaker's? so really that was not a very good answer. but i think they got that way and i think there was an attitude. i have heard this from others also, i guess more than i saw it this is general motors. this is the way we do it. take it or leave it you know. this is what we do and i think holding to that attitude over a long period of time probably got them into trouble. >> host: is certainly a common affliction among very big organizations and i want to spend a little time talking about the other big organization you rand which was at&t but more generally why do you think it's so hard for large organizations to adapt when we see time and time again the writing is on the wall. the company sees a disruptor and yet they can't make the change? what are your thoughts on why it's so hard for a company to

adapt? >> guest: i think that all has to come back to management but i think one of the problems is that maybe you get to thinking you are better than you are. you are unwilling to change. bureaucracy plays a role in that and you know. chrissy is built up by people not having enough to do and not feeling important so they set out to implement new rules are put in new guidelines so they can feel like they are part of the business. so you build in these bureaucracies of checks and balances and once you get a very bureaucratic organization it's very difficult to be flexible and it's hard to sweep that away. it goes back to management but that bureaucracy gets built up and people just can't react. >> host: it's a real challenge to be able to see -- to be both big and nimble, big inflexible. talk about your experiences at

at&t which started out to save at&t save at&t and one of whom is southwestern bell, the company that you became ceo of in 1990? >> guest: 1990. >> host: and basically ran through its expansion from the bell operating company to a major wireless player to a global data company. how did you try to keep at&t flexible even as it was growing in some cases doubling in size with acquisitions? >> well i thought about that question a lot and i certainly didn't do things perfectly and i don't know that i deserve all the credit for that. but one thing was to keep active and i guess that goes back to we were headquartered in st. louis. we have been there long time and people were sort of set in their ways. how could you deal with that? well in my case i thought a move

to san antonio roughly a thousand miles might shake things up a little bit. there were other reasons but i thought the move to put new challenges in front of our people, management and non-management is a good way to stay flexible. we bought pacific and we bought at&t wireless and we bought ameritech. just when people wanted to settle down and building the bureaucracy again, i thought it was always timely to do something else big to give people something else to focus on. i think that helped us you know. not that we were totally free of bureaucracy, we weren't but i think you can get people interested in our objective is to be the best, number one to do the best for our stockholders and to keep moving. i think that i had a huge effect on aching it successful.

>> host: you also did a number of smaller deals, joint ventureh technology companies or companies who are innovators. can you talk about the potential importance of organizations bringing in outside thinking in the form of entrepreneurs and innovators? >> guest: sure. they weren't all successful but i will give you an example. we had a large yellow pages company and we formed a partnership with the company called mdot. mdot had the ability which we didn't have the resources to do, to write software for yellow page sales and that greatly helped us in our yellow page business. they have the talent and the ability to do that. we didn't and we made a fine angel investment in amazon. they did us a great job and i think we were a great partner to them.

we did that several times but i think that's a good example. we didn't have the capabilities to do that. i didn't want us to get into things where we had no business like writing software. so we formed an alliance or a partnership and that worked out great. that's very important i think. some companies want to pursue everything. it's that not necessary. he can't be done. it's costly. you are much better off in some cases to form an alliance with somebody else to get it done. >> host: what are some examples that didn't work out so well? >> guest: we made several acquisitions. do i have to talk about that stephanie? [laughter] >> host: only in the category of lessons learned. guest. >> guest: one was long distance and one was cable television. they didn't work. we had many more success than failures.

>> host: but there was a time when it seemed that a lot of the telecommunications companies for moving in a lot of different directions. you had some companies investing heavily in cable and you had other companies potentially investing in movies in hollywood and even the operating companies joining together to try to do some content parts of the business. the southwestern bell later at&t was remarkably disciplined relative to some of the other companies in terms of its mission. tell me a little bit about where that was coming from as a manager and how you keep your team focused while looking for the opportunities that would be a potential blockbuster? >> guest: well i think that was mostly the management teams common sense. we knew how to run a telephone

company. we knew how to do that very well. we had done that for many years and most of us a grown had grown up in that business. we could see changes coming but they were telephony type changes. we didn't know anything about real estate or whatever and all i can say is boy if we went down that track we would lose a lot of money and a lot of time so early on we decided to stay focused on what we knew how to do. that paid good dividends for us i think. it was tempting occasionally to try something else but we never did. >> host: how much management is commonsense? that seems to be a theme that runs through the book and certainly your comments subsequent to the book. do you think a lot of the ways you became a manager was by exercising good commonsense? >> that is the term i applied to it. i think it's mostly common sense i think it's mostly common sense and that is the term i use.

if it was logical and and make sense and it will excite people and you can get people involved and it seems to fit in, it's not rocket science. it's mostly common sense. >> host: in the book you talk a lot about managers who helped you along in her career and that different people that you encountered as you were coming up the ranks in the old southwestern bell. did you learn mostly from good managers or did you learn as much from the supervisors and managers who weren't cutting it? >> guest: you know i'm not sure i've ever been asked that question but since you have asked it i think you learn as much from the good ones as you do from the bad ones. you learn what to do and maybe not what to do. you can't duplicate somebody else. you have to be yourself but you sort of get a general idea of how to act and how not to act and what to do and what not to do. but i think you get some of

both. >> host: how do you feel throughout your career about at&t and general motors in the role of ceo, when you saw people who weren't adhering to either the values of the company or simply not getting the job done? what was your strategy with dealing with a failing player? >> guest: 's you have to sort of get the feeling of why. maybe they just don't know. maybe they don't understand. maybe there are good people that i think in the final analysis if they are impeding europe jacked it up designing, building and selling the world's best vehicle are becoming the best telecom company in the world to get rid of them. and that is not a heartless thing. if you don't do that sort of thing you really heard everybody else. you are impeding everybody else.

it's not as heartless as i make it sound that sometimes there are other jobs these people can do and you find that and they can do it well. but you can't let those road locks stay in the way of everybody else being successfusuccessfu l so you just have to move in and make some changes. >> host: at the outset of the conversatconversat ion you said that one of the reasons you are reluctant to take the job at general motors was because you didn't have the background in automotive. what were the commonalities you saw from your experiences running at&t and general motors? what were the things that you felt were common ground? >> guest: well there were a lot of people at at&t and a lot of people in the organization. there were union forces to consider.

there were a lot of similarities. it was an organization with people, objective to do. there were a lot of commonalities. was there a big cultural difference? no, i don't think so. i never notice cultural differences and everybody talks about the culture here in the culture there. i have always found that people are people and they have the same objectives and ideals. >> host: what were some of the things you did to get up to speed on manufacturing and specifically auto manufacturing? >> guest: well i knew nothing so i was really on a steep learning curve. these people are all smarter than me for example. this car is incredibly complex. you can't believe it. i couldn't believe it. there were thousands of parts in one but i grabbed engineers and i grabs designers and spend a

lot of time with them. i spent a lot of time in the assembly plants looking at these things and it was just astounding to me. what started out turned out to be a card not many minutes later. but i guess you learn by observing and asking a lot of questions and that is the way i went at it. i didn't do a lot of reading or anything. >> host: in terms of the turnaround portion of the business, where there are other executives who had been through a similar turnaround or who had attempted to turn around what you called on? is there anybody -- >> guest: not really in that doesn't mean i wouldn't but i didn't know who to call, didn't know what to do. inside gm of course everybody was under t.a.r.p. but we have very talented table at gm and

still do. i guess i kind of set that off with the internal gm team that i had with a few changes and just kept going, you know? there aren't that many automobile ceos out there that can tell you and you know some of them were new. i just went and along with the gm people. >> host: talk a little bit about your relationship with the board of directors because you started out as chairman and ultimately became interim ceo and then ceo and every step of the way you needed the board support. how did you forge relationships with the board and what was that dynamic like from the beginning and how did it if all of? >> guest: there were a few holdovers. there were a small number of holdovers and then we appointed a normal sized board.

some i did beforehand and some i didn't. the government raid recommendations. a couple of three i knew came on the board but from the very start we told the board that the approach we were going to take which was pretty straightforward and remember we were sent there to fix gm. that was the mission, go make this thing a viable company. so we were all focused and brought the message, we are going to design build and sell the world's best vehicles and we are going to move quickly. we need your support and we need your input. so we changed a few things and we shorten something is considerably. we stayed away from the details are didn't get into the weeds on how you build a car with questions of financing, morale and positioning and that sort of

thing. the board was very supportive of that and we kept them informed. it just took off. >> host: talk a little bit about the urgency in your mind for getting out from underneath tar. you alluded to people being under the umbrella of t.a.r.p. and the impact that had on employees and on morale. why did you feel it was so important to move quickly to get out from underneath the government that ground? >> guest: as i said i thought the employee morale was not the best it could be as you can imagine. i think were -- some were shunned by their neighbors and some felt defeated and beaten down, worth not much. >> host: it was a little bit of a small town, right? >> guest: it is. you go home and maybe there's ford on one side and chrysler on

the other side. so that was a big factor. the other factor was we were labeled government motors. that was hurting us. the dealers told us and potential customers i talked to told us that. we had to get rid of that label. also found some other things. we weren't selling in the lower and it we found out frequently that people were more likely to make their current -- car payment in their house payment. they theorized you can live in your car but she couldn't drive your house. we didn't participate in that market and everybody else was. the sooner we could shed the label of government motors and start talking about what a great car we were building and put our money where our mouth was and where the employees could see some success and pay back some of these indebtedness to the government, the morale would improve and it did drastically.

we paid loans back quickly and to give the government equity with interest and pay that off. to make the employees feel better. the people that are the most important part of the company and they are not good and they don't feel good and they are not involved and responsible, you just don't make it. so we set out to do that quickly. >> host: and critical to that was the idea. >> guest: yes. >> host: you had never been ceo of a company so what was that experience like and then i want to talk a little bit about what surprised me in the book was the difficulty that you had that you would go ipo so quickly but first talk about an idea which i think many people assumed was a young company, new company hot out of the gates. what was it like?

>> guest: we had for stockholders, the government, the canadian government, some of the bondholders and the union portion. we only had for stockholders. an ipo, initial public offering is something you do normally as a young company. but we were determined to do that. that was the only way they could pay back the equity, getting rid of the label government motors. as long as they were a shareholder we were going to have that label but of course the ability to go ipo depends on how you are viewed. or you going to be successful in the future? are you making money? skinny payback debts that you when do you have a future? can you change with the future? we weren't making any money after bankruptcy of course. we didn't have any of the factors in place that would allow you to go to get an ipo.

you would make an investment in ought it was hopeless. you would never get your money back or make your return on it. so we knew the possibility was key to the idea. early predictions it would take two or three years but that proved to be false because we started making money very quickly like in january or february. and we made enough money to pay the loan back very quickly so quickly so we payback pay back the loan and we still had the equity. every month we were selling more cars. you could see some renewed faith in gm. we were building the best vehicles so we started talking to the government about hey maybe we want to do this ipo sooner than we thought. maybe a lot sooner than we thought. as it turned out we were profitable enough and going strong enough and our volumes were dead and their business picked up that we did it quite a

few months before we originally planned to do it. it was done in november of 2010 so it worked out well. based on growth factors. >> host: to get there there was a little bit of a struggle. you write in the book that my growing concern to be honest was the government is getting a loop comfortable having a grip on gm. what did you mean by that? >> guest: i don't know what i meant is that but it must have been something. the government let us run gm. we didn't get any day-to-day oversight. we had a very cordial relationship and they let us do it but it was most important to shed that label government motors and i think we wanted to go pick her than the government had in mind. and we kept pushing that and that didn't seem to be their top priority. but it did turn into that and

that's helped us get rid of that label a little quicker. that label is still here a little bit but it's gone. and the government is a much smaller part of that and still part of it. gm still has some work to do to payback you and i and the taxpayers but we are getting there. i think the government, t.a.r.p. was difficult because t.a.r.p. established salary levels, compensation and a lot of other things. you can live with that short term. that's okay. everybody could understand but over at period of time you obviously have to be able to pay the same salaries as everybody else. you had to be competitive in the market and the sooner we could do that better. so was important i think from that standpoint. >> host: and you mentioned that decade you quite a bit the

federal government. at the same time it sounds like in the book you were a little bit surprised that they didn't really extended invitation for you to come to washington despite your offer to come to talk to them to see if they ever wanted to. were you surprised by the dynamics between the company and the federal government's? was it not something you expected when he went into at? >> guest: it wasn't but you know what i reflected back on that there were other t.a.r.p. companies to map. there were other things going on in the world. there were several companies that the government had bailed out. and we were among the smallest of those incidentally. so i guess we got our share of attention. we didn't want a whole lot of attention operating it and bring it back. it didn't seem to be this top priority for to get us out from under t.a.r.p. and we need to do that in a reasonable period of

time. >> host: when i reflect back on that period and american business claims drop by how low the confidence level and the trust level that the american public and business have become. it to wall street and the banks but in general people were distrustful of corporate america. what do you think companies can do to rebuild that trust and do they have an obligation to sort of restore that pride in american business? >> guest: well you bet. let's take gm as an example. the largest manufacturer in the u.s.. we lost faith in gm and its quality and products. i think a corporation has to be trusted by its customers and to do that you have to sell a good product at a fair price. you have to stand behind it and

you have to be involved in the community. there are a lot of things to do. once you lose your reputation in business, it's tough to get back it doesn't happen overnight. you have to work at it and what you do is you get it back. you produce great products at a fair price. you have employees that are engaged. you participate in the communities. you are receptive to certain things but it doesn't come overnight. you have to stay with that. i think that is the way you get it back. >> host: as i said at the outset this book is ultimately very optimistic of business. what are the moments in your upbringing, your business career that you think contributed to your generally positive outlook about business around the country? >> guest: well remember i am from at&t and gm.

and i saw the power of people and what people can do when they are responsible and have authority and you let them go. there is a lot of -- at such it such a great resource that we forget about. look at what at&t did. there are iphones and there is wireless and there were 3 million ,-com,-com ma 4 million customers in 1990 and now there are hundreds of millions. look what that industry did. we forget the people did it. people have an amazing capacity to do great things when they are empowered. look at general motors. how could you not be optimistic after watching that? from the very depths of bankruptcy to a very successful company doing great now with good employees, focused employees, new models, great vehicles.

how could you not be optimistic? i think that is why there are a sector of business. that is only two examples but look what happened. it's terrific. >> host: and then there is also the long-standing tradition of innovation and contributions to both of those companies made. >> guest: absolutely. people do that better empowered to do those sorts of things. it's a huge reason. ..

>> my mother was not the most optimistic person in the world. but she said he just keep on going and you keep on trying and the good things will happen over time. i believe that that is right. i am not optimistic all the time or pessimistic all the time. but i do think that there is a great opportunity, persistence is one of the main keys to success. if you keep going and have an object will find coming you have a chance to make it. if i can make it, anybody can make it. and i don't know how it all happened to me. i have seen the power of people and what can happen.

not everybody wants that. everybody is different. but it can happen. i'm optimistic about the future. >> you were given a lot of encouragement. >> she mainly go to college. i set one night that i think i worked for the railroad. and she looked me in the eye and said, oh, no. you are going to go to college. well, i was taken back by that. she said you're going to go to college. and i did. good things happened while i was there. it hasn't been easy, but i did it. >> she had to drop out of college. is that right? >> guest: she was there during the depression and her father was in the depression.

>> host: she is an educator and remained an editor for many years? >> guest: she talked for a relatively short time. but she did not stay in education, but she was a smart woman. >> host: clearly valued for her educational background and then he got a summer job working for southwestern bell. and the rest is history? >> guest: the rest is history. just to show you how things turn, i was at texas tech between my junior and senior year and i needed a job. i had to work for college, because as you said, we were a modest family. i learned how to dry clean clothes as a part-time job. i went to the employment office in dallas and hold the gentleman that i really needed a summer job. he said that we don't have any.

we are all full. you and i said, you don't understand, i have to have a job. and he said, well, we just don't have any. and i said, but, you know, i need this job. i will do you a great job. i will work for very little and whatever it took. each he called me the next day and said, you have a job for you. the rest is history. >> host: how did you overcome your shyness to be able to march into an employment office and really fight for a job, of course, later in life, having to interact with a lot of people you communicate with a lot of people.

or was it a sign of something else like a lack of confidence? >> guest: i think i'm stilts still shy. my heart beats fast when i have to talk to certain people. if you really need something, like i did that job, you can sort of overcome it temporarily. but i think i have always been shy. i am not a great social person. i don't think that i ever will be. i enjoy people a lot. i like being around people. but i still have my shy moments where my heart beats faster. you know, you just deal with it. and you get better with age. >> host: talk about how you evolved as a leader. he became the ceo of southwestern bell in 1990. do you think that back i could've stepped in to general

motors in 2009 and did what you did. >> guest: i do not think so. i think all of those years, 17 years at at&t, i think it helped to prepare me better for that. i learned a lot in the 17 years. we did a lot of things. you know, you just get wiser, i think, with age. maybe you get more wisdom. but i do think you learn some things. so that time as the ceo and chairman of at&t was most helpful at my new job. >> host: at at&t you had a lot of interaction with government. not all that was positive. >> guest: that is right. >> host: and then at general motors, you had the relationship with the government as well. what are your feelings about the

institution of the federal government. are you as optimistic about the ability of our government to continue to be a beacon of democracy and inspire our citizenry in the same way that you feel corporate america can do that? >> guest: i think the answer to that is complicated. but the short answer is yes, because i am an optimist. i think there a are a lot of things going on in government. it seems like common sense has gone out the window and there is not much agreement. but i hope what goes around comes around. i hope some of the uncertainty goes away with time. so i have to say, yes, i am optimistic. surely there leaders there that

understand the american people and will make that happen. >> host: it is interesting the number of people that you mentioned in the book that you dealt with who came from the business, people like ron bloom, a number of these individuals like you working in business for a number of years. and for whatever reason, had a call of public duty to help the government or to help government related institutions at the times of difficulty. you think the government is a hospitable enough place for people to come and and potentially make an impact. >> guest: yes, i do. i think people will still continue to do public service like he did and many others as well. and i think it is things that need work.

sure, i would volunteer. i think they would do. i think they would do. i think anybody could do that. >> host: throughout the history of at&t, there has been a long-standing effort to push consumers into new products and services. bell labs is even part of the at&t family. you talk a lot in the book about the iphone and the impact that that has had on the entire world. it is the entire world of media and consumer electronics. that was a risky move at the

time. what inspired you to pull the trigger on that? >> guest: well, as i said earlier, the first thing is to do well for the stockholders. and you have to continue to make your investment better, and i do that through dividends or growth or increase stock prices. but you cannot stand still, you can never stand still, if you stand still, you are just not going to make it. so here came this great idea with the iphone. risky as it could be. steve jobs one of a lot of money for these things. it was sort of an unproven technology. but i knew that we had the network and the thing had to have a network to run. and he had the device with the capability. so you look at it. and maybe it goes back common sense again, but you have this personal communication is going

to be important. is it worth taking a risk for? it is not something that you agonize over for a long time. you don't get consultants and to think about it. because you are to know the answer. this is risky. this might work. we are not betting the company or the whole farm. this is worth taking. a risk worth taking. let's push chips on the table and see what happens. that is what we did. and we got lucky on that and the rest is history at work. >> host: were there any issues in the negotiation process? i realized that you had delegated a lot of the day-to-day things. around the issues of control. so very for a very long time, telecommunications companies wanted to control the consumer experience. as much as it could. and that is why we had, you

know, in the bell days, the phone company was the one that could provide you with your caller id and your call waiting. it was a whole bundle package that you got from the provider. >> it worked pretty good,. >> host: so he wants to be the front and center person in our relationship. and i realized there was not much discussion around the risk and reward. that was their conversation about ceding control, especially to a third-party. >> guest: yes, there was a lot of discussion, as you can probably imagine. we were just as convinced that we were going to control the network each and there was a lot of back and forth. more than you can imagine, i suspect. >> guest: there was a great

deal. one said that we would never do that again. we will never do this or that, this can't be done. no way would we do this or that. but at the end, i think we all agree that it took a network and yes, we had to give a little. and he had to give a little. but by giving, we put a great product out there for the network and it worked. but there were a lot of discussions. >> host: you know, ultimately, i think it really did unleash not just at at&t, but at all the carriers, a new mentality, as he said, at the outset of the conversation, you didn't have to be the person that could build this or provide that for the other consumers. so the result seems to be a much richer experience for the

consumer. and they use the network a lot more. >> guest: they do. and we like that. >> host: did you ever imagine a world like this in southwestern bell? we saw kinds of roadmaps, we had not seen very futuristic visions for what the consumer would experience when we took the year 2000 and into perspective. did you ever envision a world that is eccentric and always on is the consumer experience is today? >> guest: no, i do not. maybe other people dead. i left that up to them. i just said, let's take the next step and see where it leads us. it led us to where we are now, and it will continue to lead us more. but as a futurist, that is not me. i noted that things will happen.

that is a difficult thing. >> host: is this world becomes much more like a smart phone, as he will, especially like the dashboard of a car what were your thoughts of information technology advancement when you got there. i think that my perception is the luxury automakers had always been very focused on information technology. and that is really starting to proliferate the mainstream auto manufacturers. >> i can tell you that there was a lot going on. a lot of technology going on.

the car being a wi-fi hotspot. one that you don't go away from. one that stays with you the whole time. like you can't do it and drive at the same time. but there are advances in a lot of thought being put into that. we will see some drastic and radical and interesting changes. there is a lot of technology going on. all of this comes together at some point or another. i'm not a futurist, as i said, but it will be interesting. >> host: over the interesting things that you saw either on the host side or the technology side in the final days? >> guest: we have talked about it, but in my days, when there were sparkplugs and carburetors and things like that, that is pretty much gone.

now it's run by computers. maybe most people don't know that. i certainly didn't. but that is all exciting how that works. the possibility of advancing different systems. i thought that was very interesting. i am sure that other makers are doing things like we had to do. like the chevy volt. it was an electric car, but if you didn't have to worry about it. i think that companies have a responsibility to continue to explore that. so i think there will be some interesting developments better over time. that is exciting. new designs are exciting. better gas mileage, that is exciting. the ways that you can do that. if you have less friction, you will get more miles to the

gallon. if you have no friction, you cannot stop. so there is a you were going to talk about this. but it is exciting what is going forward. just look at the data explosion and what is happening. we could be limited by spectrum. so i'm sure there will be new technologies to overcome that. it is an exciting time, a time to be optimistic. >> host: caddo executives and ceos balance the need to continue investment and innovation with the very real day-to-day pressures. how do they do that? what is the formula? >> the number one duty is to perpetuate the company. if you take the viewpoint that we must perpetuate the company, then you have to be prepared for

up-and-down earnings. and i think if you take that view, you are willing to spend more on your capital projects and do more in that realm. i think that is necessary to do to stay in the forefront. if you have that mindset, you're probably pretty good. sometimes you have to take eps are some of the other measurements they would like to have daily earnings. quarterly earnings. and i think that we always kind of look to the future. you just have to take the chance and perpetuating the business, that is the most important. >> host: could have an impact and clearly changed at&t and gm.

i would like you to talk about how each of those companies change due. let's start with at&t. how do you think -- how did you leave at&t differently than when he came you came in? >> guest: well, i was tired or. [laughter] >> guest: if i had hair, it was a lot more gray hair. i think i came out knowing the power of people and having optimism in the future. turning the company over. i probably had less patience than when i went in. you tend to want things to happen faster and faster. but i felt comfortable that the company was going to do just fine. i felt good about the people. at gm, i saw how quickly things can change.

i never really got to observe that at at&t, but how quickly things can change when people get behind something and make it happen. so i came away knowing that more than i ever did. that things can happen quickly if people put their minds to it. i think that is a reason to be optimistic as well. it says a lot about the power of people. it is not quite as bleak as a lot of people think for america. we know the one sure thing is change, what it is today, it will be different in a few months, a few weeks, a few days. we know that people are adaptable. if you can keep the bureaucracy away. things can happen. he has changed a lot i know a

lot more than what i did. i do know on the road what kind of vehicle that was. so yes, i am a car person. i drive a ctsv at cadillac and i love it. it's been my pleasure, thank you so much. >> host: thank you so much for being here. >> this week, north dakota's governor signed into law new restrictions on abortion in the state. on our next "washington journal", we will look at state abortion laws and the potential legal challenges they face. in this week's same-sex marriage cases before the u.s. supreme court will be looked at as well.

in a roundtable discussion on the misconceptions of the u.s. economy. our guests include the bureau of economic analysis and a writer for the economist. "washington journal" is at 7:00 a.m. eastern on c-span. >> this is the basement of city hall, and that is a temple. >> november 24, 1963, jack ruby shot and killed lee harvey oswald. the man arrested for the assassination of president john f. kennedy. hear first-hand about the trial from this juror. who kept a diary of the proceedings. >> he worked alone, he never says anything, i made eye

contact with him. >> part of american history tv this weekend on c-span3. >> next on booktv, former ceo of american international group, or aig, maurice greenberg talks about the rise and fall of the international insurance and products company. his book is the aig story. >> good evening to all of you. first, i would like to welcome you to the center for national

interest. i would also like to welcome mr. bloomberg to the center. starting at its development and advancement, devoting time and energy and passion to the center. so i thank you for that. hank has not only made a contribution, but he also, as i think a number of you know, has made a contribution when your vice chair on foreign relations. i had to mention that because i happen to be ahead of the washington office. my first meeting was an

interview. pete peterson was the chair. so the this actually put the fear of god in me. because he said we are going in to meet with mr. greenberg. and he said, you know what, he is very direct, he is very snappy, time efficient, no-nonsense, he will look you in the eye. look them in the eye and get to the point. well, the good news is, i got the job. and that was my introduction to hank greenberg. well, we are gathered today to honor and congratulate hank on

his book. the aig story. i like very much henry kissinger 's inscription in the back, in which he talks about being a major figure in the 20th century, someone who is principle, does not waver on one's principles in a time of crisis. i think this story substantiate that. the book is not only a chronicle of a personal story, starting with his departure from being in army officer in the korean war and his entry into the insurance industry. but then going on to become the head of aig. bringing it to what became

literally the largest insurance company in the world with almost over $8 trillion. there is the personal side. but there is also the other side of the story, which is a very instructive one. that is the site of this book specifically set forth very profound and serious questions about governments and regulation in the financial industry. what are the unintended consequences of these regulations? and what does it include? well, what it does on the personal level, it is truly a national asset for the united states. with that, i want to turn it to

hank greenberg. please join me in welcoming here today. [applause] >> thank you very much. i also want to recognize dmitri who has made this organization go. i live in new york, he's here in washington. i try to talk quite frequently. and he is a man that is part of the organization. i want to recognize that we worked together for many years. one of the biggest companies in the philippines, i am delighted

that he has been recognized to be the ambassador. now, why did i write this book. well, for a couple of reasons. one is there are hundreds of thousands of people who worked with me for years. and i believe that this story needs to be told. when we made public we have $300 million of market value when i left at the end of march 2005. it was 180 billion. so we had some great growth. and it was accomplished by many people. many have left aig. and i will get into that in a moment. they were an outgrowth of this company.

i join him and i succeeded him. we had added several insurance companies and the stock companies were never part of it. they were kept out because they were too small to really put into it. i am very thankful that we did that. [laughter] it made no sense to put them in at the time. we grew rather rapidly. there are several things that we have that made us the largest insurance company in history. but if you want to call us mavericks, you can cause that. we had the typical traditional insurance underwriting.

most of the business was either automobile or homeowners and we had very real growth. we believe that we should be market in the united states that could accomplish that. on the life insurance side, we had a small company in the philippines. it became a very huge company in the philippines. we have something called amoco, and it operated in many countries around the world. we brought a new vision to the insurance industry. both the products and innovation and management structure. we introduced something that

didn't work, and most companies had an agency department and underwriting department. at the end of the year, they lost money, they just went on and on. we had one individual is was in charge of products and marketing. so you knew that there was not breathing anyone else, it was accountability. that structure was so embedded in the thinking, the people who understood it stayed with the company. they did not want to be held accountable. it worked quite well. and there was a culture in the

company. it doesn't happen automatically, but you created. the culture that we had was a winning culture. i've seen people work together very well. the board of directors initially was made up of mostly inside people who were running the company. we had some outside and very fine people. to show really what we meant to the country overall, there are a couple of vignettes that i will talk about briefly. there was a book written and there was a book about a russian sub that went down in the northwest pacific. the russians didn't know what it

was. they looked and couldn't find it. in the u.s. knew exactly what it wants. it was a nuclear sub, the technology was important. it was decided that they would try to recover this. they had to build a vessel, a very large vessel with a hole in the center. the guy would scoop the sub up and you have to think about letting the russians decide what you are doing. and what would happen if they fired.

so that wasn't going to work. so we had to have this in u.s. possession and discharge it there. so we provided the insurance to the operations. there were not many to take on a project like that. i was in hong kong at a board meeting with aig when i had a call from the agency the los angeles times i broke a story obviously, they didn't provide the kind of information that we

had, and there is one example that aig value to the company. there are many stories like that. i was asked by government officials to go out and meet with an individual that we know very well. and he had more terms as president and he was permitted by law. at times he was aggressive, one individual was ill. he was on dialysis.

and we did go out and the individual that had been a head of the naval forces came along. and so john reid, who had been the head of citigroup at that time, we had dinner with him. i decided i would wait until dinner was over. and that way we wanted to step down at the top of his game, it could be done. but nobody would believe that. the country was in on that. the step down while you can. what happened was he went on,

things went all to heck, they said he was going to die. now, how many insurance companies that you know of provide those kinds of services to the country? well, there are many others as well. point of the book was to say how different and valuable we were to this country. and the thousands of people have made that possible. the second part of the book is what happens. we had a disgraced attorney general. one who decided that there was a law on the books called the martin act, it was an act of 1921. it was designed to go after

bootleggers. one of the staff had dug it out. so if you could accuse somebody of a fraudulent act, he took the position to prove it. so you can go after anybody who made a mistake in something or another. and force them into submission were to go to trial. he used that against many companies who threw their hands up and just agreed to settle and pay the fines. now, i would not do that. when i was on a conference call with security analysts and one

asked me what is the regulatory environment like today, this is after enron. when there was a change in regulation in the united states. and i said, it is like a murder charge, trying to explain the severity of the change in the regulatory environment. enormous change. directors of companies felt horrible. so they wanted their own lawyer representing them. what happened is the ceos of companies are being downgraded in the management of an institution. in some cases it may have been good in other cases it was not. and they went abroad operating

in 130 countries. no matter how diligent they are. and the management traveled constantly. the reporting was on a real-time basis. i could tell the results and by today's i would know anything wants to know about the company. so in the quarter, we would know how we were doing. so when there was, i think in

the year 2000, we have consolidated and insurance company. we had started and we had about a 40% interest. and we've been up to over 50% in that year. i had just come back from an overseas trip trying to catch up with my senior managers in what was happening. and one of them said that we are going to show a little bit of reduction in the quarter. and we had about 25 billion of property taxes and we might be down 50 some million in the quarter. now, wouldn't that mean? a means when you are paying claims, you know, you have to pay, that is the normal process.

with the transplant that we had just consolidated, they were down about 40 odd million of the 56 million. that isn't inconsequential number. i mean, it is nothing. one of my people says, why don't we get a finite reinsurance treaty, which essentially says that this is common in the insurance industry. we have premiums and losses from a reinsurer for a finite time. in order to be counted as reinsurance, we have to have a 1% risk factor. 1%. so we got that done. whatever the number was from

warren buffett company. they happen to be the largest reinsurer. so it's logical to talk with them and i made a call to an individual that i knew very well. and he said he would check to see if they had the proper portfolio. he got back and said yes, we can do this. so the stack took over. i have people follow up on all of it. the warren buffett had a company in virginia that have done a transaction that led to that company and their bankruptcy. the two top people went to jail for medical medical malpractice.

so he was asked, did you do any of these other deals. so he referred back to the transaction five years ago that was approved. and he gave all the transactions they had done. so he jumps on this transaction. he didn't know reserves from premium. and he had no knowledge of any of that. and he uses that to bludgeon the board. and my friend was on the board at the time and he was on the board.

one of the only two that fought the silliness that was being presented. so we ought to get these results, and that will cause a little shakiness. the aaa ratings company, a growth pattern that was the envy of the whole industry. and it was clear that spitzer was in demand. and this change in corporate governance that was referred to really became a great example of what happened. and it would have led to was just unbelievable. you know, there was a meeting

held. a good friend of spitzer's. and also the other lawyer which was a corporate one for aig. he had been an associate. so it was very evenhanded, as you can tell. they had a meeting and decided that i should step down as the ceo. and so this is a march. and i was going to remain as the chair for a couple of years to see how the transition was going to work. which i thought was a reasonable thing to do. and i could remain as chair and i said no, i would not do that.

when they came back and said, okay, you can stay at the chair. i decided i had to make a trip to malaysia and china. i decided on that trip that i would ask a certain person to represent me. now, asking the auditors, for example, this transaction affects the shareholders equity's and earnings, but he said no. no, it was approved for five years in a row. and it was clear that they were getting pressure from the national office. well, it had no effect on

earnings, so what is the difference. and he wouldn't do it. so it is clear that he had one aig over. they then paid him a billion dollar fund. and that led to class action suits with several billion dollars more. when you think about what this man did, he went on national television. and he accused me of criminal fraud. without ever having contacted me or presenting any evidence that i did anything wrong. there was an op-ed written in "the wall street journal." about how could an attorney

general be part of this is one of the leading ceos. he called me and threatened me. so clearly what happened in corporate america had to do with enormous power. one more responsibility was taken over. now, is that good for american business or the economy? it is one of the reasons that i have written this book. because i do think that we are at a crossroads. i think it is disgraceful what they have done. they have tried to get me to settle a number of times and i will not do that. right now we are in the court of appeals.

it is constitutionally proper. you have to prove. and i was so far away from it that the justices looked at me for five years. and they said there is nothing we can do. but that led to the first part of aig's destruction. so now they are coasting on. but all of the rich controls that we had disassembled. ..

and so to claim gerstner's vacation is bad company should be a simple insurance covered me. look at their records. they are terrible. nothing wrong with this tragedy, singapore is a direct turns towing companies what kind of strategy they should have. is that what corporate america, is that we want an economy or is

that just plain wrong. so that issue goes on. one of the company. the risk management structure breaks down. i cheered the new york fed for a number of years and one of their top risk managers left aside, i hired him and he put together a great risk management structure for the second largest leasing company in the world. i see was just sold to china for a 20-yard alien dollars loss on their books. great step forward. we had a great risk management system. that that was to be admitted. we began taking on more and more risky credit default swaps

covering the cd is packaged mortgages. the ceos are put together by investment banks and supposedly had been rated by the rating agencies. he declared this is a aaa rated portfolio before you write a credit default swap, you want to know what you are ensuring essentially. most was declared to be aaa. they turned out to be triple garbage. and so, why would aig respond to collateral calls from those who would place those with aig? but they did.

they kept on providing collateral. aig lost everything. they weren't required to put up collateral as if they had to aaa. we've been aaa for as long as i could remember. the problem is there's no price discovery on this cd is. there's a market market you traded on like you would on a stock market. every broker dealer had a different price for the same cd. so why would you respond to collateral calls? you could get the same price, why would you respond to it? i wouldn't have responded at all. so when things got hot in the energy was running out of liquidity, they were insolvent.

plenty of insolvency. the closer a trillion trillion dollars of assets. so i reached a point where aig aig -- it was froze. you can borrow money anyplace. so by then, unmanned named williams sought came from citigroup and was running the company. i knew him quite well. i try to help in any way i could. so because the new york fed and says they need access to the side window. they refused. he kept on badgering. let me get a broker dealer license. they refused. goldman sachs cut a bank holding company license. they got media access to the fed

window. there is an insurance company in hartford. he said by a small bank for 10 they have access to the fed window. aig was denied access to any government funds. finally, paulson calls williams and sister are going to give you one plan. take it or leave it. i said if the secretary of the treasury calling. we'll give you $85 billion at 14.5% interest. everybody was spiraling at 1.5 to 2%. and we'll take 9.5% of the equity. incidentally, you're fired.

and putting in somebody else. the somebody else happened to be at libby who is on the goldman board. so he asked to sign the agreement. he said i'm not going to santa. he just fired me. so that he was on the goldman word, since the agreement, resigns richer actively three days later. i'm never at the secretary of the treasury of the united states calling a company ceo and firing him. it's the job of the curves. not the secretary of the treasury. because of the $85 billion, aig cut 60 billion, went out the back door quickly. dr. bill out what to goldman sachs and others.

aig was required to sign an agreement that was a total release to the counterparties and they were saddled with takeout order. now that's what the american system was like them when scarborough problems ahead of us. during my term at aig, we renationalize twice. once in iran and one in pakistan. we got compensated and went to the world court, got compensated in the iranian in pakistan met with retail. he compensated us for that. is this what i just described have been in the third world

country, i'd be down in washington pounding the table about what they intend to the company. we are doing that by suing the u.s. government court of claims. because what happened should not have happened. so that's what the environment is like today. the boards have taken over companies. ceos have lost a lot of power. i'm not saying they were all brought our right. all i can tell you is my experience with an aggressive disgraced attorney general that started that process and then what happened to enron to let to changing the entire environment. we've got to find our way back to a reasonable regulatory

environment that anchorages business, not discourages business. i'm going to stop here. >> quite a story and also one that's of great can you in terms of the point is made and what impact these developments and circumstances will have and have had on the american economy. we are going to invite this distinguished audience to pose questions. before you do come either to pick up in a critical point you reference on corporate governance. you reference sarbanes-oxley, clearly dr. frank is out there. what specific advice or recommendations would you have the right balance on regulation this time? you have a dodd-frank document is several thousand pages and most of the people say they've never read it. what is the right balance?

what is your advice? >> you have to decide what different degrees of corporate governance based upon size of the company in the business that it then. if you have a global company as an example that's an different types businesses, you have to rely on management because i don't care how good your direct desire. unless they're full-time direct or is working most of their time at the company, what are they going to know? they know what you tell them. if you don't have confidence in the management, get a new ceo. yes you have to report to the board. not only purport to them. they have to have the information they want and need,

but you can't have them trying to second-guess the management of the company. committed to management if you don't trust them. we never had that problem with aig. if anything, we invited to write yours to come to the senior staff meetings. they could sit and hear first-hand what was happening on a day-to-day basis. there's got to be a confidence factor and you can't frighten the directors by having laws and regulations that make them how to do things they normally would not want to do. the pendulum has swung so far in one direction that the relationship between the board and ceo has become strained and

that's not the way it should be. it's the wrong atmosphere. from the late 60s until 2005, it worked better than better. it worked beautifully. clearly we were doing something right. look at the outside fact is that brought this on. in aig's casey was spitzer and the outside directors wanted their own lawyers. they were interested in their own cells can. that's when it became obvious that we better look at some of the attorney general's and our country to make sure they are doing what they're supposed to do and not what they want to do. the attorney general sues the office to promote themselves.

spitzer's successor was attorney general. you got a guy who has ambitions as well. is that the right kind of structure you want? so corporate governance has changed. the pendulum has swung too far in one direction and we have to get back and have a hard look at what we want. look, the government -- go back to how all this started on the real estate issues. fannie mae and freddie mac were urged to issue them by more and more mortgages of quality with secondary. geithner was the head of the new york fed. citigroup is right in new york, right in his backyard. did he know what was going on in citigroup? to teach us find that out later?

how to define that out? are supposed to have examiners all the time. where were they? a lot of people take the sec. the investment banks, goldman sachs and morgan stanley and others in lehman would have had 40 to one leverage of capital. why would you let that happen? they had six months between bear stearns and what happened afterwards. every six months. what did the government do during that six months? and so to blame industry and look at the others on the other side you had responsibility. >> let's go --

[inaudible] [inaudible] every board relies on the auditors help. what do we do about that? [inaudible] >> of course they are. look what happened at enron. the auditing firm went out of business. one of the biggest and best in the country. so they were frightened to death. they are out of there. >> what do we do about it? >> we've got to bring the pendulum back to the center and not go wild and think every company is somehow crooked. that's not the case.

>> let me pick up on that point we made in the first question. you are also focused and obviously you have the largest insurance company in history. what advice would you give to smaller companies? are you concerned about developments in what it means for the american economy? >> running a company now that's private and not going to go public. [laughter] we are growing nicely and we are expanding nationally rapidly. it's a great company and its going to be a greater company. we have great people. everything we did and running aig. yes i am can learn, paula, as to what can be done. we need someone as at the governmental level not to

overkill the golden goose that is corporate america's favorite chelating that. we're going to have such regulation that she threw your hands up and say should i be incorporated in the united states? there's a lot of states you don't want to be incorporated in. i would recommend to any company having your headquarters in new york. you'd be crazy to do that. [inaudible]

[inaudible] [inaudible] [inaudible]

>> what happened is very simple. they disbanded the risk management system. the guy running aig financial products told sullivan, we don't need him. the risk management people, we have our own and solos and took down the risk management they were supposed to be looking after aig. in fact they would tell you it's in the book. the auditors went to the then ceo and said, sullivan and his number two are incapable of running the company. they did nothing about it. >> we have three questions were going to take. monday begin with dmitry science

. [inaudible] [inaudible] eliot spitzer for many years was in the building itself. and then mr. spitzer's company very soon begin to break down. cleaning became profoundly inadequate and people began --

[inaudible] on a regular basis. [inaudible] it's been that incorporated and mr. spitzer began charging and was also charging us. they said to ask coming you know, there is no way. and when i asked, was mr. they're aware -- he was well aware of our contract.

mr. spitzer was indeed aware of the concern. and another point i want to make. when i look at aig and thousands of people -- [inaudible] what we need is to allow american companies in the american people do what they do best and what made this country

great. [inaudible] >> all right, thank you. any comment on that? >> i agree with dmitry on that. we have to get our house in order and have a better balance between the regulation in the freedom of a ceo to run his company or her company and a board of directors that is supportive and not antagonistic to the management of the company. you can't have that. it won't work. >> we have your question asked and then we'll come right to you. >> it's almost impossible these

days to pick up the "financial times" or "the wall street journal" without reading the latest story about hanky-panky, no pun intended, hanky-panky on wall street. has it always been that way there is the reporting getting better? >> i think it may be a little bit of pose. i am not sure the so-called hanky-panky if you talk about it turns out to be as bad as it has sometimes been reported. he's got to be specific in each of these things as you read. 3any of them turn out to be not many of them turn out to be not improper at all when you get done with it. what happens when you have an aggressive regulator, he will bring an action. he may lose it or you're for years later. in the meantime ewa sonnet has

bigger job. we have a more complex world. and so, don't believe everything you read that there was wrongdoing. there is some wrongdoing, but there's always been some wrongdoing, whether it's in the financial world or otherwise. so i would come to that conclusion as you have. >> our final question before we close. [inaudible] -- trying to get this pendulum to swing back. after your story, that would generate a lot of sympathy. i have to pose the question, what if we talk about here is the governmental power coming further and further embedded in our system and will be difficult -- it's not a

pendulum. on page 232 you talk about the causes of the financial crisis in the governmental policies encouraging homeownership. and then you talk about interest rates held 20 for too long. here we are not too many years later as interest rates being hauled very low for a very long time. are we in danger and the fact of attacking the american dream and economic system that makes it possible? >> were printing money every month. we're going to pay a price at some point as an inflationary boom to scare everybody around. we need a leader in people recognize that individual as a leader who can bring about change. it won't be easy. we have to change the attitude

of congress. there is no free lunch. who are ultimately going to pay the price for everything we're doing. when companies can't manage their business with being held to standards that nobody could live under, it is impossible. running a company that does business in 130 countries, limits how you it's a full-time job. he needs somebody with lots of energy, knows the business and is willing to do whatever it takes to make a company better and better. that's what a good ceo does. that's the definition. how are you going to attract people like that and hold them accountable for things they have no control over? he used to be that you have a

board of directors is maybe half-and-half, half inside and half outside. then the pastor with the new york stock exchange after being pressured by government agencies but that wasn't going to work. you have to have more outsiders and insiders. and they took the next step and said the only one who should be on the board is the ceo and incidentally we want a meeting of the board without the ceo. what are they going to talk about? the right kind of tired of what? so that's got to change. you've got to have confidence between the board in the ceo. once you've lost that, that's gone. he might still get rid of the ceo or change the board, one or the other or both. how are we going to change it?

is going to take a leader in the white house and congressional leadership to bring about a change. it was ambien overregulated. that's not what i said. you want regulation, but proper regulation. not just determined to find fault. take a look at the regulation in a small country as the city state in singapore. the regulators are very brave people. how did they get buried people? they pay them enough. we've got to change the structure. we are killing the very things that made us great.

i wrote this book not with anything i hope to get out of it. i hope to awaken people to what happened. we can have that going on. what do we look like? >> hank greenberg, truly an icon of american business. "the aig story" is a must read for those who are concerned about the unintended consequences of governmental regulation nonindustry, particularly financial institutions in the future of the american economy. thank you for coming today. [applause]

be back william rhodes worked in global finance for citigroup former than 50 years. earlier this year he talked about the economic and financial challenges facing europe, japan and south korea. he spoke at the japan society in new york and has introduced by president and ceo of the mcgraw-hill publishing. [applause] >> okay. first of all, it's great to be back to the japan society family enjoy a relationship that way. tokyo for the mcgraw-hill

companies has been the headquarters of our asia-pacific operation for 25 years now. we enjoyed a terrific relationship and a lot of different ways. when my colleagues dismiss me, deb peterson who just joined us and is heading up standard & poor's rating and will welcome you, doug. derek is the dollar over the city, all over the world and as such has lived quite a bit of time in japan itself. it's great to be with you as well. let's see. in terms of this whole notion of the book, by the way, it's a very novice title, "banker to the world." when i heard of this, and i'm a close personal friend of bill, like everybody in this room is. so when he was talking to me about this concept of what he wanted to write about, lessons

of debt crises in all of this, i just knew was right in her sweet spot and what we needed to be a well-to-do. we are able to convince them. so now i'm not talking to you as his friend. i'm talking to you as his publisher. we were going to do this book and we did. the ink wasn't even dry on this book with henry kissinger came out and said this is a must-read for anybody in any section, and a level of the finance industry. no sooner did he do that, paul volker came out and wanted to make a comment about how this is a must read and it is a must-read and he wanted to put it forward in the book, so we added the forward into the book. and then we saw it again when steve forbes, another good friend was working on the european crisis at the time and

was trying to make sense of certain aspects and said this is a must-read for angela merkel, nicholas sarkozy and dave cameron. in my way of thinking, he left us in southern european countries and might also have gotten something out of it. but it's easy to see why after you get a read of it by so many people need to know what he'll knows and how he knew it and what he did with it. everybody knows that he'll spend 53 years at citigroup. i've heard over 50. 55 today. so we are going to go with over 50. that's a considerable amount of time. when you think about the timeframe and going back and he was a devout disciple of our

late and great chairman of the city, walter burstyn. again when you talk about though, you talk about icons in this field. every single treasury secretary would come to see walter wriston and there are problems in argentina. problems in uruguay. problems in peru, problems in brazil, problems in jamaica, problems in panama. and then there's problems in korea, problems in japan. then we came over here and went back to the european crisis and down to south africa where there were problems. in every case, the treasury secretary would come and say, look, walter, i need help. we don't have these people at the treasury. can you offer up somebody that

would understand this and deal a deal deal with it? walter wriston would always say, i've got the person. the person's name is bill rose, but she can't take him. you can only borrow and. and here was the fun part. the fun part was every once in a while bellerose would go on vacation and every time he went on vacation, it was walter wriston you had to call him and tell them please come back to new york right away. so the joke was, and it wasn't much of a joke. every time he started talking about vacation, people got because they knew something was coming. with all the lessons he has developed and learned and applied to in terms of debt crisis. this one person said there is in a debt crisis that bellerose

doesn't like. so ladies and gentlemen, our retreat tonight is to be with bill rhodes. ladies and gentlemen, "banker to the world." [applause] >> thank you area match for your very kind comments. i should mention that title of the book was the idea of mcgraw-hill, the publisher, just to get that straight. and i want to thank the japan society for inviting me to talk about my book, "banker to the world: leadership lessons from the front lines of global finance." i should mention that in the japanese edition, i think the

ministry of finance and the japanese banks are having been such great supporters of the work i did on sovereign debt restructuring is worldwide for over 30 years. couldn't have done it without them. i think wilber mentioned i would be talking mainly about europe, but he also has some things to say about japan. we are now in the fourth year of the crisis in europe and is certainly cast a long shadow. i think it is fair to say the problems of new york have caused major problems worldwide with the size of that economy, including in japan, united states, china. look at the trade figures worldwide. in 2010, trade grew out of the great recession 13.9%.

in 2011 u.s. 5% in the final figures for last year, 2012, will be somewhere between 2.5 m. 2.7. it is no wonder you have the problems you do in major economies worldwide but the slowdown in trade. i think that unfortunately we are going to see a continuation of the problems in europe, at least for the most part for 2013. just take a look at the greatest figures of germany, which is the strongest economy in the euros on when it came out. we have our own problems in the united states notwithstanding getting by the immediate crisis at the end of this year and the so-called fiscal cliff. i would manage to do was put off some of the biggest decisions for another two months.

europe has managed a lot with little help from ourselves and elsewhere to cloud the world economy. in the case of japan, people are very hopeful with the election pushes the lobby who want to get japan out of what is close to two decades of what you might call the last period of time. these come forth the new stimulus package, which is equivalent to 116 billion u.s., 10 trillion yen, 2.2% of gdp. a lot of that would go to infrastructure to the earthquake area, but of course we've seen 14 such packages since the late 1990s. this one has to be different and also pressing the bank of japan.

last time i was here was to introduce governor shirov colla several years ago, who i think is a very good governor for a major central bank in the world, pressing to put in my monetary stimulus, which i think is necessary. one of the points made several years ago by governor shirov colla is monetary and fiscal stimulus aren't enough. in the case of japan you need major deregulation. major structural reforms coming deregulation the service area, so hopefully that will all flow into the package as the new prime minister. certainly it's a tough job, but this is the world's third-largest economy and if we don't get japan moving aside the other problems with europe, et

cetera, the world is in for a couple tough years. we wish him the best and not. it's very important it's not just the fiscal and monetary stimulus, and it should also take advantage of the structural reform effort. japan faces a number were problems. what is going to be the new energy policy? with the policy towards nuclear energy. the aging population. i could just run on territorial disputes with its neighbors in china, korea. there's a lot of different problems, but it's crisis opportunity situation. the chinese use the expression in japanese that's very similar and so i think the new prime minister is the right person at the right time to take the

steps, but not limited them as they monetary and fiscal. take advantage to me at all of these other problems and turn them into opportunities. one less point than i will mention japan at the end of my brief remarks here. my good friend who died a number of years ago, a brilliant economist and new japan very well. he taught at m.i.t., was always concerned one day the high amount of government that japan would catch up to it, notwithstanding 90% is held by japanese. of course now it's 25% to 35% of gdp, the largest of any developed country in the world. this is something that has to be taken account of stimulus programs are pushed ahead

because it's something japan has to deal with sooner rather than later. it is like i said they are spending problem here. i mention the three largest economies in the world. i have not much in china, but i think we are looking to the emerging markets in 2013 to be very much a driver and we have a new leadership in china chic champagne conmen s. premier and take these posts are probably in march. i am optimistic based on my knowledge of these two individuals and i think what you are going to see if they'll open up the economy and the financial sector. i think there will be frayed interest rates was more rapidly the convertibility, but more

importantly they need and will stimulate domestic consumption more. china is too dependent on exports and this will mean putting in a social safety net to free up savings to help finances. so i am optimistic there. we'll have to see it will see a thing here and there, but the real changes will take place after march of the relationship notwithstanding the territorial dispute between japan and china are key for both countries. so i'd like to just put that on the table. if you take a look where growth is growing, the institute of finance thinks it won't be much better natured than this year. they talk about growth in the order of 2.7% against 2.5%.

so we'll have to see if those figures in a sense are correct. those figures are pretty low when you take a look at economic growth. others have much higher figures as you know. i think it's very important that we see europe move ahead. europeans have this idea, they've now been disabused of it because the euros on was made up of so-called developed countries, unlike latin america in the 80s and 90s in asia and the asian financial crisis in the late 1990s, that any of the lessons to people in the audience learn from those two crises and the other runs in turkey and i could run on an

eastern and central europe are not for them because they were so-called developed economies. so what i thought i would do here is run through some of the lessons we've learned there that i think fortunately should've been looked looked at by europeans and are only now starting to realize they could have cut down this negative situation because europe as a whole with a few exceptions is neither recession or stagnation. first, each country is unique and a cookie-cutter approach does not work. this is something they didn't want to see. greece got into a situation by longtime mismanagement on the fiscal side. in the case of ireland, it was the banks they tried the sovereign in.

in the case of portugal and we have some portuguese in the audience here, it was basically a decade of no growth in portugal. it was a bubble in real estate that was finance by the savings of one institutions, some of which have gone under. a number have gone on her and a government they basically drove up the deficit and regional governments because it's very important in spain. also drove up with big deficits. so in each one of these, you have someone of a different reason. in the case of italy, debt to gdp of over 120% and growing and the lack of action and trying to do anything about it by the former government came in as a

technician. technicians are great, but the period of time is limited because they have no popular support vis-à-vis an election, whether it be greece or italy. there'll be elections in italy and we'll see how he does. pitching a popular mandate to get these changes really through. i am encouraged in the case of ireland they are making good progress getting back to the market, but there's still a lot of problems. the banks held a lot of paper. they ran up a deficit they are instead they are the latest bailout keys were going to see. each country is different and that leads to what is the same. the europeans did not want to see there was contagion at the time of greece. no matter who you talk to with a

few exceptions, policymakers, they thought there'd be no contagion at increase in 2010. we know there's been plenty of contagion and the minister of finance of germany made a statement to a group of us in tokyo at the imf meetings a couple of months ago when he was asked what was the biggest mistake you made so far in the european debt crisis? and he said we did not understand and accept the idea of contagion. europe has paid for that, so is the world. he is the most important finance minister in all of europe because germany is the biggest economy. i think contagion unfortunately is alive and well.

my friend mario druggies talking about positive contagion. i certainly hope that he is ready. one other thing i learned from my friend paul volker and i learned history in the latin american debt crisis that timing is of the utmost importance because the longer you take to fix the situation, the worse it gets. and again, there has been no sense of urgency retiming in europe up until very recently. the feeling was the policymakers they are, politicians have all the time in the world. and we see what i thought it in the area. so timing really and when you announced timelines, you've got to live up to them and we still don't have important timelines lived up to there. another one is if we want a

program to succeed in a country with austerity or we phone program, we've got to make sure the local populace of the country supports it and that's been a problem day one in a country like greece. it's better in portugal and ireland but still problems there. you've got to get the people support. the only way you do that is save this is going in. it's a tough program, but it's going to lead to growth. the local population in a country will not buy off on it. so it's very important that we have that. you take a look at some of the cases, which i would say right now they're going into their six-year recession. this last year probably ended up to 6.5, 7% growth.

next year is 45%. that's not a recession. that is a depression. if you take on the take unemployment figures they have 170% of debt to gdp is growing. it's very important you convince the population that growth is better. sixth i think obviously it's very important point, which is strong political leadership. if you have strong political leadership come you can sell programs and make them work. but that means you've got to have people running a country, policymakers who believe in structural reforms, privatizations, tax reforms, budget cuts, labor, mobility and the need to be competitive internally and externally. if you don't have governments with plans like that come the will to back to growth anytime

soon. is very important you do that. then there's the tour and this is a problem because at the beginning was no interest in the case of greece in some of these other countries involving the private sector. in fact, it was only when they discuss about the greece called upon the earth which as you know is the european union, european central bank and the international monetary fund to get the private sector involved. it had been that with earlier, it would have been as bad and now they have to do another debt buyback problem of operation, which is still a problem. the idea getting the private sector involved early on in the show this in latin america and asia, asian financial crisis, korea being a good example is very, very important.

those are the lessons learned from all say that the europeans are now starting to utilize in to the fourth year. what needs to be done going forward? that's what is really important. three things need to be done. you need to get the spanking union talked about most of last year actually accomplish because you need to break the ties between sovereigns and banks. you've got to get the banks lend name and we still don't see that sufficiently in europe. and so, you need to get the banking union arranged. originally it was supposed to be and i was a questionnaire on july 26th when mario made the famous historic event that he would do everything possible in ecd to make sure the euro cut through this problem. i was designated as a questionnaire to ask him about the banking union.

at that point he thought the banking union could be worked on in and place in the first quarter of this year. now they've moved into the first quarter hopefully 2014 any still have arguments over how it's going to be done. you need to put a timeline on this and then you've got to adhere to it. but to get the banking system back with similar regulation throughout the euro zone is absolutely necessary. it is key to the recovery of europe. second of all is a plan he talked about july 26 in london my share, which is the outbreak monetary transactions with the ecb would buy bonds from the countries and travel along with the european stability mechanism in research conditions. in other words, certain conditionality.

the ecb will put up that conditionality. they've got enough of the central bank and now supervisor for the banks. it will probably be the international monetary fund. they haven't agreed what kind it will put up and who is going to do it. delete candidate should be spain, but the prime minister told me several months ago he would only go into this program if there is no additional conditional ologies other than what he was taken because he was taking enough to gain. second of all, if the ecb could prove to him by taking meson that the cause of issuing bonds would go down significantly. as you see, nothing has been done there. psychologically thought the market to another program is

fair, but they've got to make a work in show at the conditionality is going to be. the next one is something that is a favorite and i agree with chancellor merkel or germany. this was agreed on in march last year. you need 12 to 17 countries to prove ireland is one of the first to approve it and i end is very important. when the euros that was formed, whose formative monetary union, which is the european central bank and what they call a master treaty. the treaty was to limit deficit in gdp to 3%. just who is the first to break it? germany and france. what examples are countries in southern europe which is broken. she's adamant the fiscal pact go through and she is right because he cannot move forward the euro

zone unless you have a fiscal pact to match the monetary union. a lot of work has to be done on that. these are the three things necessary to get the euros sounds and most of europe back to growth. it's not going to be easy. i think i would just say to you that the banking system in europe and a number of you know it very well, wilbur is getting himself involved in it unfortunately. but the countries and businesses depend on the banking system than they do in the united states because we have a more developed capital market and have the less developed capital market. saw those developing more rapidly because of the bank's problems. the key to getting him back is the banking s