>> make sure that your direct, look him right in the eye, and get to the point. i said i will. the good news is i got the job. but that was my introduction to hank greenberg. well, as you know today we are gathered to mark and congratulate, and if i may say, hank, on his book, "the aig

story." the book i think really underpins what hank greenberg is about. in fact, i like very much henry kissinger's inscription in the back, in which he talks about, truly a major figure in american business in the 20th century, someone who is sensible, strongly committed and does not waver on one's principles in a time of crisis. and i think that it really undergirds and substantiates that. the book is not only a chronicle of his personal story, starting with his departure from being an army officer in the korean war, and his entry into the insurance industry with continental casualty company, but then going on to become the head, and ceo, of aig, bringing it to what

became literally the largest insurance company in the world with almost over a trillion dollars worth of assets. so there's a personal site but there's also the other side of the store, which is a very instructive one and one that he will probe with you especially today. and that is the site of this book which specifically set forth some very profound questions, profound and serious questions about government regulation in the financial industry. and what are the unintended consequences of this kind of regulation, and what is actually as in this case we witnessed the rise and fall of aig, what it does on a personal level to the organization, and in this case to a business that was truly a national asset for the united states. this is a must read. and with that i want to turn it

over to hank greenberg, so please join me in welcoming him here today. [applause] >> i want to thank you very much. i want to also recognize dimitri who really made this organization. i live in new york. case in washington where his organization is, and i decided -- he's the man who built his organization. no misunderstandings about the. i also want to recognize -- [inaudible]. we worked together for many years. he ran one of our companies in the philippines, and i'm delighted that he has been recognized to be ambassador for

the united states. why did i write this book? a couple of reasons really. one, there were hundreds of thousands of people at aig who worked with me for years, and i believe that the story had to be told. how did we get from when we went public, we went public with $300 million of market value. when i left at the end march 2005 it was 180 billion. we had great growth, and it was accomplished by many, many people, and their story had to be told. many of them left a aig, and i will get into that in a moment. aig was an outgrowth of the star companies. this was a small collection of insurance companies that c.v. starr, founder, had put together. and i joined him, and after some

readers i succeeded him. we have added several insurance companies, small ones, and took them public in some big old aig, but the starr companies were never part of aig. they founded aig. they were kept out because they were too small to really put into aig, and i'm very thankful that we did that las. but it made no sense to put them in at the time. we grew rather rapidly. there's several things we had in our genes that made us grow from report to become the largest insurance company in history. we were innovative. we broke with the typical traditional insurance type of underwriting where most of the business was either automobile

or homeowners. it was very little growth in anything that was new. all the large risks were going to avoid to london, and we believe we should be a market in the united states that really could accomplish that. that was on the general insurance site. auto life insurance side we had a small company in the philippines that didn't stay small for long. it became very huge company in the philippines. as we did with other companies are we at a company called alex oh, american life that operate in many companies around the world. so we brought a new vision to the insurance industry, both in products, and innovation and management structure. we introduced something that i had learned when i worked with cardinal kashmir that didn't

work and it was a great company but never worked a most companies had an agency department and an underwriting department. at the end of the they always fought. if you lost money one would blame the other and that went on and on and on. we introduced a profit center structure where one person was in charge of the products, the marketing of it, so you knew who was accountable. there was no blaming anybody else. it was your accountability. that structure was so embedded at aig thinking that the people who understood it and flourished in the state with the country. those who couldn't live under that kind of a structure, didn't want to be held accountable, went off to our competitors. that made us stronger and them weaker, and it worked quite well. is operated worldwide. there was a culture in the company that, you know, coulter

doesn't happen automatically. you create a culture in a company. the culture we had was a winning culture. senior people all work together very well. and the board of directors initially at aig was made up of mostly inside people who were running the company, had some outside people and some very fine people at the time. all that changed -- for the first part of the book, but the show, what we meant to the country overall, there's a couple of vignettes i will talk about briefly. there was a book written on something called -- a book about a russian sub that went down in the northwest pacific. the russians didn't know where the hell he was. they looked and looked, couldn't

find. u.s. knew exactly where it was. and wanted to recover it because it was a nuclear sub. the codebooks were important, and the technology was important. they decided they would try and recover the so. there was a meeting in my apartment in new york with the general counsel of the cia, his deputy, and a deputy of howard hughes. of course, if they're going to do that they had to build a vessel, a very large vessel with a hole in the center that would stoop this sub out. and yet a think about what if the russians decide what we're doing was looking for that sub and knew what it was. what would happen if they fired on us? where would you bring this sub? couldn't bring it to hawaii. what do you do, put on the

beach? that wasn't going to work. and so they had to find some specific -- pacific island that was in u.s. possession, build a board and start there. we provided insurance for that operation. there weren't many companies that would have vision for the skills, the underwriting skills to take on a project like that. i happened to be while the operation was going on, i was in hong kong, actually at a board meeting with aig directors taking them around asia, and i had a call from the agency that the "los angeles times" have broke the story. during the course, so obviously that didn't provide that kind of information -- even if you got,

might gotten some technology out of it, but here's one example of aig's value to the country. there are many, many stories like that. i was asked by a very high government official to go out and meet with president marcos who i knew very well because we had a long relationship with the philippines. marcos served more terms as president, either permitted by law, he declared martial law. as long as he was alive. the country was restless. the revolution was possible. marcos was ill. he was on dialysis. i did go out. i belong who have been the head

of the naval forces in the pacific had just retired, came along with me. also john reed would then the head of citigroup at that time, they had a big operation in the philippines. so i did go out and we had dinner with the president, and i decided i would wait until dinner was over before i -- i think you ought to step down, you know, step down at the top of your game rather than lose -- i'm not going to lose. i'm going to win the election. nobody would believe that. who is going to believe that? you have overstayed. step down while you can. he said no, you're wrong. so what happened? he went on, the election was held. there were uprisings in the country, things went all to

hell. took him out by helicopter and plane and flew him to hawaii where he subsequently died. how many insurance companies that you know of provide those kind of services to a country? there are many, many others. that's not the point of the book. the point of the book was to say how different we were and how valuable an asset we were to this country come at the thousands of people that made that possible. the second part of the book is what happened. we had in new york now a disgraced attorney general, who decided that it was a law on the books of new york called the martin act, enacted in 1921. it was designed to go after bootleggers, dormant law which

he dug out of, one of his staff the dugout your site as to intent -- silent as to intent. so you could accuse somebody of a fraudulent act, he took the position enough to prove intent. so you can go after anybody who made a mistake, something or another, and force them into submission or to trial. and he used that against many companies, threw their hands up and just agreed to settle with them and pay huge fines. i wouldn't do that. and what happened, two things i will mention. one, i was on a conference call with security analysts, and one asked me what's the regulatory

environment like today? is his after now enron when there was a sea change in regulation in the united states. and i said it's like a murder charge, trying to explain the severity of the change in the regulatory environment. and it did change. sarbanes-oxley brought about enormous change in corporate governance, and directors of companies felt vulnerable. and so they all wanted their own lawyer represent him on the board. and what happened is that ceos of companies were really downgraded in the management of an institution. in some cases it may have been good, and in many cases it was not good. when a board was trying to really run a company that's operating in 130 countries, where the management knows

moment to moment what's going on, directors, you know, four times a year, no matter how diligent they are, it's rather difficult for them to have a detailed knowledge of what it is today to run that company. the management of aig traveled constantly, on the road constantly. and our regional executives, their reporting was on a real-time basis. we knew what was happening. i could tell aig results by two days i would know anything i wanted to know about the company. it was a real-time basis. so throughout the quarter we would know how we were doing in any part of the world we operate again. so when i was, and i think the

year 2000, we have consolidated a reinsurance company called transatlantic, that we've started actually and we had a thing about a 40% interest and we went up to over 50% in the year. and i've just come back from an overseas trip trying to catch up my senior managers, what was happening in their areas. and one of them said we're going to show a little bit of reduction in reserves in the quarter. we had about 25 billion of property-casualty reserves, it might be down 50 odd million in the quarter out of 25 billion. now, what does that mean? it means when you have reserves, when you're paying claims, it goes from reserve to pay. that's a normal process, after you pay, you pay that, your reserve comes down. the transatlantic that we had

just consolidated had been paying catastrophe losses, and so they were down about 40 odd million of the 56, and that's an inconsequential number in the insurance -- i'm in, it's a nothing. so when my people say, well, why ddon't we get what's called a finite reinsurance treaty, which essentially says that you get, and this is common in the insurance industry, uk premiums and losses from a finite period of time. in order to be counted as reinsurance, and has have a 1% risk factor. 1%. and so we got 500 million of premium and whatever the number was up loss reserves from

general read which is a warren buffett company. they happen to be our largest reinsurer. so it's logical to talk to them. and i made a call to the president who i knew very well, ron ferguson, and he said he would check to see if they have the proper portfolio. he got back to me several days later and said yes, we could do this. and i was out of it after that. staff took over. we should do about 40 million things a year, so i people follow up on all of that. so warren buffett at a company in virginia that had done a transaction that led to that company's bankruptcy. the two top people went to jail, called a medical malpractice insurance company. so buffett was asked, did you do

any of these other deals? he referred back to the transaction we did five years ago, which was approved every year by the auditors, and gave mr. spitzer all the transactions they had done. so spitzer jumped on this transaction. he didn't know reserves from premiums. talk about baseball, wasn't the same thing and that he had no knowledge of any of that. but he used that to bludgeon the board, and my friend sitting here, mr. combs, was on the board at the time. a stand of person i might say. he and hills, was on the board probably the only two who fought

this silliness that was being presented. the audit was approved for five years in a row, was through their approval. you know, the auditors don't sign off on your end result. that caused a little shaken is in the value of the company. we were aaa rated country, the highest ratings, had a growth pattern that was the envy of the whole industry. and it was clear that spitzer was going to demand my head. and this change in corporate governance that i referred to really became the great example of what happened, the destruction that it led to was just unbelievable. there was a meeting held. one of the lawyers lived uptown,

dick beattie was the head of the firm, and a good friend of spitzer's. he was a jogging partner, and the other lawyer of the firm, which was a corporate lawyer for aig, spitzer had been an associate in the firm. so it was really evenhandedness, you could tell. they had a meeting, decided i should step down. i was going to step down as ceo in may at the annual meeting. this was in march. i was going to remain as the chair for a couple of years to see how the transition was going to work. which i felt was a reasonable thing to do. spitzer demanded i leave them. that i could remain as chair until the annual meeting, and i said no, i wouldn't do that.

they came back and said okay, you can stay as chair. i decided, i had to make a foreign trip to malaysia and china. i do decide on the trip that i was not going to remain as chair. i asked my lawyer to write a letter, my resignation. now, i know that bill cohen asked the auditors, for example, did this transaction affect shareholders equity or earnings? he said no, doesn't affect that. you have approved it for five years in a row. well, we can do that now. we're going to withdraw our approval, and it was clear there getting pressure from the national office, national office was getting pressure from spitzer. they even asked, well, just circle that and don't approve that. had no effect on earnings, so

what's the difference? he wouldn't do it. and so it's clear that there was, that spitzer had one aig over. i left the company. they then paid spitzer $1,600,000,000. that led them to class action suits for several billion dollars more. so you think about what this man did. he went on national television and accuse me of criminal fraud, without ever having and guided me or presenting any evidence -- ever having indicted me or presenting any evidence that i did anything wrong. john whitehead wrote an op-ed in "the wall street journal" come into how can an attorney general do this to one of america's

leading ceos? spitzer called him and threatened him after that. so clearly what happened in corporate america is that boards lost enormous power. ceos lost enormous power. boards took over more and more responsibility. now, is that good for american business? is that good for the economy? it's one of the reasons i have written this book. because i do think that we are at a crossroads. i think it's disgraceful what they have done. i would not settle for a dime. they have tried to get me to settle any number of times. i will not do that. right now we're in the court of appeals that, the highest court in new york to determine whether or not the martin act as currently written and currently in use is constitutionally

proper. it can't be. it can't be. you have to prove you did something wrong and you have to prove intent. i was so far away from transaction, the justice department looked at me for five years, for five years, and he did nothing improper. nothing we can do. that led to the first part of aig's destruction. so after that, so now you go on, aig is coasting along on its strength. but all the risk management controls that we had in the company were disassembled. we had an enterprise of risk management system, one of the first put together.

and it's been claimed aig had so many different companies and was so diverse, how could anybody managing? diversification is good, not bad. of course, you have to know how to manage it, but diversification is a proper strategy for a company. we at the geographical diversification and we had business diversification. so if one thing goes wrong, the other carries it. it worked for us for years and years, decades. and so to claim that diversification is bad, you should become a simple insurance coverage. those with a simple insurance companies, look at their records. they are terrible. there's nothing wrong with this strategy, something of boards of directors telling companies wauconda strategy they should have. -- what kind of strategy they should have. is that what one in the economy? that's just plain wrong.

so that issue goes on. i'm out of the company. the risk management structure rates down to i had hired -- i chaired the new york fed for a number of years, and one of their top risk managers left the fed. i hired him, and he put together a great risk management structure for the nine insurance entities that we have. we have the second largest leasing company in the world. i see that was just sold to china for about 20 odd billion dollar loss on their books. great step forward. but we had a great, we had a great risk management system. that was abandoned. and they began taking on more and more risky, called cdss, current default swaps, covering

the cdos of packages of mortgages. would dwell on that for a moment. in cdos were put together by an investment banks and banks and supposedly had been rated by the rating agencies. you have to declare this is a aaa rated portfolio. before you write a credit default swap on a comic you want to know what you're ensuring, eventually. most was declared to be aaa, that they were, you know, had very good mortgage content. they turned out to be triple garbage. and so why would aig respond to collateral calls from those who have placed those with aig? but they did. they kept on providing

collateral. because aig lost a aaa rating. they weren't required to put up collateral as long as they work aaa. they have been aaa for as long as i can remember. so they kept on coming up with collateral. the problem is there was no price discovery on these cdos. there was no market to trade on like you would on the stock market. so every broker-dealer had a different price for the same cdo. so why would you respond to collateral calls? since you couldn't get the same price from every other, why would you respond to them? i wouldn't have. i wouldn't have responded at all. so when things got hot and aig was running out of liquidity, they weren't insulted. they have plenty of solvency.

they had close to a trillion dollars in assets. so it reached a point where aig needed -- the markets all froze. you couldn't borrow any money anyplace. so by then there was a man called william stock the came from citigroup, was running the country. i know him quite well. we were friends and i got help in any way i possibly could. so he calls the new fed and says i need access to the fed would do. they refused. and he kept on badgering. let me get a broker-dealer license that could give me access. they refused. goldman sachs got, they got a bank holding company license, morgan stanley got a bank holding license. they got immediate access to the fed window.

there was an insurance company in hartford that said go out and buy a small bank for 10 million those, which they did. they had access to the fed window. aig was denied access to any government funds. finally, paulson calls william placke, and says we'll give you one plan, it's take it or leave it. this is the second day of the treasury. said will give you $85 billion at 14.5% interest. anybody was borrowing from the fed window is borrowing at about 1.5, to 2%. and what we want, we will take 79.5% of the company. and incidentally you're fired. i'm putting in somebody else. somebody else happened to be and

libbey who was on the goldman board. so he asked william to sign that agree with yo you just told theo is that i'm not going to sign it if you just fired me. so ed liddy was on the goldman board signed the agreement, resigned to the goldman board retroactively three days later. i've never heard of the secretary of the treasury of the united states calling a company ceo and firing him. that's the job of the board of directors, not the secretary of the treasury. and to have a goldman director do that. because of the $85 billion that was aig got, 60 billion went out the back door, backdoor bailout, 14 billion went to goldman sachs and others. and aig was required to sign an

agreement that was a total release to the counterparties, and they were saddled with a gag order to not talk about it. now, that's what the american system was like to be. we've got real problems ahead of us. during my term, we were nationalized twice. once in iran and once in pakistan. we got compensated both cases. i went to the world court, and we got compensated on the iran issue. and pakistan, i met with president bhutto. he nationalized us and the compensated us for that. if this what i just described happened to aig have any third world country, i would be down at washington pounding the table

about what they had done to the company. and we're doing that by suing the u.s. government. because what happened should not have happened. so that's what the environment is like today. we have, boards have taken over companies. ceos have lost a lot of power. i'm not saying they were all wrong or all right. all i can say is my experience with an aggressive states attorney general in new york that started that process, then happened to enron that led to the changes in the entire environment. we've got to find our way back to a reasonable regulatory environment that encourages

business, not discourages business. i'm going to stop here. >> quite a riveting story, and also one that clearly of great concern in terms of the points you have made, and what impact these kinds of developments and circumstances will have and have had on the american economy. we are going to invite the audience, this very distinguished audience, to pose questions. but before you i would like to begin, take up on a critical point that you had on corporate governance. you'vyou referenced sarbanes-ox. clearly dodd-frank is out there. what kind of specific advice or recommendations would you have about what's the right balance on regulation at this time? i mean, you have a dodd-frank document that is several thousand pages, and most of the people say they have never read it. but what is the right balance? what is your advice?

>> well, i think a company community decide what different degrees of -- degrees of corporate government based upon the size of the company and the businesses that it's in. if you have a global company, for example, that in different types of businesses, you have to rely on management. because i don't care how good your directors are, and less they're going to be full-time directors looking most of the time at the company, what are they going to know? they know what you tell them. and if you don't have confidence in the management, get rid of the management and get a new ceo. yes, you have to report to the board, and not only report to them, they have to have the information that they want and need, but you can't have them

trying to second-guess the management of the company. if you're going to second-guess them, get rid of them. we never have that problem at aig. we invited the directors to come to the senior staff meetings that we held. they get sick in and year firsthand what was happening -- they could sit in and hear firsthand what was happening on a day-to-day basis. you don't hold anything back from the directors. it's got to be a confidence factor, and you can't frighten of the direction by having laws and regulations that make them have to do things that they normally would not want to do. we've gone -- the pendulum has swung so far in one direction that the relationship between the board and ceo has become strained. 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. so clearly we were doing something right. look at the outside factors that brought this on. in aig's case it was spitzer, and he was, all the outside directors wanted their own lawyers. they weren't interested -- they were interested in their own self-esteem. that's what became obvious. we better look at some of the attorney general's in our country, make sure they're doing what they're supposed to do and not what they want to do. attorney general's that use that office just to promote themselves, this's successor was attorney general, cuomo.

they got a guy, schneiderman, he has ambitions as well. is that the right kind of structure that you want? so corporate governance has changed. the pendulum has swung too far in one direction. i think we have to get back to that and have a hard look at what we will. look, the government, go back to all this started on the real estate issues. fannie mae and freddie mac were urged to issue and by more and more mortgages. the quality was secondary. geithner was the head of the new york fed. citigroup, right in his backyard. didn't he know what was going on at citigroup? if you just find that out later? how did he find out?

he was supposed of examiners there all the time. where were they? and so there's a lot of people, take the sec, the investment banks, goldman sachs and morgan stanley and others, in lehman. 40 to one leverage of capital. why would you let that happen? they had six months between bear stearns problems and what happened afterwards. there were 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 who had responsibility. >> we have another question. let's go to dov zakheim who is on the board here. >> hank, a scary story.

probably the scariest part is the fact that the auditors for five years -- [inaudible]. what do we do about that? if the auditors are going to be subject to the pressures, we have a huge problem. >> of course they are. look at what happened at enron. the auditing firm went out of business. one of the biggest and best in the country. so auditors are frightened to death. the least thing to blink, and they are out of there. >> what do we do about it? >> we've got to bring the pendulum back to the center, and not the wild and think that every company is somehow crooked. that's not the case. >> let me pick up on the point that you made in the first

question. you were also focused, and, obviously, you had the largest, you at the helm of the largest insurance company. what advice would you give to the smallest companies? and are you concerned about these development and what it's going to mean for the american economy? >> of course i'm concerned. i'm running a company now that is private and it's not going to go public. [laughter] and we are growing nicely, and we are expanding internationally, rapidly it it's a great company. it's going to be a greater company. we have great people, right culture. everything we did in running aig. guess i'm concerned, paula, as to what has to be done. we need some wisdom really at the governmental level, not to

overkill the golden goose, which is corporate america, by regulating it out of business. that's what we are doing. we are going to have such more and more regulation that, you know, you throw your hands up and say should i be incorporated in the united states? there's certainly a lot of states you want to be incorporated in. i would recommend to any company have your corporate headquarters in new york as long as they have the martin act. you would be crazy to do that. >> let's go to the filipino ambassador to the u.s. >> as stated, i am associated -- 16 years i was ceo. [inaudible] [inaudible] they had

their internal audit department. i can't understand is how the financial product could get away with booking $440 billion, when aig spent $104 billion, which is four times. what happened to the risk management? what happened to the audit committee of the board? these are the questions i can't really answer today. i did ask ahead of us think he said he did bring this up to the

ceo. >> what happened is very simple. they disbanded the risk management systems. the guy running aig financial products told sullivan, we don't need the risk management people. we have our own. and sullivan took down the risk managers that were supposed to be looking after aig. in fact, i would tell you, it's in the book, the auditors went to the then ceo, bob, and he said sullivan and his number two, cfo are incapable of running the company. they did nothing about it. >> we have three questions we're going to take. let me begin with dmitri.

>> life is stranger than fiction. and mr. greenberger -- [inaudible] >> we are very grateful. eliot spitzer, we were in the building next door. and then mistress pictures company -- mr. spitzer's company was -- very soon began to break down. [inaudible] people began getting stuck on a regular basis.

[inaudible] that was all not enough. they took half of the floor where our officers were, and then cooperation, bathroom, halls, you sweet. and mr. spitzer began charging for the common areas. and was also charging us. and when we brought it to their attention, they said, well, you know, that is the way it is. and when i asked was mr. spitzer aware of our concern, we were told that mr. spitzer was well aware of our concern. but it still was the way it is. but mr. spitzer indeed was aware

of the concern. let me say he is a horribly dishonest man. and the other point i want to do, when i look at aig, when i look at the thousands of people worked for you, and coincidentally became millionaires because of ag stock and because of what was done under your leadership, and we know what happened to aig stock after you left, the great american middle class who really did welcome because they were a prosciutto with a great company and downgraded. my simple question is this. [inaudible] what we need is to allow our american companies and american people do what they do best, and what made this country great. and what i'm trying to say --

[inaudible] but the bottom line is what in my view, total power, it's very slowly -- [inaudible] i know it from professional experience. >> any comment on that? >> of course i agree with dmitri. look, we either have to get our house in order and have a better balance between regulation and the freedom of the ceo to run his company, and the board of directors that is supportive, not antagonistic through management of the company. you can't have that. it won't work. >> it seems to me it's almost impossible today 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. is this a growing trend? as it always been that way, or is the reporting getting better? >> i think it may be a little bit of both. you know, i'm not sure that this so-called hanky-panky as you talk about, turns out to be as bad as it sometimes being reported. you've got to be specific in each of these things that you read. many of them turn out to be not improper at all when you get done with it. but what happened was you have an aggressive regulator who was trying to make a name for themselves. he will bring in action. he may lose it three '04 years later it in the meantime he moves on and has a bigger job. we have a more complex world.

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 wouldn't, i don't think that's, i wouldn't come to that conclusion as you have. >> our final question. >> mr. greenberg, you talked about trying to get this pendulum to swing back, and after your harrowing story, that would generate a lot of sympathy, but i have to pose the question, what if what we're talking here, this abuse of governmental power, is really coming further and further embedded in our system and can be very difficult to get any kind of a pyramid, any kind of a pendulum. by way of illustration i would note on page 232 of your book you talk about the causes of the

financial crisis in 2008-2009, and to talk about the government policies. guitar but interest rates held to low for too long. here we are not to be used later were interest rates are being held very, very low for a very, very long time. are we learning anything and are we attacking the american dream and the economic system? >> i think we are. not only are we holding interest rates too low, we are printing money every month. they are printing hundreds of billions of dollars monthly and will pay a price for that at some point. there will be an inflationary boom that will scare everybody around. what's going to change? we need a leader and people recognize that individual as a leader who can bring about change. it won't be easy. we have to change the attitude in congress.

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

half-and-half, half inside, have outside. then they passed a rule at the new york stock exchange after being pressured by government agencies, no, that wasn't going to work. you have to have more outsiders and insiders. then he took the next step and said the only ones who should be on the board really is the ceo. and incidentally we want of a meeting of the board without a ceo. what the hell do they talk about? they don't know business. what are they going to talk about? are they wearing a right kind of tie or what? and so that's got to change. have got to have confidence between the board and ceo. once you have lost that, that's going. you might get rid of the ceo or change the board, one or the other, or both. how are we going to change it? it's going to take a leader in

the white house, and congressional leadership, to bring about a change. what made america great? it wasn't being overregulated. that's not what does it. you want regulation but proper regulation. and you a people who are regulated you are not just determined to find fault. take a look at the regulation in the small countries, city state in singapore. the regulators are very bright people, and how did they get bright people? they pay them enough. so you attract very good people. we've got to change our structure. because we are killing the very things that made us great. i wrote this book not just anything that them hoping to get

out of it. i hope to awaken people to what the hell happened. we can't have that keep going on. what other going to look like? >> well, han hank greenberg, try an icon of american business. this book, "the aig story," is a must-read for those more concerned and care about the unintended consequences of governmental regulation on industry, financial institutions and the future of the american economy. thank you for coming today. [applause] >> this morning to heads of state from mull ali, sierra leone and cape verde it will discuss the economies of the countries and democratic reforms in africa. the u.s. institute of peace host this event and our live coverage get started at nine eastern here

on c-span2. letter, president obama will travel to florida to push for jobs and the economy. he will focus on infrastructure and port funding at an event at port mina. watch live coverage at 155 eastern on c-span. >> william rhodes worked in global finance for citigroup for more than 50 years. earlier this you talked about the economic and financial challenges facing europe, japan, china, south korea. he spoke to the japan society in new york and is introduced by the president and ceo of mcgraw-hill publishing. [a >> okay, first of all it's great to be back at the japan societys and we enjoyed our relationship that way. tokyo for the mcgraw-hill companies has been the headquarters of our asia pacific

operations for 25 years now. we enjoyed a terrific relationship in a lot of a different ways. one of my colleagues is with met dougdiff peterson, who just joi us, and he is heading up and wei welcome you. and doug has lngived all over te world, and as such has lived a o quite a bit of time in japan itself. i so it's great to be with yout'sg tonight asreat well. let's see, in terms of this whole notion of the book, you know, by the way is a very modest title, "banker to the world," when i heard of this and i'm a very close personal frienf of bill, like your buddy in thim room is -- like everybody in he this room is, and he was talking to me about this concept of what he wanted to write about lessons of debt crises and all of this,

i just knew that it was right in our sweet spot what we needed to spot andto do. so we're able to convince them come so now i'm not talking to you as his friend and talking to you as his publisher, and we have this decision that we are going to this book, and webl di. now, making wasn't even dry onwe this book, and henry kissinger came out and said this is a must read for anybody in any section and any level of the financetioa ndustry. no sooner did he do that, okay, paul volcker came out and wanted wo make a comment about how this is a must-read, and it was a must-read, and he wanted to pute -- a forward into the books we added a forward into the boat. then we saw it again when steve forbes, another good friend, you know, was working on a europeant crisis at the time and was ad trying to make sense of certain

aspects, and he came out anda said this is a must read for angela merkel, nicolas sarkozy and david cameron.cameron. .. 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 system. all the things i mentioned are very important.

the european central bank has put in three months or 1%. they did that a year ago and now they've detonate a web cms and the collateral necessary to borrow the european central bank. the banking system has been shedding assets because they have to raise additional capital and they've been concentrating more on that in one day and, unfortunately. a lot of you and mr. amara where that. some of the beneficiaries have been japanese banks have been buying portfolios and investors like wilbur on the market. but we've got to get the european bank back to lending. that is key to what i've said here. then i would just say a few words about the ken firm timelines to do this because if you don't have firm timelines that won't happen.

.. japan, korea, and china. i think it's very important that

this go aheaded with second and it third largest economy and the tenth largest economy, korea, in the world. he said he wants to move ahead on that. i hope so. of course it's cloudedlied by the disputes. the other is something and trade as was mentioned is a subject that terry shown tremendous leadership in over the last decade. we now have something new on the table not so new announced almost two years ago which is a transpacific partnership. i think japan should be part of that. it will take a courageous decision because there are a lot of people entrenched interest in japan that don't want to be part of that. ii think if he can do the things we talked about before, you know, he's an stimulus pushing the bank of japan on the monetary stimulus. it he can do the structure reform i discussed, and push on these two northeast economic

block and a trade agreement, i think it will be a big help to japan on the export. japan is dependent on the export. you need to stop the hollowing out of industry and japan moving elsewhere. at the end of the day, as we know there are major territorial dispute with china and korea. i think i looked favorably at the new prime minister i'll be sending a representative to korea to talk with miami -- ma'am park, the president elect of korea, and hopefully something can be worked out in this area. as you know, the senior delegation lead by kurt campbell is basically in japan and korea right now trying to see if the united states can have a helping hand. that's the u.s.' two by allies

in the north pacific. the territorial dispute with china, i think, it's going much more difficult, but japan, as you know, is one of the biggest foreign investors in china. it's not just japan that suffers on to this also china does. i'm hoping when the president basically takes over in march, that he and prime minister can work something out. a lot of voices in japan and china, which are very militant. it's not going to be an easy job. what i think is very important and for the united states this is most important to get this trade moving and get our allies working together. and so i tend to be an optimist like terri, and that's why we work together on the trade

deal. it's been a long, difficult battle and korea and latin america and the others. at the end of the day, i think it's worthwhile. i hope we'll be seeing a new dawn in korea in this regard. so we have a new leadership in china, new leadership in korea, and new leadership in japan. hopefully they will be able to see some of these things through. i think it's very important not just for asia for the countries but frankly for the world given what is happening elsewhere particularly in europe. having said that, terri, i think we should have our little conversation. thank you very much. [applause] [inaudible conversations]

here is the book you -- [inaudible] japanese. >> and the book, bill, is in portuguese and simple flied china, korean and now japanese as well. i think that, you know, the dissertation we just heard from bill, you know, is so lucid and straightforward that you sort of, you know, grab this motion of why didn't we start implement on some of these things quicker? you know, and we seem to get in to such complications. so the first question, bill, i think that i'd like to ask you, a couple of questions and let's throw it over and go any direction anybody wants. because we were talking about, you know, the lack of coordination and cooperation and

relationships and that people were goings especially in the european crisis and the like. now you have the long standing relationship with walter. can you talk about that relationship? and from the book's standpoint, who are some of the world leaders that you dealt with that had the most positive influence in terms of relationship development that n in getting things done? >> he was an internationalist first class and he expanded the cityback -- bank significantly overseas. he was a great friend of japan. he used to go japan regularly. i think he, along with paul volcker on the public sector side were major mentors of mine. i think it's fair to say you have seen that walter was the greatest banker of his age.

that's what city is going back to at this point in time. we have a lot of former citi wangers in the audience that agree with me. but as far as -- and, you know, working with walter, he's someone that got me involved in all of this stuff, and john reid, later on, were both, i think, significant world financial leaders. as far as having talked with a lot of people, i think meeting mandela, having dealt with a number of cases, spent an hour in 1980 with castro. he wanted my advice in how to structure the cuban debt. he said we can speak to you because we nationalized the foreign banks and you offset on the reserve. we are kind of even here. this was in nicaragua was running the -- who is back again

running nicaragua put us together. and certainly fascinating there. i can run through so many people. i had to one of the session with mandela, i was asked to tell, the then president of zimbabwe that he used his time up. he wasn't very happy with that, and because of that, i was able to do that our secretary of commerce, ron browne, asked me if he would chair at the 50th anniversary of the united nations, the africa lunch of the u.s. was giving at that time. i did. he said, look, if you can do that. you can do take anything else, bill. so there are a lot of people, i mean, you mentioned secretary of treasuries here in the united states certainly the various heads of the fed and central bankers, i think worldwide. i think one of the things we need to see more of getting to the point that i know you want

me to talk about is we need the leadership. we haven't seen the tough leadership in europe that we need to see to get out of crisis. we were lucky in the case of the latin american debt crisis that we had paul volcker at the fed, and jack at the international monetary fund. two of the most outstanding people public sector people i have ever known. and aye the world people forget now is so long in the early 1980s was about to go under. they compared it to moving deck chairs on the tie titanic. that worked out, i think nick brady with the brady plan. we had real relationship, and i think that's what we're missing in many part of the world including europe where you -- i must say at the ucb mario and before john have shown that. but a lot of policy makers and politicians have not. so i think we need see that

worldwide. we need see it in our own country. just witness this discussion that went on whatever you want to call it at the end of the year. and we have sort of the best to come yet. because we have to decide on the debt ceiling and spending. and so this is where we need leadership which we were used to. i tend to be an optimist about the united states because gave up on vietnam. on the watergate crisis and we came charging back. i think we'll do it here. we but would be nice if we didn't have to go to the cliff each time to do it. >>well, you know, and again when you start talking about the kind of relationships and kind of leadership, you know, we still seem to have this atmosphere where people talk more at each other than trying to find some common ground some common goal in getting it con. you broach the goal of growth

and jobs and that's the answer to all of this. you also talk a lot about temptation. we all, you know, sense that if the european situation got worse, and they're representing 23% of world gdp, you know, the effect that it's going to have on the united states, india, brazil is going to be real. and so with 40% of their exports coming in to the united states and so forth, you know, all of the sudden, you know, we started seeing the effect of our own growth, brazil's growth. india's growth. -- china. >> china pee we the united is under 2% growth. if we don't resolve the debt ceiling and the fiscal order you were talking about, you're going have that weight on it. even though you proposed a lot

of hope with japan in term some of the political leadership, they are still a negative growth with 7%. >> exactly. >> so now you're up to 50% or so of world gdp that is a drag on the economy. how do you look at, you know, the broadest sense of connotation as it relates to emerging market growth and developing country growth with 50% of world gdp possibly in that situation? >> i think the trade figures tell it off. whether you agree with the imf figure on growth or not. i think the trade figures show what is happening. there's no doubt picking one of the countries that was mentioned was china. china, i mean, for the last twenty years has been double digit growth. that's year they had one of the worst years in final memory. we'll see the figures coming out. it didn't get below 7%. when you move from double digit to 7 something percent and the

major driver is the largest export market is europe, and they didn't believe that europe would a. get to the problem, and b. take so long to get out. the second largest market is us. and so they help get the world out of the great recession by this tremendous stimulus program. you're not going see it again in china. so i basically think that you've got have things worked on at the g20. the only g20 summit -- i attended two was london the world was going to have great depression not the recession. they took certain steps to move ahead to stimulate growth. so i think that this next year is going to be tough, and i think you have sense complacency in europe. it's interesting one of the real drivers drivers in brussels is -- [inaudible] and he came out with a statement the other day saying he's concerned about complacency.

i think he's right on. you have the people saying oh ever since mario made that comment on july 26 where the markets have gone, you know, the markets can be right but the markets can be wrong. i think not having been able to do the three things i said with a fixed time line, basically said how long is europe going to be stuck here? and so i think that the -- this is a real question you mentioned india also. indian yafs up 8.5% 9% growth. dropped below 6%. when you have the major world economies where they are. i think you need a good doze of not only fiscal stimulus and monetary stimulus. you center to back it up with structure reform. i think deregulation and i think that's really key for the world to get out of this problem that it's in today. because we both agree, it's all growth and jobs and if you can't

show the path -- that's why i use brady plane. plan. it gave a pathway to growth. korea, 1998, kim jong came to power. the man on the left. the last thing he wanted to do is sign an imf agreement. and he told me, look, i inherited this, you got my full backing. do whatever is necessary. who are the first ones to sport -- support me? the japanese bank. they had 40% of the debt. i got the american and european banks in line. there you have the political will do it. brazil, fernando, 1994 the country had been in moratorium i don't know how many restructuring. he decided enough is enough as finance minister. he said we have to get the debt deal done.

we worked on it and got it done. within hours he he announced the plan. which took brazil out of hyper inflation and it's been up and down since. it's a different brazil today than in 1994 with fernando. and the last example i would give is turkey. the prime minister in 2001, my friend was vice president of the world bank was called to be finance minister. i worked with them on the particular plan. we have to convince the u.s. treasury to support the imf. he put in reform and told the people of turkey, look, you have to take this austerity for x period of time. we will lead you to growth. he did. look where turkey has come after that. i use these three examples. one in the middle east, one in latin america, one in asia where they were able to do this. it was an example of leadership to do what is necessary.

i mean, in korea, we got this done in a couple of months, and four months later they were raising five $5 billion in the international market which is lot of money. they took a decision and went tat. >> there's a lot of things you were talking about the leadership, the political leadership, the timing, and the banking union getting the banks back to the lending and the fiscal pack in those components on that part. you know, just as a side. in talking about another country, russia. you know, russia desperately wants reintroduce itself to the rest of the world and not some of the ways they have been. they have the opportunity with the g20 coming up in september. crystal ball -- did you see anything from a coordination standpoint from the go, 20 coming out of this?

do you see russia's image changing? >> i think it's a big opportunity for the prime minister to show what could happen in russia. we'll have to see because they're sitting on top of the oil reserve. you know where the the price of oil is. there, as you pow, there are a lot of problems. we have to see whether, you know, russia can show that it's taking some of these reforms that needs to take, and we'll see and this is a perfect opportunity to do so. so far, i think, as i said, the only g20 meeting that really did any positive of the one in london. i give credit to gordon brown that was his greatest moment, i think, at that particular time to do it. you had well-organized meetings. i was in korean there was nobody organizing like the koreans.

it was a great organized meetings. wars and, you know, nothing much came out of it. then the one in france it rained the whole time and it was rain on the parade because it was a disaster and nothing happened. there was a lot of nice intentions comes out of mexico in the last g20 it's not clear what we'll see. one of the areas we didn't get in to here is the whole question of regulation of financial institutions. and this is one of the mandate of the g12020 the financial stability board. if they don't get this right and gate level playing field worldwide. we'll have more regulatory arbitrary than before. it's a worldwide problem not just a european problem. here in the united we have dodd-frank, in england we have vicars and in europe we have a lincoln report and all sort of

variations. switzerland has the whole series. and the whole idea is that the g20 through the financial stability board and the committee were going come through with a series of amendments and raising dam and liquidity standards on a universal-global cooperative basis coordinated basis that would avoid what happened in the great recession. so the next one is not worse. the record is mixed. >> let me take a break here and let's open it up. let start right over here. >> jim, rutgers university. lots of economists, such as your friend rudy, from m.i.t. you mentioned are believers that competition is the hallmark of a country thriving, growing, including jobses, et. cetera.

lots of economists, even before the euro was instituted argued they needed more competition rather than what a coordinated currency, et. cetera. they predicted a bad woes for europe under the euro. you mentioned a lot of the problems on the flip side of competition namely regulation. give us your perspective in terms of regulation and competition in the euro and government coordination. >> i think it's a good question. a lot needs to be done there. >> thank you. >> and i think that at the time

that the euro was put together, and my good friend, professor at colombia, nobel prize winner had different views of how it was going to work out and what happened. that was not in his idea book because you've had regulation there. you need more deregulation. there's no doubt about it. in order get more competitively take a case going back to greece because when you take a look at the unemployment rate between, you know, 58 percent --% of youth under 25. it's incredible. even in the great depression here. we didn't have that. overall unemployment of 26%. so you need that. i must say that victor, the

finance minister in portugal. we have a portuguese expert sitting here who is a professor of economic in portugal has tried to really drive that home. the need for portugal to be more competitive and they have made a lot of progress there. not enough but i think one of the things and i'm hoping we see out of all of these countries whether it be portugal, spain, italy, all of the countries they mentioned here that we get more in the way of competitiveness. take a look at france. now france is second largest economy in the eurozone, and it's very important that you see some of these reforms that are talked about happen. we're going to get france in stagnation if not recession. go back to -- as i said there's a japanese equivalent to but the chinese expression, this is a

great opportunity for the europeans to do correctly what they haven't done before. now, whether they'll pick up on it we'll see. but certainly just like ben bernanke can't solve all problems here in the united states, also mario can't solve the eurozone's problems either. so i think the point you're making of competition are key to being worked on at this moment. you can drive a lot things through now in the eurozone because of the economic situation. >> will there be a euro in ten or twenty years? >> i think they'll make it through. i think you'll question who the members will be. i think, obviously, in the case of greece, nobody wants to do anything. you have elections coming up in germany in september with chancellor merkel, and everyone wants to hold it together. but at the end of the day, it's going depend on whether greece

can implement the program they have agreed to. and i think there will be euro. the question is what it looks like and what the membership will be. originally there was a big school of thought saying that the euro should have been the northern tier of the motorcycle. -- membership. the next year or two i think are really key. and the idea of complacency. i had talks, actually, he was good enough to buy my book last year and read it. we discussed it, i was with him a month ago and i think he's one of the more thoughtful people in the bureaucracy in brussels. i think that when he starts talking about complacency. i should say younger came out also and talked about his concern on the value of the euro on the export. i think we are far from a lot of members of the marketplace are

that, you know, the worst is over for europe. don't worry. it's only a matter of time. [inaudible] >> did the u.k. make the right decision in being a member? >> well, the prime minister at the time certainly thinks so. adds you know, cameron osborn is young mentorrees of his. you argue that back and forth at this particular point in time. the question is if you had a referendum in the u.k. today, which you're not going have probably for another couple of years. what would the vote be? most polls think it would be to poll out if there's not some sort of restructuring of the u.k.'s role. certainly without the u.k., eurozone can don't exist. i think chancellor merkel

certainly wanted to keep in the e.u. because they never went to the eurozone. they are an act i have member of the -- active member of the e.u. she wants to keep it. >> time is getting a little tight here. let's go two questions very quickly. right here and right over here. >> do you think it would enhance economic opportunities of asia if we had more asian members of congress? >> that's an interesting thought. of course, if we had some very senior members in fact the senior senator just died who had tremendous clout there. you have seen more and more asian members elected male and female. i think you'll continue to see that, you know. [inaudible] >> well, you have, i think there

are several. so you one who is a korean one korean-american, and i think you'll see more going forward because you have a lot of asian-americans who are mayors, you know, in major cities, and i think that the answer is, i think would be very helpful to have more asian-americans as members of congress. of course, you had a governor who is now the secretary of commerce who is now our ambassador to beijing. if you believe the chinese -- he's the most popular ambassador of any in china today. so popular that some mens of the government think he's -- the chinese government think he's too popular. ..

>> at the time of the formation of the euro, the three tier euro was considered not adopted. and unfortunate result of this has been that the mediterranean countries so largely dependent on tourism has become -- they're really not competitive. is it time to reconsider the three tier euro and that an important fix would be very thbstantial devaluation of thed mediterranean countries? and that should result in job jb growth, economic growth simplyot from nearing increasing tourism.

>> i think it's fair to say that historically, when i talk about latin america also about the asian financial crisis, korea is an example, indonesia also, is that one of the great aid ahead was the ability to devalue and to push exports. and what do we have? we have it at one of its strong points today which is why i'm an advocate for the european central bank to drop interest rates which i think bush the euro lower and health on exports. i think it always things outlwat there. that's the biggest argument like greece. because their currency is he misaligned for a country likeen greece. mi i do not see that you're going to have three tier or two-tier system. i think if you are really goingh to have a new alignment it will

be and i think some numbers wille there and others will not. i think what is important, and i think that the policymakers are realizing this as well. you cannot just sort it out. you have to have plans for growth. that was the message that i took to portugal when i was there. in june of last year. and portugal has increased exports stay substantially. evaluation will won't give you that because you have to have deregulation. those are even more important. because it only lasts for so long. where is if you make the major changes, and this is going to be

challenged. you had 14 of these stimulus programs. none of them have really done the job. you have to bundle them up and put them through. that is the best way that i can answer you. i think that where europeans are falling down goes back to the question. he did not put the emphasis on being competitive. nor did they drive the fiscal side and they allowed it to happen and look the other way. now they are paying the price, but so is the rest of the world. >> ladies and gentlemen, i am afraid that i have the bad job of saying that i think we better hold it the