sector and imposing obligations on those who take money from the investing public. that's what we need and we're not getting it right now. >> ken, i want to loop you back in. i don't want this to just be focused on regulation. but also this is supposed to be looking at the culture of wall street. i want to talk about executive compensation. not necessarily tied -- when taxpayer money is involved. but you sat down with executives from citi group, from gm. what was your take away? >> very interesting. i started this job thinking that discussions about pay would involve material gain, right? corporate executives do you really need another car in the garage? do you need a summer home in terms of economic uncertainty? do you have to send the kids to private school? that's not what became very

emotional. what became very emotional is pay as a surrogate for self-worth. self-evaluation. mine fineberg why are you cutting my pay? my pay is a barometer of my success relative to my competition. and that gets very, very emotional because it's not a debate about how much money or compensation is enough. instead it becomes very, very personal. it mirrors what an individual feels he or she would accomplish and it's very emotional and you're getting into a discussion about how that individual judges his or her performance in the free market and that becomes extremely emotional when you try and use the heavy hand of

government to intervene and regulate that amount of money. >> but then you're thinking in trying to sort of maybe move away from high risk immediate reward sort of action is to tie executive competition to longer term performance within the company. >> that's what we try to do. we try to set packages. actual composition by saying you will get modest guaranteed annual cash under $500,000. any additional compensation that you receive will be in the form of salaryized stock in your company which cannot be redeemed immediately. but must be held 1/3 for a year, 1/3 for a second year, 1/3 for a third year. any additional composition will

be tied to the ability of the company to repay the taxpayer. that was the formula. not without controversy, i might add. very provocative. but we felt that was what congress wanted to see in putting treasury between a company and its key executives. >> could that work with shareholders? could that work? >> i guess you've got to go from company to company. that's the other thing i learned. when it comes to compensation be careful about painting with two big a brush. every company has different approaches to culture and a different approach to compensation. when you say shareholders or corporate executives, which company at which period of time let's look at that company and delve into the way it sets compensation. >> again, a lot of this is about balancing risk.

i want to move on to the volker rule. >> before you do -- >> sure. >> if i can ask you one question. how would you feel if the united states government tole you that as wonderful a job as you do, the right pay for what you do is $75,000 a year. that's it, flat. i think you would object to that. and the reason i say that -- >> we're operating under the assumption that i needed a bailout. >> i respect that. what we're now seeing is government trying to extends its tentacles. if government pads its own people wisely. i might have more faith in helping businesses do this. the business community has fallen down on the job. they never looked at compensation the way they ought to as if they're spending somebody else's money.

and they decide what it is we want for the money we're paying. and then assess what we got for the money we're paying. until the business community do that because the outrage is enormous. and businesses have to be aware of that problem in my view. >> it hasn't yet but it is. we're seeing a lot of companies now where these votes on say on pay are either getting a material or a large minority. of course, they don't have any quote legal value. but if you're running a business and you're a director or you're trying to keep the board of

directors composed in a way that helps the shareholders youth bedder take notice of what these votes are saying and you'd better figure out how to allay the outrageous. occupy wall street is pure outrage. i put that to the side. there is a lot about rage about the fact that people aren't doing the homework. i have no objection to people being paid huge amounts of money if they perform. if they're not performing i think it's not american to pay them a lot of money. >> how do we measure performing? >> that's -- >> short-term, long-term. >> that and see the problem there in your question is perfect.

if the business community does not come up with its own standards eventually government will come up with a standard for it. i'm not an advocate for government doing that. boards will have to decide, i pick up what kenneth said. different companies may have different cultures. their industries may warrant something differently. how do we measure what we're getting and how do we reach agreement with our executives as to whether they lived up to their expectations or not? that is a job for business in the first instance and in my view business is not doing its job in that regard. >> jumping off from government creating those standards, what happens when government creates those standards and then they continue to evolve or be pushed back or potentially be repealed and we're in this state of

uncertainty transitioning to jill and the volker rule, there's a lot of criticism that it's being watered down pushed back two years. it's narrowed the definition of who's a swap stealer. who's your response to that? is this being watered down and is that bad? >> it's not simple and you see that about the comments and negative comments that are submitted. it women more complicated when the proposal came out. so everyone thought we were going to have a different volker rule.

it does need to be rethought by all of the agencies involved. >> doesn't that just add to the uncertainty, though, pushing it back two years, re-evaluating the entire thing? is this limbo that we're in helpful? >> i don't know that i see another way. is it more helpful to have bad policy. >> i was going to say, i think we have the worst of both worlds. i think what we're witnessing is everyone is anticipating the volker rule. so we've seen one brain drain from the banking industry and the hedge fund industry. of course, many of those hedge funds may wind up becoming banks under dodd frank and that will come as a huge shock to everyone, but the difficulty really is in figuring out what

your true objectives are and then trying to come one a narrow approach that meets your objectives but doesn't create also sorts of problems. the biggest problem i think we had in 2007 and 2008 that exacerbated the meltdown was a lack of liquidity. and what the government has now done in its wisdom is to declare we don't want banks in proprietary trading to add liquidity to our markets. there has to be a better approach to this and i believe that you can instill safety and soundness on the banking operations, wall off the riskier operations and avoid having a systemic meltdown the way we have, but allow banks to be in a variety of businesses. i just think that we have now is

people are assuming it will pass, they have divested themselves of talent and so we are in a very difficult environment where banks are told first you must do it this way. then they're told well, no, maybe you'll get a reprieve and people don't understand when the government does that, it costs businesses a huge amount of money and it contracts jobs. these are not good approaches to regulation in my view. >> and jill, i know you also mentioned concerns about cost and concerns about what this means in terms of the global marketplace. >> right. >> talk to us a little bit about what some of your concerns are there. >> so, i have a concern about whether or not the agency did not get a thorough cost benefit analysis. with all the thorough rule makings that we've done just as an example we finalized 31 rules, but 13 of those rules have been declared major.

which means over $100 million effect annually on the u.s. economy. so 42% of rules we have done so far have been major which will have an effect on those businesses and on the economy. and i am doubtful that those banks or businesses will absorb those costs. they will pass them on and ultimately consumers will pay those costs. >> we spent a lot of time here criticizing dodd frank. but if not these rules then what? is anyone contending that we should go back to the way things were before, so then what? >> i think we could have approached this in a much more simple way. i think 2,000 pages of dodd frank has been too -- it was too

hon rouse for the agencies to been expected in one year's time to have implemented all the rules. it's an unrealist task for us to have been, you know, looking at all of these different rule makings, all of these different issues, all at the same time. i think if we could have taken an incremental approach to clearing, mandatory clearing, the trading and execution on platforms. business conduct standards could have been formed around those trading and those i think the business conduct standards and the mandatory trading obviously would have been first in line. >> harvey the story you told was pretty telling. you were actually an advisor to

paulson and company in the throes of all of this. and you sat down with regulat s regulators. tell that story. >> in talking to government officials about this, the first question every agency posed to me was do we even have any authority over this subject? can we even deal with it? i'm not being critical that was a legitimate question -- >> so there were asking you if they had regulator authority. >> sure. not that they were going to rely on what i was saying. what they wanted to do was get a view about it and so on.

the problem is there has to be a clear assignment of responsibility. there has to be a clear appropriation of authority to deal with problems the difficulty with dodd frank is it correctly uns what the major problem was with our meldown is that our regulatory system had failed. i don't think any person can question that our regulatory system did not serve this country well. the problem is if you're going to fix that, it ought to be an improvement. you really shouldn't come up with a new regulatory system that simply adds on all of the problems that previously existed and exacerbates them.

i think it could have been done with three very simple provisions. some of which dodd frank tries to do, but very awkwardly. the second is to assign responsibility in the government to read the data, analyze it and then disperse the data to the mark place because uninformed markets are markets that are ripe for panic. the third thing is a simple empowering of government to set trip wires. so if trends took you in a

certain direction, the government would have the power not to rush into regulation, but simply to say, okay, we're going to stop this process in its tracks. we're going to look at it and we're going to try to think through what it means. is this a bad trend? is it a good trend? do we need some farther reaching regulation? that would have i think given us some hope that the next crisis which i think is a lot closer than many people believe might be avoided or at least contained. i don't think dodd frank gives us that kind of chance. >> we have some questions from the group. >> we're going to squeeze in one question and wrap things up here. it is most appropriately put to commissioner summers and chairman pitt. what are the benefits of maintaining separate regulatory efforts in light of the post crisis trejs in the overlap and interdependencies across

markets. >> we should have expected that. >> been out there for a while. >> i agree with whatever commissioner summers is going to say. >> i've always been supportive of merging the agencies. i just think it would be more efficient and effective wait for us to regulate the markets. especially as markets have all been -- as the lines are blurring between what's a security and a derivative, it would just make it more efficient. >> i agree with that. in 1974, when the cftc was in the process of being created. the white house called the sec chairman ray garrett and asked him if the sec wanted the authority that it gave to the cftc. and ray was a man i worked with and admired rightly said, are you kidding? we have a harder time doing what

we have, why do we want to take on higher things. i think it would produce a better regulatory environment. >> i will say as a last thought that the agencies i think are working better together now than i've ever seen them work in my career. so something's working. >> and would you like to weigh in and disagree with them? >> i know better than to disagree with them. >> words for our children, is there still going to be money in banking? >> there's plenty of money in banking. >> when harvey says that there's a brain drain in banking, every banking official that came to me on pay, i was told if they didn't pay what they asked, they would leave. and the ceo would say this

person is irreplaceable. i reminded the ceo the graveyards are filled with irreplaceable people and most of them are still at their best. >> on that note, i want to thank our panel very much. megan, thank you. a great discussion. way to end a long and productive day here at the bloomberg washington summit. a couple thank yous and good-byes. thank you for everyone here for staying to tend. we've had a great discussion. we've had allan green span tell us that stocks are cheap. and hopefully a lot of food for thought for all of you as you go back to your jobs whether they

may be. hopefully we've added to that discussion here today at this summit. a couple thank yous again to our sponsors j and k securities which helped put this event on. our partners at bloomberg view, bloomberg government. thanks to c-span for being here to document all of this. thanks to our college at bloomberg radio, bloomberg television and bloomberg news for covering all this. the other reporters here as well from other news organizations. this reminder that there are 30 of these events around the world hosted by bloomberg link. your next chance is here in washington, d.c., june 21st, a defense conference that will be again a host to big issues to talk about there. we have a great list of speakers attending that event as well. coming up after that june 21st, we've got the bloomberg state municipal finance summit. that's taking place in the president's hometown of chicago.

that's june 7th. the asset management summit in boston on june 17th. you can check out bloomberglink.com for full te details on all the discussions. thank you for attending, your participation and thanks to all of our panelists. have a great night. [ applause ] the economic conference hosted by bloomberg news also looked at corporate tax rates. we'll hear from former house democratic leader dick gephardt and grover norquist, the president of americans for tax reform. this is half an hour.

>> we're going to keep the conversation rolling here. we're going to start talking taxes again. the corporate tax debate is our next topic. we have my colleague richard ruben all things tax force at bloomberg. he's going to lead this discussion. and good catch. we don't want any injuries up here on stage. part of the panel now we've got grover norquist the president for americans for tax reform. a regular voice of these issues. nancy mclaren going to get her aspect representing the companies doing business in the us. richard gephardt is president and ceo of the gephardt group here in washington. long time congressman from missouri joining us as well to talk taxes and the corporate tax debate. rich, it's all yours. >> thanks for joining us. i want to start by talking about where there's agreement. you have both president obama

and the chairman of the house ways and means saying there should be revenue neutral overhaul of the corporate tax code. which would mean some companies pay more and some companies would pay less. what do you think it will take to get support for that among businesses and also in congress? start with the congressman. >> it's a good idea, but it's really hard. i participated in 1986 when we did tax reform it was revenue neutral. it was really hard to do because you have winners and losers. even though the idea of tax reform is attractive to everybody. a simplified tax system that's easier to deal with is attractive to everybody. when you get down to the nitty-gritty of what you actually have to do to do it it gets very difficult. but that said, it's still a worthy thing in my view to try to do.

when the tax system gets so complicated and voluminous in its detail, it really is hard for citizens to deal with. they lose faith in the country. and so i've always thought it would be better if we could get tax reform. we did it in '86. i think we improved the tax code in a lot of the complication has come back in. and so hopefully that can be dealt with in the next few years. >> nancy? >> well, i don't think we have a choice. we really need to make this happen. ic that if we start with the premise of what's the goal of corporate tax reform? it's to make the u.s. more competitive, so businesses will locate here. and grow and generate jobs. right? so if we can agree that competitiveness is the top goal and then i think that folks can get behind it even if they may disagree on the specifics? i know that for my member

companies we did a survey of cfos of u.s. subsidiaries of global companies which includes nestle and honda and phillips and the cfos by and large said that the corporate tax rate was the one policy change that if were made would really impact their decision to invest more here. >> i'm not sure there's as much agreement as you're suggesting. the president wanted a trillion and a half dollars in tax increases as part of any tax reform last november. not revenue neutral. if he's also said he's interested in revenue neutral just on the corporate side, that leaves aside an awful lot of american businesses pay personal income taxes you can't just drop the corporate tax without also dropping the personal income tax rate. both should go to 25%.

corporate rate 25%. individual rate 25%. territorial tax structure, expend r pencing rather than long depression schedules. after that it's interesting. i think that outline is a great idea. we just have to have a house, senate and president that buy into it. >> you named a whole set of policies including a 25% individual rate that i'm sure a lot of democrats won't agree with. congressman, do you want to respond to that? what would it take for democrats to go along with something like that or to go beyond the corporate code and bring individuals into this? >> i think democrats could go along with a lot of the ideas that are in these proposals. the problem you get into is if it's revenue neutral you can give all those things to the winners who get the 25% rate and the territorial system and all the other good things that a lot

of people would agree on. then you have to take away some tax breaks that others have to pay for that unless you can pay for it by cutting spending elsewhere in the budget. so usually tax reform is holistic within the tax system. the devil is in the details when you get into who's going to lose and who's going to win. >> one of the problems may be when you're thinking about revenue neutrality, the joint tax committee scores it on a static basis. it doesn't take into account changes in behavior people and companies can make based on the tax rate changing. so if we say corporate rate change would be revenue neutral. it might end upbringing in revenue neutral. i think at looking at how tax policy may be scored may be a way in to discuss some of these issues in a way that we can get more agreement. >> if you understand that lower

marginal tax rates on the corporate rate and individual rate will give you stronger growth, if we grow for the next decade not at 2% a year, but at 3%, that increase is expected revenue into the federal government alone by 2.5 trillion. $2.5 trillion gives you a lot of wiggle room into tax reform. >> is there a way to wait until that materializes to take advantage of that wiggle room? >> a trigger? >> one of the responses is that those estimates are really uncertain. there's a lot of wiggle room. >> cut it in half.