that is tuesday at 10:00 a.m. on c-span3. also, "washington durnell" looks at the last days of mf global. fortune magazine editor peter elkind mota but mf global as part of an investigation. he answers questions about the collapse of the company. he takes your calls, a tweet, and e-mails at 9:15 a.m. on c- span's "washington journal." >> watergate was not a caper. it was about a fundamental attempt by the president of the u.s. to misused and abused the constitution, and obstruct justice, and more than anything, tried to undermine the very

liqueur process. >> has been 40 years since the water. bacon -- >> if you look at it, there was not just something done that was fun or it was not just dirty tricks. it was a strategic plan aimed at giving the week is nominee -- >> watch more online at the c- span video library. >> timothy geithner said european leaders know they need major changes to sustain the euro. his comments came days before the g-20 summit in mexico schedule to start on monday. he spoke about tax cuts, sequestration, and what he sees ahead for the u.s. economy during the elections. speaking at a council on foreign relations, this is 45 minutes.

>> thank you all very much. i am from nbc news and msnbc. you all know secretary of the treasury tim geithner. please turn off all your devices. not just on vibrate. we have secretary geithner here. it could not be a more timely moment. the headlines today across europe and the wall street journal -- the handling of the european debt crisis, and the timing of the banking committee as well. i want to give you the opportunity to talk about the crisis in the eurozone, the fact that we see rates rising

dramatically in italy, which certainly signals there is some fear in the markets about contagion spreading from greece to spain to italy. italy is going to be the big concern. sunday, you are going to the g- 20 meeting. a lot of major players will be there. your perspective on the european crisis, the possibility of contagion, and how well- capitalized our system is. today, we learned there is a lot even the best bankers do not know about business in their bank. for all of the assurances that the u.s. now is immune, are we really? >> good question. obviously, it is still a challenging moment for our economy and the world. you are seen growth slow a bit. that is in most of the other

major economies around the world. we have our familiar challenges here. europe is in the next stage of another major escalation in their strategy to make the monetary union work, and build a stronger europe. what they are talking about, at least in the near term, are three really important sets of policy changes. the first is what they call a banking union, which is a commitment to a more integrated framework for supervision, for a backstop to the financial system in europe. this is really important, because of course no economies can function or grow without a functional financial system. and it is important because of the pressures you are seeing from greece and elsewhere. what spain did over the weekend, to commit to a much more dramatic recapitalization of its banking system, is a good concrete symbol, and an illustration of the commitment to move toward a stronger

banking union. the second thing that are talking about is a set of measures to make sure the have a framework in place to support the countries undertaking these reforms. what these fire walls were designed to do was to make sure that interest rates in spain, italy, and the rest of those countries are at moderate levels, so they can grow. it is very important that the second piece of this -- that there is a credible financial backstop in place, supporting the countries that are reforming. reforms are going to take time, and they will not work without the ability to borrow at affordable rates. the third thing in the near term is a little bit of a shift toward growth on the basic framework of economic strategy. they have a very large infrastructure bank in europe.

they are talking about mobilizing a larger scale of resources, and allocating those to the countries in europe. and they are talking about the calibrating their path to fiscal consolidation, to give reforming countries more time to get there, a little more consistent with the weaker growth outlook in europe. that sets a financial union for the financial system, a stronger backstop so reforming countries can borrow at affordable interest rates. these moderates steps toward growth are important, and would be a good next step. but this is a very challenging crisis for them still. they recognize that are going to have to do a bunch more, just to restore a bit of calm and convince people date are able to make this work. i think there will be a chance

this monday and tuesday in mexico, at the g-20 meetings, to hear where they will go next. >> you believe the eurozone will stay together, or that countries will drop out? >> listening to them over the last two and a half years of crisis, my view is they have considered this carefully and decided it is in their interest to hold it together. but they say to us privately is they will do whatever is necessary to hold it together. there are three -- there are many. among the many concerns people have, looking at europe -- a worry. does europe have the ability economically and financially to make it work? i think they do. do they have the will, the political will to make it work? two months ago, it was written, "never underestimate the political commitment of european

leaders to meet european integration work." it was a project decades in the making. a huge strategic and political imperative for the members of the union. they say to us, we will do what is a necessary to hold this together. there is another misperception. people worry about, are they actually deferring their problems? are they doing things the will make the underlying economics viable? some people fear the range of actions by the central bank are buying time to enable the countries to not do anything. that is unfair to them. they are doing very difficult things, economically, to improve the prospects for long- term growth, and make it easier to start a company. they are working to make themselves more competitive, to reduce long-term fiscal deficits, and to restructure the financial system.

they will have to do that, no matter what. this is something they have to manage. they made the choice they will do what it takes to make europe work. they are doing very tough reforms across europe's that are absolutely essential for this thing to be more viable over time. >> we are feeling the psychological impact. days before november 6, what is your outlook for any real improvement barring some shots that would otherwise changes that? >> most forecasters look at the american economy and they still say that they think the economy is going to grow at roughly 2% rate over the next 18 months. some say it should be 2-3. that is recognizing the pressures we see ahead and elsewhere. >> that is not strong enough to make a lot more progress,

getting more americans back to work. that is why it is so important that we do what we really can do in the united states. that is to put in place more things that could make it stronger. we have the unique capacity. we are judged for the savings of the world. we are at a unique position for more teachers, tax incentives, things like that, combined with long term fiscal reform.

if we could do this now, we would be in a stronger place to understand the uncertainty you're going to face. >> of 42 senators said they are prepared to revisit bowles- simpson. is it time for the president to be addressed that and give some stronger signal that he would be willing to embrace the tough choices to get the market a better sense of confidence? >> but me say what would be most helpful. did the most helpful things you could see would be a willingness to legislate. the middle-class tax cuts affect 98th term of american taxpayers. no reason the should be put in jeopardy as the face those at

the end of the year. take the risk of default off the table. those are damaging to confidence. both sides should negotiate a balanced framework of broader spending savings that will help bring our deficit down over time. the pace is consistent with the recovery. >> said that will not happen, why not take bowles-simpson and have the president sends it? >> this debate began there and that is where it will end. the framework the president laid out a bill is different in a small respect is very close

to that basic design. that is the neighborhood we plan to govern. that is the only path to resolution. what that requires is tax reforms that raise a modest amount of revenue tied was spending savings across the government. i think it would be helpful to confidence to have both sides say that we are willing to negotiate a free market that moves in that direction. >> this is where this has to go. there is no plausible way to get their economically or politically without that kind of framework. it mary's tax reform with broader spending reforms -- it marries tax reform with broader spending reforms. >> should there be a temporary extension of the bush tax cuts?

>> our view right now is that we need to take advantage of the incentives created by the sequester. it will force this town to confront and take on the things that divide us now. we can go ahead and govern and start to address the other many problems the country faces. for people to we are going to put that off i think would be damaging to confidence. this is a place where people spend a lot of time worrying. there is a cloud over the economy about whether washington can work again. i do not see how they can have the confidence. >> the date the fed reported

indicated that the recession -- >> we would not support that. is that claire? >> got it. -- is that clear? >> got it. the recession is so much deeper than anyone reported. the middle income americans lost 39%-40% of their wealth. this is a devastating loss of a generation for middle income americans. how do you as a policymaker take that in and translate the effect on average american family is? >> it tells us what we already know. the crisis was much deeper. the damage to confidence and wealth and people security is much greater even people could see in the number is at the time. the economy was shrinking at an

annual rate of 9%. house prices have fallen pretty dramatically at that time they started to move up quite early in the first half pit pension savings started to go up again beginning in the second quarter of 200 income growth started to recover again. it was a deep, a traumatic scar across the economy. we still have a long way to dig out of that and repair that damage. absolutely. most of the damage was done. you can see what happened in equity prices. that damage, those things started to improve and stabilize when the president's policy started to get more traction. they got traction pretty quickly. it was remarkable.

we have positive growth in the summer of 2009. in six months, you went from an economy that was falling off the cliff to an economy growing. growth has not been as strong that any of us would like in part because of europe and the headwinds at the state and local level. in some ways that is a story of how effective and how quickly you saw the economy start to stabilize and recover because we did move very hard and very fast. we did the difficult things very quickly. that made a huge difference.

it did not bother a lot of problems. it was very important. if you look at europe, and everything is a justification for the basic lesson in crisis management. >> if that is given that the average american does not understand private equity, wall street, the banking system, except to worry about it, what is your response by jamie dimon that the best banker and the banker with the best record did not know the size of these debts and it did not know of the risk entailed and that the federal reserve imbedded in the new york and london at jpmorgan chase were unaware? what does it tell us about the regulatory system and the apparent rests? >> it is an import reminder of three things. this is inherently uncertain. nobody knows the future. what makes this a challenge is you cannot predict how any

position is going to be paid on the basis of the last three weeks or years or months. that is what caused the financial crises. that is what makes everything about managing risk complicated. you need to have a lot of humility about the basic uncertainty we live with. the second thing is that the best defense against that particular inherent an avoidable problem is to make sure these firms run with less leverage, more capital, more conservative funding. there is no rule or reform our supervisor that can define their objective as preventing these firms from taking risks or making mistakes. the only test is whether you make the system strong enough. those mistakes do not matter.

the best way to do that is to make sure firms hold much more capital against risk of the losses they make are low and the rest of the system has a cmoa structured shock reforms. -- similarly structured shock reforms. this was manageable. this is why it is being designed and implemented. if we allow them to be weekend we will be much more vulnerable. i completely agree that it is a good reminder of the uncertainty we live with.

it is related to the reality that we cannot confidently predict the future. the best way to deal with that is to recognize it and force four these firms to hold their position. >> the argument being made on the hill was that there has to be inherent risk in banking. do you think looking at it from the outside that they did anything wrong? >> i would say that one strength of what they have said is that they were direct and clear and crisp in a mixing the scale of the error and in trying to get quickly to what produce that and to get very quick. that is a good thing. the job of reform and supervision is to force them to hold more capital against risk to make sure they understand them and they let them to a

tolerable amount. he began with a related question. it is how comfortable should we be with the strength of the u.s. financial system? this is a good test. we have several test like this for the last several years. the core of the financial system we forced to raise $300 billion in common equity since the peak of our crisis. they are funded much more conservatively. they have reduced their exposures to the most obvious risks to radically. i believe we are in a much on their position that any time you were in the last six or eight months.

to withstand the strains of what is happening. the challenges are hurting growth here and elsewhere around the world. we're going to spend a lot of time trying to do this. >> why do you think wall street is putting its money and it romney's kant? the 21 big contributors have now switched sides. >> i cannot speculate on their motives. i suspect it is because they believe they are more likely to get a more favorable hearing if the republicans have a stronger hand in washington. >> i do not think they will be successful.

the core reforms we will fight to preserve. we will fight to keep them. there is an overwhelming case to do so. we are still living with the damage caused by the spirit. >> what romney said when asked what he would do if there were another financial crisis, he said -- >> why would they leave the country vulnerable? just to finish up what he said, i can tell you this. i'm not like to have to call up timothy geithner and say how does the economy work because i spent my whole life in the economy. >> who said that? >> met romney. [laughter]

>> you want me to respond to that? [laughter] >> in terms of the president's comments, we know what he meant. when he said the private economy is doing just fine, how do you explain to the american people what he meant? we are in the middle of a close campaign. >> it is a tough the economy still. we tried to put out as clearly as we can, as powerful and creative a set of proposals for

helping resolve that as possible and to legislate as many as we can. we have tried to choose one that have had a tradition of a broad bipartisan support in the hopes it would ease the prospect of legislation. that is what we are going to keep doing. we cannot just focus on growth now. we have to worry about the longer-term. we believe those things would be best combined with a long- term plan to restore fiscal sustainability. that is why you have to thing about these things. we're having a debate of the right way to help growth and now. test trying to meet the you need if you are governing, laying out what we are for. >> the justice prove your own point. you are right on the message. given what you have said about

wanting to just search for the first term, have you read thought it the president is reelected whether you would stay there it? >> no. i have not rethought that. by thank you for asking. [laughter] you've had so much fun in the first three years. now come to the time when the audience joined in. please state your name and affiliation. keep questions can size. with the microphones to reach you. right here in the fro -- wait for the microphones to reach you. right here in the front row. >> thank you are coming back. you said that we needed a balance plan for fiscal sustainability as well as room to invest.

i want to ask you as the treasury secretary, how would you tell the difference between government spending that is investment and spending that is not investment? >> this is really the only place we were proposing meaningful changes in what we spend. we what it limited to areas we think there's a pretty high economic concern. you will not see it happen without the government playing some big role. the examples are public infrastructure. the overwhelming compelling case for doing that. private markets are not investing in that context. education. very high returns to education. we have seen a significant erosion relative to the rest of the world.

there is a pretty good case for investment in basic scientific research, as we have done for decades. maybe going be on there to support areas like clean energy. you're likely to see the market under invest. this is a relatively limited list of things. a huge part of what you do is incentives for private investment. we propose a broad framework that we think would improve the incentives for private investment here, not just things like permanent advantages for this but to clean up all the muck. these are some things we think. if you look outside the medicare and medicare and social security, what's has happened to the role of

government is you're going to see a significant restraint across the government to preserve room for those third four areas that we think our investments with economic returns. >> right here in the front row. >> i am with the postgraduate school. five days before he took over the job, everything collapsed. he had a combined respectability but oversight. he said that when he got there he cannot begin to understand how the system worked. he pulled together a team. it took them six months to identify how our system in the

u.s. worked and you were all the players and who talked to one another and to do not. he said if you do not understand that, how do you know what to fix the? if we understand it, why isn't it made public? >> are you talking about the complexity of the oversight structure? >> he was looking in the whole financial system. the process really matters. you ought to be educating us on these unbelievable processes so we can see that will make a decision it makes sense. >> there is so little education about how our financial system works. when something like a $2 billion happened everyone goes the sky is falling. maybe it is. the average person does not know how to deal with it.

>> it is true with a lot of things. i agree about this. we do have a more complex financial oversight shropshire. what makes our system unique and different is that it provides tap the credit the economy needs. most of your banks are 3/4 of it in that context. it has a bunch of its advantages. some parts of the systems are weak. we also have left in place a very complicated oversight

structure. we have banks regulated. >> it needs to be there. >> i would love to spend more time talking about it. you are right. it is a complicated system. these you do not have a lot of confidence that it works. that is lived through the worst financial system. they are simple in terms of capital. in their design, they are complicated. in make it harder to make you believe that they're better. we can do a better job of it.

>> going back. >> what is the u.s. interest with regard to the euro? doesn't matter to the u.s. whether or not europe proceed with monetary jurisdiction? >> it does matter. we have a long interest in supporting this project. we cannot choose how to do it. we do have an interest in doing what they need to do. >> what role do we played? >> there is a phrase that we

can not want this more than them. we cannot make these choices for them. it is 17 countries. it is incredibly different politics. figure fun to have to out what works for them. what we're doing is what i think we can do. we're trying to be as helpful as possible. they come to us all the time to ask as for ideas on what might work. but that the lessons. they're willing to give that advice. where we have the capacity we are doing that. the federal reserve is doing what we do uniquely pierre this is what we have done on a very substantial scale. we are supporting with the imf is doing. people say we should be louder.

that would be more helpful. i do not think so. there are people that say we should go right them a check so they do not have to write a larger check. i do not know how that is valid. if we try to limit the burden than their commitment to the endeavor would look weaker. that will not help. correctmatters that's in matters because we need a strong europe. we do not benefit from long european weakness. >> last october at as you a question.

do europeans have the financial powers to sell this issue that are you satisfied with the position on this crisis? have the germans made up their mind? >> and now there's a lot of focus on germany. it is unfair to look to germany as the sole source of the problem. what germany is saying is to make monetary union work. we're prepared to put a substantial resource behind this. for that to work in these to be in support of reforms. this is a very reasonable position. there are lots of elements of this strategy. and the basic premise, he wrote this and a good sense. that is perfectly reasonable. you need vote for this to work.

we need reforms that will indoor. -- endure. and does not just about germany. we have a microphone back there. >> thank you. the g-20 is going to review your process project progress next week. i assume they're not want to do much more than that. do we have time for 11th hour action by europe once again later in the month? spain yields are be unsustainable.

do you have that time? >> i think you're right. if you wait to move in these things, and let the market ahead of you, the increase the costs of it harder to get their head there is no argument. they're having a summit. they are negotiating a new set of reforms civic and lay them out to the world. you're asking the question of the world will wait for that. they have a pretty strong incentive. they're adding as much clarity to those plans as early as they can.

they can make the major players state what their intentions are even if the take a little time. this can be reassuring. what you're going to see is the world looks still to germany and other major players to lay out more clarity what these broad objectives mean on banking unions and a fire wall for the reforming countries. at the mark parity with the better sooner. >> you listed three things, a banking union, and i remember, firewalls, support mechanisms.

you said ask that the summit. are you confident you will get all 3? are you confident? what is the risk that they are falling short? i think this goes for the consequences for the broader financial system including our own. >> i think the states are pretty high. their interest is more powerful than anyone's in trying to avoid that risk. how confident and i? -- am i?

they have laid out where they want to go in these dimensions. they put some pretty capable people in charge of trying to design the details of that framework. based on what they say to us directly they're serious about it. they intend to move. this is not like it has been the fourth major escalation. this is different from the way it felt before. they're not minimizing the risks. they are not telling us that they feel they have a whole bunch of time to wait. hopefully, that is encouraging. >> i am told that we have no more time. we want to thank the secretary

geithner and your team for making this possible. [applause] i should point out with all these cameras it is very obvious to make sure everyone knows this was entirely on the record. >> thank you. [laughter]

>> today, your calls, a tweet, and e-mails on "washington journal." been, "newsmakers" with tom price. followed by the ceo of j.p. morgan chase. later, general holders tender phis -- testifies in front of the senate judiciary committee. today, former education secretary and radio talk-show host, bill bennett talks about the 2012 campaign. then, president of the american federation of teachers talks about the role of unions following the unsuccessful recall o