-- history. sunday, former new york governor smith -- l. smith. >> coming up tonight on c-span, president obama kicks off a two- day bus tour in ohio. after that, the national education association hears from the 2012 teacher of the year. that is followed by a forum on u.s. tax policy posted by the george w. bush institute. later, a british house of commons treasury committee hearings with former barkley's ceo bob diamond. president obama kick off his bus tour thursday in maumee, ohio. he addressed the economy, and announced his administration was launching an enforcement action against china at the world trade organization for imposing unfair trade duties from exports to

the nine states. this is 30 minutes. >> four more years! four more years! ♪ [cheers] [applause] >> hello. it is good to be back in if ohio. all right. everyone who has a share, feel free to sit down. go ahead and relax. i know it is a little warm out here, but this is what a summer is supposed to feel like. there are a couple of people i would like to acknowledge. please give ida a round of applause. we are proud of her.

i am pleased to see the mayor of maumee, one of the best senators, senator sherrod brown. marcy is here. [applause] >> and your former governor, and my campaign co-chair, ted strickland is in the house. [applause] >> i love you. it is great to see you. i hope everybody had a wonderful fourth of july. we invited some people over for a barbecue. i had a chance to say thank you

to our incredible men and women in uniform. [applause] >> we are so proud of them. then it was malia's birthday. she is 14 years old. i know it happens too fast. do not remind me. she is going into high school. when she was small, i could say that all of these fireworks i arranged for her birthday. [laughter] >> she does not believe me anymore. [laughter] fact that it is campaign season. get fired up. it is campaign season again.

i understand it is not always tricky to watch. there has been more money -- pretty to watch. there has been more money flooding into the system than we have never seen before. more negative ads. more cynicism. most of what you read about or hear about on the news has to do with who is up or down in the polls instead of what these issues is actually mean for you in for america, so it can be frustrating. i know it might be tempting to turn away from all of it, turn off the television, tivo everything you want to watch so you can skip the commercials, and i know it is easy to lose interest and lose heart, and to be honest with you, some people are betting that you will lose interest, that you will somehow lose heart.

here you are, in the heat. [applause] >> i am betting you are not going to lose interest. i'm betting you are not going to lose heart. i still believe in you. i am betting on you, and the country is betting on you, ohio, because you understand that even though politics might seem real small and petty right now, the choice in this election could not be more clear or bigger. the stakes could not be bigger. i know. i am with you. [applause] >> what is going on in this election is bigger than a choice between two candidates or two parties.

it is about two fundamentally different visions of where we go as a country. see, i believe in an america where no matter who you are, no matter what you look like, no matter where you come from, you can make it if you try. [applause] >> we have never been a country looking for handouts. we are a nation of strivers, risk-takers, entrepreneurs, workers, but what we ask for is that the hard work pays off. that responsibility is rewarded. the idea is if you take responsibility for your live, put in the effort, do the

responsible thing, you can find a job that pays a living wage, you can look at your family, by a home, retire with some dignity and respect, not go bankrupt when you get sick. [applause] >> that you have that court, middle-class security that built this country, and you can pass that on to your kids so they could do things you could not even imagine. that is the essence of america. i believe in the basic promise of america because i've lived it. that is my biography. i had grandparents whose service in world war ii was rewarded with them having a chance to go to college and by their first home.

i have a hard-working mom who raised me and my sister right, but also had some help so we could go to the best schools in the country even though we did not have a lot of money. i got involved in politics. i ran for president in 2008, and some of you join me in 2008 because -- [applause] >> because we believe in that basic bargain that built the largest middle class in history, the strongest economy in the world, and we felt the basic bargain was slipping away. hard work was not always rewarded. being responsible did not always get you ahead.

we came together in that election, democrats, independents, and some republicans to restore the basic bargain that built this country. we knew it would not be easy. we knew it would take more than one year, one term, or even maybe when president, but what we did not realize is we were going to be had by the worst economic crisis in our lifetimes, and that has been tough on a lot of folks, including people here in ohio. it robbed millions of people of their dream, but the crisis did not change the fundamental character of america, this town, this state, where this part of the country.

we still have people working hard, acting responsibly. it has not diminished our belief in the ideals we were fighting for in 2008. [applause] >> our mission right now is not just to recover from the economic crisis, although that is job one, our mission is to give back america, americans across the country what has been lost, that sense of security. our goal is not just to put people back to work tomorrow, but billed for a long haul any economy where hard work pays off, an economy where whether you are starting a business or punching the clock, where you have confidence that if you work hard, you will get ahead. that is what america is about. [applause] >> that is what ohio is about.

now, i have to tell you what is holding us back -- where is michelle? [laughter] >> you know, look, i know i am second fiddle, but, you know, i will have michelle come back sometime. i'm just a warm-up act. michele says hi. >> thank you so much. i appreciate it. let me say this, what is holding us back from meeting these challenges -- >> four more years. four more years. four more years. four more years. four more years.

>> what is holding us back from meeting our challenges is not a lack of ideas, a lack of solutions. what is holding us back as we have a still made in washington between stalemate in washington between these two visions and this election is about breaking that stalemate. the outcome of this election will determine our economic future for not just the next year or two years, but maybe the next decade or the next two. my opponent and his allies in congress believe prosperity comes from the top down, that if we eliminate most regulations and cut taxes for the wealthy by trillions of dollars that somehow our whole economy will benefit, and all of you will benefit, and there will

be more jobs and better security for everybody. that is their basic economic plan. now, i think they are wrong about their vision, and part of the reason i think they are wrong is because we tried it, remember, just a while back, and it did not work. we are still paying for trillions of dollars in tax cuts that were not paid for and did not lead to better jobs for better wages for the middle class. the lack of regulation on wall street, the kind of thing they are prescribing, is what allowed people to gain the system and caused the mess in the first place. i do not think mr. romney's planned to spend trillions of dollars more on tax cuts for folks that do not need them and are not even asking for them is the right way to grow our economy, especially since they want to pay for them by cutting education spending, job- creation programs, and raising middle-class taxes, and i

certainly do not agree with his plan to keep giving tax breaks to companies that ship jobs overseas. [applause] >> i do not think we are better off rolling back regulations on banks, insurance companies, oil companies -- regulations that are meant to protect workers, consumers, our families and our economy. we do not need more top-down economics. we tried it, it does not work. we need someone out there fighting for the middle class. [applause] >> when the american auto industry was on the brink of collapse, and more than 1 million jobs were on the line, governor romney said we should let detroit go bankrupt.

i refused to turn my back on communities like this one. i was betting on the american worker, and i was betting on american industry, and three years later the american auto industry is coming roaring back. [applause] >> that chrysler plant up the road is bringing on another 1100 and police to make the cars that the world wants to -- employees to make the cars that the world wants to buy. the wrangler just set a sales record. what is happening in the legal

can happen in cities like cleveland -- toledo, can happen in cities like cleveland, pittsburgh, and that is why i am running, because i want to make sure it does. >> four more years. four more years. four more years. >> just like ida said, i want goods shipped around the world stamped with "made in america." [applause] >> i want to stop giving awards to companies shipping jobs overseas. i want to reward companies that keep jobs right here in ohio, right here in maumee. governor romney politico experience has been in owning -- governor romney's experience has been devoting companies that were called pioneers of outsourcing. those are not my words. my experience has been saying the auto industry.

as long as i am president, that is what i'm going to do every single day, thinking about creating jobs for your family and more security for your communities. that is why my administration brought trade cases against china, and we won those cases. this morning my administration took a new action to hold tschida accountable for unfair trade practices that harm american automakers. let me tell you something, americans are not afraid to compete. we believe in competition. i believe in trade. american workers build better products than anybody else. as long as we're competing on a fair playing field, we will do

just fine. we will make sure that competition is fair. that is what i believed. that is part of our vision for america. that is not all it takes to rebuild this economy. i'm going to make sure that a merkel once again leads the world in educating our kids and training our work will -- workers. the tuition tax credit has saved thousands of dollars for a millions of american families. we won the fight in congress to stop congress from letting student loans double. now we are working with colleges and universities to bring tuition costs down. i want our schools to hire at the best teachers. especially in math and science. i want to give 2 million more

americans the chance to go to community colleges and learn skills that local businesses are looking for right now. in the 21st century higher education is not a luxury. it is an economic necessity for every single one of our young people. and folks will retrain for jobs in the featured, and we will give them the opportunity to work their way into the middle class. god bless the. thanks for your service. god bless you. freedom is not free unless you have fought for it. i am running to get more responsible homeowners the chance to refinance their mortgages and save $3,000 a year. we have got low interest rates right now, but a lot of folks

are having trouble refinancing with their banks. let's go ahead and help them refinance. can you use an extra $2,000? that means you're spending it in restaurants, and buying stopped at the store. thes -- buying some clo that what you're saying? it is good for small and large businesses. we have given thousands of families the chance to do this. my opponent's plan is to let it hit bottom. that is not a plan picked that as a problem. that is not a solution. i am running because i believe that in america nobody should go bankrupt because they get sick. i will work with anybody who wants to work with me that continues to improve our health care system and our health care

law, but the law i passed is here to stay. [cheers] let me tell you something, it is gone to make the vast majority of americans more secure. we will not go back to the days when insurance companies could discriminate against people who were sick. we will not tell 6 million young people on their parents' health insurance plans that they do not have health insurance. we will not allow medicare to be turned into a voucher system. now is not the time to spend four more years of fighting battles we fought years ago. now is the time to move forward and make sure every american has affordable health insurance and insurance companies are treating them fairly. that is what we fought for.

that is what we're going to keep. we are moving forward. >> four more years. four more years. four more years. >> and i am running because of after a decade of war, it is time to do some nation-building here at home. we ended the war in iraq. we are transitioningut of afghanistan. my plan would take half the money we have been spending on war -- let's use it to put people back to work, rebuilding our bridges, rebuilding our schools, getting those construction workers out and about, rebuilding america. that is how we build our future. we cannot go backwards. we got to move forward. i am running to make sure we can

afford all this by paying down any balanced and responsible way. we had a surplus the last time we had a democratic president. they ran up the tab, put two wars on a credit card, tax cuts not paid for. prescription drug plan not paid for. left us the tab. we are going to clean it up, but we are going to clean it up not on the backs of the middle- class, we are going to do it in a balanced and responsible way. i will cut spending but we have on things we cannot afford and are not helping people, but unlike my opponent i will add the wealthiest americans -- ask the wealthiest americans to do a little bit more. by the way, just like we know that they did did not work, we know that what i am talking

about it were, because it is what bill clinton did as president. our economy created 23 million new jobs, the biggest budget surplus in history, and we made a whole bunch of millionaires as well. it was not like rich people were doing bad back in the 1990's. they were doing just fine, right? you know what, i am sure there are plenty of patriotic americans who agree with us. they care about this country. on jobs, education, housing, health care, retirement, on all these things that are the pillars of a middle-class life. we cannot go backwards. we have got to go forward, that is the chase facing this november. i am not telling you this is going to be easy or quick. about we're try to deal

-- doing this over the course of a decade. they're not going to change overnight. people feel like obama has done good things, but things are still tough out there, change has not happen fast enough. i get frustrated, too. what is required our long term solutions, not slick promises, not quick fixes, and there are plenty of well funded special interests in washington and their powerful allies in congress who want to keep things the way they are. did not by a line that they are selling, that we can accomplish more by doing less. that might benefit there interests, but it will not benefit yours. that is not how we became america. our parents, grandparents, the founders of this country did not set their sights lower, did not

settle for something less. neither did we, because we are americans. we will be the country we know we can be. we have got to keep doing hard work of building the future of this country for our kids, just like our parents and our can -- grandparents did for us. let me tell you something. from now until november, the other side will spend more money than we have never seen before and they will be raining add step down on your heads. they will tell you is all my fault. i cannot fix it because i think the government is the answer to everything, have not made a lot of money in the private sector. i think everything is doing just fine. that is what all the scary voices in the ads will tell you. that is what mitt romney will say, what republicans in congress will say. that is planned for winning an election, but it is not a plan for creating jobs, not a plan to

provide you with british kurri for you and your family. it is not a plant to secure the middle-class or restore the american dream. that is the kind of plan we need right now, a plan to build the middle-class and restore the american dream. if you agree with me, if you believe that our economy works best, when everybody gets a fair shot, everybody is doing their fair share, everybody is playing by the same set of rules, i will need you out there working, and i need you to talk to your friends and neighbors -- do not just talk to democrats. talk to independents, republic and, because -- republicans, because i want to work with anybody who believes we are in this together. i want to work with anybody who believes we have got to invest in our future. i'd want to work with anybody who says we have to give our kids a great education.

i want to work with anybody who believes that we have got to make sure that we are building things here in america. i am not a democrat first. i am an american first. [cheers] i believe we rise or fall as one nation, as one people. i believe what is stopping us is not our capacity to meet our challenges. what is stopping us is our politics, and that is something you have the power to solve. so hit the doors, make phone calls, register your friends, talk to those family members who sometimes do not vote. remind them where america's strength comes from. it comes from our people. remind them how america came this far. it came because of our people.

all this money being spent on negative ads in this campaign, they spent money in 2008, i got outspent when i ran the first time for the senate. i have learned when the american people, when ordinary folks start standing up for themselves, start making their voices heard, start coming together, start believing again, nothing can stop us. nothing can stop you. nothing can stop you, maumee. nothing can stop you, a high of. nothing can stop us, america. let's remind the world why it is we live in the greatest nation on earth. god bless you. god bless the united states of america. ♪

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] ♪ ♪ ♪ ♪

♪ ♪ we take care of our own wherever the flag is flown our owncare ioof where the hearts overrun with

mercy where is the love that has not forsaken me where is the promise from sea to shining sea wherever this flag this flown we take care of our own we take care of our own where this flag is flown we take care of our own whereever this flag is flown

we take care of our own ♪ ♪ ♪ ♪

♪ ♪ ♪

♪ all >> sean epstein is covering the bus tour. what makes ohio important in the president's campaign? >> this is a key swing state in the election. no president has won the presidency without winning ohio. it is also will the ground zero for his boasting about the auto bailout that the administration pushed early this term. detroit makes the cars, but more

parts are made in ohio than anywhere else. there was a lot of jobs on the line in this part of the state and in this part of the country. >> there is news that the u.s. will file an unfair trade complaint against china with the world trade organization. how does that tie into his comments about the auto industry? "surely it is just a coincidence that the president is filing this unfair trade complaint about a vehicles like the one made at a plant 9 miles from where this is ahead of itself. this is an opportunity for the president to do something about china. >> the president will wrap up this bus tour friday and the

june jobs number comes out tomorrow. isn't there is some risk of campaigning when the bad news could overshadow some of the comments? >> this is also an opportunity for the change of subject. this is his first campaign event decisione health-care divisio came out. he will be speaking in ohio and pittsburg. in the afternoon, he will be back at the white house signing student loan and transportation bills. if there is bad news, obama may be in a position to try to change the news cycle about something else. it is his hope that the lead story is not that the jobs numbers. >> is this two-day tour in response to the nominee bus tour

from a couple of weeks ago? >> there are similar things. they tend to happen in the dog days of the summer, between one of primaries and and the general election heats up. they're certainly going to the same types of voters. the president is standing -- is going to some blue-collar suburbs. >> how is the romney campaign responding? >> well, so far, outside of toledo, there has been a small plane circling overhead with a rum a banner -- romney banner. they have dispatched two top level sarah gets to hit all the

stops that obama is going to today and tomorrow in order to try to get the romney campaign message out before the president arrives. >> read epstein is the white house reporters for " politico." an effort to improve the economy. we look at whether this is from the job growth for wealth creation. then, on an examination on how the black community is impacted by u.s. government policies. later, the series of international news bureaus continues. we have inside of operations at the bbc as well as well they plan to cover the upcoming elections.

"washington journal" is a friday at 7:00 a.m. eastern. >> we will bring you the president's appearance in pittsburgh, pennsylvania tomorrow. friday, a form on the future of the middle east with four people from israel and the palestinian territories. you can see this at the johns hopkins school of advanced international studies. >> this weekend, head to the state capital named in honor of thomas jefferson with a book tv and american history tv saturday at noon eastern. the former senator and misery

first lady on family life inside of the governor's mansion. also, a butcher's bill, a contract, from ancient mesopotamia to the university of missouri special collection. >> at one time, in 1967, this was called the blood is 47 acres in america. >> we go through the former state penitentiary. walk through history at the state capitol and the governor's mansion. once a month, a local content of vehicles explore city and history life across america. >> 2012 national teacher of the year rebecca mieliwocki spoke at the association meeting. she urged teachers to teach be

on standardized tests and to remember their important role in american society. -- she urged teachers to teach beyond these standardized tests. her remarks are 25 minutes. >> we have a special presentation from a special person. thing is my honor to introduce to you the 2012 national teacher of the year, rebecca mieliwocki. [applause] this woman rocks, she is real. i love her. you will love her. she is an english teacher in the gray said of california. -- in the great state of california. this is her second career. we have more and more folks who

decide to do something with their lives and become a teacher. she teaches general education, gifted and talented classes, and serves on the school leadership team. you can read her bio, it is long and impressive. but, it will not tell you what is in her heart. what i admire is this sense of urgency, this passion that she has, that she needs to help these kids right now, today. in a recent interview, she had this to say about her work. "i really love it. they will carry my dead cold body out of that classroom." i found that profound and a little creepy. this is a sign of for

dedication. she cannot imagine herself doing anything else and you cannot possess that kind of commitment without being a strong leader. her colleagues look to her as an example of leadership in her class rampant are lessons -- as an example of her class. she made us all so proud in april when president obama honored her at a white house ceremony for her achievement as national teacher of the year. you should have heard her speech. it is amazing. she gave voice to what is in the hearts of educators across this country. and here is a little of what she said. "i am not the best teacher of america, there is not one. every day, here in america, teachers with patience and

creativity are opening doors for students, to reach deep within themselves and learn more, solve more problems, grow, nurture their dreams, and we do this with conviction. this is not unusual. this is not a rare thing. this happens every day in america's classrooms and i need you to know that." that is what she said to the public. [applause] rebecca, mi amiga, i do love you for what you do. we are, like you, kind and compassionate and caring, funny, passionate people whose work it is to love someone else's child. nea, give it up and welcome

rebecca mieliwocki, 2012 national teacher of the year. [applause] >> to what a large gorges group of educators, people that i loved. -- what a large gorgeous group of educators, people that i love. i imagined you all make it to call me down the that is a lot of flesh. it scared me, it did not call me down. -- i imagine you all naked to calm me down.

i would come home from a long day of driving my teachers crazy as school and come in and see my geometry teacher, my science teacher, and my english teacher sitting at our kitchen counter drinking wine. that is not something that every 17-year-old girl wants to see a on a friday afternoon. i was not exactly a model student. now, here i stand, a model teacher. i am telling you, the irony is not lost on me. [applause] there i was, november 11th, 9:32 in the morning. i was up in front my class, i had a great lesson to run for the day. i had a gorgeous graphics on the white board, i am talking, i am

teaching, i am pointing at things. things are good. the classes with me. i know this because one hand goes up, then another, then another. i think, they are with me. i got them. they're engaged. they're interested. they're asking questions. i am teaching something really fascinating like reflexive pronoun. yay, english teachers. i keep teaching. as i am teaching, something causes me to stop for a minute because now not only is every hand in the air but half of them are stabbing at the sky to try to get your attention and the other half is reaching out to me, begging me, imploringly. please, call on me.

i called on a girl. she simply points to my feet. it took me an eternity to look down and see what the entire class had known about for 10 minutes but i was far too wrapped up in what i was doing to notice. the elastic waistband of my slip had lost all traction. there was no purchase. it had given way and hand slid slowly and completely down my leg while i had been teaching, puddling in a horrifying ankle scarf at my feet. [laughter] i will spare you the david

blaine like maneuvering, but that moment is seared forever in the minds of those seventh graders. [laughter] you are asking yourself sunni, hat -- you're asking yourself, how soon as lunch? i started because this story reminds us that sometimes we get so focused on what we're doing, we get so caught up in what we think is the right course of action that we fail to see some really important truth that is staring us right in the face. for too long time, this nation has been obsessed with high- stakes testing and the results they bring. [applause] results which can bring devastating consequences and enormous pride to schools but these test results cannot tell you if my teaching was

masterful, if my students are knowledgeable, and they cannot tell us if our schools are strong. they cannot be what drives decision making in education and yet -- [applause] and yet that is what the loudest voices have been clamoring for. that is what nearly every debate has been about. by 2014, every child in america will be proficient in language, arts, mass. that is a daunting goal, some might think an impossible goal. it is a goal that you and i have spent many sleepless hours trying to attain. we understand that when we help a child's reach proficiency at every grade level, we have to change the quality of that child's life and that committee forever -- and that community

forever. [applause] aiming for proficiency means that we are creating children that are average and we all know that americans are not average. if every child in america was proficient, what then? what would we have wished we had spent the last many years, time, attention, energy on? we will have desperately wished we have spent our time and energy on us, the teachers. here i stand, one teacher symbolizing millions. one enthusiastic hard working, humble, dedicated, committed example to stand for the millions of more just like me. one voice to represent us all. it is this voice that has been missing from all of the highly charged conversations in education. it is this voice that has been told to a whisper where people who have not stepped foot

in a classroom make decisions that affect our profession. it is shocking that in our noble desire not to leave one's house behind, we might have accidently left all the teachers behind instead. -- it is shocking that in our noble desire not to leave one child behind. if we truly want innovation and reform, we have got to stop talking about testing and start talking more about developing, supporting, and celebrating teachers. teachers are the architects of the change we have been waiting for but we seem to have forgotten what a great teacher can do that a standardized test cannot. great teachers design exciting relevant lessons that said kids up for success. kids will learn what we teach them, they will take and are content when we make it relevant for them. -- they will take in content

when we make it relevant for them. you design learning opportunities for kids that mirrors their hobbies, interests, concerns, passions. you reach out to kids and help to meet them exactly where they are and take them to a place they need to be. that means that our kids read and write and think, sing, draw, act, phil make, and a maid, write poetry, solve math problems, uncover scientific discoveries. they do it all by the sides of their dedicated and skillful teachers. [applause] we make the content we teach real, relevant, challenging, and we give kids the time, support to do that. we have given them everything they need to be successful in today's world. the best part is, it is visible, measurable, exciting, and you

don't need a number 2 pencil to see it. [applause] great teachers have incredibly high standards. i understand right now that the conventional wisdom says that if i can lift a child to proficiency, i must be a high the effective educators and my kids must be educated. there is a fierce desire for accountability. to be able to say that a public education is a good investment. i get it but i'm not satisfied with it. i am not satisfied with the means with which i am being measured because it limits us to a very narrow set of parameters and i want more for my students. [applause] you and i want more for our students because the world they will be forced to find work and will demand more from them. it is incumbent upon us to get more out of kids, more creative

thinking, more problem-solving, expert communicators, the ability to see patterns, connections, solutions, a master of math and science, and great teachers teach kids resiliency in their quest for success because the road will not be easy. they will stumble and they will fall, but great teachers teach kids how to get back up and keep trying as they try to make themselves better and move forward. [applause] when great teachers are asked to focus on test scores and pushed them to the forefront of our priority list, we give kids a warped and weird education that honors neither the depth and breadth of human knowledge, but it is an absolute turning of our backs on the uniqueness of each individual child that we teach and i refuse to do that. [applause]

liken't do that because we kids or we are teachers, we do that because many of us on our parents. i have a child of my own and i would never what than done to him. this is the whole child in matters and we know that, not just the part of the child that can find the right answer on a standardized test. grade teacher's help kids learn things but show us what they know and what to do with that information. we showed kids and we help them find what they're unique capabilities are and then take in information. then, to solve problems and create a better world they will live in. the most important part is that these kids need so much from us, but mostly they need courageous teachers. teachers that will not teach to the test but far beyond it. great teachers do. great teachers teach all

children. wouldn't it be lovely if we can pick our students? wouldn't it? if we could create little all start learning teens of kids that could get a perfect scores and ensure job security? wouldn't that be great? but that is a dreamy luxury that we don't have called private school. [laughter] it is a reality that you will not see in america because american public school classroom is the melting pot described on the side of the statue of liberty. this mirrors america and all this beautiful diversity. we take all comers and all customers are served. the literate and the illiterate. the english fluent and the english lerner, the ap scholar,

the immigrant, the attentive, and the disruptive. they are all hours and we educate them equally. great teachers seek and accept every child, every child. we believe every child has the potential to learn and we help them tap into their potential and grow in a safe place. walk into any classroom in america and you will see what i'm talking about. great teachers provide the american dream of opportunity for all. [applause] great teachers lead with not just their heads but with their hearts. what we bring is our wisdom about the ways kids learn best. what they bring in, that is something else entirely, isn't it? they bring in hunger, homelessness, learning disabilities, and it mixes with

first crushes, the winning touchdown, and worry if they will get passed to the dance. it all comes in. we are expected to handle it with grace come understanding, compassion, on i need to tell you a story about max. his mom was diagnosed with breast cancer and we watched her whether a way to a shadow of her former self. and said i was certain i would lose her when max was in my class. while caring for max's mom, his dad felt at work and was wheelchair-bound for six months. this was a family that had just failed to qualify for medical insurance because maxes' mom had not worked enough hours in her

union to qualify. they were doing this on their own time. how on earth does a 12-year-old ray about whether his research paper is in good shape when his entire world crumbles' around him? [applause] god bless him, but max made his pain visible to me everyway a 12-year-old boy knows how. he acted out, he's out out, he destroyed property, he was a festival of misbehavior. i was supposed to be teaching this hit english. what was more important to him was that i understood what was going on. no matter how hard he tried to get me to give up or send him to the principal's office, i was not going to do it. i spent far more minutes counseling him in the hallway that i ever did teaching him

english. that kid learn something. he learned when the chips are down quality people hank in there with you. those quality people are your teachers. [applause] is both you and i know that of all the tools we bring to our classroom the one most essential to the job we do into the development of young people is our love that. great teachers give it freely. just in case you have forgotten about my underwear, i started today by telling you an embarrassing story about my slip. it reminded me that sometimes our focus slips. in our zeal to transform public education we get led to believe it will come from one thing when we realize it is bigger than that and it will come from somewhere else. it will come from what staring me right in the face right now, teachers.

if we spend the next 10 years focusing on testing rather than teaching we will have led to an opportunity to change education for the better and none of us can let that happen. if we have the courage to do for america oppose the teachers what we do every day for our kids. if we tell them we care. if we support teachers when they struggle, there is simply nothing we cannot do. where the nation may have forgotten how important it is -- it is never too late to shift focus to what really matters. if we want real lasting change, if we want back to the pride and power that is an american education, then the revolution begins with us in great teachers know that. [applause]

as i go in around the country talking to educators and decision makers, the first thing i asked them is to tell me about the teachers they had that there were -- that was their favorite and there is never any hesitation. there is always a name on the tip of every tongue. if there is any hesitation at all it is because they are trying to tell me which one. there is the teacher that plays dodge ball with kids, the teacher that brought the homework to the hospital. there are all these stories. what i heard recently from a friend who teaches at l.a. unified and he told me about his first grade teacher misses wilson. he said in first grade every friday she would be at the lunch

table in the cafeteria with a class. if you were good all week you could sit next to her. it was a great honor to be the first grader selected to sit next to her. he got word friday morning he was the winner. he was sitting next to her and he was so excited just to get to sit with this favor lovely lady. that they were serving chicken legs. he sat and watched her polished off play after play after play of chicken legs. she put the whole thing in her mouth, worked it for a good five minutes and spat -- spit out the bones. [laughter] he had a whole new appreciation for misses wilson. even at my age -- we are 43. he has remembered that for 30

years. the stories tell me something. it tells me kids are watching us. it tells me they are watching everything we do and they are soaking it all up. every act of support, kindness, and a love that you showed doing the job you love and do so well, they are watching us. remember that. remember that you are going to be remembered. it might be for chicken bones, but you are going to be remembered. all across this country, schoolchildren and grown adults carry their heroes with them. in the recesses of their minds and hearts long after you sat in their class. you are a hero to them and they remember you. you are affecting that even today. when the road gets difficult, remember when the political debate gets a fiery. remember that when the winds of blame and criticism blow most

fiercely. you are a hero and he will be remembered. before i go i want to ask you to do a favor. given the size of this group we could be here until christmas. i will stay here. i think you appreciate that. i know you are all incredible educators but i need you to join with me and be a good steward for our profession by seeking -- speaking positively about it everywhere and anywhere you get the chance. [applause] as much as we would like to say so, we do not have a lock on having a hard job or even a low- paying job. we do not face necessarily more difficult challenges that other people and other professions, but ours gets more scrutiny, more attention and more headlines. it is far too easy to wine and

play the victim. don't [applause] is our job difficult? yes. does that often have challenges? yes. are there factors that impact the results we get with kids? absolutely. let's not dwell there you and i. it prevents us from investing in a more hopeful destiny. for you, for me, for our profession and anybody brave enough to enter it. let's be positive together. share your success stories. post your students' work. called the newspaper. throw open the doors of their classroom to the community and anybody who would want to wander in and watch the magic you make with children. complement a colleague. ask a principle tomorrow what you can do to make your school the best in town.

showed the world the beautiful, brilliant, capable hard-working face of our profession. show them who you are and be proud. you have been born with a gift for teaching. you have been given a gift of working with school children. you have a front row seat to the future and you build it one child at a time. every day you spend in the service of educating another human being is your opportunity to change the world and they get a better place we all live in. you will be remembered for a long after we have left this planet. i am in this journey with you and i could not be more proud of our profession and more honored to be with you this year. thank you very, very much. [cheers and applause]

[cheers and applause] >> friday on washington journal, a look at efforts to improve the economy. david harsanyi looks of the economy benefits more from job growth or wealth creation.

then we hear from nicholas jones and cynthia gordy. later, the series on international news bureaus continues with simon wilson from bbc news. he gives us insight from how they plan to cover the upcoming elections. friday, president obama and his two day bus tour through ohio and western pennsylvania. he is holding a rally in pittsburgh. we will bring it to you live at 1 khalifa -- 1:50 p.m. eastern here on c-span. >> you can see this even from the john hopkins school of advanced international studies

life at 9:30 eastern on c-span 2. >> we had pulled and around 9:30. we were at a pier in the middle of a harbor. >>kirk lippold on the al qaeda attack that left 37 dead. >> i was doing routine paperwork when there was a thunderous explosion. you could feel all 505 feet of destroyer thrust up and to the right. it is almost like we hunt for a second in the air. we came back down to the water. lights went out and ceiling tiles popped out. everything on my desk lifted up 1 foot and slammed back down. i grab the underside of my desk until the ship stopped moving. hat's more with kirkklippold

sunday on "q &a." >> low tax advocates presented a historical look at tax rates and growth in the 20th century. al hubbard said tax increases under bill clinton heard to economic growth while larry lindsey suggested president reagan's cuts actually lead to increased revenue. karl rove moderates this forum hosted by the george w. bush institute. >> secretary evans, you can open the cabinet meeting with a prayer. we have been given the impossible task so let's get at it. we have to cover 92 years of tax policy. we will do it by decades and

will have to fall presentations on the nine decades. i will leave the extensive biographies to be found in your notebook to suffice for most of these people. you know them. i will give a brief introduction. they have been each asked to describe their decade in a word or phrase. why do we not launch into it so we will get through each of the decades with enough time for each of them to go at each other in mortal economic combat. there will be blood all over the floor. 1920's withwith amity. she is also working on a biography of calvin coolidge coming out. she is going to talk first about the 1920's, which she describes as boring. >>-- roaring.

>> they did not start with a roar. i am looking at it now from the point of calvin coolidge when he was coming to washington. the federal debt went up from 1 billion to $26 billion. it was out of control. taxes -- they had nationalized the railroad, kill it, and d nationalize did a carcass. there was no area into which the government -- they had inflation that they would not call inflation because that was embarrassing. workers were way underpaid and going on strikes like in russia which had just had a revolution. we think we have hard times and we do not know what we are doing

there is too much debt -- there was greater uncertainty then. you look at that recession and what was the policy response to the aftermath of world war i. there was a hangover recession, what was the policy response when you have a bad recession and angry workers who are occupying wall street and even bombing it if you recall. there was a bombing of wall street. you raise interest rates 300 basis points and cut the budget in half. that was the policy response of the harding administration which some from the wilson administration call out going to inflation and general of people and misery. cut the government and half, which they did part lee easy because of the war in not so easy because of disabled veterans, they raise interest

rates to prove to the world you are serious about inflation. they set a direction of taxes that was down. they said we will do a tax cut now. there was less uncertainty about taxes. this is just our down payment in terms of tax cuts. we will go all the way. as certain t-bill to that the government meant it through harding and coolidge -- once there was uncertainty -- once there was certainty that the government meant it, you had a decade that was not a live roar but a true roar where you had happiness among the general population, and the miracle of miracles, you found lower earners paid less of a taxes as the rates come down. when they finally achieved it,

their top rate that they got to was 25%. that remained the gold standard tax rate. >> thank you. when a minor historical note, and the first director of the bureau of the budget, he later became vice-president of the united states under coolidge. >> i talked about how they got the departments to spend less with this trade -- tremendous lot that we repealed in the 1970's. they hauled them into a room just like this where there were yelled at. you must cut your budget by 1%. the department's behavior and did what the government -- the president said it.

>> for a slightly different view john prestbo whose view is maybe a little more downbeat at the end it. it is from bust to boom -- and may be back again. >> it was a time of big change. in world war i the capital gains tax rate was in the 70's. as high as 78%. in the early 20's it was cut to 12.5%. that helped the big stock market rally that happened -- we are familiar with it in the latter part of that decade. the shoeshine boys and taxi drivers were buying stock on a margin, borrowing as much as 95% to put into the stock market

that would never, never go down. except that it did in 1929. over two or three days it lost 20 something%. it continued down into the depression. the interesting thing about the dow jones industrial average in the period from 1920 to when the capital gains tax rate was cut to 12.5% through 1933, which is when people think is the depth of the great depression, the dow jones gained 1.75% over that period of time. that is because it was starting off pretty low after world war i. the crash wiped out a lot of that and what they called

bounces in the early 1930's. it was a period of great exuberance, great inventions, my favorite was the invention of the automatic bread slicer. that happened in that decade. the first talking pictures, the first movies in color. all of that was a great innovative time in american history. the depression was a downer for everybody. >> thank you. you left out the one innovation of the 1920's which is doomed western civilization which is the discovery of the television set. do not ask me why, but these dueling economic brains appear have slightly different views on the 30's. so we will start with amity.

then we will have joseph thorndike with his view of the 1930's which is fair share. >> there was less concerned for growth in terms of companies. less interest in the private sector. you see the tax rate go up under herbert hoover. that was the great sorrow of the republicans that they be trade themselves by raising taxes at the very end going from 25% into the 60's. there were a lot of ugly taxes that came in including tax on checks at a time when you want people to transact. they were trying to raise money because they were short, because the depression had started. then you were into the 1930's

and you see the government scrambling for revenue. the revenues were disappointing. surprise, the economy was slow. the story of the great depression is not entirely a tax story, but we are looking at the tax factor today. after monetary and credit even send all the trouble, there was not enough money to go around. there was deflationary. the government was scrambling with taxes often -- they found they did not have enough money. the government grew a little bit angry, a little pouty with the economy because it was not yielding up its bounty. so you see later some very weird and vindictive taxes, which are hard to explain. such as the undistributed profits tax. those bad old businesses are not spending but they could be paying out in wages.

they are hawking their money. you see that dynamic where the government is cross with the economy. that is a bizarre dynamic that we see repeated self more recently. towards the nbc the government get together with businesses again because of the war. -- towards the end you see the government get together with businesses because of the war. they were meeting together and planning the war. businesses were relieved not to be under attack. they tend to neglect when they look at the spending, there was also a relief of companies that they were no longer targets and instead were partners. >> and joe will do three decades starting with the 1930's. that is fair share. he will do the 1940's which is, classic to mass. the 1950's with this apparent paradox. you have about 10 minutes to do it.

>> i do not know if we disagree on much of the 1930's. one of the unsung stories -- the notion of fair share is in quotes from me. it gets confused all the time in the 1930's, mostly by democrats and people in the roosevelt administration. the government is still raising a vast chunk of revenue with a very regressive taxes. there are raising it with taxes on alcohol and tobacco in particular. these are providing a large chunk -- more than the income tax for a long time. the roosevelts administration does nothing to get rid of the excise taxes because, believe it or not, there was a strain of fiscal conservatism in the roosevelt administration. some people might challenge that. but it was true. they were unwilling to give up the money from these productive role taxes. what they tried to do was to balance the regressive taxes by

ratcheting up the rates on a variety of other more progressive taxes, particularly the income tax, both corporate and individual, and the estate tax. this was the wealth tax of 1935 which raises taxes on the states and incomes. it does not do too much to the change the distribution of the tax burden that remains intact. it does raise rates on individual significantly. this goes on through the 1930's. there is dissent about doing this. a bunch of economists are saying, you know -- this is by the late 1930's, this is all well and good. we are all in favor of aggressive tax reform. you might consider lowering rates and reducing or eliminating some of the more burden some business taxes. they were worried that roosevelt's tax policy was inhibiting recovery to some

degree. the new dealers had a response to that. it was essentially that by -- there were elements where -- it was about the propensity to save and spend. by taking this money away from rich people and corporations, you would get all of this sterile accumulation of tax capital, grab it away from the rich people and give it to the poor people and that would encourage the economy to recover. that argument is not tax policy but it is an important part of it. by the end of the 1930's, you do see them concerned about this. partly because they are losing a lot of political battles. there marquee tax reforms gets to get it up immediately by congress. within a couple of years, it is gone off the books. and in the war -- we segue into the war. the war does change the

discussion entirely. among other things the federal government is faced with much larger revenue needs. their first response is one of the treasury department had been suggesting for some time. we will have to tax the middle class with an income tax. until that only rich people paid in income tax. they said, this is our most he efficient and fair tax that will raise the most money. we should turn the class tax into a massive tax. over five or six years, a number of income tax payers goes up seven or eight times. it does become a middle class reality in the way federal taxes never had been before the exception of a social security tax in the mid-1930s. the driving force behind this is a resurgent fear of inflation. they are extremely worried about runaway inflation during the war. they try to deal with that with price controls to some extent but they also use extremely heavy taxes to try to drain purchasing power out of the

economy. by most accounts it does a fairly good job. the economy recovers by the recession very effectively. sometimes or more ii is called a -- world war ii is called a gdp war. there were some tax incentives they crave for investment during the war. even as they tax the way business profit in huge percentages, it is taking almost all profits away at a certain point. they are very concerned to be afraid to invest. at the end of the war, moving on to the 1950's, you see a natural pullback in taxes. after every war where tax rates come down, that happens a little bit in the 1940's because republicans when an election. harry truman pretty effectively pushes back against that. he even embraced new deal

definitions of what encompasses taxation. he is not excited about cutting rates. he describes most republican sponsored tax bills as giveaways to the rich. you find the rhetoric has not changed much at all over the decades. truman was able to push back against it. then korea comes along, and that pushes rates back up. the real point here and the real question comes -- what happens in the 1950's when you have a republican president in the white house? the paradox here is you have a republican president, you have a peacetime economy after the korean war and, and tax rates stay extraordinarily high. they are over 90% at the end of world war ii, and they stay over 90% 2 out the 50's. i find the administration does nothing to challenge that. that is perplexing. you see this a life in

contemporary debate about tax policies. people hold the correlation of, you find under high tax rates we have had high growth. the implication is that high taxes must be good for growth. the reality is that the 1950's are anomalous. this is where the story gets irritated because they say you should not go fishing around for policy lessons in history because there is no good point of comparison. the 50's are a bad. a comparison. we are economically dominant on the global stage in the we never had been and never would be again. those high rates could be maintained with relatively minimal economic damage for a while. what is driving the eisenhower administration to keep these rates is, again, a deep and abiding fear of inflation. eisenhower is extremely worried that the economy will overheat. he is worried about deficits.

he is all about the scope responsibility. he makes a deal with democrats to protect the rates as they existed during the war for some restraint on spending to try to get back to a balanced budget. that is the only factor that really matters and 1950's tax policy is the commitment to not cutting taxes and to try to restrain spending. the paradox is not as great as it appears. growth was not as good as we thought it was. it averaged just under 3%. tax rates which are over 90% are not as high as we sometimes think they are because the effective tax rates are in decline. the high marginal rates tree incentives to get loopholes. tax rates start to drop. 60% during the war that drop to around 40% after the war. they get down to 30% in the 1930's.

even those targeted by the super high rates are finding ways around them. that is the story that will continue into the 1960's and 1970's. these very high rates, they are more fictional. there aspirational if you are a liberal. they are simply avoidable for many people. i think that leads us into the 1960's. >> thank you. we now have another three decade hitter. lawrence lindsey. at the time of his appointment, and the youngest. and my colleague on the second floor. dr. lindsey will cover the 1960's, 1970's, and 1980's. victory, disaster, and the pivot point. >> thank you.

the 1960's are interesting because the time in the economy's got dangers. what gave us our ability to be dangerous was the computer. we began to figure out that all of these theories, we could calibrate them. you could compute the numbers. what we are going to see in the 1960's, 1970's, and the 1980's, the economic profession experimented with the had not done before. to pick up on your point, to look at the context data from 1960, the top rate was 91%. there were eight americans who paid the 91% tax rate. >> there was a bracket in the 1930's that had one. >> is the were avoidable.

you have to scratch your head and wonder about the gene pool that produced those 8. there it was. how were they avoidable? they were avoidable by doing something that was essentially noneconomic. if your tax rate is 91% and you have an economically viable project that produces 10% return, and one that produces a 2% return, with a 91% tax rate go for the 2% projects. there was a lot of that that went on. the other thing that helped was that we actually had a president who knew what it was like to be rich. that was john kennedy. kennedy was very well aware, maybe he learned it from his dad or himself, about the effect of

tax rates on people's decision making. a lot of his rhetoric would be thought of as supply-side. he was very anxious to cut the top rate of tax. the problem was, he had a legacy on his left. he had the new deal legacy and a lot of his own party was reluctant to cut rates. on the right he had the eisenhower legacy of balanced budget. the republicans were not pushing of getting tax cuts through. the president was also worried -- economists were saying, we had a recession in 1958, a short one in 1960. things are not looking so good in 1962. you are up in 1964. he was very aggressive at pushing tax cuts for both supply-side reasons and also demand side reasons.

he was assassinated in 1963. lyndon johnson, who was not exactly incapable of doing the political calculations decided to pick up the legacy and decided to use kennedy's death to pass the kennedy tax cuts. at the top rate from 91% to 70%. we still think a 70% as a very high rate of tax. think of what you have just done. at 91% to keep 9 cents on the dollar. at 70% you keep 30 cents on the dollar. you have no more than tripled the after-tax return to people. this is a huge supply side the fact, and the side. you had very rapid growth in 1965, 1966. the tax cuts were among the most successful we have ever had.

the income tax collections from people at the top actually rose during this period. remember you are collecting 70 cents still in the triple the incentive for people to do something. this is a real when/win for somebody to do something. this was the first real proof that there is a revenue maximizing rate. it is certainly below 91%. as relator it is below 70%. that was a positive experiment that economists ran. then things turned down a bit. richard nixon came in. we had a reversion back to the eisenhower mind-set. we had a 10% surcharge that the

top rate back up to 77%. in the recessions of the early 1970's we had experimentation with one time lump sum tax cuts. a child credit of $35 -- which was actually real money back then. things like that. the thought was we had a return of 1930's thinking. that is high rates for "fairness," but keynesian experimentation to overcome the recession said that time. but steady are probably too young to remember the 1970's looking around this room. i will take my -- take my word for it was not a successful experiment. it was capped with a view of the carter administration that actually, since we have inflation, we all remember

bracket creep was a good thing. you can find rhetoric from senior administration officials testify to this. people get pushed into higher tax brackets. therefore they have less money to spend. that is a way of cooling inflation. again, the rhetoric that we have heard all along was playing out. we ended the 1980's with a 70% top tax bracket that kicked in a $200,000. $200 -- $200,000 was a lot of money in the 1970's. it was less in 1980's. ronald reagan proposed across- the-board cuts in tax rates. when legislation actually got through, it included a lot of other things as well. some of which were not supply- side. i will cut to the bottom line. the cut the rate from 70% to 50%.

you keep 50 cents on the dollar. that is a two-thirds increase and what you are able to keep. suddenly people began a lot more economically rational use of their money. the disincentives to work, said, and invest were dissipated. the research on the 1980's suggests the cut in the rate from 70% to 50% actually was a net revenue gainer. however, the overall cut across the board was a small revenue loser. this is sometimes where we get complicated in the debate. when you cut a rate from 6, 20% to 14%, how much of a supply side is there? it is a tiny increase. it will not be a lot of supply

side feedback. is not like the same from 70% to 50%. because they were across the board, they over all lost revenue -- not necessarily a bad thing. the top rates on net or a net producer of revenue. if you look carefully at the data -- i did this as a graduate student -- the top rate for maximizing government revenue is probably somewhere in the high 40's. this is something we should all keep in mind. who on earth would actually want to maximize government revenue? we thought

have a little pity. it is sort of a preference function between, here is the government and here in society. i do not care how society does as long as the government is extracting -- that is the preference function may be stalling what have. what you really want to have is the rate well below the rabin night -- revenue maximizing. the government is doing great and the rest of us are not. we to believe in lower taxes need to start emphasizing you do not want to shoot for the revenue maximizing rate, it should be well below it. when you start crossing 40%, and generally you are making the government a about a dollar better off and you make the private sector about $2.25 worse

off. you do have to collect revenue. basically you take $1 from the private sector and give it to the government. the economic burden of moving that dollar really costs and other $1.25. would you move up into the 40%, that rises and rises. i really think we need to stand firm here. once you cross 40%, the math of higher rates does not make a lot of sense. we have one decade of experimentation in the 1980's to prove that. we have experimentation in the 1960's and 1970's about what works and what does not work. i would think that is the bottom line. >> thank you. he attended harvard law and

harvard business on the struggling southern scholars fund program for a liver appellation youth. he served as deputy chief of staff. on august 29, 2007 he became the only member of the bush staff to be arrested on the white house campus by two uniformed officers of the cigarette service. al, he will cover the 1990's and the 2000's. >> you can see how much you can trust me and trust karl rove. >> does this have anything to do with tax rates? [laughter] >> all i can say is, you can see why larry lindsey was a popular professor at harvard. he makes economics some like it is fun. the 1990's. i believe all of you remember

the 1990's. we began with a -- remember the budget deal done by president bush 41 that included with a modest tax increase. i think it went from 28% to 31%. then there was a shallow recession. then president clinton comes in and has a large tax increase that raises the top rate to 39.6%. you did not use my phrase -- cover up, which i think is important. hopefully historians will get it straight. the media will never get it straight. the 1990's were not the gray. that we -- that the clinton administration likes to remind us of. there is no question the economy boomed because of the tech boom. we all sat around thinking, how

can these stocks keep going up, up and these companies have no earnings. there was a byproduct of that that was come up -- covering up the negative impact the tax increases have had on the economy. the narrowing of the tax base had on the economy. the other thing it did that is extremely important to recognize is that it increased dramatically the tax collections of the treasury. over time since world war ii, taxes as a percentage of gdp has been 18.4%. in the late 1990's when we started running the surplus, tax collections got up to around 21% of gdp because everyone started having these stock options and capital gains from the inflated stock prices. then you combine that with the

fact the clinton administration cut defense spending, hollowed out the defense department like some people like to say. you end up with a surplus. obviously it was not sustainable and it was covered up. the tech boom covered up the fundamental problems that existed in the economy. i feel a little uncomfortable as a move into the 2000's to talk about what president bush did since president bush happens to be sitting right here. i am sure he remembers much better than i. he happened to be president with all decision making and i was just on the periphery. but if i remember when you were governor in 1999, you and your advisers, many of whom are sitting here today, started talking about despited this big boom going on in the economy, there was a real chance the next president was going to have a recession.

there was also a recognition that the dramatic increase in taxes under president clinton was having an adverse affect on the economy. gov. bush proposed a ambitious tax-cut proposal that was the centerpiece of his campaign. once elected, he was successful in 2001 with the assistance of a lot of these people here in getting that past. the majority of which he got past. to give you a sense of what happened, the top rate dropped to 35%, for some people it dropped to zero and for some people it dropped to 10%. in 2003 as the economy was not as strong as it should have been, recognizing that there were other tax burdens on the economy.

this was a very ambitious, bush proposed -- was the initial proposal to take it -- capital gains to zero? no. was the proposal 15? it is nice having the resources here to answer these questions. [laughter] so the proposal -- they were able to get accomplished cutting the dividend tax from 35% to 16 -- 15%. the capital gains from 20% to 15%. there have been a lot of studies about what the impact of these tax cuts were on the economy and not tax collections. i think the studies on the impact of the economy have a concluded that it had an impact of -- it enlarged the economy by

0.7%. let me translate that into real dollars. we have a 14 trillion dollar economy right now. every year, that is how much larger this economy is as a result of these tax cuts. the other thing that happened -- several other things happen. the and. -- empirical evidence of what happened to tax collections. the reduction was 40% less than what would have been expected under a static model. because of the lower taxes there was changing behavior. you had more people working, there were working longer hours, entrepreneurs taking bigger risks, there was less tax avoidance.

the tax base was larger. as a result, the cost of the treasury was 40% less that what had been anticipated under a static model. on dividend and capital gains. , it cut the cost to capital. there was additional investment. higher productivity, higher wages, and more hiring. on the entrepreneurial sector of the economy, the ones you paid their personal income taxes the way they pay business taxes, that is 80% of companies -- interestingly enough, and 55% of private companies and almost 50% of business taxes come through flow through companies. you had significantly more

investment, higher productivity. we have incredible productivity during the bush administration. therefore we have higher wages. i call this the roller-coaster decade because we had great growth beginning in 2003 through the end of 2007. the we had the collapse caused by the credit expansion finally reaching the breaking point. started after world war ii, increased during the 2000's and reached the point was not sustainable. it resulted in the great recession that we're still recovering from. we are now faced -- we are faced with a choice. we have the obama administration say the way to get the economy going is to start taxing rich people. we have studies that show -- and

tax reform and cuts of the 1980's had a positive impact on economic growth, tax increases of the 1997 negative impact on growth, and the tax cuts of the 2000's had a positive impact on growth. >> before we jump to questions from the audience, let's go to each of the panel members and see if they have a comment on something they heard from one of their fellow panelists. i will say, it is interesting we talked about in 40 minutes 90 years of tax policy. we are talking about enormous volatility. down in the 1920's, up in the 1930's, turned into a mass tax in the 1940's, standpat in the 1950's. it is athe 1960's, -- wild pattern for the fundamental tax policy in the united states over a period of time. why do we not start with you, larry.

any comments to add to what al said? >> i think the point of experimentation is a good one. i think we are going to experiment going forward. there are some basic rules so that i think the entire -- even our friends and the other side would say, you want a rate that is as low as possible and a base as broad as possible. that is all there is to it. we can negotiate whether the top rate should be 39.6% or 25%, but that is a lot narrower range then no one that i know of who is serious about the economy thinks we should ever go back to the really bad old days. >> i just want to say, why are we here? because there is a record.

we just try to lay it out to you. you can add to it. there is a tremendous record. it is wonderful to consider it. why is that important? because easily these conversations happen as if there is no record. as of the world this starting. the 20th century is crucial at this point. >> i think this question of volatility and tax policy is important. i do think the take-home message for me from most of a century that we looked at, it is a brief traditional tax reform in the boring, expert dominated traditional tax reform. a broader base and lower rates. almost everybody can agree that

is a good combination. nobody serious once high rates just for the sake of having high rates. not to say that argument is out there. but we would all be better off with the broader base and the lower rates. if you need an example of this, it is that the extremely high rates that some on the left do look at longingly at this point, they created an enormous amount of avoidance. some had a legal evasion as well. what it really did was corrupted the policy process around attacks. eight tax loopholes extremely voluble to taxpayers. that undermines the whole legitimacy of the tax system. i said this earlier on another panel. i think if you are a liberal and you love taxes, then you should not like the high rates. if you of the income tax, you should want low rates because

what high rates do is they destroy the tax themselves. the create the loopholes and the avoidance, faith in the fairness of the system declines and that is when people turn around and said, i did not want to put my money into this. i did not buy this foul the proposition anymore. for a liberal, if you like big government and lots of tax revenue, higher rates are not the answer. for your conservatives, high rates are clearly not the answer. it seems to me that there is plenty of room to come together on the sort of boring, not exactly -- a traditional 1986 style tax reform. it is impossible to pull off. it was impossible in 1986, too, but it happened. >> in my work i live mainly at the capital gains tax rates rather than -- i look mainly at the capital gains rate rather than the overall income tax

rate. i think you will find something interesting here. in the 99 years through last year that we have had the 16th amendment in the fact, there were 63 years in which the capital gains rate tax was 25% or less. there were 36 years in which it was over 25%. during the 63 years of the 25% or less, the dow jones industrial average had an annualized rate of return of 6.05%. in the years that the capital gains rate was above 25%, the rate of return was 3.49%. there is a dramatic difference of 256 basis points of showing

that the capital gains tax rate did seem to have any effect on behavior in the stock market. >> thanks, john. al? >> i would like to pose a question to professor lindsay, please. i left out of my little presentation that i meant to mention and i would like larry to comment on this. when you analyze the bush tax cuts, that the economic growth came from the cuts at the higher end, i think they say that the impact they had on the highest income people and we also -- the bush administration, not only were the tax cuts i described, we also reduced the penalty for marriage and raised the tax credit for children, etc. studies show that those kinds of

things, although certainly important for fairness, don't have a positive impact on economic growth gro the way cuts and especially the higher rates, especially for the highest income people. professor? >> can you knock this one out of the park, larry? >> yes. >> softball? >> i'll do my best. what i was going to point out is that president bush was even more clever than you just gave him credit for. what happened was we had two problems in 2001. we had a short-term recession that was made worse by 9-11 and we had a long-term growth problem that we needed to improve the cash flow of the

small business sector in particular, which had been badly hurt by the stock market collapse. remember, when president bush came to office, the nasdaq had already collapsed by 80%. the economy shrank in the third quarter of 2000, before he came to office. and things were not going so well. 9-11 made them worse. so i think of the 2001 and 2003 tax cuts as two sides to the barbell. the first was to be to really change psychology and get the economy moving again and the doubling of the child credit, the cutting of the bond rate from 15 to 10. in 2001, we actually mailed checks. they went out in august, to give people a rebate from 2001, which turned out to be vital because

final in, if people remember it, -- 9-11, if people remember it, this economy came to a standstill. g.d.p. was beyond close to zero. it was pretty hard to conduct commerce. the stock market was close for five days. auto production had been shut down. etc.. the quarter after those checks got in people's hands was the fastest rate of inventory drawdown we have ever had in post war period. why is that important? well if, people are not shopping, good pile up on the shelves. if good pile up on the shelves, the factories are going to shut down pause you don't need to make good. the fourth quarter of 2001 pulled those good off shelves

when the money went in people's pockets and we were able to get the economy growing again in 2002 in spite of 911 and everything else. but you then had as the top rates came down starting in 2003, was you started to see small business cash flow revive. employment revive. we had very rapid growth in 2004, five, 2006. i think actually the great thing about the president's tax cuts was after all the experimentation up and down, which finally got both the supply side and the demand side right and we got it right in a way that really helped the economy out. one more small point, if i may, general rove. lord and master rove. karl.

you don't know all the names we called you. [laughter] >> yes, i did, larry. >> you mentioned the 6% and the 3.5% reform right? >> it doesn't sound like a lot. through the course of the century, the difference between 6% and 3.5% means the stock market would be eight times higher. eight times higher. 16,000 instead of 2,000. this is the difference over a century of 6% versus 3.5%. it is real money that we're talking about here. >> thank you. we have time for maybe a couple of questions. before we do, though, i do want to apologize to al. i want to frankly admit here today for the first time publicly. i didn't steal his car. i was mainly repositioning his

car to get it out of the sun. he retaliated by wrapping my car in industrial cellophane and subjecting me to abuse on national television. i have the photographic evidence that it actually took place. a couple of questions here. yes, sir. >> let's have a second question keyed up. good. go ahead. you first. yes. we can hear you. [inaudible]

>> anybody want to tackle that? joe? >> you're going to ask a historian that question? i'm the wrong guy. >> here is a simple way of quantifying it. back as i mentioned in 1960, we had eight people in the top bracket. last year, we had roughly 400,000 taxpayers making over $1 million. people are willing, with moderate taxes to actually report income and do business that results in reporting income. i can't think of any more dramatic explosion than that statistic. >> on behalf of the institute, we apologize for putting a picture of a bearded man in your

place in the biography of the notebook today. >> an upgrade on the photo, over the one i sent them. mr. hubbard talked about the part of the tax strategy, the 2001 and 2003, those 21st century bush tax cuts, we did these parts for fairness and other parts for growth. that seems to be the fundamental debate today, that it is all about fairness. the growth seems to have dropped out. the growth discussion versus fairness, is that the strategy, larry, or others, how do you sell growth over fairness? isn't growth the fairest of all? >> well, one way of looking at it, though, is fairness defined as what kind of avenue action? fairness in the 2001 and 2003 tax cuts is defined as what kind of tax cuts would benefit people who would not otherwise derive a significant advantage from the other kindsor pro growth cuts.

the day log about fairness is how can we sock it to somebody who is not paying enough in our view? fundamentally different. larry was very good at the time of making clear things like to child credit really didn't have implications for growth but they did have implications for families with large numbers of children to get by. it wasn't a great -- significantly more economic growth, the feedback wasn't significant but it was a way to help people get by in a tougher economy. >> jobs. jobs. if unemployment is high, it is not fair. >> do i see a question over here? yes? >> brian westbury from chicago. right now government spending is about 24% of g.d.p..

given the 90 years of tax history, is there any they with the tax code even remotely like we have seen over the last 90 years, could actually raise 24% of g.d.p.? we know historically it averaged 18%. is there any way the tax code on income, getting rid of deductions or any other way, could actually raise 24%? >> let's have a quick show of hands? who thinks it could? >> not within shouting distance during the war. the tax rate was 24%. 60% on the top 1%. possible but hard. >> and much higher on the middle class. much higher. >> we have a number of economists in the audience. those of you who have economists who believe it could raise that much of g.d.p. raise your hands. >> for one year? >> on an ongoing basis could the

tax system generate 24% of g.d.p.? is that fair to say on an ongoing basis? >> how many do not think it could? all right. well, on the one hand, yes, and on the other hand no. with that, thank you for coming. >> it could create jobs. it could spark innovation. it could expand opportunity. it can guarantee our competitiveness. it can put america back on top. >> you can talk about goals all you want, but we have put up stop signs. we have put up stoplights and none of it ever changes congress' behavior. >> from the time that i had lost total control of the committee and went out with two pitchers of beer with my staff, the tax

bill at 25% rate top. ok. i said what about 26? >> you could make the advantages to home owners much more progressive? the tax reform. what we did was to convert the home mortgage deduction to a tax credit at our lower rate. >> changing tax code yesterday and today. current and former lawmakers, the bipartisan policy center on the battles won and lost. find it online at the c-span video library. >> friday on "wall street journal," a look at efforts to im-- "washington journal," looking at whether the economy benefits more from job growth or greater wealth creation. we hear from nicholas jones of

the u.s. census bureau and cynthia gordy. get insight on operations at the bbc as well as how they plan to cover the upcoming elections. "washington journal" is live at 7:00 a.m. eastern on c-span. >> friday president obama ends his two-day campaign bus tour through ohio and western pennsylvania. we'll bring that to you live at 1:50 p.m. eastern here on c-span. >> friday, a forum on the future of the middle east. four young people from israel and the palestinian territories. you can see this event from the johns hopkins school of advanced international studies live at 9:30 a.m. eastern on c-span 2.

>> barclays, the international banking and financial services company based in london was fined $450 million in penalties by u.s. and u.k. authorities to settle allegations of manipulating international interest rates. bob diamond, the chief executive of barclays, who resigned tuesday, appeared before members of the british house of commons treasury committee investigating the banking scandal. this hearing is about three hours. [captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute] >> we would hope that you able to speak freely and of course, even more freely now that you have resigned. the hearing is about the turmoil at one of britain's leading financial institutions. certainly i have said that

barclays has suffered bad publicity because you settled first. it is much wider than that libor session even though that appears to have precipitated your resignation. given that you have resigned, i would like to give you an opportunity to explain your reasons. >> thank you chairman and thank you, everyone, for being here. i loved barclays. that's where it starts. i loved barclays because of the people. it's -- 16 years ago today on july 4, 1996, that i began at barclays. it has been 16 years of just tremendous enjoyment, and that enjoyment has been driven by the

incredible 140,000 people in over 50 countries around the world. but, chairman, as you said, this week the focus as been on barclays and in many ways because they were first. the world looks at barclays as a group of traders who has reprehensible behavior and that has been put on barclays in a way that is not representative of the firm that i loved so much and the way they treat their customers and clients and the way they deal with problems. and i think that comes to the core of the issue. clearly, there were mistakes. clearly there was behavior that was reprehensible, but as soon as that was recognized, barclays put all forces, if there is a mistake, a problem, how do we handle it? what do we do about it?

it has been three years with three of the most important regulatory agencies in the world looking at millions of files, all three regulatory agencies applauding barclays for their cooperation, analysis and productivity. we hired two external firms to work with two members of senior management, reporting to the chairman of the board and the chairman of the audit committee, and the attitude of barclays three years ago when this was recognized is let's get to the bottom of it, take the actions that are necessary, learn our lessons and if any of our customers or clients got hurt, let's make them good. i think that attitude was recognized by the three regulatory agencies in what they wrote. it is not coming out in the court of public opinion. fundamentally my decision to resign is my leadership. i think i can help bridge

barclays from the turmoil of being the only one out so this is looked at this true context of being about an industry and about libor in addition to barclays and prevent the damage to the reputation that happened over the last week. the best way for me to do that was to step down but continue to come here and answer the questions of the committee. i above barclays. history will judge barclays as an incredible institution because of its people. we need to get through this period, and the best way for me to do that was to step down. >> >> why did you change your mind over the weekend? what was the trigger? there had been reports that there was pressure from the regulators. is that correct? >> let me explain why i changed my mind. it is a good question. it wasn't over the weekend. we worked over the weekend on a communication to our colleagues internally. we did that knowing that we had the support of the board, the

support of our shareholders, who we had been working with in the announcement at the end of the week, the colleagues, clients, customers and regulators. it was clear to me on monday that that wasn't as strong and i needed to take a step in this bring to support -- from the regulators -- wasn't as strong as it had been and i needed to take in this step. >> i just want to pin that down. did one or more senior regulators -- >> i don't know. >> when you spoke to him, did he refer to any pressure of any type that had come? >> i think that is probably a question for marcus, who i know is here next week. >> i want you to tell me what he would have told you in that conversation. you would have had a conversation with your chairman about this and about your continued growth.

>> i would say broadly speaking it was just as i said. that the focus of intensity on my leadership, it was better for me to step down and -- >> why are you so reluctant to tell us what may have transpired with those regulators over the weekend? we're going to have them before us. >> i didn't -- i'm trying to think if i had any conversations with regulators. >> you didn't but marcus did, didn't he? >> chairman, i think it is as simple as if marcus had conversations with regulators, that is a conversation for him to have with you. did not discuss that with him. i just discussed my reasons. >> it is widely held that

regulators have lost confidence and it is not just libor in your leadership at barclays. why do you think that is? >> i think there has been an unfortunate series of events in the last week around barclays being identified as the first bank in what was, you know, a report that clearly showed very, very bad behavior by groups of people. and how we dealt with that, chairman, i think was appropriate and i think it was the sign of the culture at barclays. >> that is not coming out. the answer that you're giving me is that it was the first move at this vantage point. >> it is true. the f.s.a. were concerned about your -- and that they sought

insuranc from the board. it would be a change of culture in barclays. is that not correct? >> that is the first i ever heard that there was any question about my appointment as chief executive. i certainly went through as a chief executive appointment would, interviews with the financial services authority, and i got very strong support for my appointment as chief executive. >> and you know nothing of any written submission by the f.s.a. to the board at that time, setting out the need for an improvement in the corporate governance of barclays and improvement of the culture and the need to look better at how you assessing the risk appetite and to improve the control? you know nothing about that? >> i knew nothing about it at the time that i was appointed. correct. i don't know anything. >> 2010? >> correct.

>> and you know nothing about -- at all, about the suggestion that you were asked to provide insurances, that you challenged your long-term colleagues not to take excessive risk? >> i don't remember any specific comments, but i'm sure there were discussions with the regulators during the process of my succession. my memory is more around would i be able to -- having been associated with the investment bank for a number of years, would i be able to disassociate myself. so as a group chief executive, i would be able to leave the running of the investment bank to richard. >> is it true f.s.a. came to the board and expressed their concerns? >> i think it is every chairman, in that february meeting that the f.s.a. comes. >> what was said?

>> the context of the discussion , when it got to controls, which i think is what you're asking about. a control environment. the focus, the tone of the top was something they were specifically happy with, in particular, they talked to the board about chris and i and our relations with the regulators. how we dealt with any situation that came up. >> something more specific than that, mr. diamond. didn't they tell you talks had broken down between the f.s.a. and barclays? didn't they tell you they no longer had confidence in your senior executive management team? >> no, sir. there was a discussion that, as it got down into the organization, they felt that

there was some culture issues that people sometimes pushed back. sometimes the pushback wasn't always -- there was an overall discussion on culture. we took some of this as this is annual review from the f.s.a. >> this is the sort of thing that -- >> it was part of an annual review. it is always going to have some things that they are critical of that we can do better but they were specifically pleased and said so to the board with the tone at the top referring to chris lucas and myself and our colleagues on the executive committee. >> is it true there were challenges about your stress tests, your accounting practices? subsequently had the debt buyback scheme, interest rate swaps and now libor? >> i don't remember -- i didn't

-- in the february meeting, i don't mean to skip over anything if i can. there was a conversation about a series of things which became quite an issue between the f.s.a. and ourselves without going into -- you have the versions of that transaction because it was -- it was a transaction that was approved by the f.s.a. but, to be fair, it was a transaction created under another chief executive at the time so i'm probably speculating a little bit. it was a transaction that created more debate between the f.s.a. and barclays than anyone anticipated when the transaction was done. i remember coming up in the meeting in the context of let's not have these types of situations. >> well, this will all come out in the wash what happened in september of 2010 and what happened in february this year. can i turn to the decision

during the crisis to lower libor returns? in your letter to me last week, you said "the decision to lower libor was wrong." when was that decision? >> context. i discussed it -- i think the letter to you laid out pretty well that there is three different periods that it is easiest for me to refer to. the period between 2005 and 2007, with some activity that eastward up into 2008 and very northwesterly 2009, but primarily 2005-2007, which was about a group of trade tearnsd influence they were putting on -- traders and the influence. the second period was the credit crisis of 2007-2008, when there was pressure put on the rates if

i can just finish with the third and i can call it one, two and three going forward. the third is the on the other hand 2008, october 2008 where there were questions about the bank of england discussing with a senior punt return and putting pressure on rates. those are -- senior person and putting pressure on rates. >> from what we can tell from the f.s.a. duletation in 2007 -- >> the decision to influence rates? >> yes. lower libor. >> i'm pretty sure that was the -- i can't remember -- >> it is -- it is pretty reasonably clear. >> september, yes. >> this is all set out in paragraphs 111-114, the f.s.a.

report. i just want to clarify that the decision that you are referring to major n your letter, is indeed the decision and the set of actions taken in paragraphs 111- >> i apologize, chairman. i think there was a different set of decisions. some of those happened before september -- >> i'm talking about the second period. the period in the crisis to lower libor, specifically to lower it. i'm talking about that latter period, not the first period. this does make sense, doesn't it? the decision to lower libor was not made as -- it took place a year later? turn to the tucker file note.

do you usually take a file note? >> occasionally. >> how many with >> most of those contacts were not made. it is today keep how many? >> i think all in one that was referred to maine was a -- >> -- was in the fall. >> no other conversations? >> this is the submission that barclays cent in yesterday. >> i would like to know how many of these contacts are used? >> i have fairly frequent contact with the regulators.

but my contact would generally be with the bank of england. at this time, john was the chief executive. >> how many were filed noted, roughly? >> maybe a few. >> a handful? less than a handful? >> yes. >> said the affected files not insignificant, is it not? >> today, i have regular more official meetings, but in terms of the phone call that would be new. >> what do you make of this race? you put it in your file. >> yes, i did. i think that was the core of the reason that i dictated that note and communicated --

communicated with john. the final note was to john. the concern we had was that this was october 29, 2008. i do not have to remind the committee what october 2008 was like. we have the government intervention. >> i am asking what it took to ghtful"?the phrase "rifl >> the fundraisers from the middle east was completed. within the context of this market, there was a worry. >> that what i was asking. you have arrived at the the answer. the next problem says that mr.

tucker fall back during libel returns could be low. >> he felt our level rates were relative to the other 15. >> what was it? a nod and a wink? >> there is a perception and whitehall that our rates were high and the worry that i shared with john was that members of the government were told our rates were high relative to others. if they then took that to mean that we could not find are having trouble finding, i would have to be patient year. we were finding adequately any

one of the worst market environments i had ever been a part of in 30 years in the banking. it was clear that a number of the firm's core posting or had emergency loans or had been nationalized, or having trouble finding, yet we were posting the highest level. we are funding at those levels, but we would question whether some of the other institutions could get funds at the levels they are posting. >> my question is what the implication would be? reliable returns did not always as high as we have recently. you're liable records could below. >> i did make your point. i think it is the right point.

look at page 22. the our submissions from 16 banks from three months. there was a question at the time. look at the top of the page. there is a line that goes across. that is a barclays submission. in october 2008, when barclays was funding adequately, probably as well as any international bank and close to as much as any bank that cemented, and there are banks that were posting at levels lower than us, even those are nationalized, and 100% of the days in october 2008, we would highest post in the liber, or the next to highest. please, mr. chairman, bear with me.

barclays during the month was reporting levels of whatever vulnerable, and yet 15 firms -- 14 or 15 firms reporting rates lower than that. some of those banks could not find at any level. >> we know that are up to this. >> there was another point. >> could you get to the point? >> if they were told that barclays was up the highest, without knowing what i just went through, my goodness, they could not find. we need to nationalize them as they have nationalized other banks. when desperate, we had a critique been raised. maybe we could not complete equity raising. the most of important financing the barclays has had -- i am sorry. >> you do not think he received

instruction? you do not think it was a nod and a wink? if you are monitoring lobber daily and returns -- or a monetary it daily and returns? -- monetary nitoring it? >> i would not say i was the key person. >> you were giving a daily report. >> yes. >> that is a very good question. i want to take a second. this is very important. on the day of that note, liber went down. look at the very next page of november. you will see that through november, barclays was up 14,

15, or 16th. this is a relative rating. but the while it posted versus of the 15 banks. what you are referring to is following our fundraisers, which is very positive news to the market. levels of lobber went down across the market. it had nothing to do with barclays submission. meaning that we were reporting at those levels. >> i got the point. we read into that point. >> that is relative to the posting of the bank, as the 's libor.posed to we had 8e every adoptioni-- reduction in libor.

-- a reduction in libor. >> you come through it. how long have you been in that debt markets? >> i think my position at morgan stanley was in 1981 and 1982. >> so about seven years. excuse me, 17 years. i left savvy before you set up -- tell me about your experience suggests been in the

market. >> no one would consider me a derivative person. i am a little old for that. when i was actively involved before i was in the management, i was in the cash markets. >> and markets the were funded. >> i am sorry it? >> [unintelligible] >> mostly u.s. treasurys or european governments wer. >> other words, you had been living and breathing the capital markets in the different forms for 17 years.

the opportunity to use now was using -- the user experience as he wanted to? >> there was an opportunity at barclays. barclays at that time was more of a u.k. focus rather than international. >> it was sub-scale. courts in people and delivering much. >> there was still in the u.k. other firms were mapping their ability to expand internationally. >> when you set up barclays,

u.n. resourceful. you're recruited senior staff. you decided which products and which markets to play in. >> is attending. -- certainly. >> is using their hands on and hands of bases. -- basis. to give people a free rein? >> i think on the management style at the time was to have executive committee that had all of the representatives and things are reported up to me. a surge amid preferred a consensus style of management that we could agree upon -- i certainly preferred a consensus style of management that we could agree upon. if that is what you are asking.

i am sorry, you asked about something else. people consider it a more centralized. >> that makes sense. i just wanted to establish this. you have a high familiarity with the bank. you were the parties. he recruited these teams. >> in some ways. some of our people have been here 25-35 years and the money markets. barclays has such a rich and strong tradition. many of those people have been with the banks for quite a while. >> we began operating or we did not really have much of an operation. and we would hire people from outside. >> there were lots of people who would work at the bank.

>> all of the group funding, but in the execution was done to the markets. it was dumb the group treasury. and a that you would remember. he has -- it was done through the group treasury. >> tell me about your relationship with the bank of england. did think it was slow to the crisis and it doesn't it? the thing that is part of the

concern? >> no. i do not. look relative to the other banks. one of the best decisions we made was at barclays. what is the single best decision that barclays got right? i think it was when it was clear in october 2008 that there were talking about the that at the same decision to ask all banks to carry more equity -- that the fsa asked all banks to carry. i think we know that the loan had been arranged. it was after the announcement of a deal but before the completion of the deal. under all those things in the market, be raised capital. >> how did the bank of england

respond? >> there are many, many different levels of response. we always wanted as much response as we could get from the big central banks in terms of money market conditions. i do not recall specifically -- >> was either exist in court? >> i think they took the lead. for people in the markets, it was critical. we were working encouraging more activity in the banks of england and the terms of the money market. >> at the bank of england put

unnecessary strain as it did on other banks. did make a crash or worse? >> when we look back at that period, but i think it would be fair to say that our goods for a host of reasons -- a tradition, the quality of the brand name, the fact that we had a balance of funding coming from around the world so we have sent the dutch central bank deposits from japan and china. we have access to funding that was different. we had a credit rating that is very strong. >> i do not think that was an

issue for us. i think that is what your asking for -- you are asking for. >> [inaudible] [inaudible]

[inaudible]

>> he did not mention who he was referring to. i would have put it in the know. >> who do you think he could have been referring to? a department? are you aware that he told the bbc that libor was a concern? >> someone told me about it. i have not had a chance to look at it. it is relatively new to me, but i heard a reference this morning. >> prior to this phone call, did you have any prior discussions with ministers or officials are the bank of england? >> keep in mind in october of 2008, i had just moved to new

york following the decision the board made to acquire lehman brothers. having been in london with barclays, i moved to new york in that the september. john was the ceo. john and i worked very well and in regards to responsibility. he was doing most of the communication. oftentimes, he would ask to see me as well. i think it would have been people that john had on his list. not markets. i would see them -- not marcus. i would see them from time to time. >> i want to be clear. this happened in october? >> i do not have any

recollection? >> you did not remember meeting them? >> i am not trying to be evasive. >> you said you thought she was involved. privately.ing it i am sorry. i can give a better answer. i think at that time it was primarily being driven by john. yes. i had meetings with her. let me be clear that from time to time, i would see her as well. >> were you shocked when you wrote this file not down? the senior figures in the government might have been asking you to do this? >> my reaction to that note was a pri appreciation. he was tried to tell me that

there were hearing that barclays is always high. that could lead to the impression that you're not finding yourself. it took so long to walk through it earlier. my first reaction was, you have to get to why talk. in how to let the notes that -- you have to let them know that. we are raising 7.6 million pounds of capital. a number of british banks had just taken capital from the government. this was a very pressurized situation. i would not have used the word shock. this was a momentous week in the history of barclays and in the history of financial markets. >> the effect of what you wrote down was that ministers and officials were in a fact asking you to settle your submission. >> i do not believe that, then a. >> what do you think you ever

trying to do? >> i have had conversations akin -- that is not the first conversation i had with paul. i would not say those words exactly. barclays has consistently been at the high-end. i was worried, if i can be frank, but you will see in the note in the fall of what i said to john. did you explain to the minister's the real story? which is that other banks are posting lower rates than ours? it's not that our rates are long, but i was worried that other banks -- this is why i have gone to pay is to say this.

we had banks with a secret loans. we had been set to begin nationalized. we have banks in germany that were struggling. by the way, i am not talking bank.but the bandeutsche other banks, to us, did not seem to be right. if this will have an impact on our ability to is equities in the market, this is at the very core of banking, of a funding. this was a huge issue. >> sure. you discussed earlier in other notes. >> not that we know of. >> ok. could i turn now to the lack of an instruction to jamming? you say -- jerry?

he had to be asked not to keep the libor so high? given that you see him every day, how did he misconstrue the purpose of this call? how did that happen? >> you read the note. i think the chairman misconstrued it. jerry has been very honest that there was a misunderstanding or miscommunication between the communication of the bank of england and down. he was the person that instructed. while i was not aware of that, i do think it is important to put in the context of what actually happened. i refer you back to those same pages in a october and november. look at the impact on our rate of libor to the others. we never moved into the submission territory. the top rates were excluded from

the submission. it was wrong. it was pressure put on libor. it did not change the libor rate. >> i understand all of that. what i want to know is how did jerry debt is wrong when you were just talking to him? -- get this wrong when you were talking to him? >> my apologies, but i cannot put myself in his shoes. fsa is part of the three regulatory set works with -- that has worked with barclays for three years. in addition to this report, they did an individual investigation. their conclusion was that it was a misunderstanding. jerry was cleared by the fsa.

during this time, the fsa and a investigated jerry. when i was made aware of this, i talk to the fsa to confirm that was their concluding. >> let's turn to the department of justice. it refers to a general concern amongst your employees. tended to find a solution that would allow workers to submit honest rates without stand out from other loans. express the view that barclays could achieve that goal if other banks submitted honest rates. were you aware of that argument your senators were having with

the bba and fsa and the bank? >> i think is appropriate to bring this up now. page seven. it is a chart of how many times people apart as discussed with the fsa, the bba, the fed, and the bank of england that we were worried. we were posting rates, there was a worry that others cannot be posting rates at the level where transactions could occur. it is important part of this over all discussion, particularly in the context of the industry. the regulators consistently over a number of years -- it took the credit crisis to explode -- explore the

difference of one bank's rates to another bank's rates. rates were tight. there was so much liquidity in the markets. if someone were off, it did not show as much. it exacerbated things. >> my question is whether the senior people were aware that your employees were having this argument? >> no. >> these communications were not understood as disclosures through which barclays self- reported misconduct to the authorities. she did not have been aware of that? >> let me get to the exact spot so that i know where it is. where is that? grex paragraph 42. -- >> paragraph 42.

i think you recall in one of those discussions, and i know this because of the investigation, there was a meeting to discuss this between the compliance head of barclays and the fsa. the report was to carry on. >> you are not aware of it? >> no, i was not. >> it was about making clear to be at the top. >> thank you. >> what does that say about the management that you were not aware of these discussions? >> well, chairman, but we put into context the three things we're dealing with. there was the misconduct. as soon as it was identified and investigation -- >> we are talking about the discussions that were made up the time. rather than going back to square one and going through all of these three separate episodes.

why when this got serious were you aware? >> it was not brought to that level. part about is that there were ongoing meetings at a level below that with the regulators. >> why not? what was wrong when barclays but something important is not report it up? >> i think there was a feeling that it had been resolved. what was the general understanding -- let me make sure the question you're asking. there may be some firms that are not reporting levels -- >> i think you have answered the question. david. >> mr. diamond, and says that barclays acted on numerous occasions. principal five of the principles of business. between september 2007 and may 2009, making submissions that took into account concerns.

i will use a sure hand, ok? fine in the relation to that episode on page 3, which i am sure is burned into your memory, a senior management's concern about what other banks are not telling the truth. their concerns resulted in instructions been given by less management and ordered to avoid negative media comment. this was going on well before the 29th of october 2008 and a telephone call with mr. tucker. is that correct? >> yes. >> it has to be. that is what has been reported. can you tell me and the rest of us when you discovered that this activity was going on?

>> during the investigation. >> so, you did not know that this was going on when you spoke to mr. tucker on the 29th of october, 2008? >> no. that would have been before the investigation. >> ok. when did you discover this in the course of the investigation? what month? >> -- things happened. -- two things happened. it was soon after the credit crisis. it was 2009. there was a request i came in c to investigate.ftc it was during that when both the credit crisis was part of -- >> forgive me.

i did not mean to be read and indirect, but in an approximately eight. -- i do not mean to be cleared and in polite, but to give me an approximate date. it is a simple question. >> this came to name four or five days before it was published. i was not -- came to me four or five days before it was published. i was not aware of it. my job was to make sure we have the investigation going on. as i explain to the chairman -- >> with respect for the third time, what bond did you discover this? -- month did you discover this? it raises the question, you as

ceo, why on earth do not know this was going on on your watch? you were given daily reports. >> what i think this refers to is -- >> we know what this refers to. >> let me put in context that these are important questions. we should not rush through these. again, using the same charts that we all have but without going through them, in almost 90% of the -- >> you have made that point. you have said this many times. it is on the record. please do not repeat. the fact remains, the fsa said that it was still a breach of principle five. do you accept that? >> yes. >can i say one quick comment?

>> yes. >> the reports that came to me were libor. not the relative weighting. >> why did you not follow up? did you have any discussions afterwards? yet no discussions with him on what he had taken away from the corporate e-mail, which was your conversation with mr. tucker? >> this is not the first time jerry and i have had discussions. >> no. after the 30th of october. did you not discuss with them after you copied that the military and? -- that e-mail? >> as i said, my main focus in

that note was the issue with white hall. >> what did you say to him after you sent that e-mail, which is your account, of your discussion of the 29th of october? that is what i am asking. what discussion did you have? perhaps i have no separate revelation other than that. >> you do not recall? what did you say after you copied him on that e-mail? the fsa made clear that he had and misunderstanding of what was required. do you accept that? >> yes. >> what discussion did you have with them on that conversation with mr. tucker? >> of the discussion was on the context of that note. he had the impression that the conversation that i had with paul was an instruction. i was not aware that he did

instruct. >> are you, mr. diamond, to the best of your knowledge believe that under investigation, are you under any criminal and the station by the cftc or the united states of justice? >> not to my knowledge. >> think of criminal prosecution of a banker. the criminal prosecution results in a custodial sentence. do you think that would be a necessary deterrent for bankers who are on their reckless or commit wrongdoings? >> i think that is the decision for the regulator. >> i am asking you. you have been on the mill for the past several days. i am sure that some people have

sympathy for you. i am asking you. you have had quite a lot to say, haven't you? i am asking you, the and the role of banking should have eight more punitive regimes such that wrongdoers, either acting recklessly or deliberately to mislead markets, the think that should lead to a custodial sentences for bankers? it is a st. yes or no. >> i think people do things that they are not -- it is as tempelhoa simple yes or no. >> i did not see a lot of the details on the investigation. i was aware that there was an investigation. when i read the e-mails from

those traders, i got physically ill. it is reprehensible behavior. if you are asking me to those actions be dealt with, absolutely. when it became clear during the investigation that there was specific actions, it was dealt with at the time. we did not wait for the end of the investigation. there were times when it was less clear and due process was important. there were times when it was helpful to the investigation for people to be placed on suspension as opposed to terminated. i am sure, that behavior was reprehensible. it was wrong. i am sorry and i am disappointed. i am also anger. there is no excuse for the behavior -- i am also angry. there is no excuse for the behavior in those activities and the types of e-mails that were written. i stand for a lot of people at barclays that are really angry about this. one of my biggest worries is

that this is wrong. i am not happy about it. we put all of the resources we could to make sure that the people knew were dealt with. this does not represent the purpose that i know. it does not represent the work of other people or working day in and out for their clients and customers. we have to be very careful. barclays also got on top of it. there was no limit to the bonds that could be invested for the investigation. we are taking actions on it. it was wrong. >> final question, chairman. it has been said of your demise, i think it is the right decision for the country.

do you agree? >> i was not aware of that. i did my decision was the right decision for barclays. >> and for the country, says the chancellor. is that something you agree with? >> david, i love barclays. for almost 25 years, i have been part of the financial industries in the u.k. i have developed relationships. i love my time here. this is a great place to work. >> i am glad you can say that. this misunderstanding under your file note lead to wrongful reporting. it is a very unusual file note. do you understand our skepticism that even though you talked to him every day, he never succeeded in clearing up this misunderstanding? >> if you have any skepticism, i

would be surprised that that. >> george. >> we're worried about your judgment and how you ran that firm. you seem to have a great fear and idea maps do is wonder about the country and looking for major banks to nationalize. you did. we have to worry about this because the government was nationalizing banks. did you really think it would nationalize barclays? >> i did not feel that way at all. >> that is what you said. >> i was only referring to the counselor. >> let me ask you this question. you said that the first year know, but to david asked about phase three, which was after the

conversation in a october. when the american regulators indicated that they're going to do an examination, is that the first time you had any of the activities in phase two? the regular rates of phase one. is that the first time that you know anything was going on at your bank in that nature? >> what you are asking is that he keep when your new of this -- the te >> they were acting on behalf of themselves. it is unclear whether it

benefited barclays. i do not think they have any interest in benefiting barclays. >> if we take phase one, where they wwere actually cheating pensioners and pension funds. liberty to investors. -- they were cheated investors. you did not know anything about this. shopping across the room, i am going to -- this is the rate we will declare. does anyone have a problem with it? it is one thing. i do not expected to look at all of the e-mails? nobody in the firm would think -- this is the integrity of the bank. this is crucial. >> this is reprehensible

behavior. >> i know that. i know that. >> i have to answer on behalf of barclays -- >> what kind of been a year running? you are now out of a job because of the integrity of the bank. there was no one in your firm where that was happening openly with traders that came to you and said, you have to watch this or else we will be in deep trouble. >> this it first came to light during the investigation. >> ok. >> the organization said that we have a problem that we have to fix. >> from your point of view, that does not wash. the real worry, how are you running that affirm that the staff did not have the

confidence or the interested or the intelligence to say to the boss, some people are doing actions that could destroy the bank? >> none of this information until the investigation came to the supervisor level. >> what about phase two? this is the report. senior management, september high levels but expressed concern over negative publicity. their concerns in turn resulted in instructions being given to a less senior management. now, who do we describe as the senior management at barclays?

the affected that you are boasting a higher figure than your competitive banks and the worry about a government of such radical beliefs but were looking to nationalize the banks would you?on you -- pounce on >> my understanding from the report and the regulators -- >> you have had three years to find out who the hell were the senior advisement? tell us. >> people on the treasury. >> all right. and they would not think to tell you? >> at the time, i was not the chief executive. >> why did not tell you? >> i do not want to disagree

with you on the bigger question. at the time, i was is possible for other avenues of the business. i am the ceo today. this is wrong behavior. as soon as it came to light, it was addressed in a significant way. the regulators have said that this is an industry-wide problem. >> mr. diamond, let me put this to you. there are doing this. if you moved on to phase three, you have a telephone conversation on october 29, 2008. your deputy misunderstands apparently what you said and goes off and instructs his people to get this done. it never turned around and said

-- >> i am sorry. i did not get a word that came from? >> and make whatever 2008, i was not aware of the beaver going on. >> in october 29, 2008, you had a conversation. it spoke to him about this. he misunderstood. as a result, instructions were given. what kind of organization is that if he did that? why did no one turned dark brown to him and tell you, we have been doing that for 18 months. we have been doing this since 2007. there were doing it.

that could destroy the bank. they were doing it. when you have this conversation , not an? >> be there was wrong. >> ok. we know the behavior was wrong. >> keep in mind that was not l jimibo -- changing libor rates. >> when did john discover all of this? he was the chief executive. if he had been in your seat right now, he would be sad. what did he know? he knew if you threw out that time. what did he think about this problem here? >> both john and i were witnesses. it was in a prepared during the

investigation to discuss either of our investigations. find out what happened. i am sorry to come back to it again, but it is a sign of the culture of barkley's that we were willing to be first and fast and willing to come out with this. >> that is another point. but does is that two chief executives at barclays have been willing to fundamentally wrong things. no they told the chief executive. that is very worrying. >> i am sorry? >> is there any response you want to make?

>> the culture has shown that when we have a problem, we get all over it. as soon as we had a problem, it was dealt with. that is an important thing. >> ok. >> this problem is coming out now. >> how much more noise doesn't have to be before it does come out when you have a traders a traders shouting out across the trading floor? paragraph 54. this is not say something about the karcher at barclays? >> the fact that the supervisors did not raise it for there was wrong and i agree. >> ok. >> mr. diamond, you seem to be living in a parallel universe. you talk about the culture at barclays as if that is what

saved barclays, but it was officially the problem. surely you realize that people are shocked at the criminality. there is a lot of talk that you yourself has been so unapproachable. we also know that the absolute motivation for those traders prior to the financial crisis was there in personal gain. the reward was equal to the profitability and not linked to the profitability of the bank. what would you say to that? >> what is the question? >> day live in a parallel universe as compared to the rest -- do you live in a parallel universe as compared to the rest of the uk? >> it is wrong and it is

reprehensible. it makes me angry. it makes me disappointed. >> ok. >> it puts a stain on the organization. >> yes, it does. >> 14 traders. we have a couple of thousand. >>, get on that? i want to talk about the criminality of this. the into place between mid-3005 and laid to thousand seven and then sporadically afterwards -- mid-2005 to 2007 and then sporadically afterwards. 11 request were coming from tax- barclay traders asking the barclays senators to fixed rates on their behalfs. when is it was limited to a small number of traders, there was a significant amount going

on. >> we were not looking at fixed rates. there looking to impact -- >> can you please answer that question? >> it is wrong. >> do you agree this isot a tiny issue that is limited to a small group of broke individuals? this is a collision on a grand scale. only time to tell how bad it was. what do you have to say for those individuals? they were allowed to be incentivized simply doing about the profitability of their own buooks. there were able to persuade them? what does that say about the culture at barclays? >> the behavior was appalling. as soon as a minute, we moved it to eradicate it. some had a ready laugh. when it was clear that there -- some had already left.

i cannot go back and change it, but i can deal with it. i'm understand there'll be a follow-up criminal investigation on certain all individuals. >> do you support that? >> it is not up to us. >> let's go then to the process by which this sort of activity could have passed up through the bank. could you tell us where you sat during this time? where was your desk? did you have a desk on the dealing floor of the fixed income department? >> no. >> universe out there. did you put it in the daily morning meeting -- you never sat there. did you park it in the daily morning meeting next? were the morning minutes taken next >> i was not part of that. i think it was done over the

intercom. >> that is a very important point. it would be interesting to see whether it was ever discussed? clearly it does not seem to have been something anyone bothered to keep. >> and would have come out of this investigation. it is a very thorough investigation. >> if there were records -- >> it would come out in the investigation. >> to look for criminal activity, whose function was it to be looking for criminal activity? how did they do that? >> the appliance. >> how would compliance go about seeking evidence of criminal activity in the daily room? >> i am sure that they were looking for people complying with all of the rules and regulations. there are many ways for them to

follow this. they could use technology and meetings and training people. it is quite pervasive. >> their clients would sit in the dealing room or not? >> i am sure some would. >> the would have been in a position to pick up on this type of activity going on? >> >> we did not get a report from the supervisor at the desk level. the second redid, the investigation was all over and the behavior was stopped. >> with the supervisor know and appreciate that falsifying libor is an offense? so, the supervisors would have been and target implicit in this

fraudulent activity? >> i think there have been cases where the supervisors were aware and those cases were the supervisors were aware. they had been dealt with. this is done and dealt with. in some cases, we have asked them to be suspended with their compensation suspended. in each and every 1 of those cases, those two processes going on began the moment that it was published. give an impression how sorry and angry we are. what i'm saying and it can't text of barclays, there are people doing things it for their community is, customers, clients. they were all impacted by these 14 traders and it is not ok.

that is not ok. no 1 is saying this is ok. >> this is about the attitudes within the banks which allowed them to do what they did. you are saying that every desk supervisor would not have been clear that falsifying libor was wrong? >> i would think that that would be known. you would require them. >> what would they be required to take if they knew that something was going on? what was the procedure at the time? >> you keep going on the same issue. it was wrong. it should have been reported. what is the procedure that they should have followed? what was the actual procedure?

they would have been open the required to do that? it would be very hopeful to know who they should have gone to and what part of the organization? >> and that is part of compliance? >> just through compliance. >> in terms of a supervisor level, the responsibility would have been to their boss. effectively, you would confirm that this is people doing their jobs. >> it has been difficult to have some of these facts out there because they are sad and it hurts the reputation.

i also want the committee to understand that there are aspects of this which are industry-wide, i blame it on these individuals and they are being dealt with. >> what steps are you taking to look at other possible areas that could be subject to fraudulent behavior? >> i was gratified that the fact that we did not wait to get this report. the department of justice -- >> which other areas have you looked at? >> it has been many years since this happened and you can imagine how many different -- >> are you concerned that the markets have been in some ways fixed by barclays trades?

is there a potential for the market auction and other right- fixing? have you examined those areas? >> that is a regular part of our audit sectors. >> it would have been part of libor? >> it was the behavior before the submission was put in. >> they failed to notice for several years that there was an interruption going on and very openly, have you look at other areas of the bank's where something like that has been going on there for years? >> we have. >> there will not be any merit in the inquiry into whether other parts of barclays had been

fraudulently fixing. >> i think the way to do that is to start by going through the processes and our controls and our audit reports. there are other places to look, of course we would do it. that is part of the overall process. this is not meant an excuse. the behavior was abhorrent. i do think that context is helpful. you have focused much on the culture and i understand that because it was such a bad behavior. the rate-setters, many of them have been here for 25, 30 years. this is a core part of the barclays u.k. business that the jesse was asking about earlier. this was not something created recently. many of these people have been in their jobs for quite awhile.

this was not perceived by the industry to be high risk. part of that were the spreads were tight before we saw that. it was not considered high risk. >> effectively, what you're saying is that the level of complacency had been going on for years. >> audits are where the risks are to be highest andes exploded during the financial crisis. specifically, i am talking about the criminality before the financial crisis. individuals were looking after it just a number one even to the point where they could still persuade someone to help them.

this is absolute corruption within individuals within barclays and it was helped by the attitudes within the banks. people were allowed to do this for the profitability of their own. >> i think you take the conclusions too far but i will not defend the behavior of that group of people. the behavior was wrong. their compensation was not based on just the wrong book. i will not disagree with you. the behavior was wrong, it has been eradicated and dealt with. >> taken the conversation that we have so far --

>> you would say there was something wrong with the banking culture and industry? >> that is appropriate, given i've had to deal with in my short time as the chief executive. i think that there are aspects of the culture financial- services which are changing post-a financial crisis, and appropriately changing and in anytime, any age, any business. the context of people being rewarded more broadly for -- >> sorry to interrupt you, but can all of the problems you have had, like changes in regulation -- surely there is something much deeper than as a problem without banking industry. do you accept that?

>> there are problems in the banking industry that -- today one of the difficult things for bank chief executives is to recognize there were problems like ppi that happened many years ago for a period of time, but today you still have to fix it. the best we can do is recognize where the problems were, be completely transparent with regulators, understand what the impact was, learn from those mistakes -- >> but there is something more you could do -- you could join the calls for the merit of having an independent investigation into the banking industry in this country. would you support that? >> my on opinion is that there is a lot of regulation, now, and it has heightened a tremendously post-crisis what we

are trying to do is balance safe and sound banking with the jobs and economic growth and competitiveness around the world. i do feel that the level of regulation, the level of scrutiny is higher, the focus is higher. i looked back to the period of the crisis, when a regulation wasn't this strong, other institutions failed and this has been a burden -- >> you're talking about -- >> i think we have a better regulatory environment today, and i would favor of letting the tripartite -- >> i sympathize and support the goal of regulatory change, but there is something much deeper at work here, and really, that has to be ventilated. do you think there will be a positive result for the u.k. banking industry -- would we establish trust, confidence making it more transparent -- would that be of some benefit to

the banking industry? >> it is a balance between what is done, who does it, what the results are, how intrusive it is, against is impacting our ability to do business with the customers? hard to give a simple answer, andrew. >> when the former chairman to resign, he let a statement out which says "the unacceptable standards of behavior within the bank have dealt a devastating blow to barclays' reputation." do you accept that? >> i said in my opening that i think the actions announced last week -- even though this is part of something industry-wide, part of something that was many years ago -- is a shock, and with barclays right now being

the only bank in the frame, it has even more pressure on barclays and has had more impact on its brand and reputation. the single biggest reason i stood out is that i have an obligation to 140,000 people who work extremely hard. every one of our businesses in barclays -- >> i understand -- >> i cannot let a small group of people impact the tremendous work that the people of barclays and do with their community and customers -- >> let me ask you, in terms of the deferred bonus scheme for senior executives, anyone that does harm to barclays' reputation may be asked to forgo some of those deferred bonuses paid to you think that is appropriate in the circumstances, given that you

agree that barclays' reputation has been harmed? >> certainly a question for the board. >> you have heard comments in the press reports that the board is pressing it to give up future share rewards. >> i have not been an avid reader of the press. >> sorry, you rather took my attention. the final payoff, as you leave barclays -- do you think there has to be --

[unintelligible] and what should be done to put it right in the future? >> i think the 16 years of my time at barclays were a time of immense pride. we have an episode we have to fix, and those are questions for the board. i have not asked them, nor has that been of interest to me in the last day or so. since i resign, my focus has been on preparing for today. >> did you spend time way back when in the 1980's working amongst all the traders? >> yes.

>> so you are familiar with that culture of being a dealer and a trader? >> i was a trader, yes. >> did you is speculate with their colleagues how much easier it would be to -- >> this would age me -- i guess it doesn't, i wasn't pre-libor -- >> but an easier way of putting a better result of the end of the day -- >> nothing like that, no. >> never even speculated -- >> speculated about -- no, i didn't. >> easy question. the reason i asked that -- the organization -- >> i'm sorry?

>> just looking for a little love. >> lines, audit trails, all the kind of stuff -- i am trying to get to the bottom of the compliance risk. you had spent quite a lot of time within this industry, and with these individuals in their late 20s, early 30's, who were running these trading desks. what i am trying to get a sense of is whatever as you made it to assess the compliance risks that were inherent in a separate organization -- in this type of organization, and how you established a trail and compliance structure that would

take into account the risk you assessed working a way up through the ranks. >> um, compliance was taken very seriously. i got a report directly to my chief operating officer who had all these areas when i was chief executive of barclays -- >> remind you of the architect -- >> it was very important. part of the mismanagement function is to have the technology and culture in place so things like this cannot happen. while this did not pose a financial risk, the behavior of these traders -- i mean it when i say that i was finally given all of the documents on the weekend before this became public, because -- it took me awhile to get them all downloaded. i was getting frustrated with my technology and getting them downloaded. i started going through it and i got to some of the e-mails.

the culture was absolutely opposite of anything warranted. to your point, we talked about the no-joke rule, serious in barclays that when people misbehave, they have to leave -- >> but you are in charge of and you built that system, so you have to accept responsibility. looking at how the rate-setters work, the july 4 submissions working for barclays banks,

based in the london money market debt, is that right? >> some of them were in new york. the rate setters were in london. >> working for barclays bank in london under the money market. they are coming in, and the money market traders i try to make sure that the balance sheets --

>> treasury would be doing that -- this is what we have to do to balance our books, when they said it raised 1 billion or sell 1 billion -- >> [unintelligible] money-market debt would then go out -- you also have a profit and loss trading -- >> separate. >> isn't it a large conflict of interest that you have a group with the department of liquidity in the bank, and you have profit and loss in that department as well? >> they were separated. no overlap between those. >> same room? >> same floor? >> yes. these guys should have shouted across the room --

>> not quite that -- >> could walk past a dealer taking a position would be able to know what it would be. >> group treasury has that information. >> in practical terms, the trade -- they would write down the order -- go out and buy half a billion of assets and -- >> i'm not quite sure --

>> but you see what i am getting at, the risk -- >> there was a separation -- i don't me to be holding out the questions -- >> within all of this, you have the libor -- they are looking at what they are trading, all the things that go into the libor rate. >> they are on the floor, in a separate area. people can walk by -- >> it is a bit pally, isn't it? you have a trading desk running out proprietary position. you have an execution desk writing on behalf of the treasury department.

it is all about -- >> sorry, they would not have information on the positions of the group. >> it creates an image of compliance -- the other point about this is that we come back to the libor submitters, and this is something i've not been able to work out in my head. i could understand a hot headed idiot thinking it would be cool to send a bottle of champagne and say, "can you fix libor for us?" why weren't those traders saying, "guys, you cannot do this, otherwise i will tell my boss"? >> some were, some weren't.

>> some were saying -- >> some were accepting, some weren't -- >> but we see this coming in -- there were not 177 examples of going to the manager or compliance officer and saying, "i think we have a problem," until 2007. why were the libor settings not alerting compliance department? >> during this period, they were

not, and it is inexcusable. >> during 2007, you get information -- the libor dealer emailed his supervisor to say that it was too high, we ought to move it down. he said, "my worry is that they seemed to be contributing false threats, and we are dishonest by definition. can we discuss this, please?" that was in 2007. it was only then that we are seeing evidence that these rate- setters returning around and saying no. >> this came late to me during the investigation.

if i am answering the wrong question, just tell me, but there was pressure from the group treasury in the 2007-2008 period, during the financial crisis, and there was a recognition that what they were trying to do with the libor rate -- that was discussed -- >> we have got over that point a great deal. i am trying to get to why the libor setting was so flawed. paragraph 147 -- "barclays had no systems are processes until december 2009." you did not provide training for the submission process. paragraph 148 -- "barclays did not believe that libor was an area of significant risk."

getting this culture right, it is also in the middle office -- >> i agree with you. >> i cannot imagine why that wasn't the case. these are -- what has gone wrong in there? >> i'm trying to disagree with your characterization of people, but i know what you mean. the rate setters have been with barclays 25, 30 years. they are some of our most senior staff to read clearly there were risks that no one understood.

usually it is financial risks involved. to your point, the systems and controls, no excuses -- we started right away to get that improved. that is the area where i do feel good that the department of justice has been clear that we have a strong set of systems and controls in that are out now. we did not wait until the end of investigations. it is improved. >> i have one last question. in 2007-2008, do you feel you were let down by the fsa, given the fact that you were, by this point, reporting what was going on? >> there is clear evidence brought out testimony that the federal reserve bank of new york, the bank of england, there were multiple, many-year

decisions initiated by people at barclays, and in the context of the financial crisis, there was an expose in "the wall street journal" about libor and the fact that people may not be reporting right.

>> i would not say that. we fell down in not -- >> so the pay was raised every year? >> whether it was for ego or compensation -- >> when the evaluations are made, profitability will be -- >> ah --

>> is that part of the appraisal? >> yes, behavior is an important part. as soon as we realize that, people were fired -- >> that is interesting, because the reports are not just financial. they are public windows of the world into the mindset of your organization. you would imagine that it mentions the word "risk" 1,734 times. is that how you want to present barclays to the world? >> you did a word search.

do i believe that integrity and values are important? you bet. they are a precondition for everything else. i don't care how smart you are or how hard you work. i was not aware of it at the time, but there was bad behavior. it was not bad behavior, it was reprehensible. >> you said it was reprehensible and it made you physically sick, and that it was a small number of traders. what sort of professional development did they have? what review was ever made of that? you have people at the bank who behaved so badly that they made you sick.

do you not as an employer have responsibility to make sure they have undergone proper personal development? >> yes. >> it is my understanding that since november 2011, the fsa at all mobile phone communications recorded. the conversations in 2008 with the bank of england, would they have been recorded? >> not to my knowledge. a call came to me in my office

in new york. i am sure during the investigation, it would've heard of that. i have not heard a recording. do you regret that? one of your famous quotations -- "the evidence when they are taking calls --" [unintelligible] >> the traders did not behave very well, no one was watching. >> is that one of the reasons you resigned? >> not this specific issue. i was responsible for barclays capital of the time, i was responsible until yesterday.

that is different from personal culpability. i do feel a strong sense of responsibility that when we recognize mistakes, we are open about them. we report them to the regulators and take action on the people. i know how angry it makes others, because it made me angry that we had this behavior, but i am also very proud of barclays because they were not worried about how this was going to look. two of the most successful of large international law firms.

>> how about the forensic exercises -- how much did that cost? >> the amount of money it spent on this investigation is about 100 million pounds. >> ethics in the forecast -- >> i'm not sure if that is the word used -- >> in the last three years, what was actually done, specific actions, to rectify what is actually a cultural rot that led us here today? >> we focus on three categories. if you take the traders first

and foremost, there is significant investment in the system and controls in this area. various areas -- upgraded compliance. we have a new head of compliance and people under them in the entire organization as part of it. each individual involved in this -- we did not have to wait for the final investigation, then we acted. there were some cases where we felt it would have been better to keep them working -- >> in january 2011, you said there was a period of remorse and apologies for the bank, and "i think it needs to be over."

do you think it is? early part of 2011. >> i think it came across in a way that was not meant -- banks have to be better citizens, and i was aware of this investigation -- we have to evolve the culture -- >> that is a long time, though. mr. diamond, given that you have grown up in banking, you have a meteoric rise, and yet you say the behavior of these people was so shocking it made you physically sick, and yet you spent your life in banking.

surely the culture did not come as a surprise to you. >> i think it is wrong. it took us too long to fined it. i am making no excuses. but the actions we took when we found out, i think all of them were appropriate, including recognizing that we would be ahead of the pack in helping the regulators.

we did not think the focus on this would be as intense in terms of potentially harming our reputation. one of the reasons i thought it was important to come here today -- barclays is an amazing place -- [unintelligible] >> we understand. >> you say you don't know anything that was going on. you keep saying, "i didn't know, i didn't know" -- >> i am saying more than that. i am talking a lot about what we did about it. >> you also said that culture is how people behave when no one is watching. no one was watching, not even the compliance desk.

you forgive us for thinking that there is something more widely wrong with the culture. >> i have taken such pains to go into the things we've done and put it into context, but i don't think i've taken any moment or second to excuse the behavior. >> transaction reporting -- fined millions of dollars for willingly and knowingly violating international sanctions in cuba, iran. it had to pay 60 million pounds for selling risky investment products to older people. all that was before the issues we're talking about today.

what do these repeated breaches of the law and regulations say about the culture? >> the periods were from quite a while and many of them were in areas i am not familiar with because i have not worked in those areas. we worked with the authorities and worked to get to solutions and the changes in place. [unintelligible] we had ppi -- we had a number of them. there is no excuse for any of them, but many of these go back quite a period of time. one of the frustrations of keeping our organization positive today is that so many of these issues feel like -- it

feels like this is current behavior as opposed to behavior that was quite a while ago. that does not excuse it, and we still have to go through the process. >> you said many, many times today that e-mails you saw from traders made you physically sick. isn't it the case that your high-risk, sometimes high-reward investment bank helped to give rise to that kind of risk taking, and sits uneasily from what the public wants from banks, lending to small businesses and looking after people's savings?

>> i think it is a fair question. in the period from 1997 mentioned, it is focused on its clients, and it has a track record in the business of compliance, consistency of earnings, risk-management. this is a horrible experience, but if you look at the track record of barclays capital, consistency of earnings -- in areas like foreign exchange, barclays was not considered one of the top 25 participants in that market in the world, and today barclays -- the investment in technology, the investment in customers -- it is interesting, the fines you mentioned, the sanctions with iran, the ppi is in retail banking and credit cards.

it does not excuse it, and the head of the retail bank today -- a lot of this was happening in what you would think of as foreign banking. if you look at the history of the united kingdom financial- services industry to the crisis, bank of scotland failed, halifax failed. it wasn't investment-banking that was creating issues.

i worry that people are willing to assume that it was risky behavior that causes these things or bad culture. it is bad culture that causes these things. in these cases, we had a bad performance. if it happened in an investment bank, it can happen in a retail bank as well. we need a strong culture, strong systems and controls -- >> isn't a big part -- you talk in your letter last week to us about changing the culture. >> i think last week i recognize, in spite of the support i have, if you look at the barclays performance to the financial crisis, the things we're doing with businesses in africa, technology is being developed -- the technology coming to the u.k.

-- there is a lot of -- >> can i take you back to the memo that was released yesterday -- >> i think that memo was part of the investigation. >> paragraph 1112, which talks about the year before, senior managers at barclays instructed putting in false information about the libor rate. we're talking about the financial crisis period and your concerns about media attention. do you accept that as accurate? >> yes. >> there was a conference call where the manager said, "this is going to cause a storm." a lower rate was submitted.

again, there was a full year before paul tucker called. paragraph 1127 details an instruction to the money market desk to give a lower estimate of funding costs because "the honest truth would be a can of worms." that was in march 2008. am i correct? >> mm-hmm. >> there is a pattern within the financial crisis where there was consistently dishonest submissions to libor, detailed in paragraph after paragraph of the report.

do you accept that? >> we presented in documents to you come from the period of 2000 to 2008, the financial crisis, there was pressure on a libor submissions from the group treasury area to get back on the path. what i want to point out to you is this -- you go to the same point, that barclays went with the regulators and we were consistently on the high end of submissions -- i will answer it directly. it was inexcusable, but the actions of getting away from the notoriety, and the question of barclays, why do you always have to be high, and we were trying to lower our rates, and 90% of the cases in that 12-to-13-month time frame, barclays was knocked out.

>> paragraphs 118, 127, does detail instances where barclays agreed to put in rates that were lower. when you acknowledge that there is a pattern, in terms of the image of the bank, of putting in lower submissions, why was that released?

>> i did not release the document. it was a package that came from barclays. i wasn't aware that it was new. the package came from barclays. i think this the package, chairman, that came yesterday? >> yes. the point i'm making is how significant is this phone call, given the details in paragraph after paragraph of the report that said that you had been consistently low balling your submissions? >> the behavior of the people influencing the lower submissions was wrong. what is the importance to me of

the call? the call was alerting me that there was concern about why barclays rates were high, and it was important for me to get in touch with john so that he could get in touch with whitehall and let them know that there was misunderstanding. the importance of the call to me was the heads-up about the concerns with the white hall. it might mean something different. >> thank you, chairman. i just want to know if you could remind me of the founding principles of barclays.

i could help, and offer to -- honesty, integrity, plain dealing. that is the ethos of this bank that he spent two hours telling us is doing so well. i wonder why you have not made an extra bonus. you told us that it was right that there was a criminal investigation. you told us that other banks were doing the same thing. i understand from what you are saying that you never questioned the rates reported between 2005 and 2008, and you never discussed at the senior level the possibility of misreporting, misrepresenting by your traders.

>> first of all, in terms of honesty, integrity, and play dealing, that is how i have behaved through my career in the business. as soon as i knew -- >> from 2005 to 2008, you never questioned were asked about any time there was misreporting -- >> no one was aware of any misreporting. >> did you read anything of other people's suggestions that there might be misreporting?

>> there were reports that came out, 2007, 2008, on a different issue. i was not aware of any report relating to this -- >> nobody came to you, not even those people who refused to act criminally -- even those who refused to act improperly did not come and tell you during that three-year period? >> they did not act improperly. >> no, but they do not report that to the senior management?

you talked about your obligation to complete transparency, that seeing is believing. you see nothing, heard nothing, know nothing during the three- year period? in 1973, the report about potential misreporting was written by a u.s. academic. in 2007, another group of u.s. academics produced a precise report into this scandal, alleging that it was going on in

companies like yours. that was then repeated. we have a series of academics who are reporting that is going on. eventually it gets into "the wall street journal," and from that, the fed reports on this. you are in charge. readu g it. i don't understand. >> you are conflicting two separate things. "the wall street journal" report and the federal reserve report were about -- >> the academic reports -- you have not read them, but you are the man in charge. people are suggesting from outside in society, and you're not even asking questions internally?

people are not coming to you. either you are complicit in what was going on, or you were grossly negligent. >> i have agreed from the beginning that the behavior was wrong. it did not get above the supervisory level for a period of time. as soon as it did, we took action. it's hard to give another answer than that. >> you said last time that you don't really like barclays, do you -- "i'm in a more favorable group to people out there." you are in charge, you are paid

bonuses, 20-odd million a year, you are the man in charge, you are telling everyone that if you cannot work with trust and integrity, you cannot be on your team. you get these huge bonuses, and yet you did not see any of it. you must have been grossly incompetent during that period of time. >> is there a question? >> last time you were here, you said, "i think it is clear that if any banking institution gets into trouble, it goes to the chief executive."

someone asked you, how would you lose out? you said, "i would lose out by losing any share in the company." that is what you told us you do in this situation. >> as i said earlier, that is a discussion with of the board. i don't make the decisions. >> you are in favor of consistency. you can take the high ground in this -- >> we have been through this a number of times. we have a profound issue that is an industry-wide issue, not just a barclays issue, in terms of libor submissions.

i would suggest that we wait and see what the ramifications of the industry-wide investigation are -- >> there were no clear lines of responsibility for systems and control. you are the man in charge, and when you are the man in charge, you are the man being paid these huge, phenomenal bonuses -- you are accepting all the good side, the bonuses, and the people working for you, potentially some of them going to prison, criminality -- you are the man in charge. you tell us modestly that if this is the situation, you lose your job and lose your shares. that is a pretty small price for you to pay. and how you could show some contrition to the customers -- where's all me money, do i take it out of this bleeding bank? that is what they are asking me. you are responsible.

>> as i said earlier, i accept responsibility and i also accept responsibility for the actions we've taken to correct the situation, not just at barclays, but the way we have engaged with the regulators. you know and i know -- i take the full results of the organization as having been on my watch. >> if you -- [unintelligible] what happens to the shares -- it disappeared somewhere.

your bonus each year is equivalent to the amount of money that all the charity shelters have to survive on. why don't you make the proper gesture and put some serious money and pursue others to do likewise so that you can show to the outside world that you do mean business, and persuader colleagues to do likewise? then you might get a little love. >> i told you, i feel i have done a responsible thing in how we handled this since the day we understood. the word of the barclays management team, the culture of the organization, whether it is in ppi or this, is to learn our lesson in terms of how we behave going forward, and if any of our clients suffered --

>> the reputation of the bank is in tatters worldwide. >> if you were an english cricketer, i suspect your name would be jeffrey. let me try to weigh this with the culture and ethics of more than just barclays. i think the question a lot of people want to make is is this problem with libor a symptom of a much deeper and wider malaise? you can answer yes or no.

first of all, do you consider traders using libor for their own gain to be unethical? >> yes. >> to you consider managers putting in false quotes unethical? >> yes. >> do you think the submitters during the crisis were engaged in that behavior? do you think selling a complex swap, as reported on the 25th of april, to a turkish shop owner with very little english, to be ethical? >> i don't know the situation as well as you do, the specific one, we looked into each and every instance where customer claims -- there are occasions where product has been sold the someone where it should not have been.

in the vast majority of cases, going to the issue of derivatives with small businesses, the decision has been in favor of barclays. we do work hard -- >> i understand that from -- >> don't know the specifics -- >> you can find that on the front page of "telegraph" business from the 25th of april. writs against barclays for libel fixing. would you consider that to be unethical? it is possible to conclude that there was quite a considerable degree of activity that was, at least, questionable and, in some cases, unethical.

how does a bank with a culture that you tried to put forward to us >> i have been to many of the larger cities in the united kingdom, visiting with small businesses and medium-sized businesses. the feedback on the service they get from our police has been a very strong. the amount of business we are doing in business lending has increased more than any other bank in the united kingdom in the last year and a half. i am confident our team gets it. one of the frustrations with the day like today if you are bringing up something u.n. sanctions -- unsanctioned which

was so long ago. i was not aware of it at the time. to bring it up today is not as relevant. most of this behavior was in 2005-2007. >> can i just ask you something? does your board get a list of legal actions against it? >> sure. >> so you are seeing a list of the legal actions and he would know a writ was issued in april? that would be something you would know as an executive sitting on the main board? >> i would know the summary of the legal issues. yes. >> you would also know what the little -- legal department is proposing to do with that? >> guess. -- yes.

>> a note saying what is going to happen. how many actions are there outstanding against barkley is -- barclays? >> i am not sure of the number. if there are legal actions, there are not many. the number that went over the last year, i think it was 40 something. it might have been more than that. i cannot recall. that would not have been in the legal report. >> if a libal rate goes down -- [unintelligible] pay interest, he has a swap libal tax and may have to pay

another $2 million. that is now $4 million. >> the economic impact is a swap. the main level goes down because rates are flying? top about ther's value of the loan and the covenant he is given on that. the outstanding loan and the new one together. that would be outside of their government. -- of their covenant. >> i am not sure the point. >> there are small and medium businesses who in the last five years were advised to buy product. the net result is you are able to negotiate -- >> i am not sure i understand.

>> there is a huge cost relating libel to what is happening to their businesses. is that the reason lots of small businesses are finding it difficult because of the swap they were sold. libel has gone down costing the swap to go up. none of them understood what they were purchasing. but they were obliged to take it. as it was for most banks. >> i think there are errors. there are parts of that i will but that very differently. that the walk through it. was there an impact on businesses in the u.k. -- the issues within barkley's were not sterling as opposed to the

longer-term as -- longer terms. even if it was, the relative rankings is being changed. the impact on businesses that have taken out fixed loans, in theory, the economic impact in a fixed term rate loan versus a floating loan, the impact on the business, when you say it went down, it went down because interest rates went down. the bank of england has a low monetary policy interest rate because of the economy. if anyone had taken out a fixed rate loan or a floating rate loan, they would be out not because of some issue on swaps but on overall interest rates. i think there has been an impact

on business who have taken out fixed rate loans. today, it would be more to take the loan today at a reduced rate. >> we just had a conversation lasting three or four minutes that probably helped understanding of most people. our banks are run by people who talk that language. that is investment banking. high-speed used to be run by people who did not understand it but who led people money. that is a cultural problem, is it not? what we need is not one bar clay's but two colter's. and culture that understands the high street and the city. >> i think we have that. i think it can be done. i do not think this is about business models.

the people will cover our smaller businesses, throughout most of the areas in the north, is very focused on what are the needs of the small businesses? if there is a need to provide a fixed term loan where it would not potentially be a program from a credit point of view or you cannot get the loan in a derivative is a good replacement. these are not of the people unnecessarily. i came back from africa recently. in areas like ghana and uganda, the country is interested in barclay's bring in this of rustication along the smaller

banks -- in bringing the sophistication to the smaller banks. they have to compete much more with companies coming down from china, india and the middle east. they need access to head out to monitor -- commodity prices and interest rates. there is a place for an integrated model. this is not about our business model. it is about our culture. the definition we talked about inside is that every single decision remake -- we make, -- for us to believe that, everyone has to behave in that way. it is about culture, values, integrity, honesty. that is what barclay's is about.

i think the issues we are facing are about bad behavior and in some instances, culture. >> we may -- in your letter to us on the 28th of june, you spoke about your concerns. various individuals [unintelligible] who at barclays said concerns with these various agencies? >> i do not know the exact level of every meeting. i think one of the letters, there is a discussion of who the people were on both sides. is there not? it will not provide that

information? >> i am just asking if you knew who the people were raising these concerns. >> it was often in the group treasury. in some cases, from the compliance area. >> to you have compliance people -- so you have complied people making approaches to regulators. the bank of england is named. >> a suspect the conversation came up in the general sense that we talked about earlier about the wall street journal report. >> how long had barkleys been concerned about other people

making the libor rate -- >> this became a much bigger concern during 2007 and 2008 because rates have been fairly steady. liquidity was plentiful. all of a sudden there was a financial crisis and we had much more volatility in rates and banks were having difficulty lending to each other which is the genesis of liber -- libor. there was far less liquidity in the markets. it was coming from money funds, large corporate, asset management firms. but were higher levels of

capital required and higher charges. >> there was a fundamental change driven by those factors. >> some of the rate he received [unintelligible] >> not just that. there appeared to be postings being made at levels people would not be able to borrow. >> what was the response from the bba and fsa and others when you raised concerns of some of the rates your competitors have? >> various levels of acknowledgement but no action. >> the thing i find odd is that between january of 2005 and july of 2008, [unintelligible]

reputation risk-management. barclays -- you did not appear to know what was happening internally until very late. it strikes me as odd that barkley's people were able to notice other people doing this but no one internally was able to identify that it was going inside -- going on inside the bank. do you understand why we find that difficult to believe? >> it is why i have been very clear today that -- to not conflict the three issues. the issue with the traders on the -- >> i'm familiar with the

various reasons. i am asking why people at barclays notice other people doing this but were unable for what ever reason to recognize it going on internally. >> it is a completely different issue. barclays was talking to the authorities about the relative ranking elaborates -- of libor rates. >> but it is not a different issue at all. except barclays notice of the people doing it but could not notice themselves doing it. what was the fall in management

-- the flaw in mannesmann that allow your people to see other banks but not what was going on internally? >> ipad the trader behavior we have been through -- i think the trader behavior we have been through -- the issue should've come up to see management. it was an attempt to get -- not to impact libor rates. >> so as not to be noticed to manage the risk. your people were submitting rates. >> this behavior was discussed with the fsa. there were discussions between compliance and the fsa about the fact that people were trying to get back into the pact. >> when you say discuss with the fsa, d amine during the inquiry

or what was happening prior to the -- do you mean during the inquiry or what was happening prior to the inquiry? >> i think they would say they had a different interpretation of the meetings but what came back to barkley's and the chief operating officer was that it was all -- i think it is all documented in the report. >> the discussion with mr. tucker. you said -- [unintelligible] did he speak to ministers or officials in the treasury about that matter? >> yes. i cannot remember the exact

conversation i had with john after that but he did follow up. right in that today window before we completed the equity transaction in abu dhabi. it was a delicate time. >> it would be useful to know who you spoke to and what the nature of that conversation would be at some point. >> i will see if we can provide that. >> you have explained how there might be some misunderstanding. i understand that. what i am not clear about is what is your understanding of what mr. tucker wanted you to do? >> i think that was the source of confusion within barkley's -- barclays. this was not the first conversation i had with paul or jerry and i had with paul r.

jerry had had with paul. paul posted job is to work with people at our level. he is closer to the activity than i was. sometimes it would go right to jerry. it was a broad discussion about barclays as high relative to the others. we had many conversations about it. >> what is it you thought mr. tucker wanted you to do? >> he was pointing out the problem and i was pointing out that the problem was not with barclays. >> what did he want you to do about it? >> as i said, i did not take it as a directive. i took it as a head up that youare -- you are high. what i said there was pretty

clear. i said the reality is that we are reporting rates at which we borrow. it appeared giving that a number of the institutions posting below us had to take government money that they are not posting at those levels. this is the same issue that the wall street journal reported on. the same issue that bloomberg reported on. the same issue that the federal reserve report after the crisis reported on. i do not think anyone should be surprised these conversations were happening. it did not cross your mind to launch an investigation inside your own organization to check that this did not mean you as well? >> of course we knew our policies. i was under the impression that -- >> it did not occur to you to say, let's check?

>> as i said, i re-confirm our -- >> [unintelligible] >> i reaffirmed it in that note. fromm holding an article may 29 of 2008 which says, banks routinely misstated borrowing costs to avoid the perception they had difficulty raising funds as credit markets [unintelligible] you had in your own organization -- [unintelligible] you could not have been aware at that time. >>