i'm not excusing any behavior. if we can have a bigger discussion. what i said is this is not just barclays. you keep coming back to barclays. >> that is the institution you are responsible for. >> can i finish? you will see that throughout 2007 and 2008, no institution of the 16 banks with at the higher and more consistent than barclays. questions was getting and we were saying we were high because of the -- for someone to sit there was a big concern, clearly there was an issue there. with that, there was pressure being put to get back into the

pact. i am not excusing that behavior.

took -- they will see that in the context of the swap. the transaction in italy last year. that is the context. that is what was deeply flawed and deeply corrupted. that is what went wrong. >> i hope we look at that in the context of decisive action. when there is a problem, we will get to the bottom of it. within the broader industry issue -- a number of years ago -- >> two more colleagues want to chip in. we will finish in less than

three hours. >> given the fact that strategy had been shared -- on march 5, 2008, the fsa contacted barkleys to ask for information. they asked them to provide information, including the rate that barclays was currently using. in a statement, barclays said they were at a bar -- had a lot more of 20 basis points. that was in a discussion -- manager b stated, i would not go there for a moment. the senator stated -- if they are really trying to do something useful, we want to

acknowledge they had been worried, because it might be accountable. barclays informed the fsa. the truth is that -- you lied to them. >> there were other meetings and there is documentation of that. >> my question is very simple. i am very suspicious of the libor submissions. reading through the new york report, they talk about it. of two or three years.

it. of two months or three months. >> what i thought was presented and what was done by barclays -- what i thought was in my pack, the same as your pack, was in 2007 and 2008. if you do not have those, i am sure barkleys would be happy to send them to you. you can also look at the 1 months to 12 months -- the stories are similar. you can look to other currencies, like sterling or oreo. i could have your office did that. there was no -- there is no attempt here other than communications other than the discussion paul and jerry -- jerry and i had. many of the other issues were around three months. the sterling -- we can send you the sterling as well, if that helps.

>> that would be helpful for the commission. >> mr. dimon, we tried, at any rate, -- mr. diamond, we have tried to contact barkleys over the past three hours. we had readings we had heard about -- market readings in the other direction, underreporting during the financial crisis, which goes to the highest levels. of course, we had the extraordinary situation wister -- where mr. del missier did not seem surprised that he had gotten information from you to adjusted libor returns. that is a concern to this committee.

have you anything you want to add in response to that? >> i appreciate the opportunity to go here -- come here. chairman, as you learned today, as soon as the behaviors we discussed in the report, as soon as they were identified, they were acted upon immediately. nothing was -- no expense was spared in taking the right action. when activities like this are found, with the culture i want to see it barkleys -- when there are mistakes, we admit them, we learn from them, we act on them , and they have consequences. this was -- the second thing i would say in response to that is that it is typical for barclays, a firm i care about so deeply, to be isolated on this.

i worry -- i know barkleys. if we have another situation going forward, we will act the same way, come out and the first and corrected. but i worry that the impact of that this was, because we were most cooperative, because we put the most resources into this, the reaction to the one firm that is out first outside of the industry does not create great incentives for others to come forward. at the end of the day, i look forward to the continued investigation around the issues surrounding libor. some of those issues are profound. if there is anything that barclays can do to help in that process, i know that we will. >> it has not been an easy few days for you. it has not been an easy hearing for you.

we are grateful for you to coming this afternoon. thank you very much, indeed. >> thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> coming up tonight, president obama kicks off a two-day campaign bus tour in ohio. after that, the national education association years from the 2012 teacher of the year. that is followed by a forum on u.s. tax policy hosted by the george w. bush institute. later, a british house of commons treasury committee with former barclays ceo bob diamond. friday on a "washington journal, " a look at efforts to improve the economy. a look at whether the economy benefits from welfare creation or job growth. and a look at if the black

community is effected by policy. nicholas jones and cynthia gordy. later, the series on international bureaus continues with the chief of the bbc news's washington bureau. he gives us insight into how the plan to cover the upcoming elections. "washington journal," live at 7:00 a.m. on c-span. >> friday, president obama ends his two-day bus tour through ohio and pennsylvania. he will be at a rally at carnegie-mellon university in pittsburgh. we'll bring it to you live here on c-span. friday, a forum on the future of the middle east with four and young people from the -- israel and the palestinian territories. you can see this from the johns

hopkins school of advanced international studies, live at 9:30 a.m. eastern on c-span 2. >> one of my favorites things to talk about is a chemical that is and maybe 1/2 of pigs, cows, and a lot of turkeys. most of the drugs are to make the animals go faster. this particular drug is not withdrawn when they walk onto the killing floor. that means an animal is killed and the meat is sold -- the drug is in their. >> this weekend, martha rosenberg looks behind the school of -- scenes of the food and drug industries, and finds lapses in regulation and government complicity in undermining public health. part of book tv this weekend on c-span 2. >> president obama kicked off his two-day bus tour thursday in

ohio, 10 miles south of toledo. the president addressed the economy, his efforts to save the auto industry, and announced that his administration was launching an enforcement action against china at the world trade organization for on -- imposing unfair trade duties on auto exports from the u.s.. this is 35 minutes. [chanting "four more years!"] [applause] >> hey! [applause] hello, ohio! [applause] hello! it is good to be back in ohio. all right. well, everybody who's got a chair, feel free to sit down.

just go ahead and relax. i know it's a little warm out here, but this is how summer is supposed to feel like. a couple of people i want to acknowledge. first of all, please give ina a big round of applause for the great introduction. we're proud of her. [applause] i am so pleased to see once again the outstanding mayor of maumee, tim wagener. [applause] there he is. one of the best senators in the country -- your senator, sherrod brown. [applause] one of your outstanding members of the congressional delegation -- marcy kaptur is here. and your former governor and my campaign co-chair -- ted strickland is in the house. [applause]

>> we love you! >> i love you! it's great to see you. [applause] i hope everybody had a wonderful fourth of july. [applause] we invited some people over for a barbecue -- [laughter] -- had a chance to say thank you to our incredible men and women in uniform. [applause] and we're so proud of them. and then it was malia's birthday yesterday. [applause] she's 14 years old -- i know, it happens too fast. [laughter] don't even remind me. she's going into high school next year. which means that she's -- see, when she was small i could say, all these fireworks i had arranged for her birthday. [laughter] but she doesn't believe me anymore. [laughter] now, unless you have been

hiding out in the woods somewhere, you are aware of the fact that it's campaign season. >> we're fired up and ready to go! >> you're fired up! [applause] it's campaign season again. look, i understand it's not always pretty to watch. there has been more money flooding into the system than we've ever 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 actually mean for you and for america. so it can be frustrating. and i know sometimes it may be tempting to kind of turn away from all of it, and just turn off the tv, tivo everything that you want to watch so you can skip over the commercials.

it's easy sometimes, i think, to lose interest and lose heart when you hear what's going on in washington. and i'll be honest with you -- i think there are some folks who are betting that you will lose interest, that are betting that somehow you're going to lose heart. but here you are in the heat. [applause] i'm betting you're not going to lose interest. >> no! >> i'm betting you're not going to lose heart. >> no! >> i still believe in you. i'm betting on you. and the country is betting on you, ohio. [applause] because you understand that, even though politics may seem real small right now and may seem real petty, the choice in this election could not be clearer.

and it could not be bigger -- the stakes could not be bigger. >> you can do it! >> i know -- with you. [applause] what's going on in this election is bigger than just a choice between two candidates or between two parties. it's 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've never been a country that -- we've never been a country looking for handouts. we're a nation of strivers and risk-takers and entrepreneurs, workers. [applause]

but what we ask for is that hard work pays off, that responsibility is rewarded. the idea is if you take responsibility for your life, if you put in the effort, if you do the responsible thing, then you can find a job that pays a living wage, that you can look after your family, that you can buy a home, that you can retire with some dignity and some respect, that you won't go bankrupt when you get sick -- [applause] that you have that core, middle-class security that built this country, and that you can pass that on to your kids so they can do things that you never even imagined.

that's the essence of america. and i believe in that basic promise of america because i lived it. that's my biography. i had grdparents whose service at world war ii was rewarded by them having a chance to go to college and buying their first house -- because i had a hardworking mother who raised me and my sister right, but also had some help so that we could end up going to the best schools in the country even though we didn't have a lot of money. i got involved in politics. i ran for president in 2008, and some of you joined me in 2008 -- [applause] because we believed in that basic bargain that built the largest middle class in history and the strongest economy in the world.

and we felt like that basic bargain was slipping away, that hard work wasn't always rewarded, that being responsible didn't always get you ahead, that folks who acted irresponsibly sometimes were making out like bandits while ordinary folks were having a tougher and tougher time. so we came together in that election -- democrats, but also independents and, yes, some republicans -- to restore that basic bargain that built this country. and we knew at the time it wouldn't be easy. we knew it would take more than one year or one term or maybe even one president. but what we didn't realize at the time was we were going to be hit by the worst economic crisis in our lifetimes. and that's been tough on a lot of folks, including people here in ohio. it robbed millions of people of their jobs and their homes and their savings. and it pushed the american dream even further from reach

for a lot of people. but you know what, this crisis has not changed the fundamental character of america. it hasn't changed the fundamental character of this town, or this state, or this part of the country. we've still got people who are working hard. we've still got people who are acting responsibly. [applause] it hasn't diminished our belief in those ideals we were fighting for in 2008. [applause] and our mission right now isn't just to recover from this economic crisis, although that's job one. our mission is to give back to america, to americans all across the country, what's been lost -- that sense of security. our goal isn't just to put people back to work tomorrow; it's also to build for the long haul an economy where hard work pays off -- [applause]

an economy where everybody, whether you're starting a business or punching a clock, has confidence that if you work hard, you will get ahead. that's what america is about. that's what ohio is about. [applause] now, i got to tell you, what's holding us back is not -- >> where is michelle? >> where's michelle? [laughter] fiddle know i'm second -- [laughter] but i'll have michelle come back sometime. [applause] i'm just the warm-up act. michelle says hi. [laughter] >> we love you, mr. president! >> thank you so much. i appreciate it. now, let me say this. what's holding us back from

going ahead and meeting these challenges -- >> four more years! four more years! four more years! four more years! >> what's holding us back from meeting our challenges -- it's not a lack of ideas, it's not a lack of solutions. what's holding us back is we've got a stalemate in washington between these two visions of where the country needs to go. and this election is all about breaking that stalemate. the outcome of this election will determine our economic future not just for the next year or the next two years, but maybe for the next decade or the next two. and i want everybody to be clear about what this choice is. my opponent and his allies in

congress, they believe prosperity comes from the top down. they believe if we eliminate most regulations and we cut taxes for the wealthy by trillions of dollars, that somehow our whole economy will benefit, and all of you will benefit, and there's going to be more jobs and better security for everybody. that's their basic economic plan. now, i think they're wrong about their vision. and part of the reason i think they're wrong is because we tried it, remember, just a while back -- >> it didn't work. >> and it didn't work. we're still paying for trillions of dollars in tax cuts that weren't paid for and didn't lead to better jobs or better wages for the middle class. the lack of regulation on wall street, the kind of thing that they're prescribing, that's exactly what allowed people to game the system that caused this whole mess in the first

place. so, no, i don't think that mr. romney's plan to spend trillions of dollars more on tax cuts for folks who don't need them and aren't even asking for them is the right way to grow our economy -- [applause] especially since they want to pay for it by cutting education spending and cutting job training programs and raising middle-class taxes. >> no! >> and i sure don't agree with his plan to keep giving tax breaks to companies that ship jobs overseas. [applause] i don't think we're better off by rolling back regulations on banks or insurance companies or oil companies -- >> no! >> regulations that are meant to protect workers and consumers and families and our economy. so we don't need more top-down economics. we've tried it. it did not work. what we need is somebody who is out there fighting for the middle class and wants to grow the middle class.

[applause] when the american auto industry was on the brink of collapse, and more than one million jobs were on the line, governor romney said we should just let detroit go bankrupt. that's what he said! 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. [applause] and three years later, the american auto industry is coming roaring back. [applause] that chrysler plant up the road bringing on another 1,100 employees to make the cars that the world wants to buy. the wrangler built right here in toledo just set an all-time

sales record. [applause] what's happening in toledo can happen in cities like cleveland, can happen in pittsburgh. it can happen in other industries. and that's why i'm running for a second term as president, because i'm going to make sure that it does. i want it happening all across this country. [applause] >> four more years! four more years! >> just like ina said, i want goods shipped around the world, stamped with "made in america." [applause] unlike my opponent, i want to stop giving tax breaks to companies that are shipping jobs overseas, start rewarding companies that are investing right here in toledo, right here in ohio, right here in maumee. that's what i'm looking for. [applause] >> we are, too!

>> governor romney's experience has been in owning companies that were called "pioneers" of outsourcing. that's not my phrase -- "pioneers" of outsourcing. my experience has been in saving the american auto industry. and as long as i'm president, that's what i'm going to be doing -- waking up every single day thinking about how we can create more jobs for your families and more security for your communities. [applause] that's why my administration brought trade cases against china at a faster pace than the previous administration -- and we've won those cases. just this morning, my administration took a new action to hold china accountable for unfair trade practices that harm american automakers. [applause] and let me tell you something.

americans aren't afraid to compete. we believe in competition. i believe in trade. and i know this -- americans and american workers build better products than anybody else -- [applause] so as long as we're competing on a fair playing field instead of an unfair playing field, we'll do just fine. but we're going to make sure that competition is fair. that's what i believe. that's part of our vision for america. [applause] but that's not all it takes to rebuild this economy. i'm running to make sure that america once again leads the world in educating our kids and training our workers. [applause] our tuition tax credit has saved millions of families thousands of dollars each -- and now i want to extend it. we won the fight in congress to stop congress from letting student loans double. [applause] and now we're working with colleges and universities to

start bringing tuition costs down. [applause] i want our schools to hire and reward the best teachers -- [applause] 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. see, in the 21st century, a higher education is not a luxury; it is an economic necessity for every single one of our young people -- [applause] and folks who are retraining to get the jobs of the future, and our veterans who are coming home. and we need to take care of all of them and give them those opportunities to work their way into the middle class. [applause] god bless you. thanks for your service. >> my pleasure, sir. >> god bless you. freedom is not free, and you fought for it.

[applause] i'm running to give more responsible homeowners the chance to refinance their mortgage and save $3,000 a year. [applause] ratesgot low interest right now, but a lot of folks are having trouble refinancing with their banks. we've said to congress, let's go ahead and help them refinance, because that extra -- can you use an extra $3,000? >> yes! >> and that means you're spending at restaurants and you're buying stuff at the store and -- you're buying some clothes, is that what you said? [laughter] that you're putting that money back into circulation -- that's good for everybody. it's good for small businesses; it's good for large businesses. we've already given thousands of families the chance to do this. my opponent, his plan for the housing market is to let it hit bottom. >> booo -- >> that's not a plan. that's a problem, that's not a solution. i'm running because i believe

that in america, nobody should go bankrupt because they get sick. [applause] i'll work with anybody who wants to work with me to continue to improve our health care system and our health care laws. [applause] but the law i passed is here to stay. [applause] and let me tell you something, maumee. it is going to make the vast majority of americans more secure. we will not go back to the days when insurance companies could discriminate against people just because they were sick. we're not going to tell 6 million young people who are now on their parent's health insurance plans that suddenly they don't have health insurance. we're not going to allow medicare to be turned into a voucher system.

now is not the time to spend four more years refighting battles we fought two years ago. now is the time to move forward and make sure that every american has affordable health insurance -- [applause] and that insurance companies are treating them fairly. that's what we fought for. that's what we're going to keep. we are moving forward. [applause] >> four more years! four more years! four more years! >> and, maumee, i'm running because after a decade of war, it's time to do some nation- building here at home. [applause] we ended the war in iraq. we are transitioning out of afghanistan. my plan would take half the money that we've been spending on war, let's use it to put people back to work rebuilding our roads, rebuilding our

bridges, rebuilding our schools, getting those construction workers out and about rebuilding america. [applause] that's how we build our future. we can't go backwards. we've got to move forward. i'm running to make sure that we can afford all this by paying down the debt in a balanced way, in a responsible way. keep in mind, we had a surplus last time there was a democratic president. [applause] 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. well, we're going to clean it up, but we're going to clean it up not on the backs of the middle class -- we're going to do it in a balanced and responsible way. i'll cut spending like we already have on things we can't

afford and aren't helping people. but unlike my opponent, i'll ask the wealthiest americans who enjoyed the biggest tax cuts over the past decade to do a little more. [applause] and by the way, just like we know what they did didn't work, we know what i'm talking about did work, because what i'm talking about is what bill clinton did as president. our economy created 23 million new jobs, the biggest budget surplus in history, and by the way, we made a whole bunch of millionaires as well. [applause] it wasn't like rich people were doing bad back in the '90s. they were doing just fine, right? >> right. >> and you know what, there are plenty of patriotic, successful americans who agree with us. they want to do the right thing because they care about this country. on jobs, on education, on housing, on health care, on retirement, on all these things that are the pillars of a middle-class life, we can't go

backwards. we've got to go forwards. and that's the choice facing us this november. and the choice could not be more clear. now, i'm not here to tell you, ohio, that this is going to be easy, or it's going to be quick. changes that we're trying to bring about -- we're dealing with problems that happened over the course of decades. they're not going to be changed overnight. and i know sometimes people feel like, well, obama, he's done some good things, but, boy, things are still tough out there, change hasn't happened fast enough. i understand that. i get frustrated, too. but what's required are 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 just the way they are. but don't ever buy the line that

they're selling that we can somehow accomplish more by doing less. that might benefit their interests, but it won't benefit yours. that's not how we became america. our parents, our grandparents, the founders of this country, didn't set their sights lower. they didn't settle for something less. and neither do we -- because we're americans. if we're going to be the country we know we can be, we've got to keep doing the hard work of building the future of this country for our kids, just like our parents and grandparents did for us. [applause] and let me tell you something. from now until november, the other side is going to spend more money than we've ever seen before, and they will be raining ads down on your head. and they'll tell you it's all my fault -- i can't fix it because i think government is the answer to everything, or because i haven't make a lot of money in the private sector, or

i think everything is doing just fine. that's what all the scary voices in the ads will tell you. that's what mitt romney will say. that's what republicans in congress will say. winning an election, but it's not a plan to create jobs. [applause] it's not a plan to provide you with greater security for you and your family. it's not a plan to restore the middle class or restore the american dream. and that's the kind of plan we need right now, is a plan to build the middle class and restore the american dream. and if you agree with me -- if you believe that our economy works best when everybody gets a fair shot and everybody is doing their fair share and everybody is playing by the same set of rules, then i'm going to need you out there working. and you know what, i need you to talk to your friends and your neighbors. don't just talk to democrats. talk to independents, talks to republicans.

[applause] because i want to work with anybody who believes that we're in this together. [applause] i want to work with anybody who believes we've got to invest in our future. i want to work with anybody who thinks we've got to give our kids a great education. i want to work with anybody who believes that we've got to make sure that we're building things here in america. [applause] i'm not a democrat first; i'm an american first. [applause] i believe we rise or fall as one nation, as one people. and i believe what's stopping us is not our capacity to meet our challenges; what's stopping us is our politics. and that's something you have the power to solve. so hit the doors. make some phone calls. register your friends.

talk to those family members who sometimes don't 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 that's being spent on negative ads in this campaign -- they spent money in 2008. i got outspent when i ran first time for senate. but you know what 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 them. [applause] nothing can stop you. nothing can stop you, maumee. [applause] nothing can stop you, ohio. nothing can stop us, america. [applause] let's remind the world just why it is we live in the greatest

nation on earth. [applause] god bless you. god bless the united states of america. [applause] ♪ ♪ ♪ ♪ ♪

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♪ ♪ ♪ ♪ >> at the white house reporter for politico covered the two-day bus tour. what makes ohio and pennsylvania so important to the campaign? >> ohio is a key swing state.

it is a key firewall for the president. it is also important for his pushing of boasting about the auto bailout that the president's administration pushed. detroit makes the cars, but most of the vehicles -- more vehicles are made in ohio than anywhere else. a lot of jobs in this part of the country. >> on the autos, there was news that the u.s. will file an unfair trade claim against china. how does that tie into his comments on the auto industry? >> is surely just a coincidence that the president is filing this their trade complaint about vehicles like the ones made in a plant that is 9 miles away in toledo. it ties in -- mitt romney has

been talking about that from the beginning of his campaign when he is an ohio. it is an opportunity for the president to show he is doing something about china beyond that. >> the president will wrap up his bus tour on friday. june jobs numbers come t tomorrow. is there some risk of being -- of campaigning when bad news could overshadow some of the comments the president may make? >> it is also an opportunity for him to change the subject. this is his first campaign event since the health-care decision came out. he is not doing a victory lap on that. tomorrow, the job numbers will come out at 9:00. he will be speaking in ohio and in pittsburgh after that. in the afternoon, he will back the white house signing transportation bills. if there is bad news tomorrow,

then obama is in a position to change the news cycle to be something else. it is his hope that the lead story is not necessarily bad job numbers. >> is this tour by the president in any way a response to the romney bus tour of a few weeks ago, which covered similar territory? >> there are things -- these types of tours tend to happen in the summer between when the primaries and and the general election race heats up. it is certainly -- the same types of the voters. the president is stopping in a handful of industrial, white, blue-collar suburbs, places where he needs to do well. >> how is the romney campaign responding to this obama bus tour? >> so far, outside of toledo,

there is a small plane circling overhead with a romney 2012 banner. they have also sent two top- level surrogates, bobby jindal and tim pawlenty, who were hitting the stops obama is going to today and tomorrow if you hours ahead of time to try to get the romney campaign message out before the president. >> redi epstein is the white house reporter for politico. thank you for the update. >> anytime. >> friday on what "washington journal," a look at efforts to improve the economy. the -- a columnist at "human events" looks at whether the economy benefits more from job growth or wealth creation. then, an examination of how the black community is effected by u.s. policies.

we hear from nicholas jones of the census bureau. later, washington journal's series on international use -- news bureaus continues with the washington chief of bbc news. he gives us insight into operations on bbc, as well as have a plan to cover the upcoming elections. "washington journal" is live at 7:00 a.m. eastern on c-span. >> president obama and his two- day bus tour on friday through ohio and western pennsylvania. he is holding a rally at carnegie-mellon university in pittsburgh. we will bring that to you live at 1:50 p.m. eastern, here on c- span. friday, a form on the future of the middle east, with four young people from israel and the palestinian territories. you can see this event, from johns hopkins, live at 9:30 a.m.

eastern on c-span 2. >> the life of a sailor include swapping the debt in the morning, working on the sales, climbing, what ever the duties are. by the end of the day, you are ready for rest. but you do not give a full eight hours of sleep. aboard a ship like the constitution, is four hours on, four hours off. >> the life of an enlisted man among -- aboard the u.s. constitution during the war of 1812. >> the sailor was in the fear of the possibility of being whipped. the cat of nine tails was carried by petty officers in a bag. the thing a sailor never wanted to see was a petty officer getting ready for a flogging. a phrase we still used today -- to not let the cat out of the bag. >> that is sunday at 7:00 p.m. eastern and pacific. also, more from "the

contenders," our series on the people who ran for president and lost, but changed history. sunday, 1928 democratic candidate al smith. >> >> 2012 national teacher of the year rebecca mieliwocki spoke at the association meeting. 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 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] >> 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. >> instead, i will say that reminds me of my house on a friday afternoon. 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. it was more of what a shame than anything. 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. 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] we don't do that because we like 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. learnteacher's help kids 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 top of the lessons we're supposed to teach that day. 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. heacted out, he's out out, 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. what'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. let's start with 1920's with 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 of the 20's is 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. apparents with this 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. 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 prosal -- they were able to get accomplished cuttg 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 onomy 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 rest, 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 vestment, higher productivity. we have incredible productivity during the bush administration. therefore we have higher wages. iall 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 thawe're still recovering from. we are now faced -- we are faced with a choice. we he 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. >> befe 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 whatl 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 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 undermineshe 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 ich 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 above5%, 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 admintration, 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 improvthe 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 200and 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 actuly 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 commce. the stock market was close for five days. auto production had been shut

down. etc.. the quarter after those checks got in peopls hands was the fastest rate of inventory drawdown we have ever h 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 le 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 arting in 2003, was you started to see small siness 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] >> abody 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 repting 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 talke about t part of thtax 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 groh 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 sebody 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 x 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 theudience. 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 nerate 24% of g.d.p.? is that fair to say on an ongoing basis? >> how many do not think it could? all right.

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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 , 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 tting 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.

>> we can't sit here and say there was no -- on lie bore.

it's very difficult to say yes tothat. >> they weren't wide awake, were they? >> they really weren't. >> weren't acting on behalf of the bank. receiving rewards for their actions? >> asked a similar question. but also i have to be clear that that was one of the factors that went into it. >> but is that not part of the -- package? >> absolutely. >> so the senior management of the bank has fallen down and --

rewarding them for their conduct. >> the behavior went on until we caught it in the investigation. >> but these -- people were praised every year. >> their appraisal whether it was for their ego or compensation, it was still bad behavior. >> when appraisals are done and evaluations are made, probabilities will be looked at. is that part of an appraisal? >> yes. and some of the times we didn't realize -- >> and reports are not just financial. they are the public windows to the world into the mindset of your organization. and it's 283 pages.

you mention the word "risk" 321 times integrity, twice. is that the way you want to present bark leis to the world? >> -- barclays to the world? >> i don't want to present barclays >> you did a word search for certain words. i would like to do my own studies before i agree with that. but the question is do you think i believe ethics and integrity and values are important? yes. it's dot say in an environment where i'm also saying although i wasn't aware of it at the time, there was bad behavior, and it wasn't even bad behavior, it was rep rehenceible >> you said that before that it

was a small number of traders. and what sorts of developments do this have? because what review was ever made of that? it seems to me people have been there 25 years, some people. you have people that you said it was a small group of people that these were people -- were they not registered with the >> i think so. >> so do you not as their employer have a responsibility to make sure they undergo proper personal development? >> yes. hone 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. you are not seeing this, you are not reading 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] [unintelligible]