that is one area we will be watching. michigan. we are moving away from afscme -- a lot of actors have been extremely active in this campaign. >> he did not fit knowledges that the public is being left to union priority. i think there have been signs of that. the public is willing to go to the polls. that has happened recently. we will watch closely to see it that has happened. i do think that is a big threat they face. >> i think he has used the term trichet assault "on human rights. -- "all on assault" with human

rights. they're able to take walker out of office. where it has happened. this is a key part of the labor. thank you are being with us. i enjoyed it. >> thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> we had pulled into the area that morning. we had boarded the ship. lippold on the event of

an al qaeda attack. correct i was doing routine paperwork. there was a thunderous explosion. you could feel all the destroyer quickly and quietly dressed up to the right. we seemed to hang for a second in the air. the ship was doing this twisting and flexing. we came back down into the water. ceiling tiles popped out. everything on my thing came down. i embrace this until the ship stopped moving. >> war tonight at 8:00 on c- span. >> this we david cameron talked about the banking scandal which resulted in several recent resignations including bob diamond, the former ceo of barclays. it also questions of having an e

you referendum. prime minister's questions tonight at 9:00 p.m. eastern and pacific on c-span. >> on tuesday a former ambassador to afghanistan said the u.s. is hurting its own cause by not projecting an image of steadiness in the country. ron newman spoke at the brookings institution along with u.s. aid is presented a list of u.s. accomplishments in energy and how. this is about 90 minutes. >> good morning. welcome to brookings. thank you for coming out on the third of july in these difficult times of commuting and the weather. we appreciate your commitment to the afghan mission. we appreciate a commitment of the two gentlemen here and the men and women in uniform and civilian the time here. i am from brookings.

we will spend the next 90 minutes talking about national development and the ongoing state of his agency's efforts and the carter mission in afghanistan. the way we will proceed is that alex will speak with some prepared remarks. then we will have a panel discussion and ultimately go with you. let me say a few words about these two remarkable testament. first, ron. he had a broken leg and rest. he thought through and continued his commitment to afghanistan. he was ambassador 2005-2007. he was also ambassador to two other countries.

his father had also been an ambassador to afghanistan in that 1960's. there will be ed trivia question at the end -- a trivia question at the end. our featured guest and opening speaker is alex. he is the lead director on the pakistan portfolio. he has a longstanding commitment to afghanistan and pakistan. in the 1990's, he worked with the united nations in afghanistan during the difficult times of civil conflict. he has been distinguished scholar at the u.s. institute of peace. he has commitment to many issues. he has obviously a huge portfolio today with afghanistan still.

a lot is about to change. we can be in today in the preparations for the tokyo donors' conference. a lot of people were paying attention to the nato summit in may. it is no less important than the upcoming tokyo conference next week. donors' money to talk about their current and long-term commitments to afghanistan and what strategies might back the ongoing efforts. alex, we are thrilled to have you here to keynote this topic. please tell me in welcoming him. [applause] >> thank you. it is a real honor to be here. thank you for coming out. i cannot help remarking that yesterday morning, we have a large and video conference with afghanistan to discuss our ongoing efforts to develop national gas and power project in the north of afghanistan.

we almost had to cancel because of lack of power in washington, d.c. but really, it is a pleasure to speak alongside two people who have been indicated so much to keeping our engagement in afghanistan on track and honest and an eye to solving problems. michael stole my line. when you go to the embassy and you see the remarkable roads, maybe it is because of the moments, but the father and the signs are right below each other at the moment. that is a record of a multi- generational service and its perspective on the country. every time i see michael, i am reminded of the incredible work he has done. particularly when i saw his work. incredible graphics that are run

through the new york times for almost a decade. i think it is rare that you see a data set that is expertly presented. it can change people's opinions, if not thousands. it certainly did for me. we are in the midst of a political, economic, and security transition in afghanistan. to my mind, it will likely the future of the country and the region for decades to come. for this to succeed, it is going to require an enormous degree of sustained commitment. after 10 years for many people, that is asking a lot. first, this commitment has to come from the afghans and their leadership. but it also needs to come from us and our allies in the international community.

together, we must overcome the ghosts of 1991. at that moment, after about 12 years of international, intensive focus on afghanistan, it was a turning point. but it was the point when the world turned its back on afghanistan. they made a summit in chicago, the donors summit coming up in tokyo this week, the u.s.-afghan strategic partnership, are all about showing the afghan people and the taliban and the original actors and our allies, and indeed, our souls, that after another decade a joint action and investment, we're not leaving afghanistan to the wolves. the lessons of al qaeda and extremism left unchecked is not lost.

the stability of this region matters to u.s. foreign policy. this is what president obama said, "we are building an enduring partnership. the agreement we signed today sends a clear message to the afghan people. as you stand up, he will not stand alone. it establishes our cooperation over the next decade. we will combat terrorism and strengthen democratic institutions. it supports out in the commons -- developments. there be transparency and accountability. and to protect the human rights of all afghans, men and women, boys and girls." our relentless focus for the past several years has been to get results from our investment of taxpayers' dollars in afghanistan and make them sustainable over the long term.

in the last decade, we have helped afghanistan to develop more rapidly and reaching were deeply into a society than in any previous decade in their history. i realize that some of the commentary and reporting that is passing for conventional wisdom these days. let me repeat it, we have helped them develop more rapidly than any previous decade in their history. i know this because i first decided to go to afghanistan in that fateful year of 1991. for four years, i witnessed a civil war that was part of the systematic dismantlement of afghan society and state. as a result, a decade ago, afghanistan ranked among the world's lowest for life expectancy and literacy, and the highest for infant and mortality.

one-third of the afghan population were refugees. more were leaving. another third were dependent on food aid from the international community for their survival. half of the population, after an women, were about to be plunged into darkness and institutions by the taliban in 1996. over the last decade, we have invested approximately $14 billion worth of civilian assistance to afghanistan. this is a significant figure. but it is important to remember this is the equivalent of roughly four-six weeks of the costs of our military campaign.

let me give you a few examples of some of the progress we have achieved before going on to talk about what is happening next. there is a report that was available outside that we released recently. it outlines some of these things statistically. it talks about the results we have achieved. for example, gross domestic product through economic growth in afghanistan has been about a to-10% per year on average for the last decade. wouldn't we kill for those sorts of figures. per-capita income has risen, basically tripled, create millions of afghans out of property -- poverty. think of public health. life expectancy in afghanistan in the last decade has increased 15-20 years. that is the largest increase in that time period.

infant and child mortality have plunged below the previous highest in the world mark. over 60% have access to basic health care. a decade ago, only 6% had access. in 2001, approximately 900,000 afghan children almost exclusively boys, went to school. today the figure is over a million children in school. over 35% of them are girls. there are lesser known, but equally important statistics. if you look at energy, there were handout passed out. the number of energy connections in megawatts a bill in afghanistan has soared. they now have 24-hour reliable power. we have worked with the afghan

utility, which did not even exist five years ago. it has gone to only $40 million today. they are well on the path to sustainability. they have increased eight fold over the last several years. it has doubled in the last few years. if the afghans will sustain the progress, it will have to come from their own economy and their own revenues and their own private sectors. i want to say that by no means have all of these projects been successful. we are aware of that. we have tried enormously to

learn from our past failures and make significant reforms over the last few years in the way that we do business. i will not go into detail, but i encourage you to look at the report. a few things. in afghanistan, we issue the first sustainability policy. and to cars us to examine every single project that we do to ensure -- it requires us to examine every single project that we do. we issued something of accountable assistance in afghanistan. it has limited increase in betting for contractors and dramatically increased the level of staff an oversight that we have to make sure that we are safeguarding were taxpayer dollars are going. we have also signed on with other donors to some of the best and boehner practices that have emerged -- donor practices that have emerged. bottom line, afghanistan, although one of the most challenging places in the world to do this kind of work, we have also decided to make sure it the -- it is using the best practices or have the biggest

portfolio. what i want to say is that this progress remains fragile. due to ongoing insurgency, lack of a political settlement, corruption, impunity, and institutions and is decided that remains a week after 30 years of turmoil -- and a society that remains weak after 30 years of turmoil -- i am often called to ask, what is normal for the people of of afghanistan? how did they see their own future?

what is it that we need to do to break those patterns and overcome the ghosts of 1991? the din from the last 30 years, -- judging from the last 30 years, what you saw was constantly shifting sands. regimes, invaders. they come, take their toll, and are swept aside. but i believe we have the chance to help them change this dynamic. this is the heart of what we are trying to accomplish in tokyo. tokyo is not just a conference. it is a process that has included a year of dialogue and debate. it is leading us to understand

together how we can secure afghanistan's future. we have to accomplish, i believe, four things. first, i have outlined that there has to be a long-term commitment to afghanistan. we have to convince our partners and the afghans and ourselves that we are not leaving afghanistan in the lurch, even as transition moves forward. we have to cement the incredible gains of the last decade. we have to address the potential factors are causes of instability, like the economic impact that the withdrawal will have on afghanistan's economy. second, we have to set priorities. we cannot do everything in afghanistan. the needs of afghanistan are virtually endless. with a donor funds going down and this transition going forward, we need a narrow, achievable set of priorities that need to be focused on a few critical things.

private sector led economic growth, and enabling environment that will allow that growth comment better laws, and human capital development. in other words, cementing the gains and making them more ready to become part of the workforce. third, there needs to be reforms. these reforms in government and on economic policy will enable a successful, economic, and political transition. a failure to make some of these critical reforms will disable that transition. finally, as someone who has watched this process intensively over the last decade, we need clear follow-up mechanisms that will set and

tracked benchmarks, so that we know where and how we are on track and where we are off track and how we will correct the process. we also need more effective means to incentivize some of the types of reforms that i mentioned. what you will see coming out of tokyo is something that tends to find all of these four things together in a mutual and accountability framework. it is a framework that is in agreement between the international community and the afghan government. it is about how to gather, we will achieve those four objectives. i close by saying that i believe that these changes, these commitments, the is reforms, and the need for real results, are no longer nice to have a. they are imperatives if afghanistan is going to avoid it prior fate. there needs to be a transition away from what has been a donor- led economy to an afghanistan that is much more self-

sufficient. there needs to be integration. finally, we need is successful political transition. i think it is absolutely fundamental to remember that the peaceful transfer of power that must happen in 2014 will be a historic first for afghanistan. not only in this era, but ever in its history. you did not get to the second one without going through the first one. at the end, i think that we look at afghanistan with these realities in mind.

the troop levels are going down. over all, donna investment over the next decade will decline. -- donor investment over the next decade will decline. at the end of the day, we must be there to support them. but they will have to make critical changes in order to succeed in this process. thank you for your time. it is a pleasure being here. [applause]

>> ok. i think we are good to go. thank you for those remarks. congratulations on what you and others have accomplished in afghanistan. there is no doubt that there has been remarkable headway in many areas. that is one of the distinctions between this effort and many of the efforts or go into a conflict zone. it can be difficult to see the quality of life is better sometimes. the amount of headway you have made any metric of quality of life is quite remarkable. we will juxtaposed that with the broader question of the state of the afghanistan.

we are focused primarily on development on government matters. that carries over into politics and corruption matters. we are going to broaden the scope a little bit. when they get to discussion, audience can ask anything you wish. i will invite ron to comment on whatever scope he would like. for those of you have not yet read it, i recommend it. it continues to be a very important commentator. ron, over to you. >> thank you. it is an invitation if to chaos if you're not very disciplined.

while i am out of the are met, i speak only myself -- out of government, i speak only for myself. i cannot be a disinterested observer. is book off the lights coming on. that is a particular project -- you spoke of the lights coming on. that is a particular project that we invested in. we could drive around a city that is no longer a black city at night. what i would like to do for the next few minutes is reflect on a few broader realities of afghanistan and of our working there.

which often i think complicate your life. i am skeptical of some things. the first thing i want to talk about is this business of developing capacity. we use this phrase and the people in the business understand it. i think people outside do not understand it. there has been a huge gap between our military and our civilians, for instance. in the difference between training and developing capacity. in that gap, there has been a demand often for progress very fast. someone said to me, it was not that long ago. the problem is that we do not have synchronization between our military, economic, and political strategy. in the two years we have left before we turn the security to the afghan lead, we are

supposed to achieve a really modestly functioning government? you are asking for a rate of progress that has never been seen in the 60 years of post- colonial development or in the world. you are asking for something that cannot be done. then you blame people for not accomplishing what was never possible or feasible? there is a need to be realistic. there is no capacity in developing afghanistan. you mentioned bill collection. this is an interesting example. is their major progress in the collection in afghanistan? we have beat them over and had on that issue for 10 years. it took 10 years of work to transform a bureaucracy that was based on a large fleet

patrons and was antiquated. it is now collecting bills. that means they can pay for things like fuel. this is critical to keep lights on. i use this example because on one hand, it is an example of progress. on the other hand, it is an example of how long it takes to achieve process. we have strained on this as americans. we want things now. we want things done now. it will not work that way. i remember talking to the first i remember talking to a first- aid director who told me about to go into the education ministry in the early 2002. they went to a building where they had no glass in the windows.

they groped their way down a dark hall to find the minister of working by the light of the kerosene lamp with no power in the building, no computers. on the one hand, you have enormous development from then until now in their educational system. 8 million kids in school. on the other hand, you have enormous gaps. i raise this to illustrate the reality of where this country is coming from and how long it takes to get changed. we frustrate ourselves enormously. we also waste a lot of money sometimes by trying to do

things at a rate of speed which is unrealistic and criticizing the program for failure for not doing what is impossible. does not mean there are not lots of things to criticize, but we have to get a certain amount of realism. this goes back to the difference between enthusiasm and implementation. we have been bedeviled and afghanistan by repeated enthusiasms to charge off in new directions. this is also exacerbated by our short tours. i believe we will never -- until we leave people in place for a least two or three years. you cannot build a learning organization on the basis of going once a year. we tend to -- everyone who comes in at new wants to find out what he or she ought to change. the result is a program

exhaustion on the part of afghans to look around and say, this is the fourth, fifth, sixth person who has changed the program. why should i exert myself when it will change and a year? -- in a year? we jerk things around. that was bad enough for me had a lot of money. but now, we are going through an enormous process of reducing the funding. there will be a double economic shock because it is not all of the foreign aid funding that is going down, it is a huge amount of the economy that has been bolstered by military spending, and that is going down as well.

this is going to be a huge economic shock. the foreigners have been working hard to train afghans and putting them extravagant salaries. overall, there is going to be a very large economic shock. one of the things that will be terribly important -- and this is something that i give aid great focus -- credit for. trying to hold steadily to a course of action. this is fun to be very hard. washington's tendency to change. when things don't go well, this is a place like to talk about policy. everything -- we like to change the policy. an awful lot of the problem in afghanistan is the

implementation. it takes years to do something so when you switch constantly, you were always letting other things drop. your enthusiasm becomes like a small child that walks away from a complex prop -- project. you need to stick with things. you need the ability to change, to analyze what you are doing. aid gets criticized a lot for what happens to contractors. the contractor model is deeply flawed. for one thing, you hire a contractor to do whatever you hired a contractor to do. you do not hire a contractor to come in and tell you that you are wasting your money. you have a lot of trouble when we have all of the movement -- until we allow aid to grow to a level of staff for it can actually do things again, and until we give them more legal

flexibility in how they contract, they will continue to fight with work around fixes to a model a cannot alter. we need realism in this town -- to a model they cannot alter. we need realism in this town. we cannot cut this agency to the bone and expect that it performs better than it did. when i first went to afghanistan in 1967 -- you reduce the organization by 10 times, you raise its budget enormously, and then you say, why are you all screwed up? as we go forward now, steadiness is going to be enormously important. convincing the world we're going to stay. there is no more important point

about succeeding in afghanistan than that. the majority of the problems we have with pakistan are based on the strategic view that we will not stay and that afghanistan will crumble. the fact is that if we do not convey a message that we will stick, we constantly undercut everything else we are doing. we are such a major player in afghanistan that everyone takes position on what they think we are doing. whether they are friends or enemies. insurgents take position on whether they think we will bail out.

they do not worry about whether the afghan army is gone to win. the question is whether they will be strong enough not to lose. we're not winding down the war. we're winding down our part of the war. we may run out of national commitment, i hope we don't. we will take a serious price for that. our most critical challenges in afghanistan, i believe, is to make up our minds that we are going to stay at a level sufficient with the country -- so the country will not lose. that changes the entire political and economic dynamic. i fear that what we will do, we will manage to stay in another decade, but every year, it will look on certain so that we never reap the strategic benefits of the effort that we actually make.

we're pretty good at that for a number of reasons. the fact remains that in the aid program, in the politics and in the military, our ability to project steadiness is going to be enormously important. with deep respect to what alex had to say it -- we cannot describe to the american people what we intend to do in 2015 and afghanistan, we are not contained an image of steadiness. that is a political choice which will have to be made after november in this country. if it cannot be made now. it will be the major choice of the next administration whether it is a continuation of

president obama or governor romney. if we are going to state in afghanistan, even if it is more modest, but be honest about it. if we are not going to do that, we are causing americans to die for a fallacious policy. we'restop saying that winding down a war that we are not winding down. we're winding down our presence, and that is a statement of fact. we're not winding down a war. we need to say, what is this relationship of 2015, 16, 17? not in perfect detail, but in sufficient detail that we can see a year from now that we have retained a steady course. that is not what they see today.

today, they see a level that was half what it was last year. and has put to a the most excruciating business of trying to -- and has put a for the most excruciating business of trying to downsize. they see troop levels that are rapidly changing. when you looked in that context of years of uncertainty, having lived that way your entire life, and you see the troop numbers get changed, decisions that seem somewhat unconnected to the ground on numbers, budgets that are affected as much by our deficit as our policy, we are not conveying -- this is a decision the next administration will have to confront. i hope we stay.

thank you for all you are doing. i can only imagines when you finally get out of government come and go back to your previous life, the wisdom you will bring from now having actually trying to do what you're talking about. >> i will focus the question to you, alex. and then we will go to all of you for e remaining time. another point we have been talking about already, the remarkable progress in the field. i want to commend our development and diplomatic workers as well as those in the broader international community. there have been some recent critiques of the so-called civilian surge. there is a lot of critique in the the mission. i personally would disagree with the notion that the civilian upsurge has not been impressive. i think it is quite impressive.

plenty of caveat, including our strategy has sometimes had trouble with the afghanistan challenge. the dedication of the people i of scene is very impressive. this is not all happy talk for me. i will wind up with a tough observation and a tough question about corruption. that is the 800-pound gorilla or elephant in the room. we're doing all these great things in afghanistan, but how come corruption is so bad? before i get to that, because it is also not discussed enough in washington, i want to commend those great afghan reformers who all of us know very well, especially these two gentlemen. i have had the pleasure of

meeting and number and there are a lot of impressive people. on the trip that we were on in may, i stayed for the first five days and we talked about afghan politics with a lot of important officials in and out of government. there were a number of hopeful signs. let me mention a couple. the minister of finance has been doing some useful things to make it harder to carry suitcases and money -- suitcases of money out of the country. i will not go into detail, but there is a general sense that there is some progress. i am not trying to say this is a happy place in terms of eliminating corruption, but there are significant steps. the army inspector general has been following through on a lot of the corruption cases you might have heard general petraeus talk about with army supplies being sold off and not

being available to their soldiers. they are continuing on with the criminal pursuit of the people. it was not just one time. there is a legal follow-up. that is one example i was informed about. we visited the asia foundation office, which is trying to encourage good governance at the local level and afghanistan. there are 34 provinces in afghanistan with an average population of close to a million each. for the most part, they do not have a lot of control over their budget because most of them are centrally controlled. there are now efforts to try to give these governors and a little bit more of a sense they have some control over their budget and the amount of money will be tied to their performance. there is a performance based governor's fund and the asia foundation administering this, i was impressed with the trend

line. things were getting better on average in their mind. they had an objective system of evaluation. i do not want to make too much of it. all of these things are somewhat mushy and you cannot claim that it is scientific, but their overall trend line was an improvement of 10 or 15% in the overall quality of local government. there are a lot of good people doing things with in afghanistan, even as our news accounts focus on the karzei elite. we wrote about this when we came back from our trip, as you probably know, there is an expectation -- all of this effort we have made over the last few years -- which is a fairly small number for a country of this size. that is only about half the number of the iraqis have in uniform, for example. that will happen almost as soon as nato has withdrawn its forces. we raised a lot of questions about that particular planning assumption. i would reiterate that i hope

this is not becoming an expectation among policy-makers. just because we're tired of spending money, we preemptively decide to downsize the force. i would want to raise some questions about whether in the pursuit of saving a billion dollars a year, at that we lose the war because of a false economy on downsizing the afghan security forces.

you may or may not want to address that. it is relevant to the broader question of financial commitment by the united states. by last point has to do with an area where i am a little sheepish to mention this because iran does not agree with me -- because ron does not agree with me. we need to send a strong message to them. we need to remind the afghans, this is conditional on you folks not electing a corrupt warlord in 2014 for president.

that may seem obvious. how could we possibly give a billion dollars a year to of regime that is hypothetical worse than the current karzei regime? we do not know who is going to win. we're not going to give $5 billion to $8 billion a year to that kind of government. we're not going to walk away. it is not credible that we will continue to treat afghanistan as our top two or three aid recipients internationally if the corruption problem remains such as it has been in afghanistan. we need to find some way to signal this.

not to pick the winner of the elections. there are two or three people with whom we cannot work. as a matter of fact, there are some people do u.s. congress is not going to support at the levels alex is hoping that we might. that is my last comment. how do we wrestle with the corruption challenge and make sure we do not give the afghans the sense they're getting a blank check from the international community? >> i think this issue coming back to where i ended and you ended of mutual accountability is fundamental. afghanistan has to have the government, and institution better capable and legitimate. without them, they will not succeed. the decline will be slow, but it will happen.

coming from both of these comments, something important occurs to me because i go to afghanistan it so much and have almost over 20 years, you have to be able to see afghanistan as the tale of two cities. people like to look in afghanistan and say, it is failing. the reality is, those things are happening simultaneously. there is remarkable progress in some areas. when you go into these afghan ministries that maybe had a good minister, maybe not, 10 years ago, had very few other people. today, you see the young graduates and the american university, men and women both,

and the work they are doing, the deepening of the bench, it is remarkable. when you travel around the country and see the infrastructure that did not exist. today, all the security does prohibit movement in some places, -- all the security does prohibit movement in some areas, it is much better. they have experienced globalization. afghanistan sat outside of globalization for 30 years. there were a few thousand land lines in afghanistan in 2001. most afghans had never seen or used a telephone. today, 85% of the afghan people have access to the mobile network.

there will probably be more afghans as a percentage basis using mobile money then there will be americans. some of the things -- look at the explosion in media, all of these things. it is remarkable. these things are existing side by side. what we have to do to stick with the good side and held them persevere through the long challenges.

even as afghanistan does become more stable, it is still gone to be a fragile post-conflict state. it is a place we will need to continue to support throughout the process. on issues of corruption, two great examples. on one hand, you have kabul bank. it was an undermining of the afghan financial system. it demonstrated a couple of things. there is an afghan financial network that did not fail amidst all of that. a network of banks and financial institutions that survived that challenge and have been strengthened as a result. last week, afghanistan got a positive report on the imf program. the reason that is so significant is because when you have something like that happen, it threw off everything. it threw off the international confidence in their financial system. but things in place, such that many of us believed would not happen.

and then you see things on a positive sign. i am going to come back to mobile money for a minute. we are starting to use telephones to pay the afghan national police. this is a policy that has been going on for a few years. when this first happened, the afghan police who got their payments theirself funds believed they had gotten a 30% raise. -- payments through their cell phones believed they had gotten a 30% raise. cash was going straight into these accounts. it demonstrates that even as you have ongoing challenges like corruption in afghan society, by strengthening institutions, by being creative and and

powering the leaders to demonstrate that they do care about these issues, you can make progress. wages have to keep on pushing on the people -- we just have to keep on pushing the people and supporting the people able to make those reforms. it is a gradual process. amen to what ron was saying. what has been demonstrated by the past decade is that afghanistan is not a lost cause. i am always amazed by the potential that i see in afghanistan when i go. despite the setbacks, the progress that we make on a consistent basis continually gives one hope that the bigger challenges can be met. >> thank you. i really agree about the young people, the most inspiring thing that i find is talking to the 20 and 30-somethings. in an educated generation that

did not exist -- an educated generation that did not exist. an enormous number of impressive people who want a different country. that does not mean you did change right away. when a younger person goes back into a ministry, they may be a threat to leadership. it takes time for them to develop the critical mass to make change. a lot of change in ministries i have seen has occurred, some of it, you feel now. some of that will be progressively available. it does not happen all at once. it is a plea for the detail and patience rather than for broad generalizations, which we lead to on anecdotal basis.

it is complicated. you will never understand this country as clearly as on the day you arrive. that is very much true of afghanistan. the more you know, the harder it is to generalize about the country. on corruption -- i think we will make slow progress. whether we are staying or not, the results are important. if we are going, we incentivize corruption. you incentivize people to grab what they can before the collapse. our lack of clarity polls against ourselves. it is also very important as one looks at corruption and aid to be careful. we tend to want to -- washington

tends to say, because we give money, we have influence. it is very important that you recognize when you try to make that argument, you are using the lever against the right holder. those who say, by god, we have the leverage. miss understand where aid has leveraged -- misunderstand where aid as leverage and where aids is not have leverage. political survival may be connected to personal survival. age is leverage against the state. it has -- aid is leveraged against the state. it has no bearing on the political survival of the

particular politician. survival is number one. the state in its functioning are someplace down below. i have this great leverage to apply to priority #3 and somebody is dealing with priority number one, you are irrelevant. we need to understand where aid is relevant and it is not. there are plenty of places where it is useful pressure. it has to be carefully calibrated. on the elections, i do differ a little bit with mike, not much in the desire to send the message. i have no problems saying it, i just do not think afghans will believe it. they do not understand our political process. i have come to conclusions about the elections. a bad election can be absolutely disastrous for our

policy. by causing all sorts of explosions in afghanistan. two, we ought to basically keep our hands off. how could i possibly come to that conclusion? i do not think we understand what a bad election is. we are very focused on transparency. you can have a very bad election when it comes to score saddling. you could have that result -- scorer settling. the election is cleanly carried out and regarded as illegitimate. i do not even know if this sort of a brokered election between power holders is more or less disruptive than a deeply flawed contest in a politically immature society.

we do not understand what is more or less destabilizing. to think we do, is an exercise in hubris. i do not think our leverage is up to the task. our european allies do not want to rock the boat. they did not have any appetite for the level of interference. i am not sure if it is credible on our part. the one thing you want to be very careful of when you are a big power, do not bluff and lose. it means that you have less influence the next time. we intervened in a lot of ways

and we can say a lot of bad things about the last election, but at the end of the day, president karzei outplayed us. if we make threats we are not fully determined to carry out, we will again fall short. there are a lot about can politicians sitting on their behind waiting for us to fix the issues of the electoral commission. i believe we lack the power to do that and we probably lack of the will. therefore, we ought to make it very clear, this is potentially a disaster, but this is your disaster. or your success. i do not think we gain anything by leading afghan politicians to believe that we will fix their electoral process. i come to this counter intuitive the view that we ought to make it clear that while we will help, we will support, this is their election.

>> thank you. let's go to you in the second row. please identify yourself. >> international crisis group. i want to agree with the comments about the courage and commitment of u.s. civilians and our military there. i do have some questions. ron, you just said something that seems to be contradictory. you want the united states to stay in afghanistan and to maintain our presence and commitment. yet he say it may be that we do not have the ability to press afghanistan to have an election we consider to be halfway decent. if so, it seems to me that undercuts our validity tuesday.

if it appears that the government and afghanistan is worse than the current government, it seems there are two other issues on the question of being realistic. you said we should not be thinking that in two years, you can get a competent, capable ana in place. $35 billion, and everything we see from the evaluations is that it is not capable of autonomous action, the evaluation of about 220 units, all of the army units, only 7% of capable of autonomous action when they have advisers with them. we have a huge gap. command and control, the analysis from department of defense, 47 units in the ministry of defense, not capable of carrying out their mission.

five, including the ground force, airforce, are not able to carry out their mission at all. the level of confidence in what the military is able to do in terms of security is highly questionable. >> i gather those are to me. >> i want to make sure we have the developments -- pair these things together. >> if it is not a development question, you cannot ask it. >> at this moment. >> i hate to be the guy who gives a long question here. >> make it short anyway. >> all of you mentioned the youth in afghanistan. the biggest development has been in the military. last year, out of the 170,000 students, about 60% of them did not get in because there are not enough seats at the university system.

we have 8 million other kids in the system coming towards universities. we only have one or two master's degree programs in the entire afghanistan. in a country with 70% illiteracy, building a functioning modern economy, you cannot do that based on fundamentals like that. what are they doing to actually create a skills transition in the next 5-10 years? this is something that gives quick turnover results. give somebody a bachelor's degree or a master's degree, and you have them ready for a good job. >> it might be easier [unintelligible] [laughter] >> it is a terrific point.

i think that one of the things, as we have focused very intensively on basic education in afghanistan, and those figures, the 8 million children in schools represent a revolution in terms of the number of afghan children going to school. but there will have to be gains in the potential for employment in order to realize that potential and to take all those people and give them opportunity. the two ways that i believe we are trying to pursue that is that, first of all, a huge new focus on vocational training and education developing skills. the reality is that -- and this is true when you look at

construction and other industry in afghanistan -- the demand for skilled labor is a higher than the availability. that is a good problem to have. what we need to do is to make sure that there are more afghans capable of engaging, not only in their own economy, but in the regional economy. the next big thing on the horizon is the extractive industry. i say this with caution for a couple of reasons. if there was ever a case out there for the resource purse, afghanistan is dead. if afghanistan is gone to be successful with this new extractive industry, they will have to have a good governance scheme in place to make sure those revenues are dispersed transparently. it will create a lot of jobs. the most important thing that it will differ afghanistan is not the direct jobs in the mining industry, which are very important, but all the ancillary industry that will result around that are really critical. you have to have a mixture of skilled afghans and the potential to take up on to

premiership. all of those bags of cash were being taken now by afghans. there has to be an investment climate or afghans want to keep their money in side of afghanistan. you need enabling environment in order to do that. at the end of the day, it is about governance. their challenge is with governance and corruption and availability of electricity and other things that prevent them from keeping those dollars in side of afghanistan. that is going to need to change. >> can whether there is not a contradiction in my position, yes, there is a contradiction in our interest and capacities.

if the election is really bad, it may be disastrous to our ability to sustain ourselves in afghanistan, which i believe we should do. that does not lead me to the conclusion that we should massively inject ourselves. that is the conclusion that naturally follows for a lot of people. i do not believe we have the capacity or the will or the ability to follow up that

conclusion. if you cannot do one thing, understand that you cannot do it, and make it clear to the others. there is a contradiction between the importance of the election to our policy and the fact that i am recommending that we hold back. it is a recommendation based on what i think is the reality of our means and what is credible in the afghan context. on the army, i didn't mean my comment to apply quite that way to the army. i am relatively more optimistic about the army. although i am relatively pessimistic about the way we rate the army. i have. complaints about the lack of transparency and the standards by which we do military rating. i am a civilian and i worked with a platoon in vietnam as an infantry officer. i do think i know something about the subject. it is very important to understand how much of this we have not been doing for 10 years. we have been doing it for two years. when i left afghanistan, we were building a total force that was going to be less than -- just over 200,000. we have not reach those targets. we did not began to finance the building of sufficient radio, vehicles, artillery, airplanes,

any of those things that allow a force to operate in the field, until the budget of 2007. when we decided, and i think it was the correct decision, to have the enlargement of afghan forces, we had to delay building a more complex support forces because we needed every physical space there was to train and a tree. -- infantry. we have only been engaged in building the logistics base to support this force and sustain it in the field within the last

two years. a lot of it, we for gets in our criticism the last time between the decision, financing, and delivering. big decision 2009, bill before us. november of last year, -- build the force. november of last year, at every battalion was able to leave with a full set of radio equipment. that is the time lag from making a decision to unit going out of the door with a full complement of radios. what i am watching now is the process that is very critical in which we are turning over responsibility now to afghan security forces. the picture is usually mixed across the country.

it is not one you can generally -- generalize about. there were no afghan forces. there are 25,000 security forces. they are making decisions about how there are redeploying their forced to handle the drawdown of the marines. i heard enough about interaction between police and local police and army to be reasonably impressed. probably the best story in afghanistan. but it is different. the east is different. one thing i heard from all three american division commanders was the excruciating difficulty of getting hard- charging marines and paratroopers to take their hands off said the afghans take the lead.

-- so that the afghans take the lead. in short, the process of building this army is a very recent one. it is not a 10-year process. it is about a 2.5-year process. we have examples of having done this well, not a guarantee. vietnam is an example of having done it well if you look at 1972 and a massive north vietnamese attack. by 1975, the morale was already going to hell, then they fell apart. i do not say it is certain, i simply say that it is possible. we have critical issues to get through in the next couple of years. these two years our movement from quantitate to quality. we have done quantity, but we have not yet achieved equality. there are some big problems of politicizing, the upper levels of the army, which we're not talking about sufficiently in our public discourse.

we need to have a presence that is dense enough to build quality, but to let them take risks. that will be one of the critical part of the troop decision that president obama is going to make. if the yanks down the level of troops so far -- too far, the process will be endangered and could fail. i think in two years of hard training and hard fighting, if we keep the support of the level we have, we have a serious chance of producing an army that will not list its war. >> i will take three more questions and then we will finish up because we have a hard stop at 11:00. we will start here. gentlemen in the fifth row. >> i was with usaid until january.

this is about corruption. the performance based governance find rated r governor as one of the cleanest governors in the province. the afghan network rated our -- said most corrupt in the country. one of the things i saw, different people were using different data that i do not even think was data, to decide if the government official was correct or not. how do you create a more evidence-based, objective rating of corruption? >> thank you.

>> ibm a member of peace and democracy -- i am a member of peace and democracy for afghanistan since 1996. my question is to mr. ron, he said about a national commitment of the u.s. to afghanistan. afghanistan, we are under influence of england for 250 years. how do you separate the united states supreme politics over england? we want to be allied with the united states, not england. >> we americans can identify. [laughter] >> thank you very much.

i want to come back to the question that mark posed and the response and link it to the message i feel like i have heard this morning. if there was a word to describe afghanistan, from my perspective, it is conundrum. the conundrum seems to be best captured by the fact that on the one hand, what i hear from this panel is we must stay the course and we must convince friend and foe alike that we are in this for the long haul.

countering not, we are in the process of drawing down the troop level. to most people, it will sound like we're getting out of town nicely. we are advised by the ambassador, anaya understand that it is a point of view shared by a lot of people, we need to understand what age can influence and what it cannot influence -- what aid can influence and what it cannot influence. here we are in a troubled democracy with its own set of problems with the bank accounts running low on money and the intense heat of the political system ramping up.

what i don't feel like we have heard this morning, and i am wondering whether we should or can, is there a factual national security basis that can be articulated for why we must continue to invest in afghanistan and settle for our relative lack of influence and power in the process? >> alex, we can begin with you. you can respond to any of the questions he would like. >> first, i would give two different responses. at the technical level, when we work on governance and corruption issues, i think there are many things that stand out as good indicators of performance.

you are right, we need to measure those things. we need to measure them rigorously. we have to have a system that does that and looks at those things consistently over time. i will say that one of the things that i tried very hard to do usaid is it focused on results and measurements. too much of what we do is intended to create a result but we do not always spend enough time rigorously measuring those results. we put in a number of programs in place in afghanistan that tries to do that better and more rigorously. on the broader question, politically coming from local a lot and governance background,

at the end of the day it will be the afghans that know best. it is the local people who know who was doing what to understand the culture and was the opportunity for change is. which is why we have to empower afghans and afghan institutions to be the ones who are going to carry this out. i've always returned personally to the idea in the federalist papers that at the end of the day, it is competing factions to want power within the government's data going to be the ones who enforce checks and balances. until such time as we have a system within afghanistan where you have afghans who see their future as predicated on their ability to hold others to account, then it will not work at the end of the day. at think we have seen some great signs of progress in that regard. but we have a long way to go. to my mind, this gets at the

broader question that i think you and many others have proposed. what is it about the transition that is going to take afghanistan past this dangerous time we recognized in the coming years with the changing international engagement do something that will look much more like stability? i think there are a couple of key ingredients in their about the afghan ability and desire to make their institutions more self sustaining. the ability of some afghans to hold others to account and the desire to do that that at the end of the day are going to make the difference between them being able to carry forward and these institutions carrying

forward. there really is no more important factor here than the long-term commitment. all the challenges that we have identified in this discussion will remain. i think at the end of the day if we collectively, the united states, together with our british allies to do so much for afghanistan and our other allies, aren't bono longer in the driver's seat as we have largely -- are no longer in the driver's seat as be largely have been in the last decade, no way that we will continue to be there -- knowing that we will continue to be there is essential. >> one more word on the question about commitment. there is no nuance in them. i do believe that giving a sense

to afghans that there are certain people we have a hard time working with, it is not just bluffing, it has the advantage of being true. whether or not the message would get through is another matter. i accept the challenge there but i do think it is more than a bluff. i do not know how to rate afghan politicians in a way to say which possible presidential candidates would be unacceptable. i have a couple of names that probably would be in that category. i think it is worth trying to get that message through. the other way to address your question is that while afghanistan is very important to us a while i agree with alex and ron that we should not deserted the way we did 20 years ago, we may scale back a lot.

it the wrong person is elected and the wrong political process ensues. there are no guarantees about the outcome in afghanistan and the afghans should not feel any guarantee of our commitment. they have to continue to do what the reformists have been trying to do. if they are trumped by a presidential politics process that becomes fundamentally more corrupt, i think all bets are off. that is where retry to -- we try too -- i make this argument with some reluctance. the fact that al qaeda is a lot weaker gives us a least maybe 20% less absolute requirements to make afghanistan succeed.

it is a hard argument to make. i still think al qaeda could come back in afghanistan. the taliban could come back. it does matter to us a lot. if they do not do their part in this, we cannot be successful with our part. it is worth a try to get that message through. >> to a half minutes for the hardest question of the day. on the first issue about the british, there was a time when they did seem -- the task force seemed to be operating on its own but i think those days are past. i talked to some of the brits and i am pretty impressed now. i do not think they will be in control. mr. mitchell spoke of the policy as having a lot of elements of a conundrum.

you're absolutely right. i think this administration's policy toward afghanistan has been a conundrum. it has been the policy that went in two directions simultaneously of reenforcing money and troops and commitment while signaling an end where the date got too much emphasis and therefore set in motion all kinds of pressures in afghanistan against succeeding. you can tell i am out of government. i do not think it will get away from that but i regret it. i do think it has undercut our own ability to achieve some of what we could have achieved by leading people to believe we were heading out the door as we were heading in and therefore sending them -- sending afghans towards hedging behavior.

protect your money, your family and political inclination because he cannot rely on the things the foreigners are doing. the behavior is counterproductive for the better state we need in order to succeed in the policy. that is one reason i hope for clarity. that is probably excessive help. secondly, you asked a more fundamental question about the argument. you asked the toughest question at the end of a to a nod their central theme for this. i think we do still face the very real possibility of years, decades, of instability stretching from pakistan into the -stans.

afghanistan could turn into a cauldron of fighting. london on had fewer foreign players and was a smaller and somewhat less important country. it went for 15 years in a civil war. i see a disintegrated process if we leave to quickly drawing in the outside players to make it impossible to stabilize anything and put pakistan at a greater risk then it is that today. it i cannot say exactly where that goes. 10 or 15 years of having that area and stable in an area that now includes nuclear weapons, i think that's pretty catastrophic and something we should seek to prevent if we can. secondly, if we leave too early in things fall apart -- there's

a push to radicalization that has occurred over the last decade that al qaeda is no longer only and arab phenomenon. i'm not trying to say that i do know, but if people who believe they are god inspired in their attacks on us now seek vindication that the second superpower has been destroyed, defeated, i think they have an enormous psychological boost which will invigorate that movement toward attack on us for a long time to come. i cannot prove it. there's a lot to worry about. worry does not justify and less expensive for any level of expense. it has to come down. troops have to come down. there's a difference between going down to a sustainment

level in doing this in a rational way and then just saying you're tired and you need to get out. i think too little of the debate that focuses on getting out asks the two critical questions. do you disagree with the risks in national security that i think exists? one can make an argument for going home. if you agree the risks are there, then the second question is if you are prepared to tolerate those risks. do i believe because this is hard that i am willing to accept a heightened probability, more taxes on the homeland and american interests of instability in afghanistan? am i willing to say that all of these are entirely powerful costs as a price for withdrawal? if you're not prepared to make that argument, then you have a different argument about how much cost and for how long.

that is where i and the argument. think of raising the question that i would love to go on for a little longer, but i'm already significantly over time. >> please join me in welcoming our guests. c-spa [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> this news item from the associated press. a u.s. diplomatic official says international donors will pledge $16 billion in aid for afghanistan in the hopes that they will be helping stabilize the contractor for combat troops depart after 2014. the announcement will be made by the range of $1 billion-$2

billion. >> the life of a sailor include scrubbing the deck in the morning, working on the sales, climbed the loft, duties assigned. at the end of the day, you are waiting for rest and do not get a full eight hours of sleep. it is four hours on, four off. this weekend, the life of an enlisted man on the u.s.s. constitution during the war of 1812. >> there's the fear of being whipped by a cat and nine tales being carried by a petty officer in a bad. they never wanted to see a petty officer getting ready for a flogging. it is a phrase we do not -- we still used today, at the cat out of the bag. also this weekend, more from

"the contenders." key figures are ran for president and lost. today, former new york governor house met at 7:30 p.m. eastern. >> one of my favorite ones to talk about is this in maybe half of pigs, cows, and turkey. this particular drug is not withdrawn when they go on to the killing floor. when the meat is sold, the drug is still in there. >> looking behind the scenes at the food and drug industries finding regulatory lapses and government complicity in undermining public health. this is part of book tv this weekend on c-span two.

>> of barclays, the into national banking and financial- services company has been fined to settle allegations of manipulating international interest rates. the chief executive of barclays resigned on tuesday. the day before, he appeared before the british house of commons and he told committee members he had no knowledge of the alleged wrongdoing until he read the report. this is nearly three hours. >>this hearing is subject to parliamentary privilege. we hope you are prompted to speak freely, and even more freely now that you have resigned. the hearing is about turmoil at one of britain's leading financial institutions. certainly, barclays has suffered

bad publicity because you came first, but nonetheless this goes much wider than the libor settlement, even though that did seem to precipitate your resignation. before we go further, given that you have resigned, i would like to give you an opportunity to explain your reasons. >> thank you, chairman, and thank you, everyone, for being here. i love barclays. that is where it starts. i love barclays because of the people. 16 years ago today on july 4, 1996, i began at barclays, and it has been 16 years of tremendous enjoyment, and that as the driven by the incredible, over 140,000 people around the

world. as you said this week, the focus has been on barclays, and as you said, in many ways because they were first. i realize the world looks said barclays as a -- and a group of traders better reprehensible behavior, and that is being put on barclays in a way that is not representative of the firm that i loved so much in the way they deal with customers and clients and deal with problems. clearly, there were mistakes. there was behavior that was reprehensible. as soon as this was recognized, barclays put all forces of there's into how do we handle it, and what do we do about it? barclays has spent three years

with three of the most important regulatory agencies in the world, looking at millions of files, with all three agencies of plotting barclays for their cooperation, their analysis, -- of plotting barclays for their cooperation, there -- applauding barclays for their cooperation and their analysis. the attitude of barclays three years ago when this was recognized was let's identify the problem, take the actions necessary, learn our lessons, and if any customers or clients were hurt, let's make them good. i think that attitude is recognized by the three regulatory agencies in what they wrote but it is not coming out in the court of public

opinion over the last week, and fundamentally my decision to resign, it is my leadership, and questions about my leadership have been part of that. i think i can bridge barclays solve this is looked at in the true context of being about an industry and libor in addition to barclays and prevent the damage to the reputation that has happened. the best way to do that was to step down but to come here and answer the questions of the committee. i love barclays. history will judge barclays as an incredible institution because of its people. we need to get through this, and the best way for me to do that was to step down. >> why did you change your mind over the weekend? what was the trigger? there were reports of pressure from regulators. >> let me explain why i changed

my mind. it was not over the weekend. we worked on communication over the weekend to our colleagues internally, and we did that knowing we had the support of the board, the support of our shareholders who we had been working with since the announcement, and it was clear to me on monday that that support was not as strong and i needed to take a step to bridge the support. >> i just wanted to pin that down. did one or more of the senior regulators ring marcus? >> i do not know. >> did he refer to any pressure? >> that is probably a question for markets. >> you're not want to tell me what he would have told you in that conversation? you would have had a conversation with your chairman about this and the

sustainability of your continued growth as the executive? >> broadly speaking, it was just as i said, that the focus of intensity on my leadership -- it was better for me to step down. >> why are you so reluctant to tell us what might have transpired with the regulators over the weekend? we are going to have them before us. >> i'm trying to think about having conversations with regulators. >> you did not, but marcus did, did he not? >> if he had conversations with regulators, that is a conversation for him to head with it. i did not discuss that with him. i just discussed my reasons.

>> it is widely held that confidence has been lost and it is not just with your leadership at barclays. why do you think that is? >> i think there has been an unfortunate series of events in the last week around barclays being identified as the first bank in what was, you know, a report that clearly showed very, very bad behavior by groups of people, and how we dealt with that, chairman, i think was appropriate, and a sign of the culture at barclays. that is not coming out. >> the answer you are giving me is that it was the first from this vantage point. >> yes. >> ok. but it is true that the essay was concerned about your appointment as chief executive and they saw assurance that there would be a change of

culture at barclays. >> that is the first i have ever heard that there was questions about my appointment as chief executive. i went through interviews with key -- with the services. >> you know nothing of any written submission by the fsa to the board at that time setting out the need for an improvement in the corporate governance of barclays, an improvement in the culture, and you need to look better at how you were assessing the risk appetite and the control framework? >> i know nothing about that at the time that i was appointed. >> correct? >> correct. you know nothing about the suggestion that we were asked to provide assurances?

>> i did not remember specific comments, but i am sure there were conversations with regulators. my memory is more around would i be able to -- having been associated with the investment bank for a number of years, would i be able to disassociate myself. i would be able to leave the running of the investment bank to rich and gerry. >> is it true that the fsa express their concerns in october? >> every year, they come to the board. >> what was said?

>> the context of the discussion, the focus and the tone, it was something they were specifically happy with. in particular they talked to the board about chris and i, our relations with the regulators. >> wasn't more specific than that, mr. diamond? did they tell you that talks had broken down between -- broken down between fsa and barclays? >> i do not recall that. >> did they not tell you they no longer had confidence in your management team? >> no, sir. >> this was not pointed out in a letter?

>> there was a discussion that as it got down into the organization they felt there were some culture issues, that people sometimes pushed back, and some of the pushed back was not always at the top. there was an overall discussion on culture. >> this is the sort of thing they say every year? >> i did not mean it that way, sir. apologies. it is part of a review, so they will always have criticism, but they were specifically pleased

with the tone at the top, referring to chris lucas and myself, and the colleagues of the executive committee. >> is it true there were challenges from them on your stress test, your accounting practices, and subsequently we have the debt buyback scheme, the interest rate swap problems, and now libor. >> a i did not -- i do not mean to skip over anything. there was a conversation where there was a series of things that became an issue, and without going into the version of the transaction, because it was a transaction that was approved of -- by the fsa, but to be fair it was a transaction -- and i was not the chief executive at the time, so i am

speculating a little bit, but it created more debate between the fsa barclays than anyone anticipated. i remember it coming out in the context of "let's not have these situations." >> this will come out in the wash, what happened in september, 2010, and what happened in february of this year. can i turn to the decision during the crisis to lower libor returns? in your message to me last week, you said the decision to lower libor submissions was wrong. where was that decision taken? >> context. i discussed with you there will

be times for context. i think our letter laid out of there are three times that are easiest to refer to. there was between 2005 and 2007, with some activity into 2008, and early-2009, but primarily 2005-2007, which is about a group of traders in the influence the were putting down the rate-setting. there was a second time you are referring to during the credit crisis of 2007 and 2008, where there was pressure with the barclays group, and effective finish with the third, it was toward the end of 2008, october, 2008, where there were questions about the bank of england of the discussions with a senior person and pressure on rates. those are the three. i think you are dealing with the middle one. >> ok.

from what we can tell, this decision was made in september, 2007? >> the decision to influence rates? >> yes aired to lower libor submissions? >> >> it is reasonably fair. >> yes. >> this is all set out in paragraphs with the final latest report. i just want you to clarify that since the decision you are referring to in your letter is indeed the decision on the set of actions taken in paragraphs 11 and 114. >> i think there was a different set of decisions. >> i am talking about the

second period in prices, specifically to lower libor, not the third. this does make clear that the decision to lower libor was not taken as a result of the tucker conversation. >> that is correct. >> ok. let's turn to the tucker file, then. do you look at the -- do you take the file? how many have you taken in your conversations with regulators? >> most of those contacts were not me, and it is today -- and how many were in the new year? >> i think the conversation with me was in the fall. >> unno other conversations? -- you have no other conversations? on page 7 of the documentary evidence, -- >> this the submission cent in yesterday.

>> i would like to know how many of these contacts you use? >> i have fairly frequent contact with the regulator, but my contact would generally be with the bank of england, or people below the hector level because at this time john was the chief executive. >> is a frequent contact at how many were filed-noted, roughly? >> may be a few. >> a handful? less than a handful? >> yes. >> so effected file note is significant, is it not? >> today, i have regular more official meetings, but in terms of a phone call that would be new. >> what did you make of the phrase [unintelligible] >> i put eight in, and that was the core the reason i dictated that note and communicated with john, right of way. -- right away. the concern we had was october,

29, 2008, and i do not have to remind the committee what october, 2008 was like. we had had a government intervention in the royal bank of scotland, and government interaction i should of been more -- interaction -- >> i am asking what you took to mean by the phrase rightful. >> by october, the fund raising from the middle east was completed, said in the context of this market there was a worry. >> you have arrived at the answer. mr. tucker felt your library turns could be low -- libor returns could be low? >> relative to the other 15.

>> could be relatively low? >> yes. >> why on page two do you say you do not believe you received an and structure -- an instruction? >> i do not believe it was an instruction to >> was a nod and a wink? >> there was a perception that our rates were high, and the worry that i shared with john was that if members of the government were told our rates were high relative to other, and if they then took that to mean that we could not fund or were having trouble funding, and i have to be patient here, when we were funding, in fact, evidently in the worst market

environment that i had ever been a part of in 30 years in banking. it was clear that a number of the firms that were posting had emergency loans, or had been nationalized, or were having trouble finding, yet we were posting the highest level. then, as i said to paul, we are finding that those levels, but we would question whether some of the other institutions can actually get funds at the levels they are posting. >> my question is about the implication that you took that to mean. your libor returns did not always needs to be as high as we had recently. in other words, they could be lower. >> if you look at one more page, so i could make your point even more, page 22, which is the libor submissions of 16 banks,

which was the question at a time. if you look at the top of the page, and a line that goes across, that is the barclays submission. here's the important point. in october, 2008, when barclays was funding adequately, probably as well as any international bank, and closely as well as any bank that submitted, and there were banks here posting levels lower than this even though they were nationalized, and 100% of the days in october, 2008, we were the highest post in libor, or the next-to- highest. this is important to hear some

of the comments that have been made that barclays was lowering submissions for their reputation or things like that. barclays was reporting levels. 15 firms, -- 14 or 15 firms one of the% of the days were -- 100% were reporting rates lower than that. >> we know that others are up to this. could you get to the point? >> if they were told that barclays was the highest of libor, they would say that they cannot fund, we need to nationalize them. [unintelligible]

>> we are desperate, we have equity being raised, or if rumors were on the market, maybe we could not complete the equity raising. i think the most important financing -- >> you do not think you receive instruction? you do not think it was a knot and a wink, even though it reads that way to anyone who looks at it. if you are monitoring libor daily and your returns -- were you monitoring libor daily and your returns? it was a key indicator. >> i was aware, but i was not the key person monitoring it. >> you were not the key person, but you were getting a daily report, and you admit that the day after you set that e-mail. >> that is a good point, and this is one to take a second, if you look of the next page of november the day after the report went out, you will see that through all of november we were either the 14th, 15th or

16th, the highest, second highest or third highest, but this is a relative rating, where we posted relative to the other banks. what you are referring to is following our fund-raiser, which was positive news to the market, levels of libor went down across the market. it had nothing to do with barclays submission. that means we were still reporting at those levels. >> well, i got the point. i think you already knew that point. >> when someone says your libor is high, they mean that relative to the other posting banks, as opposed to libor is high, which means the absolute level.

we had two different events. we had barclays of the high level, belted to the other firms, then the reduction in libor based on the good news in the market, part of which was the fund raising at barclays. >> thank you, mr. chairman. you talked about setting up in 1998. you have come to it having been global head of fixed income and before that at morgan stanley. how long had you been in the debt markets before you arrived at barclays? >> i think my first position at morgan stanley was money markets which was the same as 1981 or 1982. >> so at least seven years -- 17 years, excuse me. >> your at barclays at that time, to. we shared some time. >> tell me about your experiences in markets. you had been in the derivatives markets? >> no derivative person would ever consider may a derivative person.

i am able for that's all i was markham -- i was markets. one was actively involved before it was in management, i was in the cash markets or the money markets. >> also markets that were funded of those blood bond markets? >> yes. mostly u.s. treasuries or european governments or japanese governments. >> in other words, when you arrived to set up barcap you have been living and breathing this for 17 years. >> the fixed-income government markets. >> the opportunity was to use the barclays treasury function to set up banking that use your ideas and experiences as you

wanted? >> i would have said it slightly differently but there was an opportunity at barclays. barclays at that time was more of a u.k.-focused as opposed to international. >> i think i heard you saying that it was a sub-scale hiring people and did not pay them very much. the opportunity to change those things must have been exciting. >> they have scaled in the u.k. but it was impacting their ability to expand internationally. >> when you set up barcap, you are responsible directly for creating senior staff deciding which products you're focused on and markets around the world? those would have fallen under your experience?

>> we would have gone to the board on any new projects or regions but i would have been in charge of that. >> did you run it on a very hands-off basis or did you give people a free rein? >> i think my management style, it says mr. askin, at the time was to have -- if that's what you are asking, was to have the representatives of the things reported to me. i certainly preferred a consensus style of management that we could agree a bridge -- we could agree on the right

decisions instead of me making all those decisions. if that's what you are asking. people would have considered it more centralized rather than less centralized. >> that makes sense. i just wanted to establish that you have a high level of the military at the bank. -- a high level of experience at the bank. >> in the gilt market even today, some of the people have been here 25 or 30 years in money markets because barkley's had such a rich and strong tradition in that market that many of those people have been there for quite awhile. conversely, as we began operating in areas we did not have much of an operation, it

would be typically people hired from the outside. >> so there would have been people in the bank dealing with the bank of england. senior management also treasury people in different parts of the bag. what other parts would deal with the bank of england? >> it would of started with the group treasury. patrick perry was the group treasurer reporting there. all of the group funding which was sometimes executed -- the execution was done through the markets of the government's and the decisions of treasury. one executive had been with the firm and had the closest relationship with the bank of england in our gilt age operation. >> tell me about your relationship with the bank of england. do you think the bank was slow to respond to the crisis in 2007-2008? does this little lie behind these concerns? >> no, i don't. relative to other banks, one of the best decisions we made at

barclays -- if i look over the financial crisis and ask myself what is the single best decision the barclays got right, i think it was when it was clear of october, 2008 that cfsa had made decisions for all banks to carry more capital. soon after, it nationalized lloyd's, that had been arranged. this 62 billion pound loan had been arranged for hboss think after the announcement of the deal but before the completion of the deal. we raise capital privately with all those things going on in the market. >> i'm talking about the bank of england. >> sorry. >> was the bank of england slow

to respond? >> there are many different levels of response. being a market practitioner, we always wanted as much response as we could get from the big central banks in terms of money market conditions. i don't recall it specifically. >> living and breathing the debt markets, you would have seen the operations. >> i think the fed took the lead. i understand where you're going. i would not have called a critical but we were working with encouraging more activity with the bank of england in terms of the money market. >> my point is whether or not the bank of england's response put unnecessary strain on barclays as well as other banks and if so, that might have made the crash worse and created

adverse behavior? >> when we look back, jesse, it would be fair for me to say that barclays, for a host of reasons, tradition, quality of the brand name, the fact that we had a balance of funding coming from around the world so we had central bank deposits from central bank of japan, china, we had access to funding that was different in many banks. we had a credit rating that was strong, a balance sheet -- >> i was talking about the bank of england adequately supporting you. >> i don't that was an issue for us. our access to money markets and access to funds, would have

categorized it relative to the other banks not just headquartered in the u.k. but other global bags was right at the very top in terms of our access to liquidity and funding. >> see you did not have to make asset sales. >> we had to make sales of securities. it was more based on not that we could get the funding but based on the fact that they would deteriorate in value. i don't want to overstated because the market was in turmoil but relative to the other banks have relative to our need to fund, the bank of england and the fed would also say that barclays was in a good position in funding. >> you are watching the barclays balance sheet like a hawk. you see when is the right moment to come into the market. >> no, i was not day to day on the desk at all or when he came into the market, no.

>> you would be forward looking? >> i would have had a report if we had a common problem. >> can we go back to the file note of your call? he said in answer to the chairman that you thought the senior figures refer to were officials in the government and later on you said members of the government. which do you believe? who do you think they were? >> i would only be speculated if i told you i thought they were and i don't think it is a proper to speculate. my recollection is paul did not refer to he was mentioning. >> would you think he could be referring to, a department? >> senior people? >> are you aware that the bbc

was told that libor was a concern? >> someone told me this morning that there was something in the paper about libor and i have not had a chance to look at it. it is relatively new to me by her references morning. >> prior to the phone call with paul tucker, did you have any other discussions with ministers or officials or the bank of england? >> the treaty was involved and the recapitalization of the banks in the u.k. keep in mind that in october of 2008, i had just moved to new york following the decision that the board made to acquire the u.s. business of lehman brothers.

i moved back to new york in that september. john was the ceo. john and i worked well in terms of who had a primary and secondary responsibility and he was doing most of the communication for treaty but oftentimes, a treaty with ask to see me as well. i think those would have been people on the list, not markets. i would see them far less than john but i would see them from time to time. >> so there where discussions immediately prior to the 29th of october? >> i'm not sure. i would think there might have been. we were not being recapitalized. we were doing it privately. sorry, i can give a better

answer -- i do think at that time, it was primarily being driven by john so i was hearing from him about his meetings with treaty but i want to be clear that from time to time, i would seek her as well and it would be after this time. >> were you shocked when you wrote this file notes that in effect senior figures in the government, officials or ministers, might have been asking you to fiddle with the libor? >> my reaction to that note was appreciation of paul tucker in doing his job. he was trying to tell me that there are ministers in whitehall who are here in the barclays is always high.

that could lead to the impression that you are not finding yourself and that's why i took so long to walk through earlier. my first reaction was that you have to get to whitehall there you have to make sure they know we are funding fine. it is adequately. we have an equity issue about to settle in two days. we are raising 6.7 billion pounds of capital and a number british banks had just taken capital from the government. this a very, very pressurized situation. i would not have used the word shocked but this is probably a momentous week in the history of barclays and in the history of the financial markets. >> but the fact of what you have written down here is that the ministers or officials were in effect asking you to fill your submission. >> i did not believe that, now. >> what did you think they were trying to do? that's what says here, isn't it? it did not be the case that we appeared as high as we were recently down is not the first conversation i had with paul about relative level of libor.

i would not say it is exactly those words but barclays had consistently been at the high end during the financial crisis and i was worried, if i can be perfectly frank, you will see what i sent back to john. i am paraphrasing but i said did you explain to the minister's the real story which is that other banks are posting rates below ours and yet not borrowing money at those rates? it is not that our rates are wrong. we are worried, and i can see this but i did not know this to be true but i was worried looking at that the other banks -- this is why, michael, i have gone to such pains to say this. we have banks with secret loans. with banks that were be nationalized. we have banks in germany that were struggling. by the way, i'm not talking

about deutsche bank but west lv was struggling at the time so banks were posting levels below hours and did not seem to be right. if this was going to lead to an impact in our ability to raise equity and the market, this was at the core banking. this is at the core of funding. this is a huge issue. >> you discussed earlier. are their notes from other meetings? >> not that we have located. that's unusual, not that we know of. >> let me turn to the lack of an instruction to jerrry del messier. he concluded that an instruction had been passed from the bank not to keep the libor so high and therefore passed down the direction to that effect to the submitors. you see him every day, how did he misconstrue the purpose of this phone call? how did that happen?

>> you read the note and i think the chairman said he misconstrued as. gerry has been very honest that there was a misunderstanding on this communication between the communication of the bank of england down and he was the person that instructed. while i was not aware of that, i think it is important to put it in the context of what actually happened and i would refer you back to the same pages in october and november. if you look at the impact on our rate of libor relative to the others, we never moved into the submission territory. the top four rates are excluded from the submission. it was wrong. it was pressure put a libor assessors but it did not change the published libor rate. it changed our submission but we were still one of the excluded rates.

>> i understand all that. i want to know how did jerry del missier get this wrong when you're just talking to him? how did he not understand this was an instruction from the bank or the authorities? >> i cannot put myself in his shoes. cfsa is part of the three regulatory agencies that have worked with barclays for three years. in addition to this report, they also did an individual investigation of jerry. their conclusion was to clear him that was a miscommunication or misunderstanding. jerry was cleared by cfsa -- i

may be using the wrong word, but during this time, the fisa separate from this investigation investigated jerry and said it is a miscommunication or misunderstanding. it is not something that fisa will act on. when i was aware of this, i talked to the fisa to confirm that was their conclusion. >> i'm going to turn to the department of justice on page 42 which refers to general concern amongst your a police -- among store employees that they want to find a solution for barclays to submit honest rates without affecting other members of the panel. they fell barclays could achieve that with other banks on those rates. were you aware of that argument that your submitters or having? >> i am aware post- investigation. on page 7, there's a chart of

how many times people at barclays discussed with the fsa, the bba, the fed, and the bank of england that we were worried that although we were posting rates, there was a worry that others may not be posting rates at the level where transactions could occur. i think it is an important part of this overall discussion. these are issues that were brought up with the regulators consistently over a number of years. one of the reasons they had not been apparent in earlier years was it took the credit card division to explode the difference between one bank's rates and other banks raised before a very long time.

rates were so tight and there was so much liquidity in the market that of someone was a little bit off, it did not show as much. it exacerbated the impact. >> my question was whether you and the senior people were aware that your employees were having this argument. you were not aware of that? >> no. >> it goes on to say that these communications were not intended as disclosures through which barclays self-reported to the authorities. should you not have been aware of that? >> let me get to the exact spot so in a weird is. which page is that? >> page 42. >> department of justice? i think you recall and i know this because of the investigation but i was not aware of it at the time -- there was a meeting to discuss this between the compliance head

of barclays and the fisa and the report back was to carry on. >> not aware of that? >> i was not. it was being in the pack as opposed to being at the top. >> bear in mind how important the rate was to barclays, what does it say about the management that you were not aware of these discussions? >> chairman, i think by putting context of three things we're dealing with with the trader misconduct, as soon as that was identified, an investigation -- >> and talk about the investigation at the time rather than going all the way back to square one and going through these three separate entities -- why when discuss serious did you relent? >> it was not brought to that

level. there were ongoing meetings at level below that. >> why not? what was wrong with barclays that something so important was not reported up? >> i think there was a feeling that it had been resolved. was there a general understanding? i want to make sure which question you're asking. the question of whether there were firms that were not reporting levels? re asking. there may be some firms that are >> on page 3 of the fsx, is says barclays acted inappropriately on numerous occasions. between september 2007 and may 2009 they made libor concessions. i will use the short hand. the fsa says on page 3 that senior management posts concerns about what other banks

are doing and perhaps not telling the truth, the concerns resulted in instruction being given by managers of barclays to reduce libor submissions to avoid negative media and comment. this is going on well before the 29th of october, 2008. can you tell us when you discovered that this lowball and activity was going on? >> during the investigation. >> you didn't know that this was going on when you spoke to mr. tucker on the 29th of october, 28 -- 2008? >> no, i was on aware. been before the investigation.

-- i would have been unaware. >> you discovered during the investigation, what month? >> two things happened -- soon after the credit crisis in 2009, there was a request that came in from the cftc to investigate. i may be using the wrong word but they want to study. it was during that when both the situation of the credit crisis was part of what i was learning going through the investigation. >> give me an approximate date when you discovered this lowball and which is the subject of the fsa memo. that is one of the reasons why you have lost your job. when did discover this was going on?

a simple question. ">> the findings of the investigation of the things i learned as a witness -- came to meet four or five days before they were published. i was not alone in this but other members of management because of the conversations we had been having as witnesses were not over the chinese law so my job is to make sure we have the investigation going on. give me a date. >> this month that as late as this month? why on the earth did you not know this was going on on your watch?

>> these are important questions. them.uldn't rush through the appeal of the 2007-2008 using the same charts we all have, in almost 90% of the cases -- >> you've made that point. we don't need to repeat that. it was high relative to other banks but the fact remains that the fsa said that was still a breach of principle. you accept that? >> yes. can i make one quick comment? the reports that came to me daily were the rates of blood or not the relative rate in the -- -rates of libor, not the relative ratings.

the reports that came to me were iscussions have any dusc with him about what he'd taken away from that copied this was not the first time we had discussions. >> i was not aware that jerry and having business understanding. >>? my main focus on the note was the issue with this. >> what would you say after you said that e-mail from which

would shore at cal? >> i have no recollection. >> what did you say after you copied him on that e-mail? you except this. what discussion did you have with them? >> discussions about the content of the note. i was unaware that he had the impression that he had a conversation i had with paul by note or conversation. >> i was not aware that he did instruct. >> are you under investigation?

are you under any civil or criminal investigation with the c ecesc? not to the best of your knowledge? >> ok. >> can i ask you to think of criminal prosecution of a banker in a custodial sentence? to you think that will be necessary? >> i think that is a decision for the regulator. >> i am sure some people have sympathy. given that you were talking about the torture and you have quite a lot to say about the royal banking, do you think the

role of banking should include that al shamregime such [inaudible] do you think that should lead to custodial sentencing for bankers? say yes or no. >> i think people that do things that they are not supposed to should be dealt with harshly. they should go through due process. when i got the results of this investigation and it was because of the interviews, i did not see a lot of detail. i was aware that things were coming out. >> i did not see a lot of the details on the investigation. i was aware that there was an investigation. when i read the e-mails from

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

reprehensible. it makes me angry. it makes me disappointed. >> ok. >> it puts a stain on the organization. >> yes, it does. >> 14 traders. we have a couple of thousand. >>, get on that? i want to talk about the criminality of this. the into place between mid-3005 and laid to thousand seven and then sporadically afterwards -- mid-2005 to 2007 and then sporadically afterwards. 11 request were coming from tax- barclay traders asking the barclays senators to fixed rates on their behalfs. when is it was limited to a small number of traders, there was a significant amount going on. >> we were not looking at fixed

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

>> during 2007, you get information -- the libor dealer emailed his supervisor to say that it was too high, we ought to move it down. he said, "my worry is that they seemed to be contributing false threats, and we are dishonest by definition. can we discuss this, please?" that was in 2007. it was only then that we are seeing evidence that these rate- setters returning around and saying no. >> this came late to me during the investigation.

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

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

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

barclays, and in the context of the financial crisis, there was an expose in "the wall street journal" about libor and the fact that people may not be reporting right. there are others that are better indications.

we cannot do it. the wall street journal carried the story. on multiple occasions barclay visited with the regulators to bring these issues to their attention. there were some issues. i am not one to blame this on anyone else. it is our fault. >> it is very difficult to say yes to that question. there was an issue out there. it should have been dealt with.

was there a word? absolutely not. i have to be clear that this was one of the factors that was into it. >> is that not part of it tax cut absolutely. >> its is fallen down. they rewarded them for contact. >> the individual profitability was one of many factors. when it it was a go or the conversation. >> i am not disagreeing were you are going. >> profit stability will be

looked at. is that part of an appraisal? yes. as soon as we realize that, people were fired. >> that takes me to the annual report. they are public windows of the world into the mindset of your organization. you would imagine that it mentions the word "risk" 1000 th hundred 34 -- once thousand -- 1,734 times. is that how you want to present barclays to the world? >> you did a word search. to i believe that -- do i believe that integrity and values are important? you bet. they are a precondition for everything else. i don't care how smart you are or how hard you work.

i was not aware of it at the time, but there was bad behavior. it was not bad behavior, it was reprehensible. >> you said it was reprehensible and it made you physically sick, and that it was a small number of traders. what sort of professional development did they have? waterview was ever made of that? -- what review was ever made of that? you had people on the bank to be have been so badly that they made you sick -- you have people at the bank who behaved so badly that they made you sick.

do you not as an employer have responsibility to make sure they have undergone proper personal development? >> yes. >> it is my understanding that since november 2011, the fsa at all mobile phone communications recorded. the conversations in 2000 with the bank of england, would've they have been recorded -- conversations in 2008 with the bank of england, would they have been recorded? the conversations in 2008 with the bank of england, would they have been recorded? >> not to my knowled >> 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. responsible until yesterday.