>> david becker from the abuse center, thank you very much. that is our show today. i want to remind you about the debate tonight at 9:00 eastern and you can watch it live on c- span and follow along at the cspan debate hub at c-span.org/ debates. we'll see you back here tomorrow for a wrapup. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

>> c-span is live outside the exhibition complex. the second of three presidential debates will get under way, beginning at 9:00 a.m. eastern. this is a town hall style debate. it will be moderated by candy crowley. it is a town hall style or they take questions from the audience. it is 80 uncommitted voters tonight. all of that coming up this evening. here is how our schedule looks like coming up this evening. we invite you to watch and engage with us beginning at 7:00 p.m. eastern with our debate preview. at 9:00 p.m., candy will moderate the town hall the bay. questions from undecided voters. after the 90 minute debate, we will take your phone calls e-

mails and tweets. also today here on c-span, the cato institute is hosting a discussion on the ideological makeup of the tea party. speakers will talk about a study that finds most self and friday part years of being united on economic issues but split on social issues. that coming up this afternoon at 4:30 eastern here on c-span. >> i watch c-span because when i want to get the news without a lot of talking and people getting their point of view, i can get the four original script from a person and then i can come to my own conclusion. which i think is better than having someone else, what i should think. i think c-span, c-span 2, and c- span 3. and book tv, which i love.

c-span 3 is the history channel. and they have been doing civil war tv. sometimes i want to visit the senate and to the house is doing. sturla. c-span for those things to. >> sandra parker mitchell watches c-span on verizon. created by america's cable companies in 1979. brought to you by a public service by your television provider. >> the head of citicorp announced he is stepping down today. the discussion yesterday talk about breaking up big banks and whether it would help protect the larger financial system. it is hosted by the milken institute. >> thank you for taking time of your busy schedules to join us this afternoon for this program sponsored by the institute for

financial markets. size,sue of the bank's and interconnectedness' is one that has affected policymakers since before during and after the policy crisis. struggling with the context of the dodd frank legislation and implementing the rules there under. international banking regulators and policy makers have dealt with this in the context of bottle 3 and recent reports issued and the u.k. and the eu report. the efforts to they have probably raised just as many questions. the issue of should these things be broken up -- or what should be done about too big to fail, is an issue that has gotten attention recently. a firestorm was kicked off when sandy, back in july on cnbc, and

he was probably the principal architect of the financial supermarkets. what we should probably do is go and split up investment banking. hatbands the deposit takers. have banks doing something that is not going to risk the taxpayer dollars. that is not too big to fail. in number of commentators on both sides of this question had chimed and subsequently. this issue just over the last couple weeks has got an increased attention. as a result of the release of the fdic chairman sheila bair's book. and then, just once again, we need to send him a thank you note, george wells, and the

washington post, where he quoted richard fisher, the president of the dallas federal reserve bank, and said that too big to fail institutions are too dangerous to permit. and in a uniquely colorful fashion, he goes on to quote president fisher, the problem posed by super sized and hyper complex banks require anti obesity policy like gastric bypass surgery. i am not sure he will be quite as colorful as your boss. the milken institute like to try to shed light on these issues. rather than try to make a lot of nice about them. i think there has been a lot of noise about this issue. it is extraordinary complex. in order to shed light on this topic, we thought we would bring

to you when old fashioned the date by four individuals who have been extraordinarily thoughtful and outspoken in terms of their policy views as to what should be done. basically standing for the proposition that certain large financial institutions are indeed too big to fail. that they perhaps should be broken up, the nuances in terms of what that entails, higher capital requirements, certain activities, etc. are of the harvey rose in bloom, and -- johnso standing for the proposition that the markets can dictate size and structure, or that there are thereun intended

consequences that may be adverse should big banks be broken up. phil is a senior fellow at the milken institute and a professor of economic policy at the university of maryland. peter is the arthur burns fellow of financial policy studies at the american enterprise institute. both are former treasury officials. phil most recently worked in the bush administration. and as one of the principal architects behind tarp. what we are going to do in terms of our format is began the program, the first half of the program with an old fashioned a high-school college debate format. stating the case, rebutting the case, rebuttal, rebuttal, and then additional questions back and forth in a summary. so, we will have harvey

rosenbloom. and choosing the road to prosperity, why we must and too big to fail now. will stay the initial proposition. he has eight minutes. phil will have eight minutes to make the counter case. why breaking up big banks may make them too small to succeed. then, simon johnson will have five minutes to rebut as well peter, and you will each have three minutes to make your closing arguments. thereafter, we will open and up to a panel discussion. you can throw questions at one another, cast of versions and make attacks as you want. we will have an open discussion as time allows and we will open and up to q&a from the audience. i know we will have our timekeeper standing in the back.

you will be cut off if you use more than your allotted time. with that, let us get started. harvey, the floor is yours. you have eight minutes. you do not have to use at all it did not choose to. >> thank you. i would like to think brad for inviting me to come up here for this debate. another thing i need to say, and i might be the only one on the panel has to do this. but give a disclaimer. the pews am going to express today our mind. -- the abuse and gorda express i am going to express today our mind. what i am going to say is not necessarily the view of anyone else in the federal reserve system or any of the parts of the institution of the fed. so, richard fisher and i have

been speaking about this topic for many years. our speeches go back to 2009. back in 2008 i wrote an article on managing walt hazzard during financial crises. i was concerned with the monetary implications of too big to fail. and richard and i wrote an op-ed piece in the wall street journal titled the blob that eight monetary policy. the blob was too big to fail banks. -- the blob that ate monetary policy the blog was too big to fail banks. the word got changed in its pronunciation. but i pronounced it sifi. because i think it history of science fiction. this year the dallas fed published its annual report. the road to prosperity, why we must and too big to fail now.

and what we did was labeled too big to fail banks the major roadblock and their return to prosperity. too big to fail is more than just about moral hazard. it is more just about seriously undermining our financial system, it is about seriously undermining all the rules of capitalism. it is a perversion of our capitalist system geared the return to prosperity requires a pre and too big to fail and quickly. i will use quickly instead of now. i have sense of urgency about this. the dodd frank act is very well intentioned. but like too big to fail banks, the dodd frank act is too big, too complex, it is part of the road block, and i think inadvertently, it favors, it favors the larger institutions in the financial-services

industry over smaller institutions. and therefore, likely perpetuates too big to fail. so, for consistency with the dallas fed's position on this subject, going back to richard fisher's early speeches, i use the word in the annual report -- it is time to break up the larger banks. but good to medication is about two things, being misunderstood -- and not being misunderstood. and i think the choice of the word break up lead to misunderstandings. and lead people to put me into a corner of being a radical. so i decided what i was saying was leading -- i needed to clarify what i meant by break up. richard fisher and i got busy again and wrote another wall

street journal op-ed. they changed the title and the quick book i had suggested. in any event on april 4 of this year they published the op-ed. we tried to explain what we meant by break up. by breakup we met restructure. rationalize. and we explained that american businesses do this sort of thing all the time. it is nothing new. businesses are always restructuring their circumstances. i concluded that breaking up sounds really radical, but is not radical at all. if you mean restructure, because what was truly radical was nationalizing our financial services industry as happened in 2008. two-thirds of the assets in the banking industry were nationalized in 2008 and 2009. to me that is a very radical outcome. especially if you live in texas

and you really think about free- market capitalism. so, the issue is, what do we do about it? i have been criticized in another sense that the actions i recommended showed that i have not proper the consequences. they are good and bad consequences. if got costs and benefits. but we sometimes seem to forget that inaction also has consequences. it also has unintended consequences and intended consequences. it also was costs and benefits. the rationale behind buy recommendation is that inaction may be worse than the action of breaking up. the status quo perpetuates this but we have any limited competition that we have. in the financial-services industry. so whose job is it to find out the scheme here? if we get down to basics, it is

congress's job. because they represent the taxpayer. thinking has been around for several hundred years. under the united states constitution the ability to create money as part of the united states prompted the united states constitution. forever 200 years a lot of that has been outsourced to the private-sector, today least 90% of our money supply so to speak is produced by the commercial banking industry. i am not even mentioning some of the other parts of the financial services industry. for the last nearly 100 years, the fed has been involved and not outsourcing. and the lender of last resort is there to support the banking industry. and for the last 75 plus years we have the fdic providing another part of the federal safety net, to make the banking industry the commercial banking industry much more robust. so to me this is all about the safety net.

but it is also time to roll back the safety net, because when we think about the money supply, what we used to pay for things, that is where we have the safety net here. it also need to recognize the the united states dollar is holding be fed currency of the world. many of our transactions are in dollar. >> you have one minute. >> what i said earlier is that there's no good solution to the breakup. there are only pat solutions and worse solutions. it is our job to pick it least worst solution. part of what i am recommending that we do just that. and as consistent with another set of proposals that have come out in the last several months from england, from the european commission from other people here in united states. i will add there and make my other point later.

thank you. >> thank you. the floor is yours. you suggest breaking up the banks could make them too small to succeed. >> thank you. i will go next. peter and i are seated together. we all have our own opinions. i do not know if we will agree on everything here. i understand the appeal of breaking up large banks. and i know that it is striking in a town and country that is so divided on party lines that this has bipartisan support. i think there's no way to avoid that. my concern is that there are costs to the economy into society, to families and businesses. and the cost of breaking up the small banks outweighs the benefits. the benefits are improved stability and improved safety. so i understand there could be some benefits there. ballots in the cost, -- but i

was in the cost of foregone activity, that forgone activity outweighs the potential benefit. at the same time, i think are better ways to deal with this. there are better policy approaches to deal with some of these things raised by banks. so what to do and what not to do the other. there are better policy approaches. and here they are. i think it would be better to say, what can we do before the next crisis. and what will we do during the next crisis. and before to implement the better capital standards and quality requirements, including dodd frank and basel and other approaches to ensure that banks, including the largest ones -- problems and future crisis. and to elevate liquidation authority during crisies to

ensure that every institution including the largest ones can fail without posing a risk to a financial system. and to the economy. and until one of them fails we will not know that their too big to fail. we will not know until the next crisis. but if something like this works, i think that is a better approach. wicked keep the benefits of large financial institutions -- we could keep the benefits of a large financial institutions and keep too big to fail. there are benefits to diversity and our financial system that we want. there are important roles for large and small banks. benefits to society and to the economy. but these benefits -- benefits of scope, benefits of scale. some transactions realistically will only be performed by large, multinational financial

organizations. and of those financial institutions will exist in canada, that is for sure. and i think there will be losses to the west. -- to the united states. my second set of observations is that, i sometimes feel like the debate over too big to fail misses out on key changes that have taken place. and in the wake of the dodd frank legislation. so what i mentioned is in liquidation authority, we know it is going to be orderly. that is about all we know. i recently reread some of the speeches of the fdic. i think they are still figuring it out. it is hard to know what it will do. by do you think two things. there's not by to be in other tarp. -- there is not going to be a another tarp.

i think the bond holders or other counterparties of a large institution that fails will face a her cut. and as a huge difference in this situation. large institutions out a funding advantage because of the funding expectation. aig about 100 cents on the dollar. that should work backwards and affect funding costs before hand. two, banks pay insurance premiums on their non-deposit liabilities. liabilities are not insured by the fdic. there's a sense in which we are penalizing large banks or the way they find themselves. mainly large banks. and is really the same thing. date face nonlinear capital

requirements. that is appropriate. but we need a change your all three of these things go on the same direction of a lowering the playing field. -- oracle leveling the playing field. i think it is important to keep these three things in mind. but me finish quickly with again two things. one is recapping the advantages of large banks. and there will be -- of giving these up. the ability to undertake transactions. they are not easily replaced. with a cap on large banks -- they proactively break up large banks. we should see some financial activity shift to smaller banks, and some to less regulated institutions and shadow banking systems.

some to foreign banks. but the activity will still take place, just take place a different way and in a way that is less safe port united states military at why do not i stop there. >> thank you, phil. >> rebuttal. >> thank you. i have three questions ballot like to put through you. the first question -- how is jpmorgan chase really -- how big is jpmorgan chase really? any earnings report, and this is in the mouth and institute report, there's about 2.2 trillion dollars in total assets. and there conventionally rank somewhere between #five and #kemp worldwide in terms of banking assets. -- #5 and #10 worldwide in terms of banking assets.

the european banks are measured under a different accounting standard that allows much less of derivatives. if you have a big derivatives book like j.p. morgan chase and bank of america, this makes a huge difference in the balance sheet. jpmorgan chase converted to fira is about 3.4 or 4 trillion dollars total assets. from a regulatory damage control point of view, i think they have a lot of appeal in terms of downside damage. in any case, we should compare apples to apples and oranges with oranges. it jpmorgan chase is the largest bank in the world by a long way.

the second point -- jamie dimon nicollette to make when he presents his quarterly earnings, i think he should be proud. the second question -- and a sensible proposal by the george w. bush to administration. the question is, where is the across the border resolution now authority? where is the agreement between united states and other important financial sectors like the u.k. on how asset and liability, all of the major global banks like j.p. morgan chase, how would that be handled in the event? jpmorgan chase and the other big complex financial institutions in this country have between

1500 and 2500 subsidiaries. they are intensely across the border and a complex way. i understand the resolution plan. but i am a member of the fdic systemic resolution advisory committee. and i fully support the fdic efforts to this direction. i pushed them to reach some sort of an agreement. among other things, i am a former chief economist of the international monetary fund. and i can tell you the imf is no secret. there were pushing the europeans for 15 years to reach an agreement on across the border resolution. they are not about to do it. so i am in favor of this. i do not think you will see a cross border agreement any time in your professional lifetime. the question is this, too in this room is really in favor of

subsidies for large banks? -- who in this room is really in favor of subsidies for large banks? the day of all people do not recognize and acknowledge and talk about the fact that too big to fail banks backed by the treasury, backed by the federal reserve, because you wouldn't allow them to fail, these banks received a funding advantage. somewhere between 25 and 75 basis points. that is a huge funding advantage in today's market. the american taxpayer -- there subsidizing an encouraging excessive risk-taking. as richard fisher has argued.

why? do you need it? goldman sachs was a $200 billion. there were a world-class bank. can go back there again. no one is suggesting we return to banks owning one branch in one state, push the banks backed down under $250 billion total assets and you get a better economy. thank you. >> thank you. >> peter. >> thank you. i wrote a piece a month or so ago about this question. but not really taking a position. because i thought that there was a deficiency in the debate. we have a lot of people talking about breaking up the big banks. but very few people actually looking at the cost and the benefits of doing that.

and i am sitting here waiting for someone to explain what the cost and benefits might be and maybe i missed something but i haven't really heard it, the idea of breaking up the big banks, it would have profound consequences for the united states. these are gigantic institutions that employ a lot of people. if we broke up there with employ fewer people. many of the things that they could do broken up they could not do -- many of the things they do now they could not to broken up. as a result, many people will have to find jobs elsewhere. united states companies at operator around the world would have to find new banking relationships. millions of banking relationships would have to be renegotiated. .e lines of credit

most big companies have with banks would have to be renegotiated or terminated. you cannot have all these lines of credits with this. and oddly enough, i have not heard anyone estimate with any profound accuracy what size a bank should be, if it is broken up, in order to be not too big to fail. i just heard the last speaker talk about $250 billion. do we believe that if we broke all of the united states banks into banks that are less than $250 billion, but failure of such an institution would not cause a financial crisis? the underlying complicit idea here -- complicit idea here is

that if a bank is smaller it would save us from another financial crisis that that would make it too big to fail, not too big to fail. it is not at all clear from everything we now, since the dodd frank act itself -- banks of $50 million is too big to fail and must be regulated by the fed. so my problem with these ideas is not that i am for or against large banks, i recognize surely that they have various financial advantages that come with being considered too big to fail, obviously they do and i would like to eliminate those. but if that is the problem they are worried about, there are much easier ways to solve that problem than to go through the great disruption of our economy that will occur if we propose to

break them up in order to solve that relatively easy problem to solve. for example, we could increase capital requirements. we could increase deposit insurance premiums. we could do a lot of things that extract from these institutions, the value that they get out of being considered too big to fail. but yet, what we have are many people walking around saying, let us break up these large institutions without actually giving any hint about what the consequences would be for the united states economy if we actually did so. so i would have to say that i am agnostic on this issue. but if the only thing that we are worried about here is that we have a certain financial advantages which are undeniable, that isn't a good enough reason

to create all of the destruction we would be creating by asking the government for allowing the government arbitrarily to break them up into smaller size. which, even then, we do not know would be so small that it would not cause a financial crisis, panic, if such an institution failed. i will leave it there. >> party, back to you for 3 minutes. >> i think about the benefits and cost of the various proposals out there. i start with the cost of the status quo. if we maintain the status quo, which can have another financial crisis sometime down the road it will come sooner rather than later. that is what the cost of doing nothing is want to do. we will have a crisis sooner. it will be bigger than the last crisis. if i were to stop into a

constellation of the cost of the last crisis we are still going through, -- a calculation of the cost of the last crisis, it would be between $10 trillion and $15 trillion. that is what it is. it is not insignificant. i think the next one would be even bigger. and i think about cost and benefits, a look at the status quo, the cost of the status quo, and that trumps the benefits of keeping the big banks' big and too big to fail. if they are were really so beneficial, i would think that the market would price them in a different way. on the look of the praise versus the ratio of the five largest and most complex banks in the united states, it is about 0.06 -- 0.6. will the ratio of the less complex but fairly large banks,

the ratio is 1.3. my take away from that is the suppose it economy's of scale and scope, the market is telling us they are not there and we are dealing with something that is too complex to praise. the market cannot praise it. i am not so sure where the benefits are. -- the market cannot christ it. the markets cannoth price it. the need to prepare a mop and two entities that are viable, profitable and can attract profit. we saw with. gust a century ago, 75 years ago, three years ago suggest that the government has no magic formula. i would rather see the

direction -- what the owners figure out how to make it work best. altman, when there's a break up, you have to of profitable entities that can create capital. i will leave it there. that is the last word for right now. back to you. >> a couple quick thoughts. i think he has identified that the subsidy the key issue. do the funders of large banks have a subsidy? and will they be bailed out in the next crisis? i think a.i.g. is the test case. everyone has identified that is the most frustrating aspect of the various efforts to save the economy. the assets of the firm were collateralized against each other. there was no time to impose a hair cut on the founders of a.i.g..

every insurance regulator in every country and every county would have been obligated to destroy the firm. in the firm would have collapsed among itself. there's nothing else it can be done. the firm has exited in a different way. smaller. very different. and maybe that is a good outcome. it is certainly a frustrating one. i think now there is an authority to do it differently. going and, everyone understands that the liquidation of party will be invoked. i cannot tell you how the hair cut will be in post, but it will be imposed -- i cannot tell you how the hair cut will be imposed, but it will be imposed. people say it could of saved lehman, just force the debt holders to become equity

holders. so that is another possibility. one other thought, sparked by hardy, i agree that market development is key. the firm picks up organically, that is the market. i do see the economy as scale and scope. so in a sense is all of our faults for arguing about it. that is hurting the firms. that is a joke. [laughter] sort of a joke. if that is what happens, i am all for that. i suspect that will not happen to every firm. i think the efforts -- every firm, which just kneecap firm as a percentage of gdp -- i think

that is decided. >> thank you. back to you simon. >> the issue of cross border resolution, i will get to that later. it would protect creditors in full if they planned to our fund operating companies. the issue of debt equity conversions -- i am afraid we are not out of the woods yet. i might have missed it before. i have never heard peter say there's an undeniable advantage to being a very large bank. perhaps he can correct me on that. i think that is a huge and very important statement and a very accurate statement. what about the cost and benefit as well? the six largest bank holding companies currently of assets just over 60% of gdp.

before the crisis there were the 66-68% range. now, what is the benefit that we have in terms of productivity or anything else from that growth and bank's size over the past 15-20 years? nothing. nothing we can measure. what are the economies of scale and scope over $100 billion in total assets? again, no one has been able to find any such return. if you write a paper i am sure you could win the nobel prize in the book of the year award. 0ccfo's. to see a

i asked if they need jpmorgan to be at 4 trillion dollars in assets. and they answered no. not at this sale. they want a stable financial system. that is very important. that is not what they had. but they do not need one bank that can provide all of that to all of their subsidiaries across their markets. but not want that. that would put too much power in the hands of jamie dimon. making the banks more is relatively straightforward. rb said the management -if you s in the interest of shareholders -- you have an increase in shareholder value, not a decrease from the

transformation. >> and the last word for the moment. >> i have been writing careers about the dangers of too big to fail and the fact that improvised financial advantages -- not only to the banks, but also to the non-banking institutions that are about to be declared to be too big to fail by the financial stability oversight council, which is extending the whole idea of too big to fail beyond the banking industry. but let me go back to something that harvey said, i was astonished to hear that some how large banks caused the financial crisis. now, my own to deal about what caused the financial crisis has been expressed a lot. although i am sure something has not read. but i believe it was the housing policies of the united states government. whether you believe that or not, we know that it was caused by a meltdown in the housing markets,

starting at about late 2006, 2007 into 2008. but i am puzzled why anyone could say that the mere fact that banks are large is something that will cause the next financial crisis. i do not see it. i cannot understand it. i cannot see the relationship between what occurred in to douse an aide and the size of the banks involved. in fact, the banks that were involved in 2008 in some way or another did not fail. they suffered losses, but the banks that failed, wachovia was acquired, wamu was acquired. there was no great crisis. there were the victims of whatever forces caused the crisis, but the mere fact of their size did not cause the

crisis. now i am in agreement with the fact that a big bank is considered too big to fail, it has financial advantages. as i said, those can be addressed without going through the disruption to our economy that would be entailed by breaking these institutions up. the analogy is to what happened earlier in the 20th-century, for example, some people make an analogy to standard oil. weeper. standard oil and that was really great. standard oil had no competitors. that was the problem. banks have plenty of competitors. not just in the banking industry but in the financial industry in general. and not only not states but from abroad. there is no analogy there. and as far as i am concerned, we would be causing a huge problem for our economy without getting

any significant benefits, unless someone can show me the real benefit coming from this. >> thank you, each of you. i think our vice-presidential candidates could take a few cues from in not talking over each other and staying on time. another is the opportunity to talk over one another and ask questions, and open it up. simon, would you like to get it started. >> i would like to go back to capitol. we can and should raise capital requirements. but to freeze its higher capital requirements? to fight against them? they argued strenuously on behalf of the biggest banks and we should not increase capital requirements. if we do it could derail the

economy. at a that is incorrect. there's no question that the largest banks are very powerful politically and they resist higher capital requirements. higher than basel three. they resisted even when we got in basel 3. >> can i respond to that? >> i guess what i would like to say is that, i am not necessarily saying higher capital requirements. i said that is one way might do it. but in some way, extract from them the benefits that they are getting from being considered too big to fail. so, i am agnostic about how do i do it. but it makes no sense to me, it we think they are getting financial benefits out of being too big to fail, to break them up to create all of the destruction we will be creating by doing that. and even when we finish up that

process, creating to wonder $50 billion institutions, would we be able to say they are not getting any financial benefits from being the size of $250 billion? i think there would still be considered by the market too big to fail. >> would you accept a tax on leverage? as a way to remove the advantage? >> i would have to look at that. i do not think these banks are the highly leveraged institutions. banks are not usually highly leveraged. >> was back up for a second. we talked about too big to fail and size. maybe size is a proxy for other things including complexity and inter-connected mess. --interconnectedness.

you talked about the need for scale to compete in global markets amongst other unconstrained institutions. but do we care, is there a difference between the $200 billion dollar organization versus a $100 billion organization with a large derivatives book and has a lot of counterparty transactions? is size a positive? >> and think we are confusing size with focus. with specialization. somebody will be able to make a profit at it. if just because it is not being performed under one roof does not mean the functions are going to go away or that the jobs are going to be going away. i am surprised to see you arguing on behalf of jobs. i would not be saying that free trade is going to create jobs.

we are going to of free trade in banking. when to let the markets determine how many jobs are going to be and where they are going to be. not create reverse incentives. i suspect there are some activities where you need size. >> or the safety net has evolved, grown -- i agree. keeps getting spread further and further. who will determine the size of the safety net? congress or the bankers to keep growing their business? i think that is where congress

has to step back. >> i agree. it is important to be able to impose her cuts. if certain funding is not stable. someone mentioned wachovia. not so much. i want to make one slightly on a related point. we somewhat mischaracterized the study. it is sort of an ivory tower view. the industry comes back and says the opposite, the world will end. it is somewhere in the metal. -- in the middle. that is appropriate and expected. >> i have this sense of deja vu

all over again. starting at about 1981, i was part of the treasury group that argued that we could separate banking activities, that is those that are insured deposit taking from other kinds of transactions such as securit ies, and we proposed such a thing in 1981. it was adopted in 1999. 18 years later. now people are dissatisfied with that. but in fact, what the purpose was a bear, was to separate from deposit taking, other kinds of activities that are important in our financial system. it turns out that since 1981, and this was an idea of donna who was the secretary at the time, the securities industry has swamped the industry.

they have produced about 1.5 trillion dollars in actual lending to the real economy. i am not talking about mortgages and i am not talking about other kinds of consumer finance. but two companies, the banking industry has created about 1.5 trillion dollars in support. the securities industry, through securities offerings and bond offerings has produced over $15 trillion during that time period. things are now -- deposit taking institutions, we have only talk about banks, we are missing of deposit taking institutions with their holding companies and the holding company subsidiaries. if we talk to just about the lending activities of a deposit taking insured institutions,

they are increasingly lending on a real-estate because they did not have competition there. the competition for other kinds of lending to companies that are operating in the back of states and around the world is coming from the securities industry. which is much more efficient than deposit banking. so, they are increasingly tied to the real-estate business. what we have to worry about is how do we make it possible for these institutions that are out competing now to continue to function profitably. we have not really addressed this question so far. but it is obvious that we have to start thinking about allowing banks, or banking organizations to get further into the securities industry.

that is where the profits are. that is where finance is going. and allows the banks themselves and deposit taking institutions to shrink somewhat. because they are right to have less business in the future. >> the problem with that vision is that four or five of our largest holding organizations -- they are running big derivative of books. they have an advantage in that space. because of the subsidy, not because of the market. and the book a lot of those derivatives and the fdic insured banks. to transfer derivative exposure into the banks. if the goal of this is to boost the profitability of the bank, i think at this point to end badly.

and we can argue about the relative importance of leverage. i think that if you are getting insurance from the government in any form, you should pay for it. not just including fannie mae and freddie mac, it includes these large banks that are backed by the government. is the same subsidy structure that you object to adamantly, repeatedly, effectively and many other instances. why do not see the subsidies for the big banks in the same way you see frannie and freddie? >> is it a subsidy of a -- that comes from deposit insurance, or a subsidy that comes from size? it is the subsidy coming from size, i think that is growing to be extracted in some way. >> i would go further.

i would say that it is an irony. the subsidy is on the deposit, and the hair cut is imposed, there is no subsidy. i think it is the reverse of what you are doing. that is why i disagree. >> deal say -- what is your position on that? >> i do not know the data. i would not be surprised they have a funding advantage. based on the belief of those funders that they will get a bailout going forward as they did in the past, i cannot think they well. i think anyone that looks at the statute will say, i do not know how it will happen. there's not another part coming. >> there's going to be a bailout. that is what peter is saying. >> i have never heard a promise of liquidation.

chapter 7 or something a little bit less. chapter 11. but me ask the question if these large institutions were told they had to have a one sentence disclosure, and other bank customers your bank deposits are insured up to this, every other customer for every other service that is not and is banking service at this time, yes i understand, there's no government safety net over my activities with this business. the company has to issue that the customer and the customer has to sign that. one sentence, clear plain english. do we believe that everything would remain as is? >> i believe things will change and change drastically. i understand there is no bailout. non. i do not think that solves the problem. because the problem with the bailouts -- the problem of tbt, too big to fail , that comes

from what people expect the government to do. and so what the customer expects is prevalent really. there's nothing the customer can do to prevent regulators from being afraid that if a bank fails there will be a panic. so as a result, we have this problem of people not believing that ola will work. i do not believe that well. for other reasons. but in any event, the market does not believe it will work. that is why there is this discrepancy between what banks, banking organizations and the holding company pays for its funds compared to what smaller institutions pay. and incidentally, that is the key point. we do not know what the benefit is. but we know what it is in relation to.

and the relation is to the competitor's of these institutions on the banking level that have to pay much more for their money, which is very unhealthy for a financial system. it will eventually produce consolidation and crony capitalism and other things that we are trying to evolve. >> let me pose this question. but the user for dollar trillion that is 60 jpmorgan's to break up along those lines. under what basis, if there is a case to be made for breaking up the bank of, you have the report basically saying the report should be separating wholesale and retail activities. another report says to separate deposit-taking functions from risk-taking function. it's back to the issue of how to

respond to the size and if size is irrelevant consideration or if there is another basis for doing this. >> i do not think peter and harvey are that far apart on these issues. >> i have noticed. >> you need a credible commitment. you need everyone to believe that when things are failing, his colleagues will say that you are on your own, do what ever. >> i think that's right. >> you need a credible commitment. many of these proposals are put forward including organizational authority may not be credible. i think cross-border is the problem. on the issue of size, there is no panacea. i will not say that i have never heard him say this one thing solves all problems.

peter, do you get benefits for society for the non-financial sector, jobs, for having the global mega-banks upgrading this? because you were taking on this additional danger. can we reduce or eliminate the chances of the financial crisis? whoever says that, they are deceiving you. can we reduce the risk that comes from the very large ability to mismanage of these risks? there are 279,000 people working for jpmorgan chase at the end of the third quarter. hsbc got burned on money laundering. barclays messed up on libor. they say they did not know what was going on. well, these guys were in london

and that's a long way from zurich. whatever the story, it takes back off of the table and it reduces this down to a much more reasonable level. the idea that you should be able to fail, that is what he is saying. it's incredibly unfair and unreasonable to not have a situation where the small guys are on their own and the big guys are protected getting the subsidy. they will just get bigger and the problem will become worse. >> i want to go back to the question of too big to fail because i think it's extremely important to understand why it's not a good idea to break up the big banks unless we get some real benefit for it. i still have not understood the benefit of this. the benefits, if i understand you correctly, is they will

reduce the risk of getting themselves in trouble. we reduce their complexity, for example, but it is that enough of a reason to create the kind of disruption and the precedent that it would create if we allow the government to simply say on day one that you will all have to break up into 45 much smaller institutions? imagine what that would do to our economy. yet, even after we have done that, we do not know that each of those institutions will not be so large that it would be considered to be too big to fail by the market and as a result it would also have the financial advantages over the smaller institutions. we do not get anything for this idea. if i believed what harvey said, that these large banks will be responsible for another financial crisis, then it would be worth it.

nothing is worth having and other financial crisis. we have to remember we have not had anything like this since 1907 and we are unlikely to have another such financial crisis for another 100 years. why should we restructure our entire economy right now with all the risks and losses simply to avoid something that may or may not happen within the next 100 years? >> the structure is different than there are two preconditions for a crisis. one is very big institutions and the other is an absence of market discipline. i'm sorry. i rest my case on that. >> i know simon has to leave a little bit early, so maybe the camera could just tighten in as he slips away but we will continue for a few minutes before opening up for q&a. before you leave, i want to put you on the spot because there have not really heard a response on resolution

authority. are you confidence that any of that can avoid polarization whether it is automobile or any other sector of the economy? >> i think there are two points, too big to manage and cross- border. hsbc is the worst example. it is where i become the closest to agreeing with you. their reaction was, mexico? we cannot manage that. that is not adequate. they were going on the wrong direction. too big to manage is just too big. all of us are living in an example of how this can be managed. this is the former auditorium of a law firm which just went down. the subs were a bunch of prima

donna lawyers managed to work it out. i think contracts can be worked out. i agree. i agree in part, but i think you're overstating the case, simon. it would be difficult across borders to work out a contractual arrangement. when aig is the parents, then how do you impose appropriate oversight on all of the little bits of aig all over the world? every country has contracts that involves foreign regulators and there's definitely a degree of difficulty. i still believe it can be worked out, but it's a challenge. >> there is a run by the regulators in every jurisdiction to grab assets. there is a final dispute on the collapse of lehman on the british side in the american side four years after. that remains unless he can get

the british, the germans, the french -- >> come on. that's the difference between lehman brothers and aig. the government, for better or worse, put in the resources to stop it. we have the advantage of putting in the resources into aig, but then they impose their hair cut after the fact. >> i know you have to leave, simon. i was going to give everyone time to close. you have the option to use that now if you would like. >> i would like to thank the organizers of this event. and i would like to thank phil, peter, and harvey. we need politicians to engage with us also. it's a very important topic and it has not been fully resolved by the are aftermath of the crisis or by dodd-frank. we have to keep pushing this

forward. the key issue i would keep emphasizing is subsidies. richard fisher repeated this very clearly. if you allow this very big sector, the financial sector has the special value to any economy, but if you allow some players in that sector to have special rights and subsidies, it is dangerous and it distorts. it messes up monetary policy and that's a point that harvey has been making for a long time. >> we should sit monetary policy for another discussion. thank you. i would like to open it up to the floor now for any questions. yes, sir? if you would not mind introducing yourself? we have a microphone as well right behind you. >> i'm sorry. >> and josh, can you hand that

around? please. >> i'm ted with george washington university. it seems to me that bank risk and systemic bank risk is really driven by the volatility in the financial-economic environment, real estate prices, credit quality in portfolios, sectors and regions concentration levels, and capital loss. large banks have the benefit of greater diversification. if you model this, they are more stable than smaller banks that are more highly concentrated facing the same financial economic environment risk which have the same capital levels and credit quality. it does not seem to me that breaking up banks would necessarily cause the system to be more stable. you may, in fact, end up with more banks that are more highly

concentrated, less diversified, and subject to systemic failures in larger numbers of banks. if you look at what has happened most recently, we probably failed 450-500 banks and most of them have been highly concentrated in a sector standpoint rather than being more broadly diversified. i'm interested in the comments on the impact on stability of breaking the big banks up into smaller banks and whether or not if you have many smaller banks failing if you do not still have a systemic crisis in terms of contractions in lending and other types of issues. that's really my comment and question. >> let me begin to address that, if i can. banking is a risky business. banks will continue to fail the

old-fashioned way. they will make bad loans. i do not think anyone would suggest we go back to the banking days of the 1970's where banks are only able to have one office in one county and therefore had highly concentrated lending in just a few industries. the question of failure has failed to a knowledge that back in 2008-2009, two of the largest banks got extraordinary government assistance. and i do mean extraordinary. they were never listed as failures. in my way of thinking about failures, they failed. top management was changed, the board of directors were changed, the stockholders went down to $1-$2 per share. that's close enough to failure at least for me if the

government has to come in. we have had very large banks fail and the fdic does not come in and close them down on friday afternoon and reopen them under renewed name on monday morning. large banks have failed than they are no less risky than the small banks. i think we have witnessed that. >> it is the federal reserve that expedited the bank holding status. >> and not talking about goldman. i'm talking about one of the largest bank holding companies, i will not mention names, but the stock trading was to be selected among the first four letters of the alphabet. >> i gather from reading recent books that there is a vigorous debate within the administration after a left about just this.

there is a difference between this and wamu is what happened with bondholders. to me, that's the question. did the bank really fail? then the uninsured depositors including bank holders and bond holders take a haircut -- including bondholders take a hair cut. in response to the question, when we do the tarp and every night we have a stack of paper like this and go around to each bank, we saw a lot of banks with cre concentrations like florida. the problem this identifies as a real one. but i cannot remember if it is tolstoy or dust penske, but every unhappy family is unhappy.

-- or dostoyevsky, but every unhappy family is unhappy. >> next question. >> i'm a senior fellow here at milken as well as a professor at georgetown. when you look at the cross- border issue, that's really significant. when you look at the efforts to really think through exactly how that would work, there has been very little movement. in the absence of a cross-border resolution, any kind of living will does not make sense because every national regulatory authority will want to grab the assets of local creditors. i'm curious to know, however, what you think about what breaking up the bank's mean. it would you consider, like in

the u.k., effectively breaking up the banks and some of the onerous leverage requirements required by a spinoff. is that a break up? secondly, towards the larger macro economic problem, to the extent to which you think about these either middle of the way regulatory programs as a stepping stone to an eventual break up, so you could imagine some kind of basel-esque world where you say what we're going to try to do is to reinvent trading assets.

if we see some kind of instability, what we're going to do is. to that second step trackless been off those operations in an effort to this incentivize on the part of the larger banks overly speculative behavior, a particularly because the larger economy keels and use that as a part of time horizon for evaluating the effectiveness of observing those assets and developing more metrics for assessing the potential for what subsidies are available for the larger -- >> you directed that to fill up, but i would also like harvey and peter to jump in that as well -- you direct that question to phillip. >> structure would make sense, to deal with some of the subsidy cost issues of the overall has

unconcerned. -- hazard concerns. >> is this an offer you can refuse? here is your capital requirements and on and on, that's a forced break up. at some point, that's tantamount to a break up. the people who misunderstood the dallas fed before -- >> i will take the blame. >> we are both to blame. i think there is more agreement than initially thought at first. if, organically, one or more firms decides to split up and maximize shareholder value, that's fine. if that happens, there's definitely a spectrum between breaking up organically and, as you mentioned, it crosses that

line and it has the cost to society. >> thank you for your question. i think you made my argument that i have been making. if you change the rules of the game come you change the incentives, put more competition in, the market will naturally evolved in a way that some of the things that seemed right under one roof will no longer seem right under the group particularly if you add the extra ingredient that i mentioned before where every counter party has to sign off and they understand that in doing business that there is no subsidy, no safety net, and they need to get that through their head and they should shop around a heck of a lot more carefully. it will put the market back in disciplined. and it will put market discipline back in market capitalism. it will not happen instantaneously. whether that is a move in the

right direction, but it will need a shot from above saying congress will no longer subsidize these things. since i am in this town called washington, d.c., the, the fiscal cliff, let me say that won substantial reason why we have this fiscal cliff is the cost of the financial crisis that we are still dealing with and distressed revenues that have led to more expenditures on the part of government because of past promises that may have otherwise been there. i don't want to say the bank providing our country, but as i think about my children and grandchildren, i think about too big to fail as a major part of the problem that, if not addressed, what they're going to face is more dismal. >> there will be challenges and of dealing with the fiscal cliff before adding in too big to fail in to that.

>> too big to fail is part of the issue. that got us here. >> i'm not an expert, but i must say that i still have problems understanding why it is beneficial to break up the banks when the problem we are looking at is either the potential for another financial crisis, which was not caused by the banks, or the fact that they have advantages, financial advantages come over their competitors because of their size which will, as far as i can tell, remain because a bank that is $250 billion will still be regarded by people as too big to fail because it is that the decision of the investor for the creditor. it is a decision of the

regulator. regulators are notoriously afraid to allow these kind of disruptions to occur. congress can say whatever it wants about whether you will protect the creditors. it did that with fannie mae and freddie mac if you read the language. it says these securities are not securities of united states. the full faith and credit of the united states though not stand behind them. they fail than they stood behind those securities. there are many ways for this to be resolved by having some kind of statement by anyone, but it is a question of the regulatory policies and what they are likely to be. i'm still puzzled by all the concern about this when the financial stability oversight council, in the next few weeks, is going to declare that certain insurance companies and

finance companies are, in effect, too big to fail. this will extend to a lot of other industries the problems that we are wrestling with right now and nobody is raising their voice about that except me. very seriouss a problem. too big to fail is very serious and much more serious in the banking industry than everywhere else, but if the remedy for it is to break up the banks to cause all that destruction, unless we can show that the large banks caused the financial crisis, which do not see at all, unless we can show that, then the cost and benefits do not match up. >> peter, i will count that as your one minute). we will -- your one minute close.

what is your key take away? >> jummy, we will not know with too big to fail is passed on till someone fails. obviously, i hope it will not happen but it will sometime in the future. in the meantime, we should improve the safety and soundness before that happens and put in a system to handle the next crisis yet better than we did the last. >> harvey. you get the last word. >> we want our bankruptcy system to work. we want our receiverships' system to work. we need to have institutions of a size that our receivership, be it the fdic, deal liquidation authority, bankruptcy courts, to deal with this on a timely basis. we are four years and one month away from the lehman's decline

in bankruptcy. if they declare bankruptcy simultaneously that week in september 2008, there's no way we could have dealt with it. that would have been the opening "too bigorkin's book to fail." jamie dimon was worried about all five firms he was dealing with declaring bankruptcy. fortunately only one of them did. two became bank holding companies and aig went bankrupt a few days later. no one could have dealt with that edge of the cliff and no one was trained to do it. we will be facing a bigger cliff if we leave the status quo on changed. >> thank you, harvey. we have come to the end of our allotted time.

in some respects, we actually screened "too big to fail" in this room with a lot of congressional officials, current and former. we need to continue these kinds of discussions and dialogue, and tomorrowe will do so t with capitol hill staff to better inform their processes. there are a lot of complexities to this issue and rhetorical flourishes. there was a fair amount of common ground, much more so than is typically given credit for. i want to invite you to join us for a reception afterwards. thank you all for taking the time to join us. i hope he will do so again in the future with center for financial market programs here at the of milken institute. -- here at the milken institute.

join me in thanking simon johnson, harvey rosenblum, phillip swagel, and pete wallison. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] up, 9.5 hours away from the second of three presidential debates. we are live now in the exhibition center in the debate auditorium where tonight's town hall debate will take place. 80 participants and "the new york times" says they will arrive to begin cards as a patient rehearsal. they will have prepared questions but will not use them during the session to preserve secrecy. lots of going on with

preparation outside of the hall as well. we are in the registration area in the spin alley area where people will come after the debate to talk about who they think one or lost.

>> we are inside the spin alley area. on c-span.org's debate hub, you'll see this live starting at 10:30 p.m. eastern. our preview program is at 7:00. the debate itself will be moderated by candy crowley at 9. , we will have your calls, emails, and tweets live. we will be opening up facebook to ask you what you would ask the presidential candidates if you had the chance in the town hall meeting. lisa asks, what question would you like answered?

how do you plan to get americans back to work? have you plan to defend our nation without getting dragged into another war? your questions on facebook.com/cspan. the cato institute hosting a discussion on the ideological makeup of the tea party and we will talk about a study saying most are united on economic issues but split on social issues live on c-span beginning at 4:00 p.m. eastern. >> i watched c-span because when i want to get the news without pundits adding their point of view, i can get the original script from a person. i watch c-span, c-span2, and c-

span3. i love "booktv." i also like the civil war series. sometimes i want to watch the senate, so i watch those, too. >> sandra parker watches c- span. created by america's cable companies in 1979 and offered as a public service. republican linda mcmahon and chris murphy debated in this is courtesy of fox in connecticut and this debate is about 50 minutes. >> good evening. tonight representing the connecticut u.s. senate debate

between the republican candidates linda mcmahon and chris murphy. welcome. we look forward to hearing more about your ideas and maybe learning some new things. this is going to cover a wide range of topics from the economy to foreign economy. joining me are three panelists. first, my co-hosts. >> there will be no opening statements. that will weaken the right to the questions and answers. there will be a 62nd closing statement. -- that way we can get right to the questions and answers. there will be a 60 second closing statement. the candidates will each have 20 seconds to answer and then a reach for rebuttal. we do have timekeepers. the league of women voters will signal when the time is up.

they will determine which candidate will start the debate. mr. murphy will go first in answering the first question. mr. murphy will go first we get to the closing statements. these questions have not been shared. there were chosen by the hartford courant. the audience here has promised to remain quiet and attentive up with no cheering or jeering and no applause or outburst set any kind during this debate. that takes more time away from learning something about these candidates. let's begin. our first topic is the nation's economy. laurie perez will be asking the first. mr. murphy. >> you talked a lot about

protecting american manufacturing jobs. your opponent has criticized you for not having a comprehensive job plan. do you? tell us about it. >> thank you to all of our sponsors for being here. thank you to ucon. this is special. we met each other at the law school. that is as dramatic as it gets for kathy and i. -- this is as romantic as it gets nowadays. let's talk about this. protecting manufacturing is critical to protecting this stage. i do have a jobs plan. linda mcmahon to stop saying i don't. manufacturing is the heart of it.

we should stop sending our taxpayer dollars overseas and use them to find jobs here. i think we could create 600,000 manufacturing jobs. >> you have talked quite a bit about your track record of creating jobs as a business owner. as a u.s. venture, how would you create jobs? jazzing u.s. senator? >> i do have a six point plan. he does not have a plan. it cuts taxes on businesses so they're competitive. it rolls back regulations. it cut spending 1%. it empowers our work force. it calls for a comprehensive

leadership policy that will continue to drill for natural gas while we develop our renewable. i do have a, 3 pence live -- have a comprehensive 6 point plan. aleksei of 30 seconds for rebuttal. >> this is made up. i have a jobs record. this idea to try to trivialize it, talk to the workers who are going to be put out of work because our government is shifting jobs overseas. it is their livelihood. we should take seriously the premise that we send these to washington they should be used to create jobs here. >> 30 seconds. >> i am not sure how this is an integral part of your jobs plan. unemployment is on the rise. this is not part of an active jobs plan.

chris keating will ask that question first. these are not things that are part of an active jobs plan that will put people back to work. >> thank you. our next topic deals with something we all worry about, taxes. chris will ask that question first. >> there is consensus that extending the bush tax cut is a good idea. there is sharp disagreement about whether the what they should benefit as well. -- whether the wealthy should benefit. how will you keep taxes lower on

the wealthiest americans and keep the jobs as a whole? >> i do call for tax cuts for the middle class. i would keep all of the other tax brackets in place. there would be no gain or loss for others. even president obama in 2010 said we should not increase taxes will we are in a recession. we are barely out of a recession. i do not think now is the time to raise taxes. my plan does call for a tax cut for the middle class. the only one on the stage as called for a tax cut from the middle class. we need to make sure that if our economy starts to turn around and we are improving, i would recommend that we pay more taxes. i would be willing to pay more taxes as long as there's were paid to pay down the debts. >> could raising taxes on the wealthy prove to be a disincentive for investment and

growth? >> the centerpiece of mcmahon's plan is an extension of the bush tax cut on the wealthy. we know that tax cuts for the rich do not work. we tried it during the bush administration. if they worked, we would not be in the situation where we are today. if we had $7 million to allocate some out and our economy, it makes sense to give it to linda mcmahon in a new tax cut above and beyond current law or put it in the hands of middle-class families so it makes sense to give her another $7 million tax cut. does it make sense to get for another $7 million tax cut or try to put construction workers back on the job? there is a difference. we have to get serious about deficit reduction. i do not think we should

reauthorize the bush tax cuts for the very wealthy. her plan is a recipe to explode the deficit, and doing great harm to our economy. >> studies have shown that if your proposal of allowing all of the bush tax cut to go forward except those in the upper income, we will lose 700,000 jobs. that is not a plan to create jobs. my plan calls for keeping all of the tax levels the same except cutting taxes for the middle- class. i get no tax cut. what you are talking about is increase the taxes across the board. >> 30 seconds. >> here is what an economics professor says about her plan, he says it would balloon the

deficit at a phenomenal rate. at some point arithmetic passed a matter. linda mcmahon calls for point with -- 4 $1 trillion in tax cuts. current spending cuts are 360 billion. that is 12 times as many tax cut the spending cuts. that is why we are in the mess today. we're not serious about deficit reduction. this country's going to flip right back into a recession. >> thank you. that is a nice segue into cutting the national deficit. >> many believe the only way to reduce our deficit is to cut back on spending. please name three specific programs you could see eliminated. the senior political science major here wants to know how

you can protect connecticut defense businesses? >> i have been proud to have stood up for spending cuts. i do not think we need $6 billion in agricultural subsidies to midwestern farmers. i do not think we need a $3 million to put the engine. -- duplicative engine. i have been clear that on our medicare budget we need to gruen efficiency by stopping to pay insurance and drug companies. deficit-reduction has to be balanced. there's no way to do this without spending cuts and some additional revenue. linda mcmahon signed this pledge to grover norquist saying that she would never vote for any revenue increases into the federal government. we do not need to send someone to washington who will be part

of the obstruction. we need to bring people together and recognize you have to be serious about spending cuts. the approach has to be balanced. >> we cannot close the dead by -- debt by not reducing spending. what he describes is a very dim view of the american economy. my plan will cut taxes for the middle class and put them back to work. they will have money in their pockets. they will pay more + taxes. it is growth in the economy. my plan is a pro-growth plan. we make our businesses competitive. we allow our job traders to continue to create jobs. our economy will grow. we have deficit reduction. we put people back to work. when people have money in their pocket, they buy more goods and services.

when they buy more goods and services people make more. that is the way our economy grows. we need to reduce taxes and spending. >> your rebuttal? >> this is a tried and true talking point. if you cut taxes for the wealthy, that money is going to trickle down to everybody else of the economy grows. we have data on this. we know what happens when we passed a massive-on finance tax cuts for the you i -- massive un-financed tax cuts for the wealthy. >> your thoughts? >> let's talk about the failed policies. our debt has almost doubled. we have 9% unemployment in our state. i do not think his policies

have worked. we cannot keep sending the same people back to washington. >> thank you. you have been talking quite extensively about this next topic. >> laurie perez, next question. >> there has been a lot of debate around the question of how to protect social security while keeping the program costs in check. what is your solution? >> we absolutely are going to have to reform social security and medicare. there's one person who has agreed to take $716 billion out of medicare. i would never support a budget that would reduce benefits for social security or medicare to our seniors. i will certainly fight tooth

and nail in never support a budget that would reduce those benefits. we know we have to have reform. it is not sustainable. we have to get in a bipartisan fashion on how we're going to reform both. i am not going to support policy but reduced benefits to our seniors. anyhe's not getting answers. what are you going to do that she would not tell you. she just said to get everybody in a room and they would talk about it. you have to be honest with people about what your plans

are. she told a tea party group that she supported ending social security of social changes are not made. she has been on the record over and over saying she would support privatizing medicare for individuals which could result in $6,000 a more in costs. i think you have to be serious. i had been on record as being willing to support cut spending rate of growth of medicare so it take money out in the hands of insurance and drug companies. i am willing to be specific. linda mcmahon will not tell the voters where she stands. >> any specifics? >> you have to be honest. you're not being honest about this whole thing about my saying that i would and social security. this morning i said that was a false ad.

i have said all along that i would never cut or support a budget that would cut budgets to our seniors. i will not. medicare was passed not in a bipartisan way. i do think we have to have bipartisan action on these issues. >> still is given another 30 seconds to give you specifics and she still did not give you specifics. she does not want you to know what she is going to do. i'm not making this up. here is exactly what you said. he said "i believe in sunset provisions. we pass legislation like this so we can take a look at a 10 or 15 years down the road. i am not putting words in her mouth. i am just saying what she told a tea party group. the only time she is been on record giving specifics about her plan for social security and medicare. >> we're going to take a quick break and then be back with more questions.

coming up next, like from the university of connecticut. -- live from the university of connecticut. >> we continue our u.s. senate debate with linda mcmahon and chris murphy. there is one enormous hot- button issue that has divided lawmakers in washington and impacts everybody. that is the issue of universal health care. chris keating will ask the next question. >> the u.s. supreme court has upheld the key part of the universal health care plan including the much debated individual mandate. which specific elements should be left alone and which specific elements should be changed?

>> it cost the family $3,000 every tiny have to take the medication. -- every time he has to take it. the insurance plan has a frigid every time he had to take the medication. it would bankrupt the family. they would lose everything. the interest plan affects this. there are thousands of families out there who are at risk of losing everything. there are individuals who lose their jobs simply because they get sick. i have been proud to stand up for the concept that health care should be a human rights, and not something you get if you

are rich enough to afford it. i am proud to have played a role. >> i will like to replace the affordable health care act. the cost of health care is going up. it is a good thing that children can see on their parents' policy until there are 26 years old. i do not think he should be penalized for pre-existing conditions. i do think we can bring down the cost of health care and have reform by having to buy bringing this across state mines? it brings down the cost of insurance that way. i think health care ought to be affordable. it ought to be acceptable. it ought to be portable. in this new bill there are 21

new tax increases. i do not think we should be increasing taxes. >> talk to students here he will be able to stay on their parents' health care plan when they graduate. see it that has helped them. talk to seniors to go into the drugstore now and perhaps as much as they used to for drugs. they have voted to repeal the bill thirtysomething times. they never voted to replace it. linda mcmahon will be a vote to repeal of the bill, and not replace it. >> your the only one that has voted to take $617 billion out of medicare. it will affect our seniors. that money will grow for

hospitals and doctors. if they're not reimbursed, about 15% will go out of business. our seniors will not have access. that is not how we should be treating our seniors. that is how we need to reform this health care policy. >> women's issues played a role from both of you. >> you have both portrayed herself as an advocate of women's rights. how would you balance the desires of institutions that are philosophically opposed to birth control with the government's requirement under the new law that they provide contraception coverage? >> i am a pro-choice candidate. i believe women should have access to contraception. i am all about women's issues. i am a woman.

i would not be opposed to them. i think the greatest thing that has happened relative to women because of the failed policies of congressman murphy. more women are out of work. women have the same issues today that everyone has. the fate of their jobs. they're worried about making their house payments. they hope their kids are going to be able to get a job. these are the issues that are really facing our women today. when i am traveling around the state they're not talking about contraception. they're talking about how they're going to make ends meet. >> it may not be an issue to her but it is to millions of that do not have access to basic preventive health care,

when their employer denies them access to birth control and contraception. that is an economic issue to women in this state tour not making as much as linda mcmahon does. linda mcmahon support something called the blunt amendment. it would allow any employer across this country to deny their female employees access to birth control and contraception. the reason why the head of pro- choice america was here today campaigning for me, in today's to make sure linda mcmahon did not get elected was because pro-choice advocates around this country know that linda mcmahon would empower a radical like -- right that would deny a woman's right to choose and would vote to and contraception coverage for millions of women. toi am for women's access contraception.

i am a pro-choice candidate. always have been. i have not changed that. >> thank you very much. >> i do not know whether she just did not read, but it is not about religious employers. it would allow any religious or non-religious employer to end contraceptive coverage for their employers. linda murkowski said she regretted that though because she realized it was a grave mistake. she reiterated her support for that piece of legislation. you cannot continue to run away from the things you said you would support. he said it would deny women access to contraception. >> thank you very much.

the next topic is about the concept. -- conduct of this campaign. >> several of our readers and viewers including sheila o'conor says they have been short on the issues. do you have any plans going forward? >> i think this campaign has to be about the issues. there are big differences between linda mcmahon and i when it comes to the issues. one reporter asked her campaign why she was not talking more about the issues, why she was engaging in these character assaults against me and my family. her campaign manager said talking about the issues would be senseless exercise. it would be for linda mcmahon. on the issues, she is wrong. she is not where the state is when it comes to passing another tax cut for the rich.

she's got where the state is when it comes to protecting women's health care. she is not where the state is when it comes to standing up to outsourcing. i do think this campaign should about the issues. i hope the next three weeks of this campaign are spent talking about the real issue differences between linda mcmahon and i a. the difference in our professional backgrounds and not the kind of personal attacks we have seen in her ads. >> i've been talking since my campaign began about my jobs plan. the primary issue in the economy. he has no plan. 23 million people are either out of work are looking for work. if you want to focus on the issues, it is the issue of whether or not he will focus on the attendance record. he needs to be honest with the

people of connecticut about these issues. >> rebuttal? >> the asset she was stop the character assaults. -- i think she asked if she was going to stop the character assaults. [applause] come on. let's talk about what the people actually want us to talk about. i read her jobs plan.

i read it twice. i read it again when it was on the republican websites in washington. she lifted almost fully paragraph and sentences from website and washington written by people who do not have connected interests at heart. -- connecticut's interests at heart. >> we want to remind you about your pledge not to cheer or applaud so we can have more time for the questions and answers. >> there have been plenty of negative ads coming from congressman murphy as well. he is not talked about the issues. this morning our host said they are accusing this relative to social security and medicare was false. let's make sure we have the facts straight year the need to be honest with the people of

connecticut. come clean about your attendance och record. >> you have run at sang in 2008 that they have given your opponent a special below market loan that ordinary people could not get in suggesting the deal was linked to mr. murphy's vote on the bailout bill. your campaign has also said that detail of the loans. if you do not know the details, what are you saying he got a special loan? >> he represented the bank. he had foreclosure issues. the banks bailed him out. he sat on the finance committee. that bank received $400 million

of special bailout money. neither you nor the bank has been willing to release the arguments. >> he responded with a campaign describing her as false. he then cited a different statistic touting your voting record. why did you describe per ads as false? >> what she is trying to essentially say is about my work ethic. the people of the fed district know that i have worked my tail off for them. i have played well about my way in winning fights for them.

this attack is ludicrous. i have worked my tail off for them. i won fights for them. but this attack is ludicrous. everybody who has looked at this from the "hartford courant" to the "connecticut post" have all said it is not true. and the hypocrisy from linda mcmahon attacking me on this issue when she took 36 years to pay back creditors and a $1 million bankruptcy during the exact time she was running this ad. she was $26,000 overdue on the taxes on her penthouse in stanford which is mind blowing. linda mcmahon is addicted to personal attacks. it is such a tight to do two years ago-- it is what she tried to do two years ago and she is doing it again. >> he says everybody that looked at his record has said it is all.

-- false. nobody has seen the records. just so your documents. what you do that, he would lay all of this to rest. i think personal integrity is an issue. only in washington could you miss 75% of your job, get paid $170,000 a year and they get a promotion. that would not happen in the private sector. >> linda mcmahon cannot talk about the issues in the campaign. she referred to this character assassinations. on this voting issue, hypocrisy is stunning. linda mcmahon admits that before she was running for the senate, she hardly ever voted. she had to show up just once a year to vote and she herself admits that she barely ever did it. spare me the indignation on this issue when linda mcmahon has not done her basic duty.

>> thank you. >> that is absolutely false. and you know it. >> linda mcmahon, you can use that time to bring that up and in the room bottle to the next question if you like. professor will ask the next question. >> i would like to continue this line of questioning. both of you at that point had challenges when it comes to paying your debt. mr. murphy, we would like to know what voters should make of these lapses on your part and on the part of your opponent. >> we both had financial issues in our life. the difference is that when i made mistakes, i corrected them. when linda mcmahon made mistakes, she waited to correct them until she was two months away from an election. he had a $1 million bankruptcy and did not payback as creditors until she was asking for people's votes.

i do not think it is credible that she did not know who she owed money to or how much money she owed. this campaign ultimately has to be about the people of this state and about what our respective plans for this budget mean for the people. you want to talk about fiscal responsibility, let's talk about linda mcmahon's economic plan that would cut taxes by 12 times as much as spending. with all due respect, i think the people of the state want us to be talking about that. >> what should voters make of these lapses on the part of you and your point? >> everybody can have a financial difficulty. a couple of missed mortgage payments and credit-card payments is different. but i am asking he come clean about is the special interest loan.

one that men regular middle- class folks in connecticut could not get. he says he voted 97% of the time and he did but he did not show up for 75% of his committee hearings and he would never learned about the issues. i will not vote just down party lines. i am an independent thinker and i will be different than my party on a lot of votes. but to just show up to vote without getting the information, i cannot think that is what the people of connecticut want to see. so i am challenging congressman murphy to come clean and show us his records. it is not just about missing some payments. this is about an issue of integrity and ethics. >> mr. murphy, your rebuttal. >> i think this is about character. when you make mistakes, do you fix them? i did. linda mcmahon didn't. when she owed people money, she ran away from those obligations.

for 36 years, she has been pulling in salaries of $40 million a year and still could not come to pay back the people of connecticut that she owed. if you want to talk about this issue, the way you handle your problems and the way that i handled mind to speak to differences between us. >> i did eventually pay -- [laughter] >> i paid them. i did it with my money. and you got a special loan from the bank. [applause] i will spend my money making sure people like you do not go back to washington and spend money from the people of connecticut. >> we will pause for a break. i think we need one. we will be back with more questions for connecticut's u.s. senate candidates live from the university of connecticut.

>> continuing now at the u.s. mcmahon and chris murphy. >> linda mcmahon, this race is important for connecticut and the nation. the outcome could go a long way toward deciding which party controls the senate. why is it important your party control the senate in 2013? >> i think what we have seen over the past four years are filled policies of an administration where our debt and deficit has increased, our respect around the world has declined. i believe we need to have senators in washington who are going to make sure those qualities are restored to

america. the biggest issues we face today are jobs and the economy. we cannot have a strong foreign-policy if we do not have a strong economy. we cannot have a strong defense if we do not have a strong economy. the greatest debt to our security is debt. we have to make sure we are putting policies in place to get our people back to work. this administration, congress and murphy has been in washington with failed policies. we need to change that. >> that was not the answer to the question. the answer to the question was why should the republicans be in charge of the united states senate? let's be honest. this is not the republican party of our parents are grandparents. linda mcmahon, a republican

majority in the senate who would stop at nothing to it and a woman's right to choose. it would stop at nothing to destroy environmental protection, a party that now denies global warming even exist. a party that would seek to perpetuate another round of massive tax cuts for the wealthy at the expense of the middle class. boaters are deciding between linda mcmahon and myself but they are also deciding whether the tea party should be in charge of the united states senate or democrats. i think both are relevant national implications to this race. and the kind people that linda mcmahon would empower do not have connecticut postal interests at heart. >> congressman murphy still tries to put me into a corner but he knows that is not my plan. i am an independent thinker.

he knows i differ from my party on various issues. i will be an independent thinker in washington. i will not vote for my party 98% of the time. i bring to the table experience of job creation, of putting people back to work and i have a plan to do that. he does not. >> mr. murphy, your rebuttal. >> what are all these republican senators coming to connecticut to campaign for linda mcmahon? because they know she will vote for them. the look of what she stands for. she stands with the national republicans on the amendment. she stands with the national republicans on more tax cuts for the wealthy and when it comes to drilling rather than investment in renewable energy. on issue after issue, she stands with them which is why they are so enthusiastic about coming to connecticut to hope that she is the 51st vote for a

tea party republican majority in the senate. >> thank you very much. our next topic is one the u.s. senators deal with extensively -- foreign affairs. >> mr. murphy, as we wind down the american presence in afghanistan and the troops come home, other problems are rising in the middle east. we saw that images of the u.s. embassy under attack in libya. how aggressive to the united states be when it comes to getting involved in internal affairs of these and other countries? >> i ran for congress in 2006. i could not sit back and let my congresswoman at the time continue president bush's open ended commitment there. i put myself on the line to bring our troops home. i am now a believer that it is time to wrap up our commitment in afghanistan.

i do not think it is in our strategic interest to stay there any longer and i do not think we can afford to spend $2 billion a week. we should bring our men and women home. i fought hard to use my voice and vote to do that. moving forward, we have to be a lot more stingy about how we use american resources abroad. and commit ourselves to the notion that if we do engage in foreign intervention, it has to be in a multilateral way. the biggest mistake we have made is one we have gone in alone. i have been proud of my commitment to bringing our troops home from afghanistan. my commitment to any foreign policy based on a more stringent intervention. that is the kind of senator i will be. >> linda mcmahon, same question. >> i did not think the united states should be involved until war in another country unless a vital u.s. interest is at stake.

i am also for bringing our troops home from afghanistan. along the timetable that president obama has established. i do not think that would have gone in and [unintelligible] we have to have a strong foreign-policy. i believe peace through strength. congressman murphy has voted twice to de-fund our jobs vote, costing our state as many as 35,000 jobs. we need to have a strong defense. we cannot have a strong defense if we de-fund this budget, especially when every other member of the connecticut delegation voted for it. >> i am proud of in part of a delegation that won a commitment to build two submarines.

the new engine on the torrance latter to be built. there is a gimmick between linda mcmahon and i on afghanistan. she wants to sit there for another two years. i think that's too expensive of a commitment and i would rather see those dollars spent on defense production and at the connecticut rather than a war overseas. >> defense production, congressman, you recently voted twice to make sure of the authorization bill. we did not get the jobs. as many as 35,000. we could lose 1 million jobs nationwide and that a 35,000 jobs. we have to have a strong defense but record recently is not one that shows you are willing to support their jobs right here in our state.

>> our next question, you will each have 60 seconds to answer. there will be no rebuttals. >> linda mcmahon, you touted your experience in business as a key asset but some of your critics say that does not qualify you to handle the business of the united states senate. they have a fair point. >> i think what we need to do is to send someone to washington who was had experience creating jobs. we need a blend of representation. the biggest hole we have is those of the private sector for businesses. a ceo has to build a team to execute the vision, manage them, motivates them, and lead them. i'm good at that. i have a good track record at that. i think those skills are missing in washington.

we need business leaders to understand that when you negotiate, you debate robustly but when you walk away, each side has gotten some of what it wanted, but not all of what it wanted. today. nobody is coming to the middle to negotiate. principles. i'm talking about negotiating for the good of our country. the ceo of starbucks said he hoped when the elections were over, the american public would think they would -- it would think they had won. >> mr. murphy, you have been criticized as someone who has no experience other than being in politics. do they have a fair point? >> not every ceo is qualified to be united states senator. linda mcmahon as an example of the kind of ceo that is not.

she denies her people health care with a badly needed it. to ship jobs overseas. she took $10 million in tax credits from the state designed to create jobs and laid off & l for work force by making $46 million. refusing to take a bit of a pay cut to keep people employed. linda mcmahon has shown consistently that as a ceo, she put her interest first over and over again, at the expense of the state, our tax players and employees that rely on her. i do not fit that qualifies you to be a u.s. senator. >> at this point, each candidate will have to 1 minutes to offer a closing statement. based on the drawing to determine the speaking order,

mr. murphy will go first. you have 60 seconds. >> again, taking very much to our sponsors today. earlier in the debate, linda mcmahon got a question about why she cannot talk about something other than personal attacks. she entered it by lodging more personal attacks against me and my family. that is what she will try to make the rest of this race about. as i challenge the people of the state at our debate on sunday,make this race be about you. as the question but one of us is going to stand up for the seniors of the state to cannot have their medicare privatized, who will stand up for the factory worker who cannot continue to see jobs sent overseas. he will stand up for students here at uconn? if that is the question in this race, there is only one choice. linda mcmahon has stood up only for herself, not for us. my career has been dedicated to fighting for the people of this

state and i cannot wait to continue to do it as a u.s. senator. thank you offer being here tonight. >> linda mcmahon, you have one minute. >> i like to thank our hosts, panelists and for those of you who joined us this evening. connecticut, it is time. time to elect a senator who is a job creator with a real plan for putting people back to work. who will cut taxes for the middle class, who values showing up for work. it cannot be bought by special interests. we do not need another senator whose primary aspiration is a political career. we need someone who will tell us that our kids and grandkids will be better off than we are. we cannot afford six more years of congressman murphy's failed policies. of higher unemployment, higher costs for gas and groceries. a low wages and homes moving into foreclosure. connecticut, it is time.

time to elect a senator who will bring knowledge and experience to create jobs and who believe that america's best days are ahead. i am linda mcmahon and i would be honored to have your vote on november 6. >> thank you very much. we would like to thank "the hartford courant" and our panelists. thank you to the league of women voters. >> coming up, the second of debates. president a the president will be on his way to new york shortly. mitt romney, already riding on

long island. candy crowley as unilateral power all as to which questions will be asked. tonight at 9:00 eastern. c-span cameras are all over hofstra university. a live look outside, the stand up area, where the satellite trucks are parked, with our coverage getting under way at 7:00 eastern. [captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute]

again, a look at the television area, all across the street from the exhibition center, where tonight's debate is happening. c-span's coverage at 7:00 tonight, with a preview program, and then at 9:00, the town hall debate. once again we will open up our phone lines beginning at 10:30 eastern, all at c-span, c-span radio, and c-span.org. we also posted on our facebook page questions.

what is your question? >> i watch c-span because when i want to get the news without a lot of talking and pundits adding their point of view, i can get the original script from a person, and then i can come to my own conclusion, which is better than having somebody else telling what i should think. c-span, c-span2, and c-span3, "book tv," which i love, and c- span3 is the history channel, and they have been doing a civil war series trade sometimes i want to see the senate and see what the house is doing. >> sandra mitchell watches c-

span on verizon. brought to you as a public service by your television provider. >> next, a debate from the 1992 campaign that was the first to use the town hall format. for candidates take questions directly promoters. -- from voters. george bush was running for reelection against democratic nominee and arkansas governor bill clinton. independent candidate ross perot had gathered enough public support that the debate commission and both candidates agreed to include him in that year's debates. this was the second of three debates held that year. it took place at the university of richmond in virginia. it is about an hour and a half.

[applause] >> how are you? >> good evening and welcome to the second of three presidential debates between the major candidates for president of the united states. the candidates are the republican nominee, president george bush, the independent, ross perot, and governor bill clinton, the democratic nominee. my name is carole simpson and i will be the moderator for tonight's 90 minutes' debate coming to you from the campus of the university of richmond in virginia.

tonight's program is unlike any other presidential debate in history. we're making history now and it's pretty exciting. an independent polling firm has selected an audience of 209 uncommitted voters from this area. the candidates will be asked questions by these voters on a topic of their choosing -- anything they want to ask about. my job as moderator is to, you know, take care of the questioning, ask questions myself if i think there needs to be continuity and balance, and sometimes i might ask the candidates to respond to what another candidate may have said. now the format has been agreed to by representatives of both the republican and democratic campaigns. and there is no subject matter that is restricted. anything goes. we can ask anything. after the debate, the candidates will have an opportunity to make a closing

statement. so, president bush, i think you said it earlier, let's get it on. >> let's go. >> and i think the first question is over here. myyes, i'd like to direct question to mr. perot. what will you do as president to open foreign markets to fair competition from american business, and to stop unfair competition here at home from foreign countries so that we can bring jobs back to the united states. -- ? >> that's right at the top of my agenda. we've shipped millions of jobs overseas and we have a strange situation because we have a process in washington where after you've served for a while you cash in and become a foreign lobbyist, make $30,000 a month, then take a leave, work on presidential campaigns, make sure you got good contacts, and then go back out. now if you just want to get down to brass tacks, the first thing you ought to do is get all these folks who've got these one-way

trade agreements that we've negotiated over the years and say, "fellows, we'll take the same deal we gave you." and they'll gridlock right at that point because, for example, we've got international competitors who simply could not unload their cars off the ships if they had to comply -- you see, if it was a two-way street -- just couldn't do it. we have got to stop sending jobs overseas. to those of you in the audience who are business people, pretty simple, if you're paying $12, $13, $14 an hour for factory workers and you can move your factory south of the border, pay a dollar an hour for labor, hire young -- let's assume you've been in business for a long time and you've got a mature work force -- pay a dollar an hour for your labor, have no health care -- that's the most expensive single element in making a car -- have no environmental controls, no pollution controls and no retirement, and you don't care about anything but making money, there will be a giant sucking sound going south. so if the people send me to washington the first thing i'll do is study that 2,000-page

agreement and make sure it's a two-way street. one last part here -- i decided i was dumb and didn't understand it so i called the who's who of the folks who've been around it and i said, "why won't everybody go south?" they say, "it'd be disruptive." i said, "for how long?" i finally got them up from 12 to 15 years. and i said, "well, how does it stop being disruptive?" and that is when their jobs come up from a dollar an hour to six dollars an hour, and ours go down to six dollars an hour, and then it's leveled again. but in the meantime, you've wrecked the country with these kinds of deals. we've got to cut it out. >> thank you, mr. perot. i see that the president has stood up so he must have something to say about this. >> well, carole, the thing that saved us in this global economic slowdown is in our exports. and what i'm trying to do is increase our exports. and if, indeed, all the jobs were going to move south because of lower wages, there are lower wages now and they haven't done that. and so i have just negotiated with the president of mexico, the north american free trade agreement, and the prime

minister of canada, i might add, and i want to have more of these free trade agreements. because export jobs are increasing far faster than any jobs that may have moved overseas, that's a scare tactic because it's not that many. but anyone that's here, we want to have more jobs here and the way to do that is to increase our exports. some believe in protection. i don't. i believe in free and fair trade and that's the thing that saved us, and so i will keep on as president trying to get a successful conclusion to the gatt round, the big uruguay round of trade which will really open up markets, for our agriculture particularly. i want to continue work after we get this nafta agreement ratified this coming year. i want to get one with eastern europe. i want to get one with chile and free and fair trade is the answer, now protection. -- not protection. and as i say we've had tough

economic times and it's exports that have saved us. exports that have built. >> governor clinton. >> i'd like to answer the question because i've actually been a governor for 12 years so. i've known a lot of people who've lost their jobs because of jobs moving overseas and i know a lot of people whose plants have been strengthened by increasing exports. the trick is to expand our export base and to expand trade on terms that are fair to us. it is true that our exports to mexico for example have gone up and our trade deficit's gone down. it's also true that just today a record-high trade deficit was announced with japan. so what is the answer? let me just mention three things very quickly. number 1, make sure that other countries are as open to our markets as our markets are to them. and if they're not, have measures on the books that don't take forever and a day to implement. number 2, change the tax code. there are more deductions in the tax code for shutting plants down and moving overseas than there are for modernizing plant and equipment here. our competitors don't do that. emphasize and subsidize modernizing plant and equipment here, not moving plants

overseas. number 3, stop the federal government's program that now gives low-interest loans and job training funds to companies that will actually shut down and move to other countries but we won't do the same thing for plants that stay here. so more trade, but on fairer terms and favor investment in america. >> thank you. i think we have a question over here. >> this is for governor clinton. in the real world, that is outside of washington, d.c., compensation and achievement are based on goals defined and achieved. my question is about the deficit. would you define in specific dollar goals how much you would reduce the deficit in each of the four years of a clinton administration and then enter into a legally binding contract with the american people that if you did not achieve those goals, that you would not seek a second term? answer yes or no and then comment on your answer, please. >> no, and here's why. and i'll tell you exactly why.

because the deficit now has been building up for 12 years. i'll tell you exactly what i think can be done. i think we can bring it down by 50 percent in four years and grow the economy. now, i could get rid of it in four years in theory on the books now, but to do it, you'd have to raise taxes too much and cut benefits too much to people who need them. and it would even make the economy worse. mr. perot will tell you, for example, that the expert he hired to analyze his plan said that it will bring the deficit down in five years, but it will make unemployment bad for four more years. so my view is, sir, you have to increase investment, grow the economy and reduce the deficit by controlling health care costs, prudent reductions in defense, cuts in domestic programs and asking the wealthiest americans and foreign corporations to pay their fair share of taxes and investing in growing this economy. i asked everybody to look at my economic ideas and nine nobel prize winners and over 500 economists and hundreds of

business people, including a lot of republicans, said this is the way you got to go. if you don't grow the economy you can't get it done. but i can't foresee all the things that will happen and i don't think a president should be judged solely on the deficit. let me also say we're having an election today. you'll have a shot at me in four years and you can vote me right out if you think i've done a lousy job. and i would welcome you to do that. >> mr. president. >> well, i got to -- i'm a little confused here because i don't see how you can grow the deficit down by raising people's taxes. you see, i don't think the american people are taxed too little. i think they're taxed too much. i went for one tax increase. and when i make a mistake i admit it. say that wasn't the right thing to do. governor clinton's program wants to tax more and spend more. $150 billion in new taxes. spend another 220. i don't believe that's the way to do it. here's some things that'll help. give us a balanced budget amendment. he always talks about arkansas having a balanced budget and they do.

but he has a balanced budget amendment -- have to do it. i'd like the government to have that. and i think it would discipline not only the congress, which needs it, but also the executive branch. i'd like to have what 43 governors have -- the line-item veto, so if the congress can't cut we've got a reckless spending congress. let the president have a shot at it by wiping out things that are pork barrel or something of that nature. i'd like to -- i proposed another one. some sophisticates think it may be a little gimmicky. i think it's good. it's a check-off. it says to you as a taxpayer, say you're going to pay a tax of a thousand bucks or something. you can check 10 percent of that, if you want to, in one box and that 10 percent, $100 -- or if you're paying 10,000, or whatever it is, a thousand dollars -- check it off and make the government -- make it lower the deficit by that amount. and if the congress won't do it -- if they can't get together and negotiate how to do that -- then you'd have a sequester across the board. you'd exempt social security -- i don't want to tax or touch social security.

i'm the president that said "hey, don't mess with social security." and we haven't. so i believe we need to control the growth of mandatory spending -- back to this gentleman's question. that's the main growing thing in the budget. the whole -- the program that the president -- 2/3 of the budget i, as president, never get to look at, never get to touch. we've got to control that growth to inflation and population increase. but not raise taxes on the american people now. i just don't believe that would stimulate any kind of growth at all. >> how about you, mr. perot? >> well, we're $4 trillion in debt. we're going into debt an additional $1 billion -- a little more than a billion dollars every working day of the year. now the thing i love about it -- i'm just a businessman. i was down in texas taking care of business, tending to my family. this situation got so bad that i decided i'd better get into it. the american people asked me to get into it. but i just find it fascinating that while we sit here tonight, we will go into debt an additional $50 billion -- $50

million dollars in an hour and a half. now, it's not the republicans fault, of course. and it's not the democrats' fault. and what i'm looking for is who did it? now, they're the two folks involved, so maybe if you put them together, they did it. now, the facts are we have to fix it. we are leaving -- i'm here tonight for these young people up there in the balcony from this college. when i was a young man when i got out of the navy i had multiple job offers. young people with high grades can't get a job. people -- the 18- to 24-year- old high school graduates 10 years ago were making more than they are now. in other words, we were down to 18 percent of them were making -- ah, of the 18- to 24-year- olds were making less than $12,000. now that's up to 40 percent. and what's happened in the meantime, the dollar's gone through the floor. now whose fault is that.

not the democrats, not the republicans. somewhere out there there's an extraterrestrial that's doing this to us, i guess. and everybody says they take responsibility. somebody somewhere has to take responsibility for this. put it to you bluntly, american people. if you want me to be your president, we're going to face our problems, we'll deal with the problems, we'll solve our problems. we'll pay down our debt. we'll pass on the american dream to our children, and i will not leave our children a situation that they have today. when i was a boy it took two generations to double the standard of living. today, it will take 12 generations. our children will not see the american dream because of this debt that somebody somewhere dropped on us. >> you're all wonderful speakers and i know you have lots more to add, but i've talked to this audience and they have lots of questions on other topics. can we move to another topic, please? we have one up here, i think. negative campaigns q, yes, i'd like to address all the candidates with this question. the amount of time the candidates have spent on this campaign trashing their opponents character and their programs is depressingly large. why can't your discussions and

proposals reflect the genuine complexity and the difficulty of the issues to try to build a consensus around the best aspects of all proposals? >> who wants to take that one? mr. perot, you have an answer for everything, don't you? go right ahead sir. >> no, no i don't have an answer for everything. >> why? >> as you all know, i've been buying 30 minutes segments to talk about issues. and tomorrow night, on nbc, from 10,30 to 11 eastern we're going to talk about how you pay the debt down, so we're going to come right down to that one. see, we'll be on again saturday night, 8 to 9 o'clock on abc, so --- >> i couldn't agree with you more. couldn't agree with you more. and i have said again and again and again, let's get off of this, let's get off personalities and let's talk about jobs, health care, crime, the things that concern the american people. i'm spending my money, not pac money, not foreign money, my money, to take this message to the people. >> thank you, mr. perot. so that seems directed, he would say it's you gentlemen who have been doing that. mr. clinton, governor clinton, how do you -- or president bush,

how would you like to respond? >> well, in the first place, i believe that character is a part of being president. i think you have to look at it. i think that has to be a part of -- of a candidate for president, or being president. in terms of programs, i've submitted, what, four different budgets to the united states congress? in great detail, they're so heavy they'd give you, you know, a broken back. and everything in there says what i am for. now i've come out with a new agenda for america's renewal, a plan that i believe really will help stimulate the growth of this economy. my record on world affairs is pretty well known because i've been president for four years. so i feel i've been talking issues. you know, nobody likes -- likes "who shot john? " but i think the first negative campaign run in this election was by governor clinton. and i'm not going to sit there and be a punching bag. i'm going to stand up and say, "hey, listen, here's my side of it." but character is an important

part of the equation. the other night, governor clinton raised -- i don't know if you saw the debate the other night? suffered through that? well, he raised the question of my father, it was a good line, well rehearsed and well delivered. but he raised the question of my father and said, "well, your father, prescott bush, was against mccarthy. you should be ashamed of yourself. mccarthyism." i remember something my dad told me. i was 18 years old, going to penn station to go into the navy and he said, "write your mother" -- which i faithfully did -- he said, "serve your country" -- my father was an honor, duty and country man -- and he said, "tell the truth." and i've tried to do that in public life, all through it. and that says something about character. my argument with governor clinton -- you can call it mud wrestling but i think it's fair to put in focus -- is i am deeply troubled by someone who

demonstrates and organizes demonstration in a foreign land when his country's at war. probably a lot of kids here disagree with me, but that's what i feel. that's what i feel passionately about. i'm thinking of ross perot's running mate sitting in the jail, how would he feel about it? but maybe that's generational, i don't know. th taking different positions on different issues, trying to be one thing to one person here that's opposing the nafta agreement and then for it -- what we call waffling. and i do think that you can't turn the white house into the waffle house, you've got to say what you're for and you've got to --- >> mr. president, i'm getting time cues and, with all due respect, i'm sorry. >> excuse me, i don't want to -- i don't want to, no go ahead carole. >> governor clinton. >> i get wound up because i feel strongly --- >> yes you do. >> let me say, first of all, to you that i believe so strongly

in the question you ask that i suggested this format tonight. i started doing these formats a year ago in new hampshire. and i found that we had huge crowds because all i did was let people ask questions and i tried to give very specific answers. i also had a program starting last year. i've been disturbed by the tone and the tenor of this campaign. thank goodness the networks have a fact check so i don't have to just go blue in the face anymore. mr. bush said once again tonight i was going to have a $150 billion tax increase. when mr. quayle said that all the networks said, "that's not true. he's got over $100 billion of tax cuts and incentives." so i'm not going to take up your time tonight. but let me just say this. we'll have a debate in four days and we can talk about this character thing again. but the washington post ran a long editorial today saying they couldn't believe mr. bush was making character an issue and they said he was the greatest quote political chameleon for changing his positions of all times. now i don't want to get into it --- >> please don't judge me by the washington post. >> let's don't -- let's don't -- you don't have to believe that. i -- here's my point. i'm not interested in his

character. i want to change the character of the presidency. and i'm interested in what we can trust him to do and what you can trust me to do and what you can trust mr. perot to do for the next four years. so i think you're right and i hope the rest of the night belongs to you. >> may i, i talked to this audience before you gentlemen came and i asked them about how they felt about the tenor of the campaign. would you like to let them know what you thought about that when i said are you pleased with how the campaign's been going? who wants to say why you don't like the way the campaign is going? we have a gentleman back here. focus on needs, q, if i may, and forgive the notes here, but i'm shy on camera. the focus of my work as domestic mediator is meeting the needs of the children that i work with by way of their parents, and not the wants of their parents. and i ask the three of you, how can we as symbolically the

children of the future president, expect the two of you, the three of you, to meet our needs, the needs in housing and, and, and in crime and, you name it, as opposed to the wants of your political spin doctors, and your political parties? >> so your question is -- >> can we focus on the issues and not the personalities and the mud? i think there is, there is a need, if we can take a poll here, with the folks from gallup perhaps, i think there is a real need here to focus at this point on needs. >> how do you respond? how do you gentlemen respond to -- >> i agree with him. >> president bush? >> let's do it. let's talk about programs for children. >> one other thing? >> yes? >> could we cross our hearts, it sounds silly here, but could we make a commitment? you know, we're not under oath at this point, but could you make a commitment to the citizens of the united states to meet our needs, and we have many, and not yours. again, i have to repeat that, it's a real need, i think, that we all have. >> it depends on how you define it, i mean i -- i think, in

general, let's talk about these -- let's talk about these issues, let's talk about the programs, but in the presidency a lot goes into it. caring is -- goes into it, that's not particularly specific, strength goes into it, that's not specific, standing up against aggression, that's not specific in terms of a program. this is what a president has to do. so i, in principle, i'll take your point and think we ought to discuss child care, or whatever else it is. >> and you two? >> ross had his hand up. >> yes, ross. >> no hedges, no ifs, ands and buts. i'll take the pledge. because i know the american people want to talk about issues and not tabloid journalism. so i'll take the pledge and we'll stay on the issues. now, just for the record, i don't have any spin doctors. i don't have any speech writers. probably shows. i make those charts you see on television. but you don't have to wonder if it's me talking.

what you see is what you get. and if you don't like it you got two other choices, right? >> now wait a minute. i want to say just one thing, now, ross, in fairness. the ideas i express are mine. i've worked on these things for 12 years and i'm the only person up here who hasn't been part of washington in any way for the last 20 years. so i don't want the implication to be that somehow everything we say is just cooked up and put in our head by somebody else. i worked 12 years very hard as a governor on the real problems of real people. i'm just as sick as you are by having to wake up and figure out how to defend myself every day. >> i got -- >> i never thought i'd ever be involved in anything like this. >> may i finish? >> yes you may finish. >> very briefly? q, yes. very briefly. >> i don't have any foreign money in my campaign. i don't have any foreign lobbyist on leave in my campaign. i don't have any pac money in my campaign. i got five and a half hard- working people who put me on the ballot. and i belong to them. >> o.k. >> and they want or are interested in what you're interested in. i take the pledge -- i've already taken the pledge on cutting the deficit in half.

i never got to say that. it's a great young group. lead or leave. college students. young people who don't want us to spend their money. i took the pledge we'd cut it out. >> thank you. we have a question here. nation's infrastructure q, yes, i would like to get a response from all three gentlemen, and the question is, what are your plans to improve the physical infrastructure of our nation, which includes the water system, the sewer system, our transportation systems, etc. thank you. >> the cities, who's going to fix the cities and how? >> be glad to take a shot at it. >> please. >> i'm not sure that -- and i can understand if you haven't seen this because there's been a lot of hue and cry -- we passed, this year, the most farthest-looking transportation bill in the history of this country, since eisenhower started the interstate highways, $150 billion for improving the infrastructure. that happened when i was

president and so i'm very proud of the way that came about and i think it's a very, very good beginning. like mr. perot, i'm concerned about the deficits, and $150 billion is a lot of money but it's awful hard to say we're going to go out and spend more money when we're trying to get the deficit down. but i would cite that as a major accomplishment. we hear all the negatives. when you're president you expect this, everybody's running against the incumbent, they can do better, everyone knows that. but here's something that we can take great pride in because it really does get to what you're talking about. our home initiative, our home ownership initiative -- hope it'll pass the congress -- is a good start for having people own their own homes instead of living in these deadly tenements. our enterprise zones that we hear a lot of lip service about in congress would bring jobs into the inner city. there's a good program and i need the help of everybody across this country to get it

passed in a substantial way by the congress. when we went out to south central in los angeles -- some of you may remember the riots there -- i went out there, i went to a boys club and every one of them -- the boys club leaders, the ministers, all of them were saying, "pass enterprise zones." we go back to washington and it's very difficult to get it through the congress. but there's going to be a new congress. no one likes gridlock, there's going to be a new congress because the old one -- i don't want to get this man mad at me but there was a post office scandal and a banking scandal. you're going to have a lot of new members of congress and then you can sit down and say, "help me do what we should for the cities, help me pass these programs." >> mr. president, aren't you threatening to veto the bill, the urban aid bill that included enterprise zones? >> sure, but the problem is you get so many things included in a great big bill that you have to look at the overall good. that's the problem with our system, if you had a line-item veto you could knock out the pork, you could knock out the tax increases, and you could do

what the people want and that is create enterprise zones. >> governor clinton, you're chomping at the bit. >> that bill pays for these urban enterprise zones by asking the wealthiest americans to pay a little more, and that's why you want to veto it. just like you vetoed an earlier bill this year, this is not mud-slinging, this is fact- slinging. a bill early this year, this is facts, that would have given investment tax credits and other incentives to reinvest in our cities, our country, but it asked the wealthiest americans to pay a little more. mr. perot wants to do the same thing. i agree with him. i mean, we agree with that. let me tell you specifically what my plan does. my plan would dedicate $20 billion a year in each of the next four years for investment and new transportation, communications, environmental clean-up, and new technologies for the 21st century and we would target it especially in areas that have been either depressed or which have lost a lot of defense-related jobs. there are 200,000 people in california, for example, who've

lost their defense-related jobs. they ought to be engaged in making high-speed rail, they ought to be engaged in breaking ground in other technologies, doing waste recycling, clean water technology, and things of that kind. we can create millions of jobs in these new technologies more than we're going to lose in defense if we target it, but we're investing a much smaller percentage of our income in the things you just asked about than all of our major competitors and our wealth growth is going down as a result of this, making the country poorer, which is why i answered the gentleman the way i did before. we have to both bring down the deficit and get our economy going rough these kinds of investments in order to get the kind of wealth and jobs and incomes we need in america. >> mr. perot, what about your plans for the cities? you want to tackle the economy and the deficit first --- >> first, you've got to have money to pay for these things. so, you've got to create jobs. there are all kinds of ways to create jobs in the inner city. now, i'm not a politician, but i think i could go to washington in a week and get everybody holding hands and get this bill signed.

because i talked to the democratic leaders and they want it, i talked to republican leaders and they want it. but since they are bred from childhood to fight with one another rather than get results -- you know, i would be glad to drop out and spend a little time and see if we couldn't build some bridges. now, results is what count. the president can't order congress around. congress can't order the president around. that's not bad for a guy that's never been there, right? but you have to work together. now, i have talked to the chairmen of the committees that want this. they're democrats. the president wants, but we can't get it, because we sit here in gridlock because it's a campaign year. we didn't fund a lot of other things this year, like the savings and loan mess. that's another story we're getting to pay a big price right after the election. the facts are though -- the facts are the american people are hurting. these people are hurting in the inner cities. we're shipping the low-paying jobs -- quote "low-paying jobs" overseas. what are low-paying jobs? textiles, shoes, things like that that we say are yesterday's industries. they're tomorrow's industries in the inner cities. let me say in my case, if i'm

out of work, i'll cut grass tomorrow to take care of my family. i'll be happy to make shoes, i'll be happy to make clothing, i'll make sausage. you just give me a job. put those jobs in the inner cities instead of doing diplomatic deals and shipping them to china where prison labor does the work. working together q, mr. perot, everybody thought you won the first debate, because you were plain-speaking and you made it sound oh so simple, we'll just do it. what makes you think that you're going to be able to get the democrats and republicans together any better than these guys? >> if you asked me if i could fly a fighter plane or launch -- or be an astronaut, i can't. i spent my life creating jobs -- it's something i know how to do. and, very simply in the inner city they're starved. see, small business is the way to jump-start the inner city, not --- >> are you answering my question? >> you want jobs in the inner city? do you want jobs in the inner city, is that your question? >> no, i want you to tell me how you're going to be able to get the republicans and democrats in congress --- >> oh, i'm sorry. >> to work together better than these two gentlemen. >> well, i've listened to both sides and if they would talk to one another instead of throwing

rocks, i think we could get a lot done. and among other things, i would say, o.k., over here in this senate committee, to the chairman who is anxious to get this bill passed -- the president is anxious -- i'd say, rather than just yelling at one another, why don't we find out where we're apart, try to get together, get the bill passed and give the people the benefits and not play party politics right now? and i think the press would follow that so closely that probably they would get it done. that's the way i would do it. i doubt if they'll give me the chance but i will drop everything and go work on it. >> o.k. i have a question here. my question was originally for governor clinton but i think i would welcome a response from all three candidates. as you are aware, crime is rampant in our cities. and in the richmond area, and i'm sure it's happening elsewhere, 12 year olds are carrying guns to school.

and i'm sure when our founding fathers wrote the constitution they did not mean for the right to bear arms to apply to 12- year-olds. so i'm asking, where do you stand on gun control and what do you plan to do about it? >> governor clinton. >> i support the right to keep and bear arms. i live in a state where over half the adults have hunting or fishing licenses or both. but i believe we have to have some way of checking handguns before they're sold -- to check the criminal history, the mental health history and the age of people who are buying them. therefi