now the president and c.e.o. of the financial services roundtable. thank you for being here this week. >> i am delighted to be here. >> our reporters, he covers the financial services beat. we will start with that. >> great. great to see you. you have been at the financial services roundtable for a few weeks. what are you hearing from your members about the fiscal cliff? is there optimism at all or are you sensing that there is a real sense of alarm? >> our members are very concerned about the fiscal cliff. if it is not solved in a timely manner we will have another recession and other severe financial convinces. they want this problem solved for understandable reasons.

>> it is still more or less the same debate. is there anything different at this point as a reason for optimism? >> the discussions with the deadline. that is the difference. an actual hard deadline that has to be moved or severe consequences set in. i hope they get something done by the end of the calendar year but if they can't it would be prudent to tackle the problems more comprehensively in early 2013. one, the election has passed. people can settle down and govern rather than just political. two you have a real deadline that will hopefully motivate people to get a new deal.

>> the dynamics are slightly different. the president won the election. the democrats did well in the senate but you still have a republican house. while the dynamics are marginally different they are not too different. you have a hard deadline and you see a shift in tone now. you saw the president come out to give a firm message and indicate willingness. you saw the speaker coming out saying he did not want to raise the tax rate. you know hopefully they are putting out markers and beginning to show flexibility. >> we heard a number of republican governors in las vegas this week saying that republican members of congress may have to be open to tax

increases for the wealthy. do you think there is a reasonable view that involves increasing taxes on the wealthy? >> they have signaled a willingness to put additional revenues on the table. while some of that discussion is focused on whether there should be an increase in the rate for so called wealthy americans, others talked more about getting traditional revenues through capping deductions and credits and the likes. so it is not clear what form called for tolerance. but i think that it is noteworthy that republicans and conservative commentators have said some additional revenues might have to be a part of the deal. >> what specifics are being discussed in the eyes of your members.

limiting capital gains, morgan interest deductions. so, with the perspective of the people you are now representing where are their areas they would prefer that washington don't go? >> well, our membership wants to see the details before they take a position on any potential package. reducing and eliminations certain deductions and credits. that sounds good. people nod their heads. but the rubber hits the road when it hits you or your industry. so we believe in the best interest of the country and economy and avoiding the fiscal

cliff and digging out of the holes more broadly, tax reform with that direction should be on the table. >> do you have any personal thoughts on tax rate increases for capital gains, a certain number? >> well, i don't think there is a desire to increase the capital gains tax. from my perspective we want to encourage investments. we want to reward that. one of the deductions that is very important is business interest deduction. if you didn't allow businesses to deduct interests, that happened to have a severe

effect on the economy so businesses can capitalize and start and grow. have you to be careful how you do it at a time we need it the most. others have been sending messages to congress. do you have a sense of specifically what it would look like when the market it is finally get concerned about what is going on? with the attention to the media, you are seeing markets have a down day 6 of the last 7

days. i think that is the marketplace expressing anxiety about the uncertainty surrounding the fiscal cliff. of course we know what the consequences will be. shrink by 2.9%. they said unemployment will go back up nationally over 9%. those are devastatingly bad consequences for the economy and our country. that is why we have to get this thing solved. >> january 1 is often treated as the deadline. if there has been no deal struck, will there be a substantial response or will

markets realize there is time for congress to act to. guest: perhaps what they could do is to stop sketch out an outline of what a deal might look like overall upward not renew -- and where new revenues will come from. they could signal that entitlement reforms would be on the table, enough to justify each side saying this is worthy of an extension. i hope they can get it all done by the end of this calendar year but if not, if they can get an outline of a measure to give themselves enough confidence in each other to have the extension, that would be great. hopefully they could have a series of milestones toward a real deal by the beginning of the year. >> your tenure in office was defined by battles with the

democratic legislature over spending. you're willing to shut down the state government to get a deal. is there a productive way in which president obama can use his executive power to negotiate and try to strike a grand bargain deal? guest: there is an opportunity in these matters. unlike the legislative branch that speaks of many voices, the executive has the opportunity to have that bully pulpit and be the vision and speak with one voice and command a disproportionate amount of the attention around the messaging. if that person has the courage to go first and go big, it could have a big impact on the debate. president obama has a tremendous opportunity here coming off of reelection. he could set the tone and the

direction and show willingness to compromise to get a deal done. >> what will this look like for the president? guest: everyone sees the contours of the branded deal. -- grand deal. they will have to just entitlement programs not just for recipients but for coming generations and that could include adjusting the retirement age overtime. from a republican standpoint, you will have to split a divided government so there will be no additional revenues. the details will have to be hashed out. you can see the broad context of this -- you can see the broad contours of this. this is a question of when it will occur and how much pain you want to visit on the country.

the reality around the nation's finances are not a matter of partisan spin but mathematical reality. and eighth-grader could look at the numbers and tell you there is an unsustainable mathematical the implosion imminent. those walls are moving on the policy makers. the time for endless discussion is coming to an end. it may not be immediate. >> the election in sure that the health care law would proceed. would you overlay the implementation of the health care law and what affect will have on the economy? guest: there are or sorts of studies about this on the economy. from a business standpoint, there has been concern about this being a regulatory uncertainty on small and medium businesses.

with the president's reelection, at least one or two of the main challenges have been resolved. it is a reality so people have to make their decisions about how they want to implement it. from an economic standpoint, the so-called experts give mixed reviews whether it will be a net dragged or a net plus. business people are worried about it. >> beyond the fiscal cliff and the deficit deal, another thing coming up is the debt limit. the treasury department's as we will hit at the end of the year and should extended at the beginning of the year. should that be wrapped into a fiscal clipped deal? should be handled separately? guest: in light of the negotiations over the fiscal cliff we have seen, it would seem natural to include that as part of a larger deal and a

larger discussion. it will have to be consulted -- confronted and address. it is a mathematical certainty but it puts pressure on policy makers to take some action. that could be a helpful tool that is not taken too far. >> when you are a candidate, you made some suggestions that maybe we should raise the debt ceiling but this time, you think it should be dealt with promptly and quickly? >> policy-makers need deadlines and pressures. if they don't have those things, things sort of drift. it is mathematically going to be hit. there's no question about that. this is a pressure point you can use but it's not bad to wrap it into the discussion about the fiscal cliff. >> we know that during the

obama administration's second term we will see some changes may be of new faces. we know secretary of the treasury tim geithner will probably be leaving the administration sen. maybe by the beginning of next year. what kind of names are being thrown around? >> >> your the one throwing around the names in your articles. guest: jack lew and erskine bowles are generally mentioned. i don't have any inside information on who the president might consider. we will have to wait and see. >> is there one candidate that you would think could take on the job? guest: it is a tough but in for a job but i don't have a statement.

guest i want to g your thoughts and a new center, in in the next session, elizabeth warren. >> she developed her washington presence to set up the financial protection bureau. do you have any thoughts have the financial community will try to work with her especially if she gets a seat on the senate banking committee? i traded messages with her a few days ago. guest: has strong views about consumer protection. our members want a safe and orderly and fair and transparent financial system and one that treats their customers and consumers in a fair and appropriate manner. the key thing is to make sure as we implement dodd-frank and hopefully refine it so it is

better, that as these regulations are imposed and implemented and don't go so far that you chill important economic activity where people need access to credits and lending so they can get a car or a mortgage or start a business. . we want to make sure these systems and regulations are not overloaded so it deters the tools of the economy. >> can there be common ground? h guest: sure, roby strong voices. we want to find the difference between the top of the bell curve and regulations verses no regulations. you have the wild west and the key is to find that top of the bell curve sweet spot where his balance.

host: the image of the financial-services sector has taken a drubbing in public opinion. is it a matter of time and continuing business that will reset the opinion polls in the -- from the american public? do you see yourself acting in some way as an aggregate that could help refrain public opinion. you don't just = =." >> guest: you don't just get trust, you have to earn it. the way that they will continue to rebuild the reputation is to earn it and you do that by following the rules and doing things that are viewed as valuable and helpful and trustworthy. so many of our members do that.

there is still lot of bad publicity around things that happened five or six years ago. our goal and our members sincerely want to do this is to reestablish the reputation of the industry by hurting it and that means you have to do things that are helpful and not harmful to your customers and consumers and the economy more broadly. that is a more generalized overstatement. these are important institutions. everything that goes on in the economy from mortgages to buying cars and starting businesses and people's personal accounts, in one form or another, it slows the vessel institutions. there were others in the process including policies that led to bad behavior is by fannie mae and freddie mac and had non-financial institutional

actors that contributed. >> there has been some talks of a possible qe4 coming sometime next year. is that a good idea? does that the set the economy up to be more vulnerable to inflation? guest: the experts and economists are split on this matter. some suggest that with this much monetary policy into the economy, it could trigger a round of inflation. ben bernanke would say there are no signs of that. there is a debate about

that. we will see but i think the economy is still in a tenuous state. we had modest improvement but we have signs of worry. i heard this week about the change in chinese leadership also worries about the future economic growth in china. use a more troubling news coming out of europe and trouble from the manufacturing report out of the united states. i don't think we should prejudge what economic policy should look like 12 months from now. many people do not know what will happen one month from now. do you have that a more thoughts of the job ben bernanke has been doing? guest: he's got a tough job. they went through an enormous crisis of historic proportions and has been working diligently to try to do the things that he thing needs to be done. i don't know if he will want to

continue on in another term. most of our members feel very positively about chairman bernanke. >> i want to ask you about the debate surrounding dodd-frank. republicans insist that labeling banks as too big to fail from your perspective. , do your members think that too big to fail is good? guest: that is a concept that is problematic. we don't want institutions that can take down our economy social week -- so we should be in favor of making sure mechanisms are in place to address that. i was in new york this last week and listen to a representative from the new york federal reserve. he said we should give these

rules a chance to be tested. if more dramatic measures have not proven themselves to solve anything, we might embrace these rules. we could have a living will for financial institutions of they don't get into trouble and we shall have a prohibition on taxpayer bailout fund that would cover the cost of these from the industry. the clearing house did a simulation of a melt down in important institutions and issued the report. they concluded the protections in dodd- frank would work. let's give them a chance. it appears to be from work that makes sense. if you have other ideas, you can put the details on that.

right down, the bulk of it is under too big to fail and it is a matter of law. host: final question? >> i have to ask you a policy question? guest: you have to? >> governor romney recently said president obama route 1 the election because of the guests to young black and hispanic voters. what to do make of these remarks? i did not see them but i heard about them. guest: if you look back at the election of 2012, when you have a product you put into the market place, and the marketplace does not buy it, you either have a better marketing or a better product. this is the wake-up call for the republican party to have

better marketing republicans need to do better with female voters and blue-collar voters and latino and hispanic voters. we also need to have products that sell that. that does not mean you change your philosophy. i think president obama did a better job getting out the vote in his campaign. i don't think it is a matter of people looking at the election and saying i will vote because of gifts. i think they said which one of these candidates they prefer. host: you disagree with the analysis? guest: of think it is as simple as saying the president gave the gifts.

>> your a couple of weeks at your new position but any thoughts for you returning to public service? senator franken is up for reelection in 2014. have you given thought on that? guest: i have thought about that and i am not doing it. i had my full run but now i'm focused on my new job. host: we thank you very much for being our guest on "newsmakers." we are back after talkin to governor tim pawlenty who is now the ceo of the financial roundtable. he represents the financial sector but this week, the president met with business leaders as part of his crafting of the fiscal clip deliberation. what were the message is the two exchanged?

what did the president have to say to the business community and what was their message back to him? >> the message is fairly similar on both sides. the business has been very productive getting the message out to congress. they're concerned about the impact of the fiscal cliff and they want them to deal with the deficit but they don't want it done in a dramatic fashion. the president and members of congress have been consistent as well. when you have the business community and the white house getting together, the business community continues to hammer this message of needing to do something. i think the white house wants to get more ave buy in . they want to have additional leverage. host: there a generalized

message about taxes? >> that underscores that this is not just an issue where one party has a lot at stake. this is everybody in the community that has a lot at stake including business leaders and ceo's. at the end of the day, it will be the conversation that happens between president obama, house speaker john boehner, senate majority leader harry reid, and a lot of their colleagues and people from the business community need to tell them and put the pressure on them to say this is serious and we're getting to the 11th hour. host: both of you were asking

questions of the governor about whether the dynamics have changed and whether or not this was essentially a status "election. what is the consensus on that question? >> president obama did win a second term in a fairly strong fashion. it was suggest the president has an upper hand. at the same time, when you look at what actually happened to the make up the federal government, not a lot has been changed. democrats picked up a couple seats but the house is still run by the republicans and democrats have a slim margin in the senate. in terms of the big pieces, there is more of the same. host: what leverage does he have? >> he was explicit on the campaign trail on what he was running on. he wants to see the wealthiest contribute more in terms of

helping the middle-class. the president can now go back to congress and say i made this case to the american people and they reelected me based on best. from his perspective, i would say this is clearly what the voters want. >> we have seen some movement from some people in the republican party. we have seen some signs of them thinking about being more flexible when it comes to increasing taxes on the wealthy. we have some republican governors -- republican members of the government have to be more flexible on the issues on the table ic