then, q&a with keith richburg. on the next "washington journal ", rick snyder talks about how issues like the economy, immigration, and gun violence are affecting his state. then a look at the possible impact of across the board spending cuts with tom shoop. defense news correspondent marcus weisgerber. that is live at 7:00 a.m. eastern, on c-span. >> at age 25, she was one of the wealthiest widows in the colonies. during the revolution, while in her mid-40's, she was considered an enemy by the british who threatened to take her hostage. later, she would become our nation's first first lady at age 5057. meet martha washington, monday night, in the first program of c-span's new weekly series, " first ladies, influence and image." we will visit some places that influenced her life,

colonial williamsburg, mount vernon, valley forge and philadelphia. be part of the conversation about martha washington with your phone calls, tweets, and facebook post live monday night at 9:00 p.m. eastern on c-span, c-span radio and c-span.org. >> the british house of commons was in recess last week so prime minister's questions will not be seen tonight. the japanese prime minister met friday with hobo at the white house. later that day -- president obama at the white house. later that day, he discussed his economic plan which has been called abenomics. this is 45 minutes. [applause] >> thank you for coming.

i am delighted to have you here. i am the president of css. i have to share with with you, this is a little story. the more important you are in washington, the worse you are treated when you come to a building. there were six elevators, you could take any one you wanted. you have to come on the trash elevator. we make you come down to reserve room. that is what it means when you are important. it is called security. we are delighted to have the prime minister here. this is an exciting time for us. we know of his leadership through the years and we are really delighted to have him here. we are excited that he can be with us today. i would especially like to say words of thanks for our colleagues. we are delighted to have you here, a senior advisor to the prime minister is here. the deputy chief and cabinet secretary.

the ambassador is here, one of my bosses. i have to recognize him. a great service for america and japan, we are delighted to have you here. and the governor from alaska, he is our closest state to japan and has the keenest interest in japan. it is wonderful to have you here, governor. there is a new word in washington, the new economics that prime minister abe is bringing to japan. we have to get ourselves started again and i think that is exactly what he is doing in japan. i would like to take a second, talk about the foreign-policy agenda.

japan's foreign policy going forward to protect freedom of thought, expression, and speech in the asia-pacific. can you think of anything more important than that? this will help transform the region. to make sure that the seas are governed by rule of law and not by intimidation or power. to pursue interconnected economies and bring about a more fruitful enter cultural ties with japan and other countries in asia.

and to promote the exchange with the younger generation. these are the principles the prime minister has articulated and i think they are good for america. this is a partnership that is good for us. we will have a chance to hear prime minister abe. the meeting with the president was extended because -- i do not know how much he is going to tell us. it is a very important dialogue that we have between japan and america. this is the most foundational relationship we have and we needed to be successful. i know the prime minister will be a key leader for that. about 80% of americans believe that u.s.-japan relationships is the most important foundational relationship in asia. it is emblematic of how a important we give this relationship. in his tenure and president obama's second term, we are delighted to have him here.

please welcome him with your applause, prime minister abe. [applause] >> thank you for your warm introduction. thank you, ambassador. thank you, governor. thank you, doctor green. and thank you all for joining me today. last year, we updated a paper about japan. they asked if japan would end up becoming that nation.

here is my answer to you. japan is not and will never be a tier two country. that is the core message i am here to make. i am back. [laughter] [applause] thank you. and so shall japan be. that is what i wanted to say. i could stop here and take questions for the next 50 minutes. i know, however, that society has started to look anxious.

bear with me for another 20 minutes. the time i have spent, five years, since being prime minister. first and foremost, where japan should stand in the future. japan could do this, and what japan must continue to do, here are the tasks that are always in my mind. in the asia-pacific, it gets more and more prosperous. japan remains. for investment properties,

labor, environment, and the like. secondly, japan must continue to be a guardian of global commands. like maritime command (enough to benefit everyone. japan will work even more closely with the u.s.. throughout the region.

we are and effective ally and partner to the u.s.. i also looked at the globe. as your longstanding ally and partner, japan is a country that has benefited from and contributed to peace and prosperity in the asia pacific for well over half a century. needless to say, it has been our

alliance. it is high time in this era of a resurgence for japan to bear even more responsibilities to promote our values. and grow side-by-side with high achievers in the region. no luxury is allowed for japan to be absorbed against economic malaise. they also told me that japan must remain a robust partner in fighting against terrorism. the result is even stronger now after what happened in algeria. the killing of 10 japanese and three american engineers. the world still awaits japan.

we are promoting human rights. global warming. the list goes on. that is why i am turning around the japanese economy. i said a moment ago that the agents are making great progress with the exceptions of a single country. i should have added the exception, of course. north korea.

the nuclear test, inducing an added distinction. the nuclear ambitions should not be tolerated unless they give up on developing a nuclear arsenal. they objected. my government will give them no reward. this is no regional matter. we should work with the u.s., south korea, and others to stop them from seeking those ambitions. if you look at the lapel of my jacket, i put on a blue ribbon to remind myself each and every day that i must bring back the japanese people that north korea has objected.

among banharn was a girl -- among them was a girl who was only 13. that is the reason why behind human rights, japan must stay strong. for the economy and also for national defense. let me tell you that japan must be here as well. to increase for the first time in many years, the budget for homeland defense. today, here, with you and all of my distinct friends and guests, i make a pledge. i will get back a strong japan. we will do more good for the betterment of the world.

[applause] japanese borders have given me a renewed ability as prime minister to turn my tasks in to reality. each morning, a wake-up with tremendous responsibility. something called abenomics. i did not coin the word.

this is the name for my economic supply. in japan, inflation has gone on for more than a decade. my plan is to get rid of that, first and foremost. indeed, it has made a jump start. the bank of japan who will do their job. investors, both japanese and foreign. japan's industrial fell to export growth has risen as a result. the second is to carry out a supplementary budget. to lift the economy by 2%.

the third one is about growth strategy. consumption and investment will come much sooner. so far, all economic indicators, which have shot those before. but only incrementally. there are strong and being shot with any interval. soon, japan will export more. the u.s. will be the first to

benefit from that. from china, india, indonesia, and so on. that is not the end of the story. a task even graver remains. to enhance japan's productivity. women should be given much greater opportunities. the mostly aged population should be able to give their

money to the younger generation with similar tax burdens, which is exactly what my government is now doing. before conclusion, let me make a few words on china. and then define how i view the u.s.-japan relationship. history and international law both attest the japan sovereign territory. between 1895 and 1971, no challenge was made by anyone against japanese sovereignty. we simply cannot tolerate any challenge now and in the future. no nation should make any miscalculation about the permanence of our resolve. no one should ever doubt the robustness of the japan-u.s. alliance. at the same time, i have absolutely no intention for escalation. my government is investing more into the people oppose the exchange's between japan and china. for me, japan's relations with china stand out as among the

most important. i never cease to pursue what i call mutually beneficial relationships based on the economic interests with china. the doors are always open for

the chinese leaders. it leads me to say a few words on our mutual ties between the u.s. and japan. in order for us, japan and the united states, to generally provide for the region at the world, more democracy and more security with less poverty, japan must stay strong. that is my first point. i have started to revisit our national defense program outline. our defense ministry is getting an increased budget in order to do that at the start. looking back, it is remarkable.

between japan and the u.s., bad days and good, rain or shine, for more than one-fourth of the entire history of the united states. it should not surprise anyone. the oldest and the biggest maritime democracy. and japan also has the most experienced and the biggest democracy. it is a natural fit. the biggest emerging market, now out in conclusion.

ladies and uncommon, my task is to look towards the future. and make japan the second biggest emerging market in the world. and even more trusted partner for the region and the world. the road ahead is not short. i know that. but i have made a comeback just to do it. for the betterment of the world.

i know that i must work hard as well to make it happen. ladies and gentlemen, japan is back. [applause] and keep counting on my country. thank you very much. [applause]

>> prime minister, thank you very much, and welcome back. we will take questions. please ask the questions in english. keep them short and to set the standard, i will turn it back to john. >> i don't know of an american president that could give a speech to the japanese public in japanese. i want to say thank you, this is a real honor that you gave us this speech in english, thank you. prime minister, i received a phone call from the national security council had they said it was a very good meeting. they felt it was quite constructive and they did not tell me what you talked about. i am wondering about your insights in your perspective. [speaking japanese]

>> today's meeting was attended by vice president biden and the secretary of state. basically, we discussed how we would strengthen the alliance that exist between our two countries. as a result of our discussion, we were able to share not just the understanding of strengthening our alliance, but concrete ways in which we would achieve that.

we were able to agree completely on those things between the two of us. and i think the bond of alliance between japan and the united states which tends to waver a little bit during the past three years, i can declare with confidence that a strong bond of alliance between japan and the united states is back. we were able to discuss many issues, wide-ranging, and the area of politics, regional issues, economics, and we talked about how we will deal with those issues in those areas. based on a strong like between the two countries. >> [speaking japanese]

>> this is one example, but on the issue of north korea have launching of missiles and the conducting of of tests by north korea, we agree that we would deal with these issues in a cooperated way. we would resolutely deal with that issue and jointly pursue a chapter 7 resolution in the un security council. we also talked about how we would strengthen sanctions. for example, financial sanctions being applied to north korea.

>> [speaking japanese] >> concerning the asia-pacific region, we agreed that we would have to work together to maintain freedom of the seas. and also that we would have to create a region governed not on force, but based on international law. >> thank you for coming and taking my question. i am a student at american university and i conducted a research study to examine how the next generation of americans use the u.s.-japan relationship. the greatest problem i found was a lack of awareness and what is going to happen moving forward. i was wondering if you could address your plan to make sure that you understand the rich history our countries have had.

>> [speaking japanese]

>> i look like the people from the younger generation to pay attention to the alliance between japan and the united states. i said this in the meeting with the president today that a stronger united states leads to a stronger japan. and a stronger japan leads to a stronger united states. this is not only for the promotion of our respective national interests, but also for a lot of things we can do together in areas like the middle east or africa or at the united nations. our countries can do things together working in these areas to create a better world. moving forward in the future, i would like people to think about this.

>> [speaking japanese] >> in concrete terms, the u.s. forward deployment strategy is the linchpin of peace and stability in the region. but at the same time, the presence of the u.s. forces in japan is what leads to peace and stability in the region.

japan provides a possibility for that to happen as well. i don't think there is any country in the world that doesn't have the willingness to serve as a port for the fleet. >> mr. prime minister, it is good to see you again. you mentioned in your speech about north korea. i would like to ask you about south korea. we have a new president to be inaugurated next week. but at the same time, it has created a difficult tension in japan and south korea relations. i would like to know what your vision is for the future. given the threats that you mentioned in your speech.

[laughter] >> [speaking japanese] >> first of all, i would like to

say that korea, south korea is the most important neighbor for us. and the president-elect, i have had -- i have met her twice and i have had a meal with her. my grandfather was best friends with her father. at the same time, the president was someone very close with japan, obviously.

but we do have the territorial issue between japan and the united states. japan and korea, sorry. even with those issues, the economic relationship is very strong. the people to people exchange is very strong. the ties with japan and korea is something that cannot be

severed. i think the relationship that we have which south korea is extremely important, the cooperation we can achieve between these two countries. we can try to work to resolve these issues and have a good relationship with three out. -- with korea. we are planning to dispatch the prime minister. >> thank you for a speech with so many good sound buoys. -- sound bites. are there things you would like to have the united states say or do? have you conveyed some wishes or

perhaps something more, like actions or statements? >> [speaking japanese]

>> on that issue, the obama administration has already made clear that article 5 of the japan-u.s. treaty applies. they have also made clear that they opposed unilateral action to undermine japan's administrations. maybe this is not just limited to the same issue, but on the issues of the sea, i think it is important that we do not tolerate people's actions when they try to alter the status quo based on force. that is what is necessary. and on that issue, our intention is not to ask the united states to do this or that.

we intend to protect our territory. if it is inherently japanese territory and we intend to continue to protect our own territory into the future. at the same time, our intention is to deal with this issue in a reserve the matter. you'll be doing so in the future. we think that this issue should not be escalated and we do not agree to that kind of approach. i know that they have a press conference later, so i am trying to look for non-japanese questions. over there in the back. >> a senior associate with the defense department. thank you for sharing your reassuring message about japan's intention to return to the world stage and claim greater international responsibility.

you mentioned you and president obama agreed that the north korean threat requires a chapter 7 resolution. what is your expectation of china's role, and do you think china has played an enabling role in the missile and nuclear program? >> [speaking japanese] >> i believe that china is a country with the biggest amount of influence over north korea. and i think implementing sanctions, we need the cooperation of china.

and also in our efforts to adopt chapter 7 sanctions resolution in the un security council, since china is a permanent member of the council, we need cooperation from them as well. and when we look at the recent missile launcher and the nuclear test by north korea, we look to these, not as simple events, but in combination. they have increased the range of their missile immensely and they have not attained the ability to reach even mainland united states.

and they themselves have said that they have made their nuclear bombs smaller, and they have delivered on a missile. at the same time, i believe they are working and moving towards obtaining those kinds of technologies. this is why i think the united states is pressuring china to exert more influence over north korea. i think the important thing is for the entire international community to work on china towards that end. >> japan is back. it has a strong leader and america is your partner.

would you share with me your applause? [applause] everybody please stay seated because we need to let the prime minister get out. it is a security thing. the escorts will take him out. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

>> next, a former executive of goldman sachs talks about why he left the company. at 11 o'clock p.m., q and a with author and journalist keith richburg. then they talk about trade relations with japan and the united states. tomorrow the national governors association closes their winter meeting with dr. oz talking about healthy eating. that is live on c-span two. >> we know foreign countries and companies swiped our corporate secrets. now are our -- now our enemies

are trying to seize our power grid, our air traffic control systems. we cannot look back years from now and wonder why we did nothing in the face of real threats to our security and economy. >> you hear a lot of different concerns. interestingly enough, one of the concerns that we hear and you see it reflected, volume quality and timeliness. you have shared information about stuff that happened three months ago. what about now? that is one reason we are trying to increase our timeliness so that we are ahead of the issues. we are making progress in that space. i think over the last year, we have really improved our ability to share information faster with the private sector. i also hear concerns about ensuring that the other sectors that they rely on are also increasing their cybersecurity.

if you are a bank, you are reliant on power come a water, to conduct your business. what i frequently hear, all the companies want to make sure that the critical infrastructure sectors are moving together to increase their cybersecurity because everything is interdependent. >> the president's new cybersecurity executive order, monday night on "the communicators." on c-span. >> wall street executive reg smith resigned on -- greg smith resigned last year. he has since written a book called "why i left goldman sachs: a wall street story." sanfordtly spoke to hi students about why he left and the ethics of wall street investment firms. >> professor of political economy here at the stanford

graduate school of business. this event is cosponsored by the center for ethics in society which has a year-long series of seminars on the ethics of wealth. there are other parts of that series you may find interest. -- interesting. this may be of interest to you going forward throughout the year. before we get started, i want to say a few logistical things. greg is doing an event at the bookstore at 6:00 p.m., if you have detailed conversations you want to have, that might be the appropriate for them. secondly, this is being recorded by c-span, so this is forced future broadcast, just so you know if you are asking a question, you may wind up on television. because of that, we have microphones for q&a, so he will

talk for about a half an hour and then do some q&a. if you have questions, head to a microphone and he will call on you. greg came to stanford from south africa in the late 1990's, he graduated from here in the class of 2001 and immediately went to work for goldman sachs. as you probably know from reading the "new york times" he left in a high-profile way that a lot of people argued about. in some sense, the point he was making was that old man used to be a greedy type of firm in trying to build its long-run profitability by serving clients interest. his argument was that had changed. something in the operation of goldman said at people were more focused on their arsenal success and the success of their subunit.

this is a topic that was very controversial here. i hope that we can have an interesting dialogue between greg and people in the audience. you probably have all sorts of different views. welcome back to stanford and we look forward to hearing what you have to say. >> [applause]thank you very much. can everyone hear me ok? is that a yes? it is a great privilege for me to be back here. like you said, the first time i ever came to america was the day i arrived at stanford. i associate stanford with a lot of great things, a lot of idealism and optimism and it is great to see a lot of familiar faces. there are three or four people

here for my freshman dorm which is terrific. i was sitting where you were about 15 years ago, although the business school did not look like a hotel back then. it looked a little bit less fancy. a few things i will tell you about myself before i start. one is, i am from south africa. i have a slightly funny accent because i lived in california for four years and new york for 10 years, london for a year and a half areas people ask where i am from, i often tell them i am from brooklyn just to confuse them. when they get quite confused, i say, yeah, east oakland. that confused them even more. i hope everyone can understand may. i used to have a ponytail, which is also hard to imagine. a third fact about me, i started at stanford as premed.

i started the economics and premed track at the same time. ultimately, i decide to go into the business world. just to get a sense, can i take a quick poll -- who are undergrads in the audience? and business school students? and members of the community? faculty? rate. -0- - great. we have an excellent and diverse audience. you will have a good dialogue, i imagine people are split on these issues. a couple things i will say -- the professor mentioned the op- ed i wrote about goldman sachs. everything i said i very much believe is true to the industry. i do not think -- goldman is a smart firm and excellent firm

at what it does. i do not think it practices are very different to the industry more broadly. when i wrote the book and the op-ed, i was using my career there as a view of what i think has become conflicted in the industry. the second thing i would say, i think a lot of people would would want to classify my views or this talk as in the occupy wall street camp or a different type of camp. i would say, i am very much a capitalist. i just have the view that free markets imply that the playing field is fair and there aren't a lot of conflicts of interest. a big thesis of my book and what i was trying to get across in the op-ed is the fact that capitalism, at least in the financial industry, i no longer

think is on an even playing field. i think advantages aren't stacked in favor of banks and against -- are stacked in favor of banks and against their clients. i will get to this more later on. let me tell you the three things i will discuss today. the first is, has anything really changed in the industry? certainly when i wrote the op- ed, a lot of people said, things have always been this way. or, wall street has always operated in a certain sense. i will tell you how, at least since i was sitting where you were 15 years ago, in my opinion, things have changed. the second thing i will tell you is, with all these changes, how do banks exploit conflicts of interest to make money in a way that i view as unfair at best and potentially very

systemically dangerous to society at worst? then, what needs to change in order to fix this and why hasn't enough changed? on that point, i would ask, how many people in this room have heard of the dodd frank act? how many people think the dodd- frank act as then implement it? -- has been implemented? 2.5 years since god-frank was passed, less than one third of it has been implemented and more than three quarters of the deadlines have been missed. millions of dollars were spent lobbying against it. perception that conditions have changed -- i want to show you guys why they have not changed. why obama or romney or any number of politicians would want

people to think. starting with the point of what has changed, i think there have always been practices on wall street that are not great and are dubious. the simplest way to mark what has changed is look how banks make their money. and i joined the firm in 2000, when i joined wall street, at least half the money was being made in the original things that made finance get called finance. wall street finance, things that help companies raid -- raise money. they acted as an advisor in many capacities. when i joined, about 60% of goldman sachs also revenue within the banking side of the business. there will always be conflicts, but there aren't less complex than in the trading side of the business. fast forward to 2007, close to

80% of the money is being made in the trading business, which is a very marked change. i do not think people can debate that as being non-factual. with that kind of revenue change does is leads to behavioral and cultural changes. what occur that allowed this revenue shift to change? three main things occurred around the time when i was joining wall street. the first thing, in 1999 there was a thing called the glass- steagall act separated commercial banks from investment banks. it was repealed. in 2000, there was a thing called the commodity futures modernization act which essentially took complex securities called derivatives and deregulated them. it allowed the trading of derivatives to move off exchanges and basically into the dark. the third thing was, a thing

called the net capital rule was overturned. what that did was allowed anxious to increase their leverage from -- leverage, for those who do not know, is basically, if you have you can effectively leverage yourself up by taking on debts 10 or 20 or 30 times the amount that borrowing extra money. from the early 2000's to the mid 2000's, banks took leverage from five to one up to 35 to one. with these three things, which were all regulatory in nation and all -- nature and all lobbied for by the banking industry, it became very clear that as a professor said, the old model of long-term greed, which was the motto goldman sachs had for many years, which essentially said if we do right by clients over the long term and maybe turn away business in

the short term which can affect our reputation, they will keep coming back to us. we will have a collaborative relationship with the client as a partner and they keep paying us and keep doing business with us because they trust us. this shifted to a model i would call short-term greedy, which ultimately makes more profits for individuals and for the firm in a short-term but in a long- run standpoint does not serve your business well and does not serve the society well. because potentially you are doing business that is toxic to your clients and ultimately endangers the system, as we saw in 2008 where merrill lynch, aig, they had taken such huge risks that it ultimately brought the whole system down and the government had to come in and bail the system out. so we talk about all these regulations occurring -- what

basically happens is it becomes clear it is more advantageous for the bank to start betting with their own money. when you can take levered bets of 30-1 you may start seeing a client more as an information provider to help you bet more smartly as opposed to seeing eight client as a partner you help to make returns on their money. in the early to mid part of my career i saw this cultural shift occur. the firm started seeing what the biggest mutual funds and pension funds in the world were doing and started implementing their own bets using as information -- this information in a way that was not insider trading technically but allowed banks to use this big picture sitting in the middle position to bat -- bet. goldman sachs trading revenues in 2002 were $5 billion.

i 2007 it was $38 billion. it is -- businesses do not multiply by five or six times in five or six years unless there is some meaningful shift in the mindset. ultimately that leads to a what i would call a behavioral call troll shift. it does not happen overnight. if people are being incentivized to use my information to better the firm's own money and nobody is telling them there is anything wrong with that, it filters up and down an organization. this shift occurred everywhere on wall street during that period. a few examples to show this mindset shift, in the last year or so, countdown what i call the scandals that show this kind of swing from the fences behavior. you had mf global, a futures brokerage in chicago, where the

head of the firm started making proprietary bets on the sovereign crisis in europe and alternately the firm went bankrupt. there was a scandalous situation where they were potentially using customer money to fund these bad bets. secondly, in the last few months we all heard about the libor rating scandal. libor is an interest rate that affects hundreds of trillions of dollars in assets throughout the world. this is, i would say, a example of this, where traders were collaborating with each other to set an interest rate because they knew they would make more money for the firm. look at the facebook ipo -- we can argue endlessly what is facebook's fault or morgan stanley's fault, the investors fall, but certainly a manifestation of this swing for the fences try and get as much out of the deal as possible. let me go on to point two, to

explain how banks make this money using a analogy i used in my books. if you compare wall street today, 75% of revenues come from trading, to a real casino. not everybody likes gambling, but whether we like gambling or do not, when you walk into a casino you can have a lot of faith that the rules are not going to change during the game and that there are cameras all over the floor and that there is a regulatory body that for the most part is keeping an eye on things. the other thing i would say is the casino, the house is not allowed to take bets based on what everybody in the casino is doing. it is what i call an objective counterparty. let's run through this analogy a little bit. if you think about an investment bank, they are not dealing

everyone cards. let's say at the table is a pension fund, a hedge fund, a mutual fund, hundreds of billions of dollars sitting at the table. that bank, or the dealer, can see what all those people are doing and can then go out and use that information to place their own bets. you would expect someone not to lose very often if you could see everyone's cards. this is very much borne out in an example we see every quarter where banks have to release their results on the trading books for the whole quarter. there are many quarters where a bank will literally make a profit 100% of the time. that is like batting .100 -- 1.000. i am sure most people in this room invest in the market. if you make money 50.1% of the time you are probably outperforming any people in the market.

it is very hard to understand how trading books can make money 100% of the time unless you have some kind of asymmetric information advantage. that is where i would come back to the analogy of you are seeing what everybody else is doing, so you can bet a lot smarter with your own money. the second part of the analogy, i mentioned the cameras. what happened with the deregulation of derivatives is gambling can be taken to a back room where there are no cameras and no one is tracking who is losing a lot of money and making a lot of money. this is the example of lehman brothers and bear stearns and merrill lynch, where no one knew how much risk they had on their books. it turns out they had all sorts of risk and nobody in the market knew or understood them. this is the big danger of business being done in an opaque fashion, in the dark, in a very complex nature. i would argue that ultimately you need to bring began pulling

out of the dark room and bring it back into the light. in exchange, where everyone can see what is going on. to continue a little with the analogy. this is what i think is the most dangerous part of the way business is done on wall street today. the dealer. when you are playing blackjack, i think everyone knows the rules. if you get more than 21 you are bust. there are certain statistical probabilities you should and should not bet on. when you go to a casino, does anyone in the audience expect the dealer to give them bad information? for example, where the dealer is actually telling you when you are on 19 that you should take another card? no one would expect, at least when i have been to casinos, -- the dealer is kind of on your side and somewhat friendly and will tell you. you often peak -- see people who

never gambled before who will take another card of 19 and ruin everyone else's hand. the dealer would like to tell you this is a bad idea. i think you have what i would call an implicit sense of trust , we do not expect the dealer to miss guide you. what sometimes happens on wall street is a client or investor will get told to do something that if they understood the rules of the road very well would know is not in their interest to do. yet a wall street firm will tell them you should do this because they're firm might make 15 million or $20 million off of this. they are not technically doing anything illegal. that person walked into the casino. they are responsible for their own actions. i think this is where a big misunderstanding comes from. many of you remember, in 2010 there was a big sec lawsuit

against goldman sachs. there was a big hearing in front of carl levin where a lot of swear words -- one particular word was used over 20 times because of how bankers spoke about these deals. the big argument for why it was ok to sell someone something without full disclosure or without telling them your intention was this idea that everyone is a big boy. if they come to play they deserve what is coming to them. even if there is a sense of deception or a sense of misleading them. now, i think a lot about the words fiduciary duty. this is a word thrown around a lot. but the essential meaning of it is that when someone is coming to you for advice, if you are bound by a fiduciary obligation

you owe that clients, that person, the duty of telling them what is in their interest in what is not in their interest. over the time i was a waltz -- at wall street, it has turned into the sense that a fiduciary duty is not owed to anyone. the big problem with that is i would argue many clients with hundreds of billions of dollars of assets to not understand that. i will give you two examples that ultimately led to me writing the op ed. i would like all of you to think about this as an ethical dilemma, especially since we live in a time today where the idea of ethics versus legality are very different things. it if something is technically legal and will not get you sent to jail, a lot of people will do that thing. an example, we recently had a terrible storm, hurricane sandy. everybody gave donations to the

red cross society or any number of charities. i think what the general public does not know is that red cross , every university, stanford, harvard, teachers pension funds , governments, are the biggest fish in the market. they have hundreds of billions of dollars of assets and are investing with wall street. what i would ask is, as a hypothetical example, if the red cross society came to you and asked to trade a very competition derivative product that was going to pay the firm $20 million yet you knew it was not in their interest, but it would not necessarily get you sent to jail because the government classified it as sophisticated. would you do that business? more and more i saw the attitude and behavior moved to a point where yes, we will do that business because they are a big boy.

i would argue it has reached a point where because of the asymmetric information i told you about not everybody is on an even playing field. i think more needs to be done to prevent that kind of behavior. the second example i would give you is a very powerful one. for helping me make my decision. the european sovereign crisis, which is still boiling but we may remember last summer or the summer of 2011 when it looks like portugal, spain, italy were teetering on bankruptcy. i would go to trading meetings every morning and our traders would have a very negative view on the european banks, yet we were being asked to go to some of the biggest investors in the world and try to convince them why the european banks were such an attractive investment, purely because we did not like the investment and wanted to sell the banks but we knew somebody else -- needed

somebody else on the side of the trade to buy the banks. if we were just talking about some arcane investment that did not affect anyone this might not be so relevant. but i would go to my desk and i would see the biggest banks in france and all over europe moving up and down five percent- 10% a day. largely driven by this idea that every two days to drum up business clients at banks across wall street would be convinced that today's the day to sell, tomorrow you should buy, now is the time to panic. the truth is, traders across wall street did not really believe conditions were changing on the ground every day. to me this started having real world impact. millions of citizens across europe are affected by the fact that their governments cannot get their act together and banks are trying to drum up business in order to make their profits at the end of the quarter. this ultimately became something

that i thought crossed the line of the letter of the law versus the spirit of the law. ethical versus legal. it got to a point where i felt this was not the type of business i wanted to do anymore. the final point i will talk about before i take some questions and answers will be what needs to change in order to fix the system in my opinion. one thing i would say, which i do not expect a lot of people know, is that the five biggest banks in america are now bigger than they were before the financial crisis. whatever people claim or do not claim, banks still have an input said, and i would argue almost exclusive, guarantee that whenev government will support . just to explain a little bit, there was an example last summer where a jpmorgan trader

who was nicknamed the giant whale or the london whale basically took a massive debt, lost $6 billion for the firm, got a wrist slap, lost his job. the person who ran the group over the course of her career made more than $50 million, and left the job. if that loss had been $200 billion instead of $6 billion the thing that happened to the person who took the trade would be exactly the same. they would get a risks, -- wrist slap, leave the bank, and a society would have to bailout the bank because of this existing implicit and explicit guarantee. anybody who talks about free- market capitalism, we saw in 2008 when faced with the idea of are you really going to let the banks they'll, the truth is -- fail, the truth is the

government was not willing to take the risk and see what happened. everyone on wall street knows that. there is now incentive to swing for the fences and do whatever you can to maximize profits because of the trade goes bad you will just lose your job. everyone has to bail the banks out. i think what this amounts to today is what i call a privatization of profit and a socialization of downside risk. that is still in force today. anybody who claims it is not in a force is not, in my mind, telling the truth. why is not enough done to fix this? i would -- at the end of the book i point the finger back at politicians. the truth is that i think the thing we should all be most outraged about is, look at the senate banking committee, who are the firms that are giving them the greatest campaign contributions? goldman sachs, jp morgan, morgan

stanley -- look at the regulators. the hundreds of millions of dollars lobbying in order to kill regulation. this is very counterintuitive to me. a way to kill legislation in today's day and age is not to get rid of it or to get it struck from the act. it is to fatten it up. this was not obvious to me at first. a thing called the volcker rule , designed to completely eliminate proprietary trading, banks betting with their own money. it started out as a two-page document written by two senators as an amendment to dodd frank. two years later there was something like 700 pages. banks realize that if they can get the law firms to exert hundreds of loopholes and amendments you ultimately reach a point where the law is so complicated that nobody can actually -- you have achieved a victory were nothing has changed at the end of the day.

we need to say the politicians, number one, why do you not have the political will to actually fix a problem that affects everyone? banks can still be profitable, things that serve economic prosperity, raising money, helping companies merge, but when 80% of bank profits are coming from trading i do not think of banks or are being honest with the public with how their money is being raised. look at commercials and tv for citigroup goldman sachs or jpmorgan. you would think they are in the business of helping new orleans rebuild or giving money to charities. certainly there is a significant amount of philanthropy on wall street. but i would say to you that the amounts of money i aid by investing in urban communities is less than 10%. i think there needs to be a greater sense of honesty, where

people are upfront and say 80% of the money is being made in a business business that the public does not understand, frankly politicians do not fully understand, and i would say to you regulators are not resourced enough or nimble enough to understand things because they are so complex. so what i am advocating for is a return to the old long-term model where you do business, you make money, the clients make returns, banks can still be profitable. and people who do things that risk the systemic safety of the economy are held accountable. the way to do that, and i'm not a huge fan of regulation, but i think the three big things you need to do. one is derivatives. you need to bring them back the light. you need to bring them onto exchanges. proprietary trading, through the volcker rule, you need to out live. the role -- law does not have to

be 700 pages. it can be one page. a lot of times banks will hide behind market making or hedging, which is a more competent discussion. what i would tell you is it is a way to hide behind something that will let you continue to do proprietary trading. the third one, which i'm interested to hear what people in the audience think, is about our bank still too big to fail and are they too big and too complex to manage? i would say they definitely are. i would say there is critical mass building where you do not want to be destructive of the banks but when they are still so systemically dangerous is there merit to making them smaller? spin off the trading business from the retail side? i would argue that yes, there is merit to that. with those three things, i will leave it there. thanks for listening. i will open it up for questions . [applause]

>> first come first serve? go ahead. >> thank you for speaking. it seems like a lot about what you are talking about was a policy analysis of what the situation is on wall street today. but there are a lot of us in the audience who are interested in taking those issues the way you described it from a personal perspective, if we were in your shoes, what is our duty and what is the best way to effect change? one thing that i noticed was since you wrote the op-ed and attracted a massive amount of media attention, a lot of that momentum seems to have died down over time. there does not seem to be the same degree of scrutiny over goldman or wall street generally. it made me wonder, maybe part of it is because publicly publicizing your reason for leaving goldman sachs, even

potentially sympathetic employees at goldman think there is some pressure to did -- defend the integrity of the firm because they are attacked from the outside. perhaps you faced more resistance than you would've had you taken this internally. i'm wondering, given the information you know today, if you had to do it all over again would you think it would have made more sense to have the same content of the op-ed but not take it to the "new york times" but e-mail it to every employee in the goldman sachs worldwide directory? >> that is a great question. there is a way to send something to everyone in the global directory, which everyone fantasized about at some point. if you have mistakenly sent an e-mail to everyone. what i would say to you is it took me -- in the book, i say i wrote the op-ed over four months. i went through a process of having dozens of conversations, first with the people sitting around me. behind closed doors, a lot of

people on wall street feel a sense of angst about the sense that the game could end any day. i think everyone, 95% of wall street, are fundamentally decent people. but i think they're being asked to do things that, as i have been talking about, step over the line of what i think is ethical at times. what i would say to you -- i do not think goldman sachs is the problem. i think this is a systemic problem. i know the professor was saying -- there is a real temptation to think that if we send two or three bad eggs to jail the problem will be fixed. the point i tried to get across in my book is that this is not a problem about a few bad people making bad ethical decisions. this is about a whole system that does not just encourage people to make these decisions,

but incentivizes them. their bonus will be directly determined by how much they bring in. conversations to check with people who felt similar. i also had conversations with goldman partners behind closed doors, half of whom agreed with me about these ethical lapses and long for a time about returning to this long-term agreement tally. it gets to a point where it is the golden goose -- as long as it is paying people money, there's not a lot of incentive to pull the curtain curtain back and actually change the system. what i would say to you is that there are a lot of people in difficult situations. not just relative to the world, but people who have kids going to private school, all sorts of bills. living and expense of life. by sending a letter to people internally i could very quickly see through my conversations

with people, including a couple in the management committee. by the way, i think this applies to any firm. there is not a lot of incentive to change something. if you are doing something and are not going to jail are going to trouble for it, in my opinion by talking to people about it internally you will not have an impact. i think this problem is as big as politicians and regulators not understanding the broader problem. alternately i decided i was going to leave. i did not think there would be merit in trying to say something publicly -- i did think there would be merit in trying to say something publicly, not to destroy profitability on wall street but may be restored to a more stable fashion. giving you an example for the business school students. look at, is a short-term greediness actually good for goldman sachs's business or jpmorgan's business? i would say i do not think it is good for the business. look at how the stock market values banking stocks.

banking stocks are valued at below value. even the markets does not like this model where there is no predict ability, no sustainability, no long-term orientation. earningspmorgan's statement. there is zero disclosure of how the money is made and where it is made from. investors cannot value companies correctly. i just thought there would be something to be said for saying something publicly. i think the people from within the industry do not say something -- nothing will change. we will go through a cycle where every seven or eight years we have bubbles that expand and ultimately burst. let's hope it does not happen again. >> that is pretty discouraging. you bring out a really good point that the process of regulation seems to be kind of hopeless. big money will defeated over

time by boring from within. who watches the watchmen? is that an ethical thing we have to have, to change the structure? how do you see the move from these great investment houses moving from a partnership to a corporation, and do you see a correlation of that, the emphasis on a fiduciary relationship versus a counterparty relationship. do you see that? >> i see that as being a huge contributor to the problem. goldman sachs was the last large private firm on wall street. when you are a private partnership your partners' incentives are much more aligned with clients. if you do a deal with the government of libya and it ruins your reputation and people pull money from your firm, you will feel immediate pain because your capital is tied up. when these firms became public it became much harder to take

ownership of the problem. i do think that it is an issue. it is hard to go back in time and privatized firms, but when they were private incentives were aligned. i think client interest was better served and banks were less dangerous because they were less big. the reason banks became public is because of this move in the to create what i call these banking supermarkets like citigroup. in order to compete every investment bank had to get bigger by getting public funding. if we could go back in time and reverse glass-steagall being repealed, reverse the derivatives being deregulated, reverse the leverage issues, in my opinion i do not think we would have had this scandal as bad. the financial crisis could have still occurred, but i do not think it would have occurred on the same scale. alternately i think the way you

fix it now is point the finger at politicians and regulators and say, we elected you to understand what is going on. if the system is too complex to understand you need to make the system less complex. if you are being corrupted or unable to be objective because people are giving you money and lobbying and funding your campaigns, the a left rate needs to vote those people out of office and say, this senator is no longer objective. this regulator running the sec no longer understands what is going on. i have said the public is not more tuned into this issue. my biggest goal in the book was really to write this book not for a wall street audience or anyone who knows anything about finance, but to write it for people who know nothing about finance. to pull the curtain back to show. there are a lot of good things going on wall street, but a lot of conflicts of interest. only if the public holds

politicians feet to the fire will things change. my hope -- an earlier question was how can business school students and college students change things. one thing, speak to politicians, hold them accountable. fill yourself in on issues. when you do work in finance, act within your own ethical compass. one by one people can change things. but i do think politicians ultimately probably harbor the largest amount of blame in this. >> this was a great segue to my question. what are your plans for the future as far as her career? i think you would be great in congress are working for the sec or the department of justice with your background in values. i'm sure there are people in this room who would support you. >> thank you. i told some people i am becoming a dj, which is not a very popular thing, as a joke. in the short term my plan is to try to bring awareness to i would say the motion or term crisis, the fact that dodd frank

is dying what i call a very slow death by a thousand cuts. i am sure everyone tuned into the presidential election. not one candidate talks about financial reform. does not matter if you are democratic or republican. there is literally one person running for president -- senate to even mention it, who is a elizabeth warren. we can agree or disagree about whether her views are accurate or not, but what i do commend her for is that she is talking about it. if it affects people's lives, politicians should talk about it. i want to give talks like this to give a little bit of awareness to what i think is a serious problem. longer term, i would like to be helpful to congress and to the sec. i have been in touch with people in congress, and i hope to be helpful to them. in terms of my longer term

plans, have not figured it out yet. a lot of people said, you have burned your bridges on wall street, you will never work there again. but i think the point i make to people is that that is not what i hear from the public in terms of this idea of returning to fiduciary standards. the big players in the market are not hedge funds. hedge funds -- those investors account for five percent. the big players are teachers pension pants and sovereign wealth funds and mutual funds to hold 401(k)'s and donations and retirement savings. i would like to be part of the solution in terms of bringing a greater fiduciary standard back to markets. >> earlier in your talk you mentioned merrill lynch and lehman brothers and bear stearns as being three firms that were overleveraged and operating in the dark.

and they kind of disappeared. could you give us your thoughts on why lehman was allowed to burn up and the other two were rescued? >> it is a very controversial topic, which i think conspiracy theorists will talk about for a long time. but i was sitting on the trading floor when that happened. when lehman brothers was allowed to fail, any record checkers or fact checkers should go back and look at the editorials the following day. liberal periodicals and conservative periodicals praised hank paulson for drawing a line in the sand and saying, you know what, if you take irresponsible risk in your leaders are not willing to fix the problem or show the right amount of transparency, you are going to be allowed to die. ultimately when the government reversed course on aig and molto

other things i think it showed a tremendous amount of uncertainty in the market area everyone panicked, and it led to more problems. looking back on that, i think there was a mismanagement in that what markets like, anyone who invests in stocks will no markets like consistency. they like to be able to see what will happen in the future. the fact that every day was a guessing game of who will be allowed to live and die was a very dangerous thing. i think perhaps everyone should have been saved or everyone should have been allowed to die. i think everyone would have been scared to see what happened. that is an extreme view. but ultimately i think history will look back on it and the crisis probably would have been worse if -- i say it is hard to say. you need a crystal ball in order to tell. >> first of all, thank you for speaking out on wall street. a lot of paychecks are dependent

on not speaking out. i wanted to thank you for that. there is precedent for prosecuting people for securities fraud, like in the 1980s during the savings and loan scandal. i wanted your thoughts about how or why there have been zero criminal prosecutions of any wall street executives. >> an excellent question. i think the question everyone in america asks. the reason is quite simple. the laws are not, i would say, on the level that allows criminal prosecutions to take place very easily. this is what wall street wants. right now you need to prove criminal intent to defraud people. look at any number of examples, the mf global example, a particularly egregious one where jon, the former head of goldman, a former governor of

new jersey, essentially $1 billion of money disappeared. the reason they will tell the public that nobody went to jail or was prosecuted is because in order to prove intent that they were trying to defraud people, it is a very hard thing to do. i would argue -- as i said, i would not classify myself as a pro-regulation person, but any thinking person realizes that if everyone is driving race cars and there are zero speed limits and everyone is just mandated to self regulate and not crashing the people, alternately you will get bad accidents -- bad actors to crash into other people. i think the laws need to be more strict. the hope was that the momentum coming out of the crisis would be used to change those laws, but unfortunately things are fading into memory. frankly, that is what banks

want. they want us to receive into memory. personally i thought the jpmorgan example was something that should have been a much bigger deal. it was very symptomatic of this reckless, we gamble and if we win we keep the profits and if we lose we do not have to worry about it. it was an opportunity for congress to change things. someone speaking at the business will next week have done great work -- has done great work prosecuting insider trading. go for the low hanging fruit. it is easy to prove a billionaire used misinformation in order to make some money for himself or herself. the truth is that insider trading does not actually affect that many people. the real issue in my mind that the justice department and lawmakers should be going after is the systemic issue of, i mentioned earlier the proprietary trading. i would tell you it is absolutely going on.

it is just going on under what i call a new term, hedging or market making. we are doing this. the truth is in my mind much less is being done in the service of clients. much more is being done by using the fact of serving clients to make yourself money and place your own bets. i think congress needs to become a lot smarter fixing the rules. if they can fix that rule i think it will be more valuable than sending people to jail. the great danger of that is then everybody says we have fixed the problem. the real problem is much greater and much more systemic in my mind. >> you mentioned mutual funds are among the major players in the market. do these systemic factors that you mentioned have a significant impact on what i will call mainstream mutual funds that invest in equities or fixed income as opposed to the fringe players? should we as individual

investors have concerns? >> absolutely. i will give you a couple examples. may 2010, there was a thing called the flash crash where the market literally dropped 12% in one second. nobody could explain what happened. people who researched the issue speak about a thing called high frequency trading, which wall street firms have computers that they get to the stock a millisecond before anybody else. this creates a lot of volatility. i would argue that mutual funds, no matter how vanilla, are still investing in stocks. if the market cannot be assumed to be fair and without uneven advantages, i do think people should be concerned. i do think mutual funds should also be held accountable not to use products like derivatives when they do not fully understand them. a lot of the time they don't. >> thank you very much. >> i have a question that is

related to some of the answers you have provided. i think all of your responses have talked about regulations that are instituted and also talked about incentives and perhaps disincentives for some of the behavior that he this. i would like to understand, given the complexity of enforcing regulations and what you have advised the audiences and future generation of financiers in wall street -- what would you recommend on the business side aside from the legal consequences of violating regulations, something that relates to the financial rewards? in that context, if you could also tell us what differentiates what goes on here in the us versus the european market? >> good question. i think a lot has been raised

about compensation on wall street. i think one of the ways wall street firms will defend paying people 10 million or 20 million or $30 million is that if we do not do it they will go somewhere else and do it. i think this is a circular thing that keeps going around. if firms decided to bring consensus -- incentives back in line things would change. the way you do this is you have to tie compensation and incentives to the performance of your clients, and have to tie it to a long-run orientation where you take away the incentive the london whale had to swing for the fences because they wanted a big bonus in year one. you have to make compensation based on a five-year or 10-year record where clawbacks are very strict and are enacted. yesterday i am sure many people saw jamie dimon, ceo of j.p. morgan, his compensation was cut because of the london whale

yesterday. people might say that is a great victory. i would say that to me it is more of a band-aid, trying to show the public. there needs to be a more systemic change in incentives. the truth is that human nature and agreed it is something we as a people in my mind cannot regulate. if one had to fall some of the protests that took place around wall street, what i think is effective is to protest something very simple and factual, like bring derivatives onto exchanges. outlaw proprietary trading. do not give people the ability to swing for the fences. you take away the product they are using to do that. i think you try to tell people you need to make less money or we are going to your pay at x amount does not -- i do not

think that jibes with american capitalism as i see it. people should be able to get rich and make lots of money. i just think they should be required to do it in a transparent way that does not endanger other people. i think the easiest solution in my mind is to hold regulators accountable, hold politicians accountable, and take away the things that allow people to swing for the fences by regulating the markets. in terms of the question about europe versus the us, europe i would say is more like the wild west than the us. the last chapter nine book, when i moved to london i actually called the chapter the wild west because there is very much a greater sense of anything goes. i would say the us is a leader in a lot of these products, and the europeans follow. if the us can get these lot right -- these laws right, one

reason congress doesn't want the passes he does it they do it here banks remove the euro. i guarantee that if the us changes something makes the system more responsible they will be a sense of arbitrage around the world where everybody will try to get somewhere else, but ultimately the us is the strongest market in the world and i think others will follow if we do things here. >> in terms of your second point of the asymmetric nature of information and the casino analogy, when we talk about deposit creation like what is going on right now, the last month of last year there was $220 billion of deposit creation in the us system, it is working its way into fractional reserves and then the banks are obviously hedging as you pointed out, possibly not in a best interest. in terms of the deposit creation, the largest in history, who -- where is that

money coming from, and in the casino analogy who is that person? >> i think deposit creation comes from the fact that you look at retail investors and how much they have been investing in the stock market. since the flash crash in 2010 it has dropped significantly. i think there is a sense that people just want to put their money in a bank account and keep it safe to an extent. i think it is the fearfulness that come to invest in the market. do i believe that a big banquet of citigroup or jpmorgan is necessarily using those funds -- bank like citigroup or jpmorgan is using those funds recklessly? i do not think so. but are they proprietary trading? yes. that was the example of the london whale. i would hope that the system and the stock market become more transparent.

investors do not feel the need to put their money into savings accounts but in vast. because that has helped the market grow. >> you mentioned a number of banks that have behaved rather badly. what are the banks that have behaved well? that have been more profitable than the banks that paved badly? if not, you have a reversal. >> look at the canadian banks. just as an example. they did not have a unending leverage. they did not get the same complex products. they weathered the financial crisis just fine. i would say in the us, you look at banks like wells fargo that did not have a similar ratcheting up of risk and the fiduciary responsibility, look at the more boutique asset

management places whose interests were not all over the place and did not have all sorts of conflicts. i think they survived a little better. in retrospect i think banks like goldman sachs and morgan stanley and frankly jpmorgan were lucky to have survived the crisis. i think there was an effect occurring -- the government would step in and save. i think the people who weathered the crisis just fine were the ones who retained this fiduciary duty, where they were not betting against their clients, were not using client information to make themselves money. at the time they were less profitable but five years later i would argue they are a lot stronger and lasts shaky ground -- on less shaky ground. >> in the case of, was it because of any government regulation? >> it was. governments were not allowed to take 31 leverage. there were not allowed to proprietary trade in the same sense.

well we as americans want maximum profit and maximum capitalization, the speed limit topic is relevant. if you have smart curbs that do not allow you to make 50 times the amount of money but also do not allow you to lose times the amount of money, i think it is just smarter. >> i wanted to say, i applaud your courage. that was a great day to post on facebook your announcement and get feedback from friends and family. you talked about the ethical and legal dimensions of your decision-making process. this is your token seminarian question. was there a moral or religious dimension to that? >> you know, a theme that runs through the book -- i am jewish, and i do think that my upbringing has some effect on things.

when i talk about the idea of a charity or philanthropy or university being charged hidden fees, i do think there is a ethical element that ways on that that stems from one's religious upbringing. i do think it had some impact. i think it goes to this final line between ethics and legal, and there are too many people willing to make decisions that are technically legal but not necessarily immoral. i think religion in my mind plays a part in that. that is a good question. one last question, and let's wrap it up. >> in order to effect change you have to almost use the kiss principle -- keep it simple, stupid. could you boil it down to two items on a macro basis -- repeal the repeal of glass-steagall

and derivatives, bring it back to where it was in the clinton era because it seems to have worked for 70 years. secondly, on a micro basis would've restrictions such as what happens with morgan stanley where the treasurers get compensated in deferred compensation over five years, would that not create the disincentives for next year's bonus? -- to bet the house for next year's bonus? >> to keep it, i agree. the two major history -- regulatory things i am advocating for are the repeal of the two things that happened in the early 2000's that led to a lot of problems. derivatives being re-regulated. the cftc has been sitting on it for two and a half years and has not made a lot of progress. the second is the volcker rule, which in a sense is a little bit like many of the things glass-

steagall stood for. there are certainly people who stand for the full repeal of glass-steagall. there are huge political fears about doing that, but i do think some form of breaking up extremely large banks and disallowing reckless trading activity is noteworthy. i do think the thing about compensation and deferring is essential. but does it fix the problem completely? i do not think so. the truth is that if you swing for the fence in year one and your bonus, things do not work out, you can still leave and go to a hedge fund or go do something else. i do think that the law actually has to become stricter. i think greed and swinging for the fences will always be around. it is impossible to stop. so i think you actually need to change the root cause, which is in some -- if someone gambles with client money or bets against their client, that

person needs to potentially go to jail or have some disincentive that is so great that if you're reckless person, there are only two or three things they think about before they endanger the whole house. laws have to change in addition to compensation. but not irresponsible laws, just ones that create curbs that do not allow reckless activity. i do very much, everyone. -- thank you very much, everyone. [captioning performed bynational captioning institute][captions copyright nationalcable satellite corp. 2013] >> tomorrow, the arms control association holds an event with former ambassador thomas on iran's nuclear capabilities. the event is live on 2:30 p.m. eastern on c-span three.

secretary of state john kerry has begun his first official overseas trip as secretary of eight. the nine-nation 10-day trip will take into great britain, germany, france, and italy, along with turkey, egypt, saudi arabia, united arab emirates, and qatar. he gave his first major speech at the university of virginia, talking about the need for a strong foreign aid budget. >> i joined president obama today in asserting with urgency that our citizenry deserves a strong foreign-policy to protect our interests in the world. a wise investment in foreign- policy can yield for a nation the same return that education does first student. no investment that we make that is as small as this investment puts forward such a sizable

benefit for ourselves and our fellow citizens of the world. that is why i wanted to have this conversation with you today, which i hope is a conversation that extends well beyond the borders of charlottesville, well beyond this university, the all- americans. when i talk about a small investment in foreign-policy of the united states, i mean it. not so long ago someone told the american people and asked, how big is our international affairs budget? people pegged it at 25% of our national budget. they thought it odd to be paired way back to 10%. let me tell you, would that that were true. i would take 10% in a heartbeat. 10% is exactly 10 times greater than what we do in our efforts to protect america around the world. in fact, our whole foreign- policy budget is just over one

percent of our national budget. think about it a little bit. over one percent -- that funds all of our foreign affairs efforts. every embassy, every program that saves a child from poor drinking water or aids or reaches out to build a village. every person. we are not talking about pennies on the dollar. we are talking about one penny on a single dollar. so where do you think this idea comes from, that we spend 25% of our budget? i will tell you, it is simple. as a recovering politician -- [laughter] i will tell you nothing gets a crowd clapping faster than a lot of people -- and a lot of places than saying i will go to washington and get them to stop spending all that money over there. sometimes they get a lot more specific. if you are looking for an

applause line, it is about as guaranteed as you can get. but guess what? it does nothing. nothing to guarantee our security. it does not guarantee a stronger country. it does not guarantee a sound or economy or a more stable job market. it does not guarantee that the best interest our nation are being served. it does not guarantee that another young american man or women will not go and lose their life because we were not willing to make the right investments here in the first place. to the to say no politics of the lowest common denominator and the simplistic slogans and start making real choices that protect the interests of our country. that is imperative. [applause] erry's ee secretary carrk entire speech, visit our website, c-span.org.

>> next "q and a" with an author and journalist keith richburg. after that, the japanese prime minister talks. discussesculture uppe challenges facing the agriculture industry. >> tomorrow, the bipartisan housing policy commission will issue recommendations for future housing policy. it will discuss a new system of housing finance and affordable rental housing. >> we know foreign countries and companies swipe our corporate secrets. now our anomie is are also seeking to sabotage our power grid, our financial institutions, our air traffic control systems. we cannot look back years from now and wonder why we did nothing in these days of real threats to ours. he and --

>> you hear a lot of concerns. interestingly, one of the concerns we hear and you see it reflected in volume, quality, and time. great, you have shared information with us about stuff that happened three months ago. what about now? that is one reason we are trying to increase our timeliness. so we are out ahead of the issues. we are making progress. over the last year in particular we have really improved our ability to share information faster with the privates actor. i also hear concerns from different sectors about ensuring that the other sectors they rely on also are increasing their cybersecurity. if you're a bank, you our reliance on power and water and transportation's to conduct your business. what i frequently hear is that compie