think that gun trafficking is a federal crime. now, most americans already think that gun trafficking is a federal crime. i have news for you, it is not. they have no idea that there is no federal law targeting firearms traffickers who use straw purchasers to buy guns for convicted felons and other dangerous criminals who cannot legally buy guns on their own. in congress we have heard repeatedly from law enforcement that the law to prevent straw purchasers, and this is their words, not mine, that they are viewed as nothing more than paperwork violations similar to getting a ticket for going 65 in a 55 mile zone. again, not my words, those are the atf and police words.

after years of working on this issue and hearing firsthand from law enforcement officials that they needed congress to strengthen gun trafficking laws, i join my republicans and democrats in february to introduce gun trafficking prevention acts for 2013. this common-sense legislation will put a first time explicit prohibition on firearm trafficking, making straw purchasing a serious crime by increasing the maximum penalty to 20 years in prison. i am grateful to have significant support from law enforcement officials all over the country. nearly 30 organizations support the bill, including law enforcement officials throughout the nation. these officials believe that this legislation it is very critical to combating firearms moving to criminals, cartels,

and other dangers people. the bill also enjoys significant bipartisan support in the house of representatives thanks to the fall leadership of -- and others. bipartisan support for the legislation grows every day. we have now surpassed the house of representatives. the legislation also has significant bipartisan support within the senate. it was passed by the senate judiciary committee with the support of republican ranking members, charles grassley, with the support of republican senators off the committee as well. this week, after months of

work, the full senate will vote on this critical legislation. then there will be time for the house to act. judiciary house committee act to begin the process of marking up legislation so that the full house can vote on a package before summer. i know that we still have a long way to go before the president and sign this legislation into law. but it will be a tough fight. but it will be a fight worth fighting. we have so much on our side. we have common sense. a desperate need. the importantly, we have driving passion of thousands of

families who have been victimized by gun violence. the vast majority of americans believe that congress passed legislation to keep guns out of the hands of criminals. i know that both the president and vice president share of the passion for reducing gun violence. for the first time in decades the white house made preventing gun violence a top priority. just last week the white house held a press conference on this issue. but we will never forget those who lost their lives because a gun man decided to pull the trigger. as the president said, "" we are proposing -- what we are proposing is not radical. it is not taking away anyone's gun rights. it is something that if we are serious, we will do it. now is the time to turn heartbreak into something real." now, i have been asked apart

--m our gun trafficking bell bill whether i support other gun related legislation, and the answer is that i do. for example, i believe that fixing the background check system is one of the most common sense actions we can take to prevent criminals from getting guns. i think that would complement our gun trafficking legislation very well. background checks would prevent many criminals from obtaining guns. the anti-trafficking legislation would impose strong new penalties on those who try to get around the system. for myself, i have chosen to focus primarily on gun trafficking legislation, because it is an issue i have been working on for several years.

in the house. i have worked painstakingly with both democrats and republicans to slowly build a bipartisan coalition behind this bill. i strongly believe that when people understand what this bill does, they will support it wholeheartedly. in fact, even the nra has come around over the past several months. there are only two groups that still oppose this bill. let me say that again, there are only two -- that still oppose this bill. criminals and people who want to buy guns for criminals. if congress had passed this universal background check legislation, we will have made substantive reform to reduce gun violence across this great nation. we are not done yet.

work believe that if we together and work hard and we focus on our common purpose, our common purpose of protecting our families from gun violence, then we will have succeeded. no parent, not one, should have to send a child to school, be it sandy hook or old dominion, and wonder whether he or she make it home alive. our country is better than that. we are better than that. in america's inner cities, suburbs, and small towns, gun murders take more than 11,000 american lives each year. more than three times the number of americans that lost their lives during the decade- long war in iraq. that is the reality.

we must make these deaths by gun violence transformative. as a nation we must help to heal the families who have suffered so much. part of the healing process for me and for countless other families is to prevent other senseless deaths from gun violence from occurring again. we are the congress of the united states. we must be vigilant and put party politics and rhetoric aside, taking protecting american families and future generations of our priority. this is our watch. this is our watch. to borrow the words of the great martin luther king, he said the be must substitutes courage for cost. for passing meaningful gun

legislation as soon as possible." one last word, when i think about the many young people who have died, i think about the children in sandy hook. i think about the mass shootings we have heard about and seen on our television sets, the ones that you have written about. heart --e with all my do believe that we survivors do not have the right to be silent. we do not have the right. with that, i will take questions. >> ok, i will monitor questions. stay here with us. you have to reach far down. i am going to lead off the

questions and ask the moderator to ask if, the politics of this issue, with 90% of americans supporting your measure and the background checks, in fact are there not more parents concerned about the lives of their kids than leaders of the nra? not even the membership, which by a majority supports these measures. what are the politics that allow the nra to transcend and have a story like in today's open "the washington post," that your bill will be gutted and inserted with new language? being circulated by the national rifle association? " what are the politics around that? how can we reverse it? are we going to lose the

opportunity unless american selectively pay and not attention? -- pay not attention? >> i am so pleased that you will all have a in a few minutes an opportunity to ask wayne pierre appear. -- up here that question. i cannot answer that question, because i am not the nra. i can only speak from my own reality. i do believe will all my heart that when you have 20 children murdered, little children, simply learning how to read "run, spot, run," getting ready for christmas and somebody comes in and murders them -- i my speech that there are

certain transformative moments that happen in all of our lives. if that does not cause folks to step back and say that we need to look at the way that our country is operating and say that we need to do something about gun violence, i do not know what will. i will be interested to hear what the nra has to say about that. let me say this, having lived in politics as lawyers i have, one of my greatest concerns is that these arguments go back forth and we wind up doing nothing. we wind up doing absolutely nothing. i do believe that when you have these moments, they are pregnant with opportunity to

make a difference. and if we do not act in those moments, then things will likely only get worse. you will not hear me beating up on the nra. i want to work with the nra to bring about meaningful legislation so that we get something done. i want to deal with the bottom line. do we get something or don't we? do we have legislation, or don't we? the arguments will fade into the universe. the question is, have we accomplished anything.

great questions. i would put that on to mr. la pierre. >> all right, are you ready? start in the back. identify yourself and your organization. straw purchasers, -- >> straw purchasers resulted in the deaths of one u.s.-mexican border patrol agent. would your bill prohibits the federal government from participating? straw purchasing? >> clearly, first of all -- yes, and other words it was wrong. everyone said the reason it was wrong. the legislation would address that issue. yes, it would address that issue. ok? >> in the front? >> you talk about these transformative moments.

them. a congress woman was shot in the head. >> yes. >> what is different with sandy hook? people say, is it really different? doing a crime bill in the late 1980's in texas, a shooting in scotland in 1995, repealing the assault weapons ban in the house. why would sandy hook be different? you talk about reading "1, spot, ron," why would this be different? >> 5-year-old children. i do not know if any of you have children, but the idea of sending a 5-year-old to school and then someone walks in and murders them, i think that that -- in other words, every life precious, whether it is a 100 year-old or a five year-old, but you can learn something.

i am glad u.s. that question. -- i am glad you asked that question. i believe that -- i wish that all legislators could go and do what i did last friday. one of the things i try to always do is make sure to feed my passion. what i mean by that is that i stay focused on my job. about one week ago i -- two weeks ago i called our medical center in baltimore. i asked if i could come and see an autopsy. i wanted to see an autopsy of someone who had been the victim

of gun violence. after about one week, a case came up and he allowed me to see it. because i wanted to be reminded of how serious this thing was. i had an opportunity to see a young man, the age of my nephew, who had been shot in the head. i looked at him. a very healthy young man. i watched the autopsy. i do not know if any of you have ever seen an autopsy. it is not pleasant. to look at.

but do you know what got me? what is it? reality check. this young man the day before was probably sitting getting prepared for easter. this was a human being. who had plans. who had friends and probably a girlfriend. who has a mother and father. the reality is i am looking at a body. it has gone through the autopsy process. we need some reality checks. i do not know what it is. knownot know, i do not

what has to happen. people are trying to do the right thing in their judgment. people concerned about the issue of gun violence are trying to do the right thing in their judgment. there has to be a way to make these things come together and make sense so that folks do not have to witness that. i am convinced that it can be done and it must be done. people say -- do you have hope? just because you do not get every single thing the one, i learned this as a legislator, over 30 some years, you just keep pushing and pushing.

hopefully the difference is what we're talking about. of course you would step back and hear about that. perhaps again that would be the question to ask. of others. >> second row? yes. caldwell, associated press. the language proposed by the nra would increase the evidentiary requirements. making an already difficult crime to prosecute that much more difficult because there is not a federal trafficking law. is that something that you would except? -- accept?

>> i think that'd waters down the bill tremendously. according to what i read in the post, it appears that they are not solid on the language. it is apparently a draft but i would hope that our friends in the any -- nra would consider that. andnt to be effective efficient. we have laws that are meant to keep people who are convicted felons from getting guns. it would seem that we would close the loopholes with regard to that.

i mean, that is just logical. mr. lapierre said something not long ago when he was talking about this bill, and i want to quote him, because i do not want to misquote him. he was on "meet the press" a little while ago. it was a week or two ago. beefing up penalties on straw purchases and the illegal trafficking that they want prosecuted. look, we are 5 million families. law-enforcement families and trainers. "we want to make people safe. that is what we do every day." i did not say that.

the nra said that. if that is the case we should be able to come together and create some common-sense legislation that is effective. period. i'm hoping we will be able to do that. we will have to wait and see. >> let's go back to the front. >> could you tell us about the stacks of legislation to put andrictions on ammunition magazines? >> as you know, the leader of the senate has said that he does not know if he has the votes to do what he needs to get that legislation up. he says he has opened up a door

for it to be put before as an amendment. seeonally, i would love to limits on magazine clips and assault weapons. but at the same time i want to make sure that something gets done. i want to go back to something i said earlier. we can argue this and argue that. and we would do absolutely nothing. we have to be absolutely careful of that. to her credit, senator feinstein has done a phenomenal job and i have tremendous her and heror

efforts, but at the same time i think what is happening is that they have a determination and we will have to see how it goes. in the senate. >> in the back? >> robert, from wjla. just a quick question, it has been made clear in the past, the point that was made today, a proposal made to congress even on speculation for the changing laws about armed guards on campuses. your perspective out -- on armed guards on campuses? >> having more guns in schools is not necessarily the answer. toh all due respect, i think take care of their kids in to

see helen? that way, their students, it may not be a bad proposal. was it february 28, that thursday? we still do not know exactly all the details. i assume that that is what he will be talking about in the next few minutes. keep in mind that gun violence is not restricted to schools. we have malls, movie theaters. in my neighborhood, the neighborhood i live in. schools are one thing, but we have to look at it in a general scope. district,area in my howard county, which has guns -- guards in schools, certain schools. talking to the guards, they tell me that the greatest

benefit is intelligence. in other words, talking to the kids, learning what might be going on. things that nature. so, i do not know. but i would not just throw that suggestion out the window just as i would not want them to toss " we are trying to address here. it is a way to accomplish some good things and i would hope that they would take a look at those things and not do things to water them down. --going back to the high >> thank you.

>> i am with a mexican group. said back to what was about support for a proposal about the universal background check. i was hearing you when you said had co-sponsors. >> yes. >> and i was thinking, there are more than 500 members in the house, and the fact that your bill has only 20% support of the congress is in part responsible for this situation. the nri. at the same time,

would you say that congress is not being effective or efficient? >> 435 members of the house, 100 members of the senate, just to get the numbers right. >> let me be clear. just because we have 100 co- sponsors. by the way, that is a lot. most legislation may not even have that. maybe 20, 25 co-sponsors. my point is that the number of equal the number people who support the legislation, you get what i am saying? sponsors thebody co- legislation. i want to be really clear. i think that we have, as a congress, a duty to look at problem very carefully. i think that when we have a responsibility to reach other come up with meaningful

regulations, like those happening in our urban areas every day, one of the things about this legislation, and i want you to understand this, what is happening is we have cases where as i said in my speech where folks are convicted felons. they are trying to figure out how to make money and supply their gang members with guns. there are a lot of cases where we have had testimony on this. get someone to buy guns. to straw purchase.

one gentleman's girlfriend purchased 64 guns in rural georgia in a manner of months. those guns were sent to oakland, sold and distributed, the next thing you know they are showing up at crime scenes. that is happening all over the country. according to testimony we have become one of the crimes du jour. the problem is that we do not have the necessary dedicated trafficking federal statutes to close that big hole. buy-ar about all of these backs in various cities. various organizations are buying

back guns. this is only to find that maybe one year later, there is another buyback. the guns are constantly flowing into areas all over the country. we want to make sure that we do everything in our power to stop it. members understand only two people would be against this. the criminal and the person who wants to buy the gun from the criminal. would be against it. all right. >> they are giving you a workout today. >> thank you for doing this

today. he said you had spoken to many congressmen over the years on this issue. what keeps coming up? can you generalize the major things to keep coming up? resistances to your proposals, which seems sensible? >> you know, i think -- i say one particular thing. i do know that i have seen to the republican co-sponsors. notink that the nra, telling you anything you don't know, has put forward significant efforts to put forward their position. aople would say that that is consideration.

others i assume are looking at possibilities, but i believe that there is a way where you are do it -- dealing with something of this significance as something in your brain, the kind of pain and suffering that comes out of this issue. that it is on the side of what is right. by the way, our constituents are pretty much convinced already. talk about gun owners who say that they believe that background checks would be supported at 90%. people who actually have guns feel strongly about these measures.

in some way the role that the mayor of new york has played has been significant in trying give folks a push to remind them to come up with reasonable ways to investigate the problem, at the same time making clear she puts it in the home. balancing that out to make sure that folks understand that's we are not trying to take away their guns, but at the same time you want to demonstrate so that things like sandy hook do not happen. to take theirying guns away, but at the same time,

you want to legislate. i think that balance for some is a little difficult. >> ok, i want to make sure you have an opportunity to ask a question. congressman, to ask more explicitly, are you frustrated by the fact that democrats in the senate have not moved on this? are you concerned that this>> a great question. i -- you know, frustration -- i am not frustrated. because i believe that everything has its moment. i think that the cases being -- keep in mind that we were at a

point where we could not even have this discussion a year ago. i may not have even been to the press club. but here we are. this is about moving the ball up court. i do not know if we will score two points, three points, or more. but i believe that we will accomplish something. it may be that we laid a foundation to do even more in the next congress. the fact is that the passion that comes out of the parents from sandy hook, the passion that people that you and i know about in baltimore from those

who have suffered so much gun violence, the passion that comes to me and others, i do not get frustrated because my concern about frustration is that sometimes you can get so caught up in the frustration that you get distracted from your goal and i always try to keep my eye on the prize, to make a difference. the prize is that when i think about a young man who is lying there dead, with a bullet hole under his year on the side of his head, that is my passion. i believe that if he could speak, he would say that congress does not have the

right to remain silent. and that we need to keep it in mind. a lot of people look at folks who have suffered from gun violence and say -- they are the crusaders. but one thing that they do not think about and tend to forget, that they are acting out their pain and they have turned it into passion to carry out a purpose. and so, it may take years to achieve that purpose, but you still keep pushing on. by the way, they are not doing it for their kids. their kids are gone. they're doing it so that it does not happen to other children,

so that it does not happen to other young people. other young christophers. two other folks, like the teachers in sandy hook. ladies and gentlemen, thank you very much. >> congressman, as we conclude, thank you for the sharpness of your time. this guy is ahead. we have been yelled at for going too long. on behalf of the national press club and for what you have done on behalf of america, the national press club when like to present you with our traditional mug, and, by the way, we would have found some other reason to ask you. >> thank you all. [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] >> president obama continues his push for stricter gun control laws with a visit to colorado wednesday. he is speaking at the denver police academy about that state's newly approved gun control measures.

see his remarks starting at 5:00 p.m. eastern here on c-span. on the next "washington journal," alan talks aboutomez comprehensive legislation. then, a former immigration and naturalization commissioner, doris meissner, who now is the head of the policy institute. and later, a spotlight on magazines features lisa margonelli, from pacific standard. >> wall street executive greg smith resigned on resigned last year. times" op-"new york ed. stanfordspeaks at

university, his alma mater. this is just over one hour. >> this event is co-sponsored for the center of ethics and society, which has a year-long seminars on the ethics and wealth so there are other parts of the seminar series that you might find interesting. so this is something that may be of interest to you going fward throughout the year. before we get started i want to say a few things. first of all greg is due at the bookstore at 6:00 p.m. so if you have detailed conversations you want to have with him that might be the appropriate forum for that. this is being recorded for c-span so this is for future brad cast on c-span. cast on -- broad

c-span. we have microphones. greg will talk for about an a half and hour and once you get questions head to a microone head and he'll call on you. he graduat from here in the class of 2001 and immediately went to work for goldmanachs. as you probably know from reading "the new york times" reresigned last march in a high profile way that a lot of people argued about and a lot of people at the business school argued about. the core point he was making was at it because greedy type of firm and but greg's argument that had changed in the operation of goldman people were more focused on their personal

success or the success of their sub unit or the profits they could make in a short run. o this is a topic that was controversial and i hope we can have an interesting dialogue between greg and the people in the audience who probably have all sorts of different views to this question. welcome back to stafford and we elcome what you have to say. >> can everyone hear me ok? is that a yes. like the professor said the first time i ever came to america was the day i arrived at stay ford. so i associate the school with a lot of great things.

it is great to see a lot of familiar faces. so for the students i was sitting where you were about 15 years ago. although the business school did not look like a hotel then. it looked less francecy. a few things i will tell you about before i start. i'm fromouth africa. i have a slightly funny accent because i lived in california for four years, new york, 10 years. so when people ask me where i'm from i tell thei'm from rooklyn to confuse them. when they get quite confused, i say, yeah, east brooklyn. that confused em even more. i hope everyone can understand may.

i used to have a ponytail, which is also hard to imagine. a third fact about m i started at stanford as premed. i started the economics and premed track at the same time. ultimately, i decide to go into he 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? great. we have an excellent and diverse udience. 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 nterest. 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 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, imy 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 systemicallyangerous to ociety 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 has been implemented? 2.5 years since dodd-frank was passed, less than one ird of it has been implemented and more than three quarters of the eadlines 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 ined 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 raise money. they acted as an advisor in many apacities. 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 ultural 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. hat that did was allowed banks to increase their leverage - if you have $1 you can effectively lev it up by taking bets 10, 20, 30 times the amount by borrowing extraoney. 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 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 siety 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 your 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 wn bets using this information in a way that was not insider trading technically but allowed banks to use this big picture sitting in the middle position o 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 wha i would call a behavioral 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 fault,ut certainly a

manifestation of this let's swing for the fences and try to get as much out of this deal as possible. let me go on to point two, to explain how banks make this money using an 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 paris 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. hat is like batting 1.000. i am sure st people in this room invest in thearket.

if you make money 50.1% of the time you are probably outperforming any people in the arket. it is very hard to understand how trading books can make money 100% of the time unless you have some kind of asymmetric information adntage. 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 wi 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 e 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 ee what is going on. to continue a little with the alogy. 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 audien expect the dealer to gi them bad information? for example, where the dealer is actually telling you when you are on 19 that you should take another card? o 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 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 ou th is a bad idea. i think you have what i would call an implicit sen of trust, we do not expect the dealer to misguide you. what sometimes happens on wall reet is a client or investor will get told to do something that if they understood the ules 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

misunderstandi 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 nterest. over the time i was 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 twexamples 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. if something is technically legal and will not get you sent to jail, a lot of people will do hat 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 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 uld 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 trads 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 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 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 government will support them. 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. ifhat 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 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 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 ou 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 woul-- 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 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

actuly -- 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 at affects everyone? banks can still be profitable, can still do 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 made by investing in urban communities is less than 10%. i think there needs to be a eater sense of honesty, where people are upfront and say 80% of the money is being made in a 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 nile 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, ani'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 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 defend the integrity of the firm because they are attked 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 see 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 isot a problem about a few bad people making bad ethical decisions.

this is about a ole system that does not just encourage people to make these decisions, but incentivizes them. their bonus will be directly determined by homuch they bring in. i've had 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 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, bupeople who have kids going to private school, all sorts of bills. living an expensive 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 somethg. 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 rit 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. look at jpmorgan's earnings 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 w 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 int that the process of regulation seemso 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 hses 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 prate 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 the firms bece 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 late 1990s to create what i call these banking supermarkets like citigroup. in order to compete every investment bk had to get bigger by getting public funding. if we could go back in time and reverse glass-steagall being repeed, 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 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 longeobjective. 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 th 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 youown ethical compass. one by one people can change things. but i do think politicians ultimately probably harbor the largest amount oblame 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 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 beart of the solution in terms of bringing a greater fiduciary standard back to markets. >> earlier in your talk you mentioned merrill lyncand lehman brothers and artearns 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 topi 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 guesng 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 thghts about how or why there have been zero criminal prosecutionof 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 pson, but any thinking person realizes that if everyone is driving race cars and there are zero speed limits and everyone is just mandated to selfegulate and not crashing the people, alternately you will get bad actors to crash into other peop. 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 mory. 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 has done great work prosecuting insider tradin go for the low hanging fruit. it is easy to prove a billionaire used misinformation in oer 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 everody 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 goeon here in the us

versus the european market? >> good question. i think a lot has been raised about compensation on wall street. i thinone 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 incentives back in line things would ange. 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 areoing 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 ld regulators accountable, hold politicians accountable, and take away the things that allow people to swing for the fences by regulang 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 laws

right,ne 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 send point of the asymmetric nature of information and the casino analog 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 intest.

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 ash 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 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 on lesshaky ground. >> in the case of, was it because of any government regulation? >> it was. governments re 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 taed 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 se 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 etcal 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 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 mpensation over five years, would that not create the disincentis 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 earl2000'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 thi 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

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 noirresponsible laws, just ones that create curbs that do not allow reckless activity. thank you very much, everyone. [captioning performed by the national captioning institute] [captions copyright national cable satellite corp. 2013]

henry paulson. [applause] >> good afternoon. it is a pleasure to welcome you, where we are honored to post

today's conversation, a preview of and for the 2013 fortune global forum, which, this year, will be held in china. each year, the forum brings together chief executives and global thought leaders to discuss international commerce and other global issues. i am delighted to announce the george washington university will become the first and only educational partner for the global forum. accessum will provide to our students and faculty and alumni to some very important, at -- content that has developed, but also, "fortune" have access to our expertise. it is my pleasure to introduce today's speakers. was sworn in as the secretary of united states department of treasury in 2006. as secretary, he is the president's leading adviser.

paulson he founded the institute in chicago committed to promoting economic growth that is sustainable. before we -- he helped -- he held several leadership positions. he has long advocated the building of a strong relationship between co-chairman of the asia-pacific council and supported research on chinese investment in the united states. andy swerwe -- serwer overseas

fortune.com with a combined audience of 11 million readers. wasr his tenure, 'fortune" named to the hot list and a list in 2012. "fortune" won10, for best in business and general excellence. it won a global war for its 2009 reporting. went on to serve as a reporter and editor on wall street and entertainment. he is a regular guest on msnbc and cnbc. from 2001 to 2006, he served as a business sector.

please join me -- business anchor on cnn. please join me in welcoming them. [applause] >> thank you very much. atnk you to everyone here george washington university. thank you to all the students and everyone else who has come here today. we are delighted to see you all. also, thank you, secretary paulson, for coming and having this conversation with us. let's get right to it. the conversation today is about china and united states's relationship with them. hank is uniquely qualified to discuss this given his role in government and goldman sacks and the non-profit world. ish one of those roles

salient in a unique way to what is going on in china and the relationship with the u.s. you will see that. let's get right to the most important topic with regard to china right now. that is the changeover in leadership. the goodu have said news is the president is a strong leader. the bad news is he has to be one. i wonder if you could explain exactly what you mean by that. >> yes. let me also say it is good to be back in washington. if only for a day. particularly good to be here with all of you. you stole my line there. he is a strong leader. they have a strong leadership

team. we can talk a little bit about that. i think they have got some real challenges. this leadership team will be tested by challenges domestically and internationally over the next 10 years. on theg that economy scale they have to manage it, given that things have changed and it has been unprecedented, and their current economic model, i think, is running out of steam. i think they need to reinvent that. he has other major challenges. he really needs to make big changes in governance. institute the rule of law, which is very necessary for continued business and economic and political success.

the environment is a big area of concern. and protests. meeting to address the dirty air, and dirty water. corruption, again, which is infuriating a lot of chinese, particularly over issues like property rights and so on. it is a big challenge. this leader is particularly strong. grow rigidleadership group of the party, it is now seven rather than five. it will be much easier to reach consensus. are the only two members who are not term-limited. they will be there presumably for 10 years. the other five are really good

at getting things done. expectations are very high in the country. you would have to look back and remember how high expectations were year after president obama was elected. there is agh because general perception i agree with which is that reforms have stalled for five years. there is a lot to be done. they are high because his leadership style is very appealing. very different. he has said when people meet with him, bureaucrats come in and read talking points. he has really spoken out against some of the abuses of power. and some of the perks.

away with many of the motorcades that disrupt traffic. when i had lunch at the embassy a couple of months ago, i came away a little bit hundred. [laughter] four courses and a soup. [laughter] he said there would be no more hard liquor served. liquor company stocks dropped 10% next day. people innot allow the vip waiting rooms in the casinos. so he has done things symbolically. he understands the role the private sector has got to play. i think expectations are high. there is a lot that needs to be done. it is a difficult challenge.

running an economy where you take a look at what has happened. never in the history of the world has any country of that size had so much change that quickly. the expectations of the chinese people are continuing to grow. so they continue to manage that change. on ao put in place reforms scale he will have to do in the face of vested interests. people are going to be fighting for the status quo. the leadership team has got their work cut out for them. >> you touched on a number of challenges in terms of the economy switching from a production economy to a consumption economy. the environmental factors. the political factors, the survey -- vis-a-vis some of the neighbors. when i talked to some of the people in china, they indicated that could be problem number one. the feeling among many people in china is that to get ahead in

china, you do not play by the rules. the feeling that is something that has changed and is different than 10 years ago, and this is something the president needs to address and is very keen on addressing, do you think that is correct. ? >> let's step back and talk about rules. the reason i started off by talking about the challenge, and talked about instituting the rule of law. as you look at the history of china's economic reform, they have moved very quickly. they usehat quickly, pilot programs. and encourage innovation various activities, which are really a hint of the rules they had in place. ruled byen a country

men, as opposed to law. that is probably an oversimplification. i think the reason i and so many others went as frequently as we did to china was that relationships are very important. size andry is now at a scale where, for them to be successful, they are going to need to engage in an institution building, and to be able to implement an have laws in beijing and rules, but to be able to implement and enforce those rules, it costs -- across a wide range of areas, from the environment, and so on. with lot of this has to do not just rules and

institutions, but good governance and transparency. i believe the only way for this to work as for leaders and citizens to be invested in the in a rules based system.

lklnks to the thoughrftfuk leadership. bipartisan support is growing every day. cosponsors in the house of representatives. it was passed by the senate judiciary committee with the support of the ranking member and has the support of the committee as well. the full senate

will vote on this critical legislation. -- the full house can vote on a package for the summer. i know we still have a long way to go. before the president can sign this legislation into law. ,ut it will be a tough fight but it will be a fight worth fighting. on our side.ch we have ammon sense, desperate need, and most importantly we have the drive and passion of thousands of families who have been victimized by gun violence.

the vast majority of americans believe congress should pass legislation to keep guns out of the hands of criminals. both the president and vice president share this passion passion for reducing gun violence. ,or the first time in decades the white house made preventing gun violence a top priority. the president held a press conference on this very issue and reminded nation we will those whon -- forget lost their lives because a gunman decided to pull the trigger. what wepresident said, " are proposing is not radical. it is not taking away anybody's gun rights. it is something that, if we are serious we will do it. now is the time to turn that heartbreak into something real." --ave been asked, a part

apart from our gun trafficking bill, whether i support other gun related legislation. the answer is i do. believe fixing the background check system is one of the most common sense actions we can take to prevent criminals from getting guns. it would complement our gun trafficking legislation very well. background checks would prevent many criminals from obtaining guns and the anti-trafficking legislation would impose a strong new criminal penalties on those who try to get around the system. for myself, i have chosen to focus on merrily on gun trafficking legislation because it is an issue i have been working on for several years. i worked painstakingly with

democrats and republicans to slowly build a bipartisan coalition behind this bill. strongly believe when people understand what this bill does they will support it wholeheartedly. in fact, even the nra has come around over the past several months. there are only two groups who should oppose this bill. let me say that again. only two groups should oppose this bill. who want tod people buy guns for criminals. if congress can pass firearms trafficking legislation and universal background checks we will have made real, substantive reform that will help to reduce gun violence across our great nation. we are not done yet. but i believe that if we work

together and work hard and focus on our common purpose, our common purpose of protecting our families from gun violence, then we will succeed. , should havet one ,o send a child to school whether it be sandy hook elementary school or old dominion college, and wonder whether he or she will make it home alive. our country is better than that. we are better than that. ,et in america's inner cities , gunbs, and small towns murders take more than 11,000 american lives each year. a death toll more than three times the number of americans who lost their lives during the decade-long war in iraq. that is the reality. these steps

transformative. we as a nation must help to heal those families who have suffered so much. part of the healing process for me and for countless other prevent other senseless deaths from gun violence from occurring again. we in the congress of the united putes must be vigilant and party politics and rhetoric aside. americanecting families in future generations are priority. this is our watch. this is our watch. of so, to borrow the words the great martin luther king, he said "we must substitute carriage for caution -- cordage for caution" and

pass meaningful gun legislation as soon as possible. one last word. when i think about the many young people who have died, i think about our children at sandy hook. i think about the mass shootings we have heard about and seeing, witnessed on our television sets, and the ones that you have written about. i do believe with all my heart that we survivors do not have the right to be silent. we do not have the right. with that i will take questions. >> i will moderate the questions. stay up here with us. you have to reach way far down. am going to lead off the questions with one that bothers me -- i will take the

prerogative as the moderator to ask it. it is the politics of this issue. with 90% of americans supporting your measure and the background , aren'tand the fact there more parents concerned about the lives of their kids than there are leaders of the nra, not even membership of the nra, which by majority supports these measures -- what are the politics that allow the nra to transcend and have a story like in today's "washington post" that your bill and others could be gutted if republican lawmakers accept new language circulated by the national rifle association? what are the politics that allow that? how could we reverse it? are we going to lose the opportunity unless america collectively figures out a way to not pay attention to that kind of thing? what can be done and how do you explain it? >> i am so pleased that you all

will have in a few minutes an opportunity to ask wayne lapeer that question. i cannot answer that question because i can only speak from my own reality. i do believe will all my heart that when you have 20 children murdered, little children, simply learning how to read "run, spot, run," getting ready for christmas and somebody comes in and murders them -- i said in my speech that there are certain transformative moments that happen in all of our lives.

if that does not cause folks to step back and say that we need to look at the way that our country is operating and say that we need to do something about gun violence, i do not know what will. i will be interested to hear what the nra has to say about that. let me say this, having lived in politics as lawyers i have, one of my greatest concerns is that these arguments go back and forth and we wind up doing nothing. we wind up doing absolutely nothing. i do believe that when you have these moments, they are pregnant with opportunity to make a difference.

and if we do not act in those moments, then things will likely only get worse. you will not hear me beating up on the nra. i want to work with the nra to bring about meaningful legislation so that we get something done. i want to deal with the bottom line. do we get something or don't we? do we have legislation, or don't we? the arguments will fade into the universe. the question is, have we accomplished anything. great questions. i would put that on to mr. lapierre. >> all right, are you ready? start in the back.

identify yourself and your organization. >> straw purchasers resulted in the deaths of one u.s.-mexican border patrol agent. would your bill prohibits the federal government from participating? >> clearly, first of all -- yes, and other words it was wrong. everyone said the reason it was -- everybody agrees that is was wrong. the legislation would address that issue. >> in the front? >> you talk about these transformative moments. but there have been a number of them. a congress woman was shot in the head. is it really different?

doing a crime bill in the late 1980's in texas, a shooting in scotland in 1995, repealing the assault weapons ban in the house. why would sandy hook be different? >> 5-year-old children. i do not know if any of you have children, but the idea of sending a 5-year-old to school and then someone walks in and murders them, i think that that in other words, every life is precious, whether it is a 100 year-old or a five year-old, but you can learn something. i am glad u.s. that question.

i believe that -- i wish that all legislators could go and do what i did last friday. one of the things i try to always do is make sure to feed my passion. what i mean by that is that i stay focused on my job. about one week ago i -- two weeks ago i called our medical center in baltimore. i asked if i could come and see an autopsy. i wanted to see an autopsy of someone who had been the victim of gun violence.

after about one week, a case came up and he allowed me to see it. i wanted to be reminded of how serious this thing was. i had an opportunity to see a young man, the age of my nephew, who had been shot in the head. i looked at him. a very healthy young man. i watched the autopsy. i do not know if any of you have ever seen an autopsy. it is not pleasant. i am glad that we titled this -- i am glad d it.

ledtitled this what we tith this. what is it? reality check. this young man the day before was probably sitting getting prepared for easter. this was a human being. who had friends and probably a girlfriend. who has a mother and father. the reality is i am looking at a body. it has gone through the autopsy process. we need some reality checks. i do not know what it is. i do not know, i do not know what has to happen.

people are trying to do the right thing in their judgment. people concerned about the issue of gun violence are trying to do the right thing in their judgment. there has to be a way to make these things come together and make sense so that folks do not have to witness that. i am convinced that it can be done and it must be done. people say -- do you have hope? just because you do not get every single thing the one, i learned this as a legislator, you just keep pushing and pushing. hopefully the difference is what we're talking about. of course you would step back and hear about that.

perhaps again that would be the question to ask. >> second row? >> alisha caldwell, associated press. the language proposed by the nra would increase the evidentiary requirements. making an already difficult crime to prosecute that much more difficult because there is not a federal trafficking law. is that something that you would except?

>> i think that'd waters down the bill tremendously. according to what i read in the post, it appears that they are not solid on the language. it is apparently a draft but i would hope that our friends in the any -- nra would consider that. i want to be effective and efficient. we have laws that are meant to keep people who are convicted felons from getting guns. it would seem that we would close the loopholes with regard .o that.that's logical

-- i want to aid quote him. we are beefing up penalties on straw purchases and the illegal trafficking that they want prosecuted. look, we are 5 million families. law-enforcement families and

trainers. "we want to make people safe. that is what we do every day." i did not say that. the nra said that. if that is the case we should be able to come together and create some common-sense legislation that is effective. i'm hoping we will be able to do that. we will have to wait and see. >> could you tell us about the stacks of legislation to put restrictions on ammunitionand magazines? >> as you know, the leader of the senate has said that he does not know if he has the votes to do what he needs to get that legislation up. he says he has opened up a door for it to be put before as an amendment. personally, i would love to see limits on magazine clips and assault weapons.

but at the same time i want to make sure that something gets done. we can argue this and argue that. and we would do absolutely nothing. we have to be absolutely careful of that. to her credit, senator feinstein has done a phenomenal job and i have tremendous admiration for her and her efforts, but at the same time i think what is

happening is that they have a determination and we will have to see how it goes. >> in the back? >> robert, from wjla. just a quick question, it has been made clear in the past, the point that was made today, a proposal made to congress even on speculation for the state changing laws about armed guards on campuses. your perspective out -- on armed guards on campuses? >> having more guns in schools is not necessarily the answer. with all due respect, i think that any jurisdiction that wants to take care of their kids in that way, their students, it may not be a bad proposal.

we still do not know exactly all the details. i assume that that is what he will be talking about in the next few minutes. keep in mind that gun violence is not restricted to schools. we have malls, movie theaters. in my neighborhood, the neighborhood i live in. schools are one thing, but we have to look at it in a general scope. i have an area in my district, howard county, which has guns in schools, certain schools.

talking to the guards, they tell me that the greatest benefit is intelligence. in other words, talking to the kids, learning what might be going on. things that nature. so, i do not know. but i would not just throw that suggestion out the window just as i would not want them to toss the things that we are trying to address here. it is a way to accomplish some good things and i would hope that they would take a look at those things and not do things to water them down. >> going back to the high

support for the proposal, the % in congrere -- 100 ss. but there are more than 500 members of the house. with a 20% level of approval of both members, with this legislation be good? at the same time when there is hard support around the people we use this legislation, do you think that congress is not being effective in the position?

>> 435 members of the house, 100 members of the senate, just to get the numbers right. >> that is a lot. most legislation may not even have that. my point is that the number of co-sponsors does not necessarily equal the number people who support the legislation, you get what i am saying? i think that we have, as a congress, a duty to look at this problem very carefully. i think that when we have a responsibility to reach other to come up with meaningful regulations, like those

happening in our urban areas every day, one of the things about this legislation, and i want you to understand this, what is happening is we have cases where as i said in my speech where folks are convicted felons. they are trying to figure out how to make money and supply their gang members with guns. there are a lot of cases where we have had testimony on this. get someone to buy guns. one gentleman's girlfriend purchased 64 guns in rural georgia in a manner of months.

those guns were sent to oakland, sold and distributed, the next thing you know they are showing up at crime scenes. that is happening all over the country. according to testimony we have received, gun trafficking has become one of the crimes du jour. the problem is that we do not have the necessary dedicated gun trafficking federal statutes to close that big hole. we cannot always buy back in the

various cities. the guns are constantly flowing into areas all over the country. we want to make sure that we do everything in our power to stop it. members understand only two people would be against this. the criminal and the person who wants to buy the gun from the criminal. i do not know anyone else who would be against it. >> thank you for doing this today. he said you had spoken to many congressmen over the years on this issue. what keeps coming up?

can you generalize the major things to keep coming up? >> you know, i think -- i cannot say one particular thing. i do know that i have seen to the republican co-sponsors. i think that the nra, not telling you anything you don't know, has put forward significant efforts to put forward their position. people would say that that is a consideration. others i assume are looking at possibilities, but i believe that there is a way where you are do it -- dealing with something of this significance as something in your brain, the kind of pain and suffering that comes out of this issue. that it is on the side of what is right.

by the way, our constituents are pretty much convinced already. talk about gun owners who say that they believe that background checks would be supported at 90%. people who actually have guns feel strongly about these measures.

in some way the role that the mayor of new york has played has been significant in trying to give folks a push to remind them to come up with reasonable ways to investigate the problem, at the same time making clear where she puts it in the home. balancing that out to make sure that folks understand that's we are not trying to take away their guns, but at the same time you want to demonstrate so that things like sandy hook do not >> is the baltimore sun

still here? >> be more explicitly, are you frustrated by the fact that democrats in the senate have not moved on this? are you concerned that this legislation could be slipping away? >> a great question. i -- you know, frustration -- i am not frustrated. because i believe that everything has its moment. i think that the cases being -- keep in mind that we were at a point where we could not even have this discussion a year ago.

i may not have even been invited to the press club. but here we are. this is about moving the ball up court. i do not know if we will score two points, three points, or more. it may be that we laid a foundation to do even more in the next congress. the fact is that the passion that comes out of the parents from sandy hook, the passion that people that you and i know about in baltimore from those who have suffered so much gun violence, the passion that comes to me and others, i do not get frustrated because my concern about frustration is that

sometimes you can get so caught up in the frustration that you get distracted from your goal and i always try to keep my eye on the prize, to make a difference. the prize is that when i think about a young man who is lying there dead, with a bullet hole --der his year on the side of rough the ear and th side of his head, that is my passion. i believe that if he could speak, he would say that congress does not have the right to remain silent.

we need to keep it in mind. a lot of people look at folks who have suffered from gun violence and they are the crusaders. but one thing that they do not think about and tend to forget, that they are acting out their pain and they have turned it into passion to carry out a ke yearsit may ta but you still keep pushing on. by the way, this is the gun. they're doing it so that it does not happen to other children, so that it does not happen to other young people. two other folks, like the

teachers in sandy hook. ladies and gentlemen, thank you very much. >> congressman, as we conclude, thank you for the sharpness of your time. we have been yelled at for going too long. we have a very informative presentation and we would like to present you with this traditional national press club mug. thank you for coming. by the way, yes, we would have found another reason to ask you. [laughter] >> thank you, all. >> we are now adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] [captions copyright national cable satellite corp. 2013] pushes fornt obama sure control laws with a visit to colorado. he will speak at the denver police academy. live at 5:00 p.m. eastern on c- span.

>> people ask me how did you come across a story? while you new story are supposed to be working on something else. that is what happened to me. i was doing research one day. this photo is the one i came across. it was on a department of energy website. a newsletter saying this month in history -- i loved this because there was a vanishing point at the end of the room. i looked at the machines. i was sucked in. the women looked lovely. they have nice posture and the 1940's hairdo.

the caption said these young women from rural tennessee work and wrenching uranium for the world's first atomic bomb. they did not know. lives and work of women in atomic city. saturday at 11:00 a.m. on c- span three. american history tv. greg smith resigned from goldman sachs in 2012. he speaks to students at stanford university and why he quit and the ethics of wall street firms. this is just over an hour. >> 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 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 icrophone 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. people ask where i am from, i often tell them i am from brooklyn just to confuse them. [laughter] when they get quite confused, i say, yeah, east brooklyn. that confused them even more. i hope everyone can understand me. 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? 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 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 has been implemented? 2.5 years since dodd-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 i want to gainst it. touch on the 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. when 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 raise money. they acted as an advisor in many capacities. when i joined, about 60% of goldman sachs' 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 occurred 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 one dollar, you can effectively levy by taking bets 30 times the amount. from the early 2000 costs to the mid-2000's thanks took their 35 21.e to this measure made it clear that the old model of long-term a model goldman sachs had for years. it said if we do right by congress -- by clients over the long term, we will turn away

business in the short term that will affect our reputation. they will keep coming back. they will keep paying us because they trust us. to a model called short-term gritty. it makes more profit for individuals. it does not serve the business well or 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 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 bet. goldman sachs trading revenues in 2002 were $5 billion. i 2007 it was $38 billion. businesses do not multiply by five or six times in five or six