and that happened. and that's pretty much true of every government program that's ever been set up. but if we stay with it and we understand what our long-term objective is, which is making sure that in a country as wealthy as ours, nobody should go bankrupt if they get sick and that we would rather have people getting regular checkups than going to the emergency room because they don't have health care -- if -- if we keep mind, then we're going to be able to drive down costs, we're going to be able to improve efficiencies in the system, we're going to be able to see people benefit form better health care, and that will save the country money as a whole over the long term. >> do you think without the cooperation of a handful of governors, particularly large states like florida and texas, that you can fully implement it? >> i think it's harder; there's no doubt about it. >> but can you do it without those?

>> we -- we will implement it. there will be -- we have a backup federal exchange. if states aren't cooperating, we set up a federal exchange, so that people can access that federal exchange. but yes, it puts more of a burden on us. and it's ironic, since all these folks say that they believe in empowering states, that they're going to end up having the federal government do something that we'd actually prefer states to do if they were properly cooperating. see how we're doing on time here. last question. antonieta cadiz. where's antonieta? there you are. tell those big guys to get out of your way. [laughter] >> thank you. and two questions. there are concerns about an immigration deal from the house -- from the gang of eight -- in the house can complicate the chances for immigration reform in the senate. it seems to be a more conservative proposal. is there room for a more conservative proposal than the

one presented in the senate? that's immigration. and second, on mexico, yesterday the mexican government said all contact with the u.s. law enforcement will now go through a single door, the federal interior ministry. is this -- is this change good for the u.s. relationship with mexico? do you see -- [inaudible] -- of security and cooperation -- [inaudible]? >> on immigration reform, i've been impressed by the work that was done by the gang of eight in the senate. the bill that they produced is not the bill that i would've written. iere are elements of it that would change. but i do think that it meets the basic criteria that i laid from the start, which is we've got to have more effective border security, although it should build on the great improvements that have been made on border security over the last four to five years.

we should make sure that we are cracking down on employers that are gaming the system. legaluld make the immigration system work more effectively so that the waits are not as burdensome, the bureaucracy is not as complicated so that we can continue to attract the best and the brightest from around the world to our shores in a legal fashion. and we want to make sure that we've got a pathway to citizenship that is tough but allows people to earn over time their legal status here in this country. and, you know, the senate bill meets that -- those criteria -- in some cases, not in the ways that i would, but it meets those basic criteria.

and i think it's a -- you know, it -- it's a testament to the senators that were involved that they made some tough choices and make some tough compromises in order to hammer out that bill. now, i haven't seen what members of the house are yet proposing. and maybe they think that they can answer some of those questions differently or and i think we've got to be open-minded in seeing what they come up with. the bottom line, though, is, is that they still got to meet those basic criteria. is it making the border safer? is it dealing with employers and how they work with -- with the governments to make sure that people are not being taken advantage of or taking advantage of the system? are we improving our legal immigration system?

and are we creating a pathway for citizenship for the 11 million or so who are undocumented in this his country? and if they meet those criteria but they're slightly different than the senate bill, then i think that we should be able to come up with an appropriate compromise. if it doesn't meet those criteria, then i will not -- i will not support such a bill. so we'll have to wait and see. when it comes to mexico, i'm very much looking forward to taking the trip down to mexico to see the new president, pena nieto. i had a chance to meet him here, but this will be the first more extensive consultations and will be an opportunity for his ministers, my cabinet members who are participating to really

hammer out some of these issues. a lot of the focus is going to be on economics. we've spent so much time on security issues between the united states and mexico that sometimes i think we forget this is a massive trading partner responsible for huge amounts of commerce and huge numbers of jobs on both sides of the border. we want to see how we can deepen that, how we can improve that and maintain that economic dialogue over a long period of time. that doesn't mean that we're not going to be talking about security. firstk that in my conversation with the president, he indicated to me that he very much continues to be concerned about how we can work together to deal with transnational drug cartels. we've made great strides in the coordination and cooperation between our two governments over the last several years. but my suspicion is, is that things can be improved. and some of the issues that he's

talking about really have to do with refinements and improvements in terms of how mexican authorities work with each other, how they coordinate more effectively, and it has less to do with how they're dealing with us per se. so -- so i'm not going to yet judge how this will alter the relationship between the united states and mexico until i've heard directly from them to see what exactly are they trying to accomplish. but overall, what i can say is that my impression is, is that the new president is serious about reform. he's already made some tough decisions. i think he's going to make more that will improve the economy and -- and security of mexican citizens, and that will improve the bilateral relationship as well. and i -- i -- i don't want to leave out that we're also going to be talking to -- during my visits, to costa rica, the

presidents of central american countries, many of whom are struggling with both economic issues and security issues but are important partners for us, because i think the vision here is that we want to make sure that our hemisphere is more effectively integrated to improve the economy and security of all people. unitedgood for the states. that will enhance our economy. that can improve our energy independence. there are a whole range of opportunities, and -- and that's going to be the purpose of this trip. and i'm sure that those of you who will have a chance to travel with me will have a chance to discuss this -- all right? thank you very much, everybody. >> jason collins -- >> thank you, guys. >> jason collins, do you want to say anything about him? >> yeah, i'll say something about jason collins. i had a chance to talk to him yesterday. he seems like a terrific young man, and, you know, i told him i couldn't be prouder of him. you know, one of the extraordinary measures of progress that we've seen in this country has been the recognition that the lgbt community deserves full equality, not just partial

equality, not just tolerance but a recognition that they're fully a part of the american family. and, you know, given the importance of sports in our society, for an individual who's excelled at the highest levels in one of major sports go ahead and say, this is who i am, i'm proud of it, i'm still a great competitor, i'm still seven feet tall and can bang with shaq and, you know, deliver a hard foul -- and for, you know, a lot of young people out know, are -- are know, gay or lesbian, who are struggling with these issues, to see a role model like that who's unafraid, i think it's a great thing.

and i think america should be proud that this is just one more step in this ongoing recognition that we treat everybody fairly. -- everybody's part of a part of a family, and we judge people on the basis of their character and their performance, and not their sexual orientation. and so i'm very proud of him. all right? >> a conversation on the changing role of u.s. ground troops and defense spending cuts. at 9:00erage starts eastern on c-span to. formern the morning, state department officials from the george w. bush administration will discuss the use of drones.

will also hear from former 9/11 commissioner. that is live at 10:00 from the bipartisan policy center. >> it is driven by this certainty that religion and region are in different boxes comment that science and religion are in different boxes and the two are at war with each other. not ae who is rational is religious. someone who is religious is not rational. this is the ultimate irrational idea. is --lief that religion it is completely untrue. melanie phillips takes your

calls, e-mails, facebook comments. at noonurs live sunday on the booktv. forlarence thomas sat down a conversation about his life and career earlier this month. on the high court since 1991 discussed the law profession and the interworking said the court. this event was held in pittsburgh. it is about an hour. the story of your life growing up is really a remarkable one, justice thomas. do you know what part of west africa your family came from? >> i think they lost the itinerary. [laughter]

no, that was in the 1700s. i don't think anyone quite knows. for those who are from the deep south, much was unwritten. the people are into their genealogy now. i have no idea of much of my own genealogy. some of my relatives told me we do not want to know. but, the answer is no. it is unfortunate. that is one reason why in the last few years we have tried to focus on trying to retain some of what is left of that culture. when you look across the

country, you see the fine buildings, the sandstone buildings, the beautiful architecture. there is much of an effort to preserve those things. there is another part of culture, of people who aren't preferred, of people who had a caste system, would be the untouchables. their culture was just as rich. it was just as important, just central. the effort to retain that, or to record the is not there. we would spend more time on aristotle or socrates, more time on frank lloyd wright, but on the the unlettered. you look at the barrier islands -- that is where my family is from. frompeople may have heard the term fiji.

that is because those of us who were from those islands also -- most is bordered. -- one of the slurs grow my way was fiji. i was proud to be fiji. i have never been ashamed of where i am from. i think it is a wonderful culture. the people are wonderful people. >> does your family speak the gola language? wing spoke the exact same

was. i am from a different island. that is where we went to live. it is hard to really do it. it would be similar to west indian dialect. when i went north in the 60s, people would ask if i was indian. i would have no idea what they were talking about. it was not like i had travel to the caribbean. my wife accuse me recently of -- she said i was beginning to talk my language again. anyone who is from that part of the country or ethnic groups will know that you do not come back into that group speaking the king's english. otherwise people will say you think you are better than us now. there is this delicate balance.

that is one thing, when we went north in the 1960s, you had to move in and out of cultures. you moved into the white culture. then you moved into the urban culture. moved into the northern culture. homehe went back to your culture. it you talk to buddies one way, you talked to her parents another way. you might be speaking at three or four different languages every day. i wasn't going to say anything. i am willing to bet you that you just can't immediately start talking your pittsburghese, but if you are in a conversation, you slide -- what led which are you talking?

i have always been respectful of the people who spoke it. i still, i love it. i love going home. as soon as i crossed the river, finally i am home. when i stopped in washington dc, i was going to go home. i only went to law school to go home. finally i was going home. thisbeen been stuck in place for 30 years. it was kind of other people or trying to prevent me from going.

what do i care? >> we are fortunate to learn about your home life in georgia. which is really a very touching book. tell the audience who your grandfather was, and what he meant to you wish mark what did he mean to you? >> it is embarrassing to sit here and watch that stuff. i did not want to write the memoir. people have a tendency to re- create us in public life. i think i owed it to my grandparents to leave a record, and the people around me, all the people who made up this wonderful world, that we somehow sweep over because we have to have a narrative of how tolerable it was. these were good people who try to make you lead a decent life.

iowa to them to leave a record. my initial plan was to record and leave it. to leave it in my papers. i still have the entire manuscript. it was only to leave an accurate record. eventually, i was told, it is probably good to put it in the form of a book. then i made the fatal mistake. i signed a book contract. [laughter] that sentencing your own self. i sentence you to a book contract. that was really -- talk about an eighth amendment violation. [laughter] once i got started, it was very hard. it was two pages a day. everything you do.

your homework. you push yourself, you push yourself. having to relive it, think about things that you hadn't thought about for years. having to dredge up memories and pains, to put it on a piece of paper. you live your life. you give it your best shot. there are things that, we have all said it, i just want to get it behind me. i am through that. i'm going to put it behind me. >> some said about writing opinions. [indiscernible] >> let me ask you, specifically about the nuns where you were educated. what did you learn from them? >> a sister was my second grade teacher. i had a chance to go back and

think all of my teachers, and to have a totally separate life. also, the ones who were just so sweet to me like sister mary. my second grade teacher, i did make contact. sister mary said that when we arrived at saint benedict's, the gas with the cast-iron, you set to buy two and little tiny desks. she made a stand and repeat why did god make you?

god made us to know and serve him in this life, and be happy with him in the next. all the philosophy, nietzsche, kant comes back to what she said. they made us believe that we were inherently equal. that was a main stay. it is him and you see me repeat over and over. we were told under all circumstances we were inherently equal. that was in the face of segregation and theories that said we were inferior. they held us to that standard.

those who are old enough and he went to schools probably probably remember those exams. achievement test that you took at the end of each december and in may. those measured where you stood with the other schools. the nuns had held rb to the the fire. my favorite nun, my eighth grade teacher, she is still alive but not doing very well. she's at a retirement home. she was, when i was in 1962, i performed very well and high school entrance exams. i've always done well academically breathing that is

god's gift. she said, you lazy thing. she was right. i was kind of sliding by. i never forgot that. she called me out. fast forward to 10 years ago. i was there intent to fly visiting her with a friend of mine. a very dear friend of mine. i met him through tom, who graduated, a wonderful man. we were there with sister mary. she was in her 90s at the time. she still is. she said, when i die, this goes to the sisters, this goes to my relatives, this goes to this person. and she took this photo of the two of us, and she did this to

her chest. this goes to my coffin with me. to say that this photo, it that is just a bus, they will go there where she is to lay. >> they made you take latin. my children might see this program. >> the only latin i remember is always wear underwear. [laughter] >> oh boy. >> that is what i learned. >> oh my goodness. i cannot believe you just did

that. i see virgil just spinning. at any rate, i was required to take latin to go to major seminary. you had to learn latin. i repeated the 10th grade to take latin. it was very aggressive and quite difficult. i took latin am a three years in high school and one in college. my only regret was i did not take greek. i would not, if i had to go back, i would take more music. i would take more mathematics. i was good at sciences.

i would probably take another course in physics and chemistry. rigorous education, and the people who required me to educate myself, or prevented me from avoiding education, our fabulous -- our fabulous and what they help me do. people don't run out and say it let me take latin. you say you're required to take latin. you are required to take philosophy. you are required to take metaphysics. you're required to take ethics. as what i got. i say think offer the people who knew better than i did, and required me to be better than i would have without their invites. that is the beginning of my education. out of that, they taught me to read more books, to think about things.

to be willing to listen to people who are thinking about things. and to continue that education process. latin was like a spelling bee. back then, there was this faith that if you're given a chance to go to the right school, we could do as well as whites. we would hold our own. this was proof positive. i was the only black kid in the high school for two or three years that i was there. this was in the 1960s. his point was, this is exhibit that we can hold our own at any time.

it was important. it was encouragement to the few people who were at meetings that their efforts were worthwhile. >> holy cross was a critical aspect of your education. surely making that difficult transition to massachusetts. you talk about that as a difficult time in america. you describe yourself at that time as an angry young man. what were you angry about? >> the same thing that every other black was saying. we had a lot of problems. race wise. the question is, how do you respond? how do you deal with it? when you are young, you do with things by what? you lash out, criticize, savings to people. you you do it in a way with a

lot of emotion and a lot of passion. i think one of the values of being educated is you find out how do you channel that passion? how do you deal with difficult things in a way that is constructive, as opposed to the way we dealt with things. >> as all the judges and lawyers know, we are still suffering with a lot of angry young men who find themselves in criminal justice systems. do you have any theory as to what the chief contributors are to that national problem that we have? >> i started mine career in washington in the early 1980s pointing out something that bothered me. the 1980 census. the breakdown of black families. it is not because i had a solution. i am not someone who tries to have a theory each year.

i do not do that. i do not claim to be god or anything. but something said in those numbers that there was a fundamental change in the structure of the black family, and the one thing that was stable, even on an extended basis was at least you had a family. he you had a lot of other problems. you had a family. when that was gone, what are you left with? i looked over data. the penetration of drugs in our lives, of addictive drugs. you can, when i read petitions, i read 9000 a year, for 21.5 years. every crime is drug-related. from your work as a district

judge, you see these young people with no families, no education. we pointed out those numbers back in the 1980s. one of the things that has happened is that if you do not toe the ideological line or narrative, then you are not listen to, for pointing out not the family members were good. i was cast as blaming the victim. dismissing the obvious. we have a problem. by the solution? no.

any solution, you have to accurately set up what the problem is. you do be willing to say what it is and try to deal with a preview go to the doctor. the doctor you want to have an accurate diagnosis of the can have a constructive and positive diagnosis. anyway, i do not have any of those solutions. my heart is broken because i worked in the inner cities. we've been trying my entire adult life to just be honest with people about it. they came with urban renewal. look at our neighborhoods. they came in with this program, and that solution, and this and that. all of these theories and programs. i go back to my neighborhood. as soon as i drive in, my heart is broken. where i grew up, i could walk to school. i knew everybody. everybody, we were poor but

proud. i would walk to the 6:00 mass three quarters of a mile in the inner-city. who would let a little kid walked three quarters of a mile in the intercity to serve the 6:00 mass today? i'm not getting into the very complicated. i am asking a simple question for you i can walk to serve the 6:00 mass with my bookbag on, and nobody ever bothered me. and you do it today question rick something has happened. i not have a theory. i do know that we should at least fess up and say that something is wrong and then deal with it and not try to turn into some kind of political fodder. >> let's talk for a second your time at gl.

you have an open about talking about a business. i think you still have this 15 cent cigar sticker on your degree from yale. why was it unsatisfactory? >> i probably should have been more respectful of my years at yale. fromk a lot of positive yale. did i have disappointments? yes. the sticker had less to do with my experience than what i thought you would mean, how people would perceive it. that there is this assumption that when you graduate, you are a certain level. becourse, we should

realistic that they were discounted. we know why they were discounted. the $.15 was put there so that i could get a job with it. it is hard to be upset when my grandmother used to say, some doors closed, but god opens other doors. how could i complain? yale is mixed. i have a deeper appreciation for that now. i should've asked respite early on. putsticker was point -- there out of frustration. supposedrything i was to do and i cannot get a job. how was i supposed to feel? i have student loans. i was frustrated. i was very upset. yielded not make it better. >> you wrote later in your opinion in a case called

jenkins, you wrote "it never ceases to amaze me that the courts are so willing to assume that anything that is predominately black must be inferior." >> it speaks for itself. it is true. our schools were closed because people said they were not as good because they were all black. i do not believe any of that stuff. i went to all black schools. i lived in all-black neighborhoods. i had a wonderful life in those neighborhoods. people think you are making it up. theare trying to paint south anyway it wasn't. they have a narrative. i was moving back home when i stopped in dc. i still wanted to get back. my high school was not inferior.

my neighborhood was not inferior. my church is not inferior. my family was not inferior. i never believed it. i never will. i do not think you need to start from the armistead if something is predominately one group or another that you can make these broad assumptions about whether or not it is inferior. if i were to ask you today what school, what university produces the largest number of black doctors, or black going to medical school, which would say it is? it is xavier. xavier has been considered a predominantly black school. they should ask how they do it. >> wasn't on your radar to go to a historically black college? >> yes. i was angry. 1968, dr. king had just been

assassinated. i was done with it. i understand people's reactions when they are angry. i was angry. grandfatherand my kicked me out of the house. the only school i could apply to was holy cross. holy cross saved me. stategoing to savannah college. >> had a that come about? >> the mythmakers that come up with these theories. it was because of my chemistry teacher. >> it is because sister mary

called a friend of mine who was already at holy cross and told them to send me an application. i got accepted. i got accepted because i had almost a straight a average. then the myth makers came up with the myth that i was recruited, i was not recruited. it was serendipity, if you're not religious that i ended up at holy cross. >> your career takes off, did you set out to be politically active? did you say i might have an opportunity as a young conservative and move up the ladder? myselfver called conservative, that was another putdown in the 1980's when they named us black conservatives to show we're sort of like some vile thing that occurred. but we did not call ourselves

anything. we were just people trying to think about difficult things and offer a point of view but suddenly there was a prescribed point of view. i found it fascinating. if people are told they can only go to one neighborhood that is wrong. if you're told you can go to these schools, that's wrong. but it's ok to tell people only to think certain things. that is bizarre. at any rate, i was never politically involved. i don't like politics. that's another thing, i'm interested -- i think about things. i think about philosophies or things in that happen in society. i don't know how you can tell someone something and make them believe it. i don't like it. [applause] i certainly was not republican when i came to d.c. i became a republican to vote for ronald reagan. i was a registered independent.

but that was about it. i voted in law school -- i voted at 18 because i was from georgia. i voted for humphrey in 1968 and mcgovern in 1962 and i thought they were too conservative. [laughter] it was again, trying to think things threw. i was more of a libertarian. i was triesing to figure things out but -- trying to figure things out but you're black you are not supposed to think about things. that's bizarre. why did we go to school? give us a the list of what we're supposed to think and that saves time. we just read, what am i supposed to think today? >> so you went from humphrey to reagan -- should we anticipate some future -- >> no. i returned to the way i was

raised. i went from -- if you want to look at the transition it was a deviation from the way i was raised then a return to the way i was raised. as my grandfather said when i was involved in all sorts of radical things my boy, i did not raise you to be like that. i did not raise you to be disrespectful, uneducated, etc. he would -- when i came home talking nonsense as he called it, he would get up and leave the room because i was so far off the charts in his mind. >> before president bush was elected had you envisioned yourself as a judge? >> oh, god no. the judge is the last thing. i did not envision myself living in washington. i think you are called -- those of us who are former seminarians or religious they

understand what i'm saying, you you're called to do certain things. when you are called you're supposed to do it. i would say to myself just don't call me. [laughter] then the president calls you dick thornberg, two of his aides called me in 1989. i forget the two at the end of the breakfast they said some people are interested in you being a judge. that was the beginning of the process. i believe when you -- when you're called, the president calls you to do a particular job an its the right thing you are to do it. if i had to choose what i

to do, no i would not do this. >> do you have a dream job? >> i wanted to be priest. >> after you left -- >> no, not really. my wife and i talked about it, prayed about it, i could have made a lot of money. i could have done lots of things. but i didn't want to do that. i didn't go to law school to make money. i didn't go to law school to be famous. i went to law school to go back to georgia and do what i wanted to do to be a priest. i wanted to go to my neighborhood and be a leader. a young woman said to me yesterday that she was naive. she said i'm proudly naive. you can call it idealistic or naive. whatever. you do well in order to do good. when you have a chance to make

hard decisions, if you're called to do it, you're bound to do it. you must do it. you don't have that choice to wimp out. >> on that topic, justice thomas mass, when the controversy erupted with the anita hill statements that was a difficult thing for you and your family did you think of withdrawing? >> i never run from people who i consider or circumstances that i consider bullies. i don't believe in that. not in playing sports, you stand your ground. that did not make sense to me. you're going to do all of these things to me because you don't agree with me. innk goodness, the people the country are better than the people who claim to be better than everybody else. [applause]

>> soon after your swearg in at the white house, you had the -- swearing in at the white house, you had the opportunity to speak with thurgood marshall. did can you share some of the things you got to talk to him about. >> he was a delight. it is interesting when people have these narratives about public people and you actually get to meet that person. the man was a delight to meet. 10-as supposed to be a minute meeting and it lasted for two and a half hours. if you know him, he will regale you in stories. it was laughing and stories about his travels. both he and his family have been just delightful. she is there at the court frequently and she's been a

delight. >> what advice did he give you? did he talk to you about the interaction between the justices? what to expect going into the new environment? >> what is interesting did you notice that the justices are nominated the only people who don't say anything is the people who have done the job. nobody who has done the job presumes to tell anyone how to do it. it is a humbling experience. i was looking at the pictures of me when i was nominated. look at what this job has done to me. [laughter] you crawl away from it. you do not presume to tell anyone else how to do it. he told me exactly the right thing. i did what i had to do in my time and you have to do in your time.

>> did he tell you anything about collegiality. one of the narratives when the justices come down with the 5-4 decisions in the hot button decisions. yulle court a colleague place, has it been like that during your tenure at the court? >> for those who have been to the court -- for those of you haven't, the walls are about that thick. unless they have an insight that i don't have or an in road they don't have. when you make hard decisions, of course, there's disappointment, there's probably -- you're exass per rated.

i read some place where someone said justice scalia was yelling or making noise, something, everything about banking the walls. he's my next door neighbor and he was doing fine. he's a hunter, he's probably trying to figure out how to kill an unarmed animal. yeah, you're disappointed. it is a hard job. i have not seen all this. the worst that i have seen has been in the opinions, the edgy opinions. that's about it. no, i have not seen it. there are times when people get upset because i think people work hard, they feel strongly about their-minutes on this thing. put nine of you in the room with different views and pick any hot button issue, pick

abortion. put you in a room and how long do you think you can get along? throw you some issues. see lounge you can survive together. people can't sit in the room and talk about it, they are not making the decision, they just have an opinion. they storm away from the dinner table, storm out of the restaurant, stop speaking each other. they are not making the decision, they just have an opinion. people in the court, at my time, at least think the constitution, the country, the process of the court is much more important than they are. they somehow keep it together to decide cases appropriately and to get along with each other in a civil way. >> any of the justices particularly close friends? >> justice scalia and justice

ginsberg are very close. i tend to be more of an train vert and -- intravert. i'm close to justice scalia but not as close as justice ginsburg. they are very dear friends. i think people are very respectful there. they are very kind but people have different schedules and different lives. i like opera but i like opera on the radio so i don't have to go. [laughter] some people like to go to the kennedy center. i'm a nebraska corn husker fan. there's not a lot of those around here. i'm close to my kids. i'm very, very close to my wife.

if it requires me to leave her that is a nonstarter. >> did you expect to see an african american president during your lifetime? did you think that would happen? >> oh, yeah. i always thought there would be black coaches, black heads of universities. maybe, again, as i said i'm naive. but the thing i always knew it would have to be a black president who was approved by the elites, the media because anybody they don't agree with they would take apart. that will happen with virtually -- you pick your person, any black person that says something that is not a prescribed things they expect from a black person will be picked part. pick anyone, not me, who decided not to go along with it there's a price to pay. aalways assumed it would be

somebody that the media has to agree with. >> have you met president obama? have you had a chance to speak with him personally or in passing? >> passing, he visited the court. i don't do a lot of washington and i'm not into politics. i shook hands with him at the inauguration. he's very polite. but i had no in depth conversation. >> was that a courtesy to all the justices or you -- >> to everyone. >> did president clinton do that? >> we were at yale together so i knew him better. in recent years, they stop. the president-elect will stop by and shake hands with the members of the court and meet us as a group. >> do you see, obviously, you

and president obama have different opinions on things. do you have any common ground on things with him that you could share with us? >> i have -- >> do you want to take the fifth? >> that's hard to say. havecommon ground did i with president bush, 43. i'm not into politics. i don't like politics. i do my job. i have common ground with some of the appointees say with justice ginsberg or justice kagan. we're doing the same thing. but as politics, i just don't do politics. i don't like politics. >> do you avoid intention talley in terms of media, a lost judges don't keep up with the news the way they did when they were practicing law. >> i don't like politics. i'm just done. i like history, i like things of substance. i don't understand politics. i don't understand scuba diving.

you know, when i think of scuba diving i think of drowning. [laughter] i'm not against it, i'm not going under water. [laughter] >> in a minute, we're going to ask questions that have been supplied by students. i do want to ask you this justice thomas, all of the current justices on the court attended an ivy league law school. do you think it is healthy to have that kind of diversity for justices from smaller universities? >> finally, you're on things i like to talk about. i agree with that. i think we should have people from other law schools. it is all harvard and yale and

justice ginsberg graduated from columbia but also attended harvard. they are wonderful, wonderful people. they are talented, good people. but the -- i do think -- i've been all over the country. there's more people, there's smart people. this school was started for immigrants. it is like holy cross college. there is something valuable about these people who live in these little neighborhoods and work their way out. i tend to hire kids from modest backgrounds and smaller schools. my lead law clerk was from l.s.u. i've had clerks from rutgers, george mason, georgia. modestclerks from backgrounds. i'm from a modest backgrounds. they are special. they keep at it despite of the

odds. get up every day, nobody gives them a break but they keep going. that is something special about that kid. this past weekend -- i'm very much involved with an organization, one of your students was in that. these kids come from very bad circumstances and yet, their grade point average as a group, the 107 scholars is like 3.97 or something. some rare grade point average. these kids live in homeless shelters, their parents are drug addicts. what kind of resolve does it take to keep going? it would be wonderful to have those kids as members of the court. i think they would have a different perspective and add something to the court. >> speaking of this school, you mention in the book that you frequently prayed to the holy

spirit when you were faced with difficult and challenging times. why was the holy spirit important in your life? >> it is hard for me when you say "the priest" i always thought of that suicide the holy ghost. i'm trying to be modern. i'm not trying to very hard. [laughter] i do have an ipad. [laughter] that's only because it was forced upon me. i just think -- i'm one of these people who still believes it is through grace that you do lots of things. angry go home and i was and upset and fighting with my grandfather she would pull me aside and say son, say your prayers. or i would have problems and say son, turn it over the lord. it was always the same answer. i didn't have any political

transformation. i didn't have any political transformation. i just went back home. if you just read my book you will see i simply went back and embraced the legacy they gave me and part of that is the way we do things and the faith we have. part of that is, of course, is serenity.-- is the trinity. so as you say, let the holy ghost speak through me. i was at mass, the feast of the assumption, which was oddly celebrated on monday. but the theme was humility. we have to be humble to receive this. i think it is very important. it is important in the way we do things. that is as deep as i can explain it but it is all important.

>> we have a few questions from some of the students, justice thomas, so i want to read a couple of these. the first one is one of our all- star third year day students. did the court's recent decision upholding the affordable care act produce any hard feelings among the justice us because there were such strong views on the subject? >> no. >> ok, check that off. >> you know, it would be enormously prideful and presumptuous of me to assume that i have the right answer. i have an opinion. i do not have the gospel.

i give it my best shot and that is the way i approach the job. i try to be candid with you. was there hard feelings? no. i don't have hard feelings about a lot of things. if i was going to have hard feelings it would be on race issues. then you wouldn't let me in this room, ok? that's a reason why we offload these things. i don't have enough -- i don't think that it is appropriate for me to be angry with people who have a different opinion. read my dissents i respect your right to have a different opinion. in this society, think about it, as much as -- i just read when something is said about me, most of them are white, they assume what they know what i think because i'm black.isn't that odd to you? they are upset with me because i don't think what they think i should think. isn't that bizarre? i'm not going to follow that and

say i disrespect justice ginsberg or justice breyer or justice scalia if they disagree with me. i respect their right to have a different opinion. >> this question is from a second year student. >> are you outing people? >> yes, i am. they are in class. this one is always asked. the media has made a big production about you not speaking in court. a two second comment you made made national news. what is your philosophy about justices at oral argument? >> my philosophy is never watch it, you never hear about it.-- about the news is never watch it. you never hear about it. so this is the first i heard about that. thank you. i don't follow it much of this stuff.

i think that we have become -- when i first went on the court there would be a series of questions by one member of the court. others would listen as this person asked a few questions in succession and had a veers of mini conversations. that is helpful. it allowed people -- each to have a turn to talk. today, it is just -- oh my gosh. everybody has a question. i don't have a question about everything. there are some things you let go. but i just think there are too many questions. i think we have capable advocates and we should let the capability advocates talk. >> that is an old fashioned view, right? >> the 1990's. >> it is true. in the past there were far less questions. >> does it make impossible to judge if --? >> is it more of a show now?

i remember being a student in the late 1980's and you can walk to the court with your jeans, t- shirt, and sit there and listen to a couple of arguments. now there is a massive humanity, it is very formal. is that a cultural shift? >> i've said enough. [laughter] i do not think what we're doing is necessary. if you go to argentina, we were there visiting their supreme court a few years ago. the members of the court -- i'm using the numbers i remember i could be wrong. a couple hundred cases a year and i think they have two arguments a year. they have two oral arguments a

year. so if you look at the courts of appeals, you're on the court of appeals. what percentage of your cases decided without arguement? >> about 75%. >> i rest my case. >> a second year student matt asks, you mention in your book that you pray to pope francis, were surprised that the pope and that a name. jesuit was chosen. >> i'm more surprised by the latter than the former. [laughter] that's why i don't say anything. i can be a smart alec, that is what got me on the national news. anyway, no -- i don't know. i don't keep up with these things. i'm glad they seem to have a good man as pope. i don't know. i just go to church. [laughter] >> here's a question from bridge get -- a third year student. do you believe the same-sex marriage that this is the sort

of issue should be tackling rather than the legislative branch or the states? >> i'm not going to say anything about that. >> a for effort anyway. >> i shouldn't -- there's no way i can comment on that. [laughter] i'll be back in the national news. [laughter] >> well, ok let me try this one. >> nice try. >> you live in virginia and married to your wife, a white woman and the supreme court struck down a virginia law that prohibited an interracial marriage was the court right to consider that issue? >> that that was aracial classification case. that is pretty much it. i try to, if you go back and look at some of the things i have written i have tried to

talk about racial classify case. we have to be careful. some things we're careful about classifying people by race. why? because we like classifying people i will racial classification. some people like to segregate people by race. this is another racial classification. it says, this is right at the heart of the 14th amendment. this is what it says. this is what it was meant to deal with. i know this is leading -- trying to lure me -- >> that's what we're trying to do. >> i've been doing this a long time. [laughter] you grow up in the inner cities you hear a lot of guys and people try to sell you a lot of stuff. >> as you mentioned and those

who read the supreme court's opinions know you are an extremely polite center, certainly, the most polite. in a case called kelo involving property rights you wrote something has gone seriously wrong with this court's interpretation of the constitution. citizens are safe from the government in their homes but the homes themselves are not. that struck me than the typical justice thomas. was that a case that you felt particularly strongly about? >> i said seriously awry not seriously wrong. [laughter] i'm nitpicking. no stronger than other cases. i took a lot of property law glass law school. property is for poor people it is something you did have, particularly in the south.

so i tried to understand property. who do you think would be most profitabled by taking someone's property? a well-connected businessman or a poor person? where do you think they would build a highway through a poor neighborhood or a rich neighborhood? where would they let people have an industrial development? i think that we should be very, very careful with words that change when use becomes purpose. what is a purpose versus a use? a park is a use. can a purpose be a bigger tax base? can it be beautification? can bit urban renewable? you're taking people's property

and the constitution uses the word use and not purpose. what i was trying to say that something is wrong. something doesn't make sense. i was -- i wasn't angry, i did not personalize it. i said the court. something is wrong with what we're doing and it is, again, that lady she didn't have anything. she lived in that house. you say -- you were talking about neighborhoods, this lady lived -- that family lived in that house 100 years or so. that's all she's got. if it does not protect her, who does it protect? >> we would like to end with another question from a student. this is a first-year day student. i think it is a great question to end our session with you on. she asks, what do you tell young men and women who are entering the legal profession today? >> oh, my goodness. the world is different from when

i started out. i did not have good advice for myself. i try to give advice to my law clerks to try to tell them, there's going to be challenges out here. i had my share and i can't claim to have reacted in an appropriate way a lot of times. i was very negative, cynical. i listened to a lot of the wrong people. i wound up being not constructive or positive. i just encourage them to no matter what try to remain positive and try to remain -- remember why you went to law school. i can still remember my -- sitting on my 30th and 31st birthday in st. louis catalogging why i went to law school and why what i wanted to do. i was shoing away the wrong reasons, i'm in it for the eschewing the

things that weren't appropriate. i said write down why you went and remember that and try to remember to stay positive and base the bar exam. [laughter] i know they are going to give the me the hug but c-span will just cut you off. i just wanted -- first of all, i want to thank you all. i want to say to the students that sometimes when you get a degree you really don't know what you're going to accomplish. i mentioned the young man -- i mentioned tom. he introduced me -- when i was at school to another young man

who was a student at the time mark. mark would then go on to be absolutely the key and instrumental in my confirmation. he's the person with whom i spent the most time during the most difficult times. he was a kid who was educated here. whoever educated him, which ever professor educated with him, whoever dealt with him, i want to congratulate you. the product of your work, the honorestty, the energy, the inintegrity is all embodied in this young man. i want to thank you for inviting me here today. i don't do as my speaking engagements as i should. but it is an opportunity to help people to understand why we do well in order for people to do

good. i encourage you to think that way and do things that way. thank you for putting up with me this afternoon. [applause] [captioning performed by the national captioning institute] [captions copyright national cable satellite corp. 2013] but warmer president bill clinton spoke at his own home altar, georgetown university. here is part of that conversation. mater,ke at his alma mulde georgetown university. here is part of that conversation. >> the united states has about a million foundations of various sizes, down to community foundations, up to the gates foundation. which is not only the wealthiest but arguably the best. they do wonderful work.

that does not count the 355,000 religious institutions across our country of all different raise -- faiths that try to do public does desk part of their mission. half of those foundations have been established since 1995. , half at in india million activengos -- half a million active ngo's registered in india. china has a quarter of a million registered. and probably at least that many more not registered for fear of political reprisal of one kind of or another. russia used to have 150 house and but mr. tuten seems to think they are a threat -- to have

seems tout mr. putin think they are a threat. i remember thinking about the freedom component of the ngo movement. there was a hilarious cartoon that appeared in many newspapers , theerica at the end of middle of my second term when i was in a long-running battle with the republican special counsel kenneth starr. in this cartoon, i am talking to the president of china and i said you should allow more political liberty. in our country, these people you keep putting in jail, they would be out there speaking on the street corner. she said in an our country, kenneth starr would be in jail making tennis shoes.

that was the cartoon. [laughter] it was really funny. it may make reconsider my whole position on liberty. no. the point i'm trying to make is this ngo movement has also been a thorn in the side of governments. like anybody else, they are not always right but they have basically pushed the envelope of lyrical responsiveness in a way that is very positive. >> you can watch the entire event online at c-span.org. joint chiefs chairman general martin dempsey talks to reporters about national security. then a discussion on counterterrorism policy. later, president obama's news conference from tuesday.

on our next washington journal, we will talk to former under secretary of state nicholas burns about chemical weapons use in syria. onn joan walsh of salon.com a progressive agenda. as part of our spotlight on magazine series, ted connor who went undercover as a meat inspector, will discuss his article on the u.s. meat industry. we will also take your phone calls, e-mails, and feed. boston to journal, each morning at 7:00 a.m. eastern -- washington journal, each morning at 7:00 a.m. eastern. >> general martin dempsey said u.s. military forces stand to take action in syria is called on but says a no-fly zone could be hard to implement. he sat down with reporters for an hour. the christian science monitor hosted the event.

>> i am dave cook from the monitor. our guest is general martin dempsey. this is his first visit with our group and we are grateful to him for making time in his busy schedule. he graduated from west point in 1974, and since then has served his country and a wide range of places and positions. early in his career he was an english professor at west point. more recently his assignments have included being commander of the first armored division in baghdad, deputy commander and then acting commander of u.s. central command, an army chief of staff. general dempsey and his wife have three grown children, all of whom served in the u.s. army. please, no live blogging or tweaking, no filing of any kind while the lunches under way. there is no embargo when the lunch is over except that c-span

has agreed not to use video of the session for one hour after the lunch in, in order to give those of us in the lunchroom chance to file. we will start by offering our guest the opportunity to make some opening comments and then move to questions around the table. >> first of like to thank you for your service, and some of you may know that from 1969- 1971, they've worked on ballistic missile defense, of all things. you also have two sons currently serving, and we thank them for their service. this day in history, in 18 03, the louisiana purchase, so kind --

this day in history in 1803, the louisiana purchase. kind of theopposite of sequestration. we will glance off that, and just let me tell you briefly about my recent trip, because there is always some trip that i would describe as recent. i am back three days now from my fourth trip to the asia-pacific, and my first visit to china. it started in seoul, went to beijing, ended up in tokyo. i described it as a trip with the theme of assurance, starting and ending with our allies in seoul and tokyo. assuring them of our continued commitment, and then stopping in beijing to assure them as well

that we will continue to work toward a commitment that the heads of state made to find a new relationship. we have not actually agree on the definition of a new relationship. you will hear all kinds of phrases used. i did not get into the taxonomy of the whole thing. i simply said yes, we think it is an opportunity to forge a new, more positive relationship, but it has to be done in the context of our existing relationships, not as a blank sheet of paper, if you will. i think the message resonated. i came back committed to doing our part, although this will be clearly beyond just the military instrument. i got off the plane and we have the other issues that are lingering, whether they are mideast or budgetary issues. we are trying to sort all that out. it was a very useful trip and

one that i found to be kind of encouraging. with that, and with full recognition that when i come to lunches, i don't actually eat lunch, i admire land.-- i admire lunch. i would be happy to take your questions. >> we had senator mccain last thursday and he was arguing that our priorities art upside down on how we are going to take care of airline passengers and what we don't take care of our national security. he felt that there was a danger that we would not be keeping good and qualified and talented young men and women in the military who are all considering getting out because they see no future, at least a predictable future, which is the least we owe them. how would you assess the impact of the sequester on

military morale and retention of the best and brightest? >> that is the other reason i travel, is to get out of washington and to go visit soldiers, airmen, marines, and coast guard. on this particular trip, beside the senior leaders in seoul and tokyo, i met with military members serving there. i also stopped in alaska both coming and going and did a town hall meeting. it is on everyone's mind. i found that disappointing, frankly. you want to go and hear about their issues related to their service in wherever they happen

to be serving, yet what we hear most often is their concerns about their future -- you know, the potential for a future career in the military. for example, if you are a pilot and you come into the air force to fly. if you are not flying, there is a level of dissatisfaction in that. we have a current readiness challenge, because in order to observe the fy 13 sequestration target in the last six months of the year, we have had to go where you can sweep up the money. generally speaking, that tends to be in readiness and training. i won't bore you with the budget

details, you'll just have to take my word for that, but we are in the business this year of finding the money wherever we can find it. that generally draws you to the readiness accounts. so we have our readiness challenge, which is not to say we are not fulfilling our obligations globally today, but in order to do that, we are advantaging those organizations that are either in deployed or about two deployed. everybody else is not training or not maintaining. that's of course is the challenge we will have to overcome. the final point on that, today's greatest challenges could indeed become tomorrow's retention challenges. they are not there yet, but again, if we bring these young men and women who have been operating in such a significant

pace with significant responsibilities and feeling as though they are making significant contributions, and we bring them back and sit them, i predict that will lead to a retention problem. >> i was struck by a quote from you were you said we have been living with unconstrained resources for 10 years, and frankly we have developed a bad habit that we are seeking to overcome. did you think that observation does more broadly about the dangers beyond his personal conduct? >> absolutely. it is not just a cliche to say that when you have all the resources you need, you know longer have the responsibility to think. we are trying to think our way through this challenge, and i think we will find opportunities to maintain our level of

effectiveness of becoming more efficient. you cannot wring that towel out too tightly. we were asked to find $487 billion in the budget control act. there is a point at which you just cannot do that by being more efficient. as part of secretary hagel's -- we are trying to find that now. >> use that chemical weapons to find game changer as rethinking chemical weapons available to us. give us your take on that. >> i did not see the press conference. i was actually in a budget

meeting, believe it or not, so i cannot speak exactly the what the president said. nothing i have heard in the last week or so has changed anything about the actions we are taking in the military. we have been planning and developing options. we are looking to determine whether these options remain valid as conditions change. that does not mean that what we have heard over the last week would not change the policy calculus, both in this capital and in others. but militarily, our task has been to continue to plant, to

continue to engage with partners in the region and to continue to refine options so that if we are asked to implement any of them, we will be ready to do that. >> in the wall street journal yesterday, you are quoted as saying in white house meetings that once a year constrained was syrians air defenses which came from russia. can you comment on how constrained both air defenses are for you?

>> i am not sure i said constrained. i may have, but the point i was trying to make, there were people comparing our actions in libya to what could potentially occur in syria. i was making the point that the air defense picture in libya was dramatically different than it is in syria. in syria i think you have five times more air defense systems, some of which are high end air defense systems, higher altitude, longer range. they are collapsed into the western one-third of the country. it is a much denser and more sophisticated system. the u.s. military has the capability to defeat that system, but it would be a greater challenge, take longer, and require more resources. >> fy14 has been called a straight line projection from fy 13. why did the pentagon ought not to make some of the hard choices in the fy14 request, and do you expect to send an extensive amended request to the hill?

>> as to why the budget went in without acknowledging the budget control act caps of sequestration, having been a service chief, i can tell you that the act of preparing a budget is comprehensive, complicated, and tedious. sequestration really did not get signed into law until the first of march, meaning when the deal was not made and the continuing resolution came due, that is when it became real. it would be literally impossible for us to have done -- we would've had to do two budgets, and that is not possible when you are talking about furloughs. the same people you are asking to do budgets generally are subject to furloughs. it was not of neglect, it was a practical matter, literally what was possible for us to ask the services to do. to your follow-on question, where we now have to submit an

alternate budget, that decision has not been made. it will not be mine to be made, but i know that the decision has not been made. if we think about it pragmatically, especially now with the news that the deficit breached is now being delayed. as you know, we thought that was going to occur in july it would provide some forcing function for additional budget negotiations. that has not been swept to the right. it does not appear that what we are living with out into the fall. there are two choices. we could submit another budget,

or if we don't, we will have to enter into some negotiation with congress on how to of the door of those cuts. but that decision hasn't been made yet. >> general, there that has been a lot of talk in this town recently about throwing up a no- fly zone. and without reference to any specific country in the middle east, could you talk a little bit about what goes into an operation like that? i think there is a notion around that it is pretty simple and easy, but what i know of it, it may be a little more complicated. could you talk about that? >> well, no-fly zones -- well, actually any military operation tends to be more complicated than generally gets talked about in open sources because there are the things that have to occur. secondly, they tend to be more risky. and the third thing i would mention is we are kind of the victims of our own success. we have made the very difficult look very manageable for a very long time. so we do have to be a bit cautious about that. but to be effective, a no-fly zone would have to have several

elements. you would have to knock down some of the integrated air defense system of an adversary. although stealth technology exists, to have a no-fly zone, you simply don't penetrate it. you have to control it. at some point you would have to defeat the integrated air defense system. any time we would put an airman over potentially hostile territory, you would have to have a search and rescue plan. so we would have to have the plan and resources, either by hostile actions or mechanical

failure, that we would have the capability to extract them from that situation. you have to assume -- i shouldn't say you have to assume. i have to assume as the military member with responsibility for these kind of activities, that the potential adversary is not going to sit back and allow us to impose our will on them. they could take exception to the fact that we were imposing a no- fly zone and then act outside their borders with long-range rockets, missiles, artery, and even asymmetric threats. so yes, you can establish a in no-fly zone, and you have to have personnel recovery. and in the region that bounds the zone, you had better have your readiness condition up in the event they would take action against the imposition of the no-fly zone. >> how long do you keep it in place? >> i could go back to operation northern watch and southern

watch, and for about 10 years we kept the no-fly zone in place. it is indetermined. by the way, since you are talking about a particular country in that region, about 10% of the casualties that are being imposed on the syrian opposition are occurring through the use of air power. that is an estimate. it may be off by 2% or 3%. the other part is by direct fire artillary.- or by the question becomes if you eliminate one capability of a potential adversary, will you be inclined to be in a position to be asked to do more against the rest. none of these reasons are reasons not to take action, as i have said from the start, but they all should be considered before we take that first step. >> we are going next to stephanie, and then mark, eric,

and others. >> general, thanks for being here. could you tell us a little more about what our troops are doing in jordan? i believe there are supposed to be 200 or so, if they are there, under way? has their tempo increased in the past weeks? do you plan to send more? and quickly, do you have anymore information on furloughs and specifically who will be exempted? >> sure. on our presence in jordan, i guess probably six months or so ago we placed a forward headquarters in jordan to do some integrated planning with our partners on the defense of jordan, and that relates to the potential for rocket and missile attacks, so ballistic missile defense apparatus. we also wanted to have in place in jordan the communications architecture.

we wanted to have a headquarters with, let's call it, the pipes in place for communications, intelligence, all the things necessary, all the satellite feeds, all the things that allows us to take advantage of command and control. should there be a need, or a desire, or a request to provide support through humanitarian issues, that we would have the logistics piece of that in place, whether it is air field access. again, one of our true distinctive advantages as a military is mobility. so we wanted to do some mobility planning. you asked if their tempo has increased.

as you know, we have been rotating people in and out. so as the new team comes in, they will tend to take a while to get up to speed. i would say the tempo probably has increased a bit given the heightened tensions that appear to be accruing around the alleged c.b.w. use. so yes, their tempo has increased. by the way, we have always got besides that 200-man package, we do a lot of training with the jordanian armed forces. we do exercises with them. in fact, we have one of our major exercises with them coming up. so our tempo in jordan is fairly significance. [inaudible question] >> i did not check it today, but at any given time it is probably something between 1,000 and 1,500 given exercises, train, advise and assist and this 200- man headquarters. you asked about furloughs. first of all, it is heartwrenching to me that we are

at a point where we have to furlough those civilian counterparts of ours who work just as hard as their uniformed counterparts, and who often sit next to each other in office spaces in the pentagon. i have said before that of the 800,000 or so that could be affected, only about 16% of those are in the national capital region. these aren't a bunch of white collar guys out there waiting to be furloughed. these are men and women across america. secondly, we have been doing our best to avoid it. as you know, the secretary of defense announced that that from an initial target of 22 days, we have been able to reduce that because of the reprogram authority to about 14 days, and he has challenged us to keep looking. i don't know whether we are going to find the opportunity to

avoid it entirely, but we would certainly like to do so. >> you think 14 is about the most squeeze you are going to get, or do you see it going down to about a week? >> i don't know, but i do know that the secretary has about on a daily basis asked us to determine whether 14 is the number. >> do you have a date when you have to make a decision? >> well, probably -- the date certain would probably coincide with his strategic choices management review, which comes due by about the end of may. >> mr. chairman, in february, leon panetta created, and you endorsed, the distinguished warfare medal. >> yeah. >> two weeks later a new secretary of defense comes in,

and there is a big storm about it, and all of a sudden he has appointed you to rereview the notion of this new kind of medal. and two weeks ago with your endorsement he came out and basically said forget it, it is not a medal. it is a distinguishing device. so the whole issue of precedence even goes away. what happened? >> well, for one thing, i think as a first principle we have to remember that the challenge that secretary panetta gave us was to recognize the contributions of those who may be remote from the battlefield but having significant impact on the battlefield. we stayed true to that principle. our initial swing at this if you will, to use a baseball metaphor, was that a separate medal would be preferable, and we had consensus among the joint chiefs in that regard.

then we talked about precedence, and the precedence became kind of the third rail actually. when we realized that the discussion of precedence was kind of overwhelming the first principle which is look, we really need to recognize these guys and gals, we decided at the request of secretary hagel to look at could we remove this concern of precedence and still recognize those who are serving around the globe but not necessarily in iraq, afghanistan or wherever. we found that the issue of a device that could be affixed to literally any medal now got us beyond the third rail of precedence. and so we decided that that was a better solution. we took input from the field, whether it was through veteran support organizations, but also did not believe it or not i have a persona in the blogosphere, and my persona in the blogosphere was getting beaten

severely on this issue. so we realized that we either had a wrong or didn't roll it out correctly. either way we didn't want to lose the first principle, which is recognize these men and women. now in fy 14, we are going to have another complete review of medals and precedence, and it may come back up, but for now we think that the device provides a better answer. >> a couple of quick follow-ons. the reaction was so strong when it first came out, that suggests that you didn't go to the v.s.o.'s and others when you rolled it out initially. and secondly, if secretary panetta was in charge, would this have happened? >> we try to collaborate with them on things we know they have

a deep interest in. clearly that collaboration didn't reach the level it probably could have, should have in this particular case. as far as secretary panetta, when this all started, when secretary hagel said we had better take another look at this,, i picked up the phone and called him, and so did secretary hagel. so he understood why we were doing what we were doing, and he supports it. >> eric. >> the same thing i did when i was chief of staff of the army and thought it was time to put the parade back in the bag. the first call was to another general. >> thanks for this lunch. in its letter suggesting that syria had used small a little of chemical warfare, the administration said there was physiological evidence of this. can you talk about what physiological evidence that was and when did that become

available to american officials? >> i can't add anything to what you have heard already. there are questions still being answered as far as chain of custody and so forth, but i have nothing to add. >> how recently did that piece of information overall come to the attention of the american government? >> of the american government? >> yes. >> i don't recall actually when the intelligence became available. it was a couple of our european alleys -- allies who came upon it, but i don't have the chronology committed to memory. >> all right.

[inaudible question] >> i don't think we should put a no-flow zone over capital hill. i am against it. [laughter] >> you said the majority of what is affecting civilians is artery fire. i want your assessment of how effective a no-flow zone would be. the country is pretty awash in weapons right now. the two things that lawmakers are calling for now, what is your assessment of how effective they would be on the ground in syria? >> militarily effective, we could make them militarily effective. whether it would produce the kind of outcome that not only members of congress, but all of us would desire, which is an end to the violence, a political reconciliation among the parties and a stable syria, that's the reason i have been cautious, is the right word, about the application of the military

issuing power because it is not clear to me that it would produce that outcome. that said, options are ready. either if it becomes clear to me or if i am ordered to do so, we will act. but at this point that hasn't occurred. >> crossing a red line, whether it means in syria, iran or in north korea, does crossing a red line obligate a military response? >> first of all, you are asking the wrong guy. i don't set red lines.

in the 21st century you can actually check that. i didn't set red lines on the budget. i don't set red lines on our military activities across the globe. i simply prepare for options when asked to produce them. so you are literally asking the wrong guy. >> two questions. a follow-on from your comments there. is it -- you said if it was important to engage militarily, you would. >> yes. >> would you do that if you thought it wouldn't achieve -- >> would i follow orders? i think i would. >> so even if you thought the military option would achieve those broader goals -- >> besides being the chairman and the military advisor to the sec-def and the president, i am a member of the national security council. so i do have the opportunity to express my personal judgments

once the issues present. i do follow orders. >> you have talked about bad habits that have built up over the years with the nearly unlimited military budget. can you talk about what those bad habits are? an outsider sees a budget that has doubled in the last decade, outside of a war. what has gone wrong where you find yourself in such a tight spot right now with a relatively small percent of your budget set aside? is it defense contractors? is it congress? is it the military leadership? what are the bad habits we need to get rid of? >> i have a few thoughts that are certainly not an all- inclusive list.

but i think in our acquisition perhaps, i think there is certainly room to become more efficient. i think over the years our health care costs have exceeded expectations in a no pun intended unhealthy way. i think that infrastructure -- and these are places where we could use the help of the united states congress by the way.

on infrastructure, we haven't had to reduce the scope and scale of our infrastructure accounts. i think we will have to do so under the budget authorities that we see coming our way. i think that even in operations there are times when we have probably over invested. we might be able to accomplish the task in different areas of the world with fewer resources if we force ourselves to think about how to do that. you mentioned contractors. i think our reliance upon contractors is excessive, and in particular in certain aspects of the use of contractors. so i think what you will see out of the secretary of defense's strategy management review is a look at the places we have grown most and decide whether that growth is justified. i think we will find in many cases it is not all justified. >> back to afghanistan for a moment. i have spoken to multiple combat commanders who said the afghan'' ability to medivac and care for their wounded already important after our draw-down. what do you think is going to

happen when we pull the majority of our pilots and doctors out by the end of 2014. >> first of all, i do think a medivac or a casivac, and there is an important difference. what we are trying to do is establish a casivac ability. it is a confidence building measure. we don't walk out of our forward operating base unless we have confidence there is somebody there to care for us and evac us to the next place. it is one of the reasons you have seen our increase in purchase of certain things, one of the reasons we are trying to establish field hospitals at key regional nodes around the

country, as well as building up their own medical specialists. that is a key factor in how confident they will be, and with a little less than two years now to build it, the assessments ivan my personal observations-- that i have any my personal observations suggest we will be able to make it and have them in a position where they can do most of that, if not all of it, themselves when they have to. to your point, one province is a great example for me. there is a large percentage of the violence in afghanistan normally occurs in a handful of districts and provinces.

and those districts and provinces probably provide a glimpse of what is possible in the future. in those provinces, urban villages and towns are generally under the control of afghan security forces. a lot of the space in between is contested. and i think that probably for the foreseeable future that will be the case in some of these districts and provinces. the question will become can the central government through the afghan security forces, when it chooses to impose its will on that part of afghan that remains contested. the metric of successes, can the taliban raise a taliban flag over a particular district center, if that is the measure,

we are going to be disappointed. but if the central government, having seen that flagrant raised, can re-impose itself on behalf of the central government of afghanistan, then i think we are probably on to something that is sustainable over time. but that is my observation from today, 20 months or so from the end of 2014. >> a follow up on the questions you were just asked. to what extent do you see the reports of the u.s. money going to the karzai government as an impediment to what you are trying to accomplish there? the second question is i just came from the president's news conference, and he said he was looking back at a way to close guantanamo. my question is to you. how do you imagine you might be able to help with the impediment if it is congress? can you help with that endeavor on guantanamo? >> the first was karzai and money.

the d.o.d. generally controls the afghan security forces fund and the commander's emergency response program.

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[captions copyright national able satellite corp. 2013] [captioning performed by national captioning institute] >> if not chairman bernanke, who sits in that office a year from now? >> well, i would say that janet yellin has the right of first refusal. she has extraordinary experience. obviously being on the board, then being vice chair, being president of the san francisco fed, being chairman of economic advisors, talking a lot about exit. there is an advantage of bringing in transitioning to someone who has that kind of experience because what ear going to go through during her -- during the next chairman's tenure is an unwinding of a lot

of this. so i think she has the right of first refusal. one of the things that is difficult is coming up with two, three, etc. >> i was just coming out of the jackson hole point. i agree with larry's point about chairman bernanke not weather channeling to personalize. i think we're missing the point here on jackson hole. he didn't want to go last year. that's why they moved it by week. they could trap him and say his schedule was open. he doesn't want there always to be so much focus that there has to be a policy announcement for jackson hole. they may continue to the next chairman. >> when we were preparing for this meeting yesterday, you said you were a - that great skeptic. >> i'm not a great skeptic of

completely or -- i agree with vice chair yellin. she is brilliant. it is no question of qualification. through history, there has never been a vice chairman who has been promoted. pick the list. so the idea that there is a right of first refusal or so presumption that the vice chairperson has to be promoted is contrary to history. there is no right of first refusal because she is vice chairman. no, not at all. she has the right of first refusal because she is janet yellin. she is a brilliant economist. that experience, not so much as vice chair. that experience on the board during this crisis and her, you

know, her ability as an economist, that's what -- >> i agree. no vice chairman has ever been selected as chair. >> he has been watching long enough. merit and appointment don't go together. again, this is not about vice chair yellin's merit. this is about likely -- likelihood. the presidents usually choose someone they have a perm relationship with. -- personal relationships. i'm sure president obama has high regard for yellin. but i don't get the sense that they are particularly close in any way. >> your last answer begs a follow-up. then who?

if i have to bet on someone other than janet yellin, it has to be tim geithner. >> are there any questions? >> that stirs the pot there. we had a couple of questions from several submitting questions. has dodd frank constrained growth? any thoughts on that? >> i have a definitive answer. who knows? in general, i think the -- we had an adjustment period. we're not talking about future growth. it may be future growth. ok? t right now, i think basel 3 is the story more than dodd prnk frank. i think that has been a drag on the economy. i can't tell you how much. a modest drag. second order. people spend a lot of time

trying to quantify it. >> i agree. i have no idea what the quantitative effect might be. but i would think it would be yet another factor tending to slow innovation and slow investment. >> one last question in here. it has to do, i think you touched on it already. the brown proposaling banks. what do you make of that capital requirement for banks? does it make sense? you talk about capital being the ultimate protection. >> just to say i think too big to fail is a genuine issue. i commend the senators for trying to make a practical proposal out of it. but what we really care about is not just too big, but too systemic to fail. it is not clear a direct sized number is the right number.

i hate to complicate it. i think we're going to have to work harder to get the right response pmp >> seeps to me if we're going to con -- seems to me if we're going to constrict the banking industry in that way, we ought to be simultaneously thinking about how we can aid the economy with some more financial entities with give birth to some new financial entities that will take the place of the bank ending that is not going through very heavy capital retirements. >> i'm in the familiar with that particular legislation. what i'm familiar with under basel 3, a surcharge for systematically important financial institutions. i think that does sense. the story here is not just bank failure but -- the macro

consequence is a systematically important bank failing. so those banks, i think, reasonably should be required to hold more capital relative to smaller banks where there is no systemic implications. you know, who can argue about what the capital is. risk rating is a good thing. it is very complicated in doing that. setting those risk weights can be very challenging. >> final question for your panelists here? >> i think it has been a great panel. we could talk about these things for hours and hours. we're already over time. we pride ourselves on that. thank you so much for your intights. >> thank you. thank you as well. to our pammists. >> more now from the bloomberg summit. this next panel looks at the

budget deficit and debt. t is 40 minutes. >> first of all, it is nice to be here. it is tougher to talk about the deficit and debt these days than it was years ago when i was overing ronald reagan. he was crawsing with a stripper named fanny fox. those were scandals. today, the scandal is did they cheat on their excel sheets?

i really prefer fanny fox. it is a lot more fun. let's start with the controversy today. it is the premise of the great peril that we all, that many people accepted four or five years ago. was it exaggerated? let me start with you, mr. comptroller. >> i think the debt and deficit issues are serious, particularly over the long term. as we have done our simulations, e showed the recent actions by the congress and the administration have brought the deficit down. but in 2016 it begins to increase. we have a huge wave of democrat changes occurring where almost in today's society, we have about 8000 people turning 65. between now and 2029, there will be 10,000 people.

those demographics are going to hit to the medicare and social ecurity programs and it is going to cause the deficits to increase in the future. we have a huge long-term problem. >> let me stay on this for a sec and. no question it is a demographic problem. staying with the spreadsheet controversy, are we exaggerating where the debt, the injury it will do to the economy, i guess i am asking is paul krugman right? >> first of all, i agree with gene, because of demographic shifts, you have to get a long-term deficit and debt under control. otherwise as the economy improves, you will have a squeezing out and that will put the brakes on the economy. the problem has been people

applied that analysis to the here and now. they said we have to act today to cut into near-term deficits, even when the economy is low. another referee, the congressional budget office projects three quarters of the deficit in 2014 is due to be a the economy is slow. you have lower demand. the last thing you want to do is pull back quickly and deeply. things like the sequester. to the extent people saw that study and they said we need to cut back in the current years, it is a mistake. it puts a drag on near-term growth. at the same time, we can take action today but kicks in and the long-term to address the out

here deficit and debt, which we should do because you will have the squeezing out effect. it has always been a timing issue but that study was misused by many of my republican colleagues to argue for a so-called cut and grow idea. cut and grow is not the way to move forward. >> we're going to talk about the long-term chronic debt and what we should do but short-term, should there be a stimulus? should we be spending more money to get the economy in better shape? >> one version of the stimulus would be to get rid of the sequester, which you saw the house blink on the faa when they were faced with having to go to the airport and stand in a long line. >> is unconstitutional to have to wait five hours.

>> i voted no on that. >> you cannot fly to maryland. you have to take a car. > you need a helicopter. >> to come back to your original question, i do not think this study causes cutting vital government service. it was used for that purpose. i think in the short term, now we have to focus on the health and state of the economy, getting growth stronger, and adding jobs growing faster. i think that means what we need to do is look toward investments that can be done in the short term on infrastructure and other places that would put people back to work, more juice into

the economy. i think you could do that in the context of a long-term plan. the out here start 10 years away. -- out-years start 10 years way. we have gone, when simpson and bowls were first meeting trying to put a plan together, the projection was that debt to gdp was going to go over 100% in 2020 three. now we are looking at it around 73% -- 2023. now we're looking at it around 73%. it is a flat line. after that we have the challenge of the retirement of the baby boomers.

the issue is structuring medicare to reduce the overall cost of healthcare in society and to produce results of lower-cost. that is what is going to make a big difference over the long run, not cutting head start, faa customs, and the severe cuts in the defense. >> the president did offer entitlement cuts in his budget a few weeks ago. is that the blueprint for the long-term deal you think is necessary? >> right now, the debt held by the public is over 72%. in the last several decades it has been around the mid-40 ots. we are more in debt now than we have been historically. our margins are a little thinner as we face this demographic.

in order to stay, you'd have to cut or increase revenue 44% and if you cut savings, 32%. just to stay at that ratio in the long-term. entitlement reform needs to be on the table. revenue needs to be on the table. there are a lot of smart cuts that could be made. >> how substances are the cuts he president proposed? does that get you where you want to go? >> is a good starting point for a dialogue. i think there has to be a broader dialogue in the uture. >> congressman, what was your take? >> a couple of issues. the budget also includes the

thing john was talking about. number one, the first and symbol should be do no harm. the sequester is doing harm to the economy. the congressional budget office estimates that by the end of the year if the sequester remains in place we will have 750,000 fewer american jobs in the country. have a big employer in my district in the biomedical area. cuts have imposed a hiring freeze. this is an invisible job killer because there are people that are not hiring because of it. do no harm. we have huge infrastructure issues in this country. american society of civil engineers has given us a rating of a d+. nothing to be proud of. we have 15% unemployment. in the construction industry. it is a no-brainer to help the more competitive against our major trading partners. we should do that right now. second, i believe we should take action now with respect to long-term. i think we need to build on the reforms we made in the

affordable care act, bring down the overall cost of healthcare. moving away from a fee for service system. it is one of the worst designs. nobody has an incentive to state -- save money. the brookings today, they have all come out with ideas to help us do that by reducing overall cost in the health care system. not simply shifting those costs onto the backs of seniors, which is what the voucher proposal ould do. i welcome the move. the president will put on some of those ideas some of the other ideas are more controversial and i have some concerns with them. we can talk more about those. the overall thrust of the budget is invest now to boost the

economy, do no harm, and take a balanced approach. if you try to do it all on the tax side or on the cutting site, you are going to make unsustainably and unacceptably deep cuts or high increases. >> let me ask you this, if you were to get a vote in the house, the president's entitlements and some revenues, could that with the means testing, could that when a majority in your aucus? >> the president cost proposal, especially the chained cpi piece, this troublesome. there is evidence that suggests senior spends a disproportionate amount of income on healthcare, which tends to rise faster.

if it is supposed to be an accurate measure of increased costs, we should make sure it is accurate for all of the onstituents. that conversation, at least it is a live on the democratic ide. on the republican side, they have rejected entirely the idea of one more penny of revenue for the purpose of reducing the deficit. they have said they will not accept one tax break loophole closure in order to reduce the deficit. that is what the grover norquist pledge says. that is their position. they reject from the starting point the idea of a balanced approach and that has been the impediment to moving forward. it is going to be -- have to be part of the solution. >> why is it so hard, the chamber of commerce is for it.

the aflcio is for it. mayor bloomberg is for it. the governor, republican governors, why is it so hard? >> i think it is a combination of all that was just said. this anti-government, almost half knowledge he that exist among a good chunk of the members on the tea party side. and the inability to find financing mechanisms because it requires some resources and revenue to be put into place. whether that is trying to find it from traditional sources, or by trying to find it by reducing loopholes, getting rid of the penalty the oil and gas industry has, there is no capacity right now to get any revenue through the house.

the president has suggested creating an infrastructure trust by creating more of a fee off of the extraction of oil and gas on ublic lands. there is no appetite for that in the house. whether you can find a way through by eating a bipartisan deal in the senate, as we saw in the end of 2012, and then see if you could force a vote, i think that has run out. i think the house is dug in and they're not going to accept additional revenue. >> do you think it is possible right now as you look at the landscape, and you know little bit about politics, you could get enough in the senate to go

along with a deal that includes higher revenue and something like entitlements, to replace the sequester? >> my view is they should agree they hate each other. that is a place where they can start finding consensus. all of the dinners aside, the kind of revenue the president needs is never going to pass the house under this congress. and therefore, i'm coming to a solution, they need to have a shorter-term plan to get them through the next few years, get rid of the sequester, restore the investments that were in the baseline that were agreed to, stop this craziness over the debt limit. and just get a deal together that can last. >> that would have to involve

higher revenues. >> the number is a lot smaller. >> one of the arguments the tea party makes is the reason we do not want investments because it is wasteful and inefficient. you wanted it the economic recovery act of 2009. give a scorecard as to what kind of waste and inefficiency, fraud, whatever there was. t was a big program. >> a lot of money, and $800 billion. >> we will leave this discussion and go to coverage now of the daylong summit on debt, deficits, and the economy. it marks from alan krueger. this is just getting underway. >> that has been the challenge.

you have to recognize the political constraints. >> when do you give a evice? >> it was wrong. it was monitored like it was part of the line that our republican colleagues who voted to a person against recovery bill put out there. but the overwhelming number of economists who looked at this have said obviously that helped

to prevent the free fall in the economy. helped turn the ship and now we ave had some gradual growth. just on your point on the infrastructure. it is kind of interesting. we had a hearing the other day in the budget committee in the house on infrastructure. the witness was called by the democrats. ur witness was called. representing people in labor and in the workforce. was simply arguing in the tradition, the old bipartisan transition of the government playing a role, there is a continuing and important federal role in here. otherwise we're going to get

beaten by our competitors. we should localize the concern is that is ow that you don't ill in the gaps. something that used to have bipartisan consensus, a very different philosophy among the a party caucus is not moving forward. >> we had finance in the nation's transportation infrastructure on a list that we keep for congress for a number of years now because the revenue sources haven't kept pace. state and local governments are under fiscal pressure at this time. i think the debate needs to take

place about the responsiblies at the federal, state and local level and how to move forward and there haven't been good measures of performance in place. it now requires better measures of performance. i'm hopeful that will increase confidence in a what kind of return you get on that area? >> let me ask you, someone alluded to the debt ceiling a moment ago. i think it was august 2, sometime this summer. are we going to go through another wrenching ordeal? >> i hope not. >> i'm worried. for this reason. i believe that the speaker of the house, john boehner, would agree that it would be a bad idea to do a replay of the summer of 2011 where went right up to the deadline, created all sorts of uncertainty. had a negative impact on the economy. i think he would like to avoid

that. the issue is how. how he can put together the votes in the house of representatives, including a lot of tea party republicans that would allow us to lift the debt ceiling which we technically hit on may 17, but people believe through management techniques, they ought to gets through september and october, nobody really knows now. i think they would like to avoid it, but they don't know how, so they have come up, at least for now, with that cockamamie idea that you are going to have to pay some of your bills but not all of your bills. they call that debt prioritizeation. >> if i could do that. if i will pay my mortgage but i don't have to pay my car. >> so they want the united states government to do that which would be disastrous and a terrible signal and hurt the economy.

that is so far their response. we'll pay some of our bills. we'll pay the bond holders including china. won't pay our troops in the field. that is not a solution. >> there are only two ways to deal with this. one is long-term. we made $2.5 trillion in deficit reduction the next 10 years through actions already taken. the president is proposing $1.8. if that is not possible, we will have to take bite-sized proposals. we will have to shut down some of these tax loopholes. tax expenditures. senator mccain and others have suggested that they might be open to that kind of thing to replace the sequester.

made some statement that you could maybe put together a smaller package. even that, it includes closing some tax loopholes. violating the norquist rule. even that is going to have rocky times. i'm very nervous when i think of the speak ears good intentions, he can't see his way to putting on a table a deept way out now. the clock ticks. we have a proposal to deal with it. >> chris is right, but do you think republicans will play hardball? it could hurt the republican party also. >> i think the president means what he says when he says i'm not negotiating over there. hold on to your hat. >> he said he couldn't negotiate

over a $200,000 cap. and the f.a.a.. >> i think what he has concluded what happened the white house has concluded is this really is almost a constitutional issue. that back and forth in the summer, they are not going to do it again. you could throw out a lot of xamples. i don't think they are going to negotiate over this. these guys take back the wheel of their car. they are on their own. i think boehner knows this is u just one more nail in the political coffin of that house caucus. if he was to get right up to the edge. >> what would be the implications if we have another crisis? > what we calculated was the crisis in 2011 increased the federal government's borrowing costs $1.3 billion just for 2011

alone. the yield spreads between corporate bonds and treasury bonds, you know, narrowed during that period of time. so we paid more in interest costs. we recommended it. the only way to really change this on a permanent structural base is to raise the debt ceiling when the budget is passed at the beginning of the year at the time you make revenue and spending decisions. all we're doing is raising the limit to pay borrowing for spending we have already authorized. it is really not anfective way to manage your debt in the future. we're hopeful that change we made, you won't have this by fur bifurcation. >> peter cook i think has some questions from the audience. we have about four minutes left. he told me the secret to his

success, for every tax cut and spending bill, there is a debt ceiling. if everybody did that, -- he said you think this place is on the level? there are question to your panelists. how does the panel quantify the overall o.r.i. on the stimulus investment. >> do you want to take that first? >> a lot had the agencies better evaluate the effect of the stimulus money including on the transportation area and other areas. so really there were controls in place to prevent fraud and abuse, but there wasn't enough in my estimation evaluation on a program by program basis as to what the results really were over that period of time. >> let's just look at the macro level. in january when the president was sworn in before he even put

his hand on the bible, the economy was dropping at a negative 5.9% rate. steeper decline at that moment in time that heading into the great depression. number two, almost 800,000 americans lost their jobs in that month. right? so the sequester, which was the first major order of business passed the congress in february. >> the recovery bill. >> what did i say? >> the sequester. >> thank you. the recovery bill clearly had an impact feeding through the economy, stopping the free fall, turning the corner and taking us in the right direction. i think you just have to look at the chart or the pattern where the economy was going like this and then turned and goon climb. >> with an sperm between the u.s. and the u.k., which has, you know, they don't have perfectly parallel economies,

but they have similar structures in their economy. the u.k. government tried it the other way. i think they are in a triple dip recession. you know, had zero growth. they keep pushing out to time in which they are going to stabilize their debt to g.d.p. ratio. it had the opposite effect which was to increase their debt load because they can't get their recovery picked up. >> one more? >> one more question here. the subject line is what if the fiscal multiplire is negative? the government really spending money doesn't help the economy. why should we expect a huge eficit to help us? >> it does matter what it is spent on. in other words, there are some investments that provide a greater return. r.o.i. in terms of our future. i would argue infrastructure investment is important. vem in our children's education

is important. we also know in this period of the economy where you have all of this slack, you have trillions of dollars on private investment on the sidelines because of the lack of demand that moving forward and making these investments now can help the economy in both the short-term and the long-term. i should say that i do believe we should also act now to put in place this balanced approach to long-term deficit reduction. i'm not saying you wait to do that. but that should be phased in over a longer period of time. as john said most of the real demographic push comes eight, nine, 10 years out. yes, you take actions to phase ome of those actions in. it is very short-ed to cut deeply now into these vems.

it is a drag on the economy. >> there is plenty of savings as gene noted and i know we're short on time. i think the f.a.a. example is a good example. we're not talking about let's spend a lot of money and try to raise demand. look at what happens when you cut core government service? what is the real effect? when you cut air traffic controllers and t.s.a. agents? that i think it is not just -- $100 billion, the sequester, in a $16 trillion economy. but when you're cutting off the things that really grease the wheels of commerce that are part of core government service, you're going to have a dramatic effect on the overall economy. it is bigger than just a portion of extradition of demand out of

the economy. >> the federal government is on a long-term unsustainable fiscal path. the sooner action is taken, the better. you have to balance the near term versus the long-term for economic growth purposes, but the other element in that question was who is closer to make the decision? states or federal governments? the big missing element in my view is this relationship between the federal financing and state financing. the fastest growing source of revenue has been federal grant stand that changes, the whole dynamics will change. it is under the same fiscal pressures long-term that the federal government is. >> if anybody wants to know more about that there was a g.a.o. report. thank all of you and all due respect to president reagan. i'm afraid this problem is too big to take care of itself.

this is very, very interesting and informative. >> hear now from the bloomberg summit on the economy. we'll hear from a former treasury department official, from the george w. bush administration. his is about 30 minutes. >> welcome and thank you. i noticed on the program and perhaps you did too, there is no description of that panel other than the title. i assume that is because the people here felt it was no way to bridge the divide but i'm going to try to do it, at least alk about it anyway. i want to start off by beginning with the question that came up at the end of the first panel about the brown legislation.

there have been of late a lot of unhappiness about the big banks in the u.s. the feeling that five years after lehman brothers, three mops after the dodd frank legislation, we still haven't done enough to reign in the behavior of america's biggest banks. it has prompted calls for raising capital. cushing risky activities and outright breaking up the banks. this is not a discussion only happening in the u.s. it is happening in the u.k. and europe as well. this bill came up before congress to impose a 15% capital

ratio on the banks with assets of over $500 billion, which is about six u.s. banks. what is driving this dissatisfaction? is this the right approach for congress to be legislating capital levels and is there any chance that it is going to go any place? >> right. i'll be brief on that. one, the consequence -- negative consequences over the crisis are still being felt. it is not surprising here and in europe that politicians get a lot of mileage out of going after the banks. secondly, i would say there is a real, jn win frustration that or whether it is basel 3 dod frank haven't been drafted in detail. a response to last week, a bill to simplify this, let's go after something that is not too

complicated. actually i think there is merit in the case in the following way. i think the number one issue to protect the banking system is to have higher capital retirements. i think there is something there as to what the right number is from protecting the system. the higher the better, so they came up with a big number. i think it is a natural response 2,000 plus pages of dod frank. -- dodd frank. >> the prosect of it going any place? >> low. >> capital retirements are a better strategy than forcing banks to either split up or not engage in so-called proprietary trading, whatever that may mean. >> there are a lot of things to do. the number one item i have on the list is capital. the more you have, you take risks and get lower returns. that is a good measure and far

better than just simply saying break up the banks. i don't think that is sufficient. the issue is how you measure the capital. are you -- >> what the level is. >> behind this is this notion that somehow we're still at risk. the banks are at risk and therefore the financial system is at risk and therefore the conomy is at risk. there was some discussion in the first panel about whether we're weighing down the banks with too many -- in the desire to make them safe, we're making them so unrisky that they are not lending and not helping stimulate the economy, it is a drag on growth. do you want to talk about that for just a minute before we move on? >> sure p.m. i can touch on it. i think -- i can touch on it. i think that is -- i'm not concerned about that. in the u.s. in particular, we have such fluid capital marks. there are a lot of different

ways for capital to move if there is a need for capital. in europe, they are more dependent on the banking system. the banking industry puts that forward. don't put so much regulation. i really don't believe -- >> david, i wonder if you could pick up on that. one of the consequences is that more of the risk moves out the banking system to hedge funds like yours or other parts of the financial infrastructure. is that a good thing? is it -- are you happy to have that to take on that risk? what do you see as the consequences from your perspective? >> one of the biggest hedge funds in the united states. as the actual bridge between wall street and washington because he used to work in the treasury department during the financial crisis. it brings a perspective that i

think may help us get at some of these questions. >> i think the short answer to the question, how it affects us, is not much. in other words, not much of what's happening is affecting us. it may over time. to i think the, you know, step back and look at what gary was saying, i think the conversation, more regulation, less regulation. i think there is three legs to this stool here in terms of addressing and following up on the financial crisis. i think the answer to the question are we safer today is a lot safer today in the sense of in the u.s. in particular, given the raising of capital and the writing down of bad assets, it s a marked contrast to europe. it is ironic that we are where we are today. but i think there is regulations. there is capital standards and the harmonizeation of those

standards. i think it is an isolated u.s. centric orientation and then there is market discipline and resolution authority and all the things that go along with that to ensure the appropriate actions are able to be taken and investors are protected by the government. i think it is a much broader discussion. each of those areas is somewhat stuck in terms of the evolution of policy for some of the political reasons gary mention. >> talk more about the dissonance between national and international regimes. switzerland did this on its own. the assets of the banking system are something like six or seven times the economic -- of the country. somebody woke up and said hey, this could be dangerous. they put their own higher capital ratio on it. is that a bad thing?

countries acting on their own based on their own interest? >> i think it is a bad thing. i think if you step back and say we're in the middle of a classic deleveraging. it imposes a level of pain and duress. authorities, regulators understand we're trying to take steps within their national concepts to take another one of those in the future. we have had pa years of globalization, movement toward global capital flows. i think there are yellow flags of some of the things you might worry about in terms of things happening in movement that would impede capital flows. i think some of the things the fed is considering within the addressing foreign banks, all of these appropriately focused well-minded people trying to do the right thing, i think the combination of those things over

time can be very problematic. i'm worried about it. now, with that said, i think you look at basel 3 and the issues, it is not to say we figured out to right global regime, but i think the starting point would be a global approach that is sensible and that can be applied appropriately within each sovereign needs to be the way we're going to operate in a global economy. >> mike, maybe you could talk bout this issue as well, mike. boston runs the deposit tori trust.- depository we were talking about a rocky start to his job last august, on the first day of the job. the fiasco. two months later, his offices in manhattan were flooded by hurricane sandy and 1.7 million

pieces of paper do you meaning stock certificates was washed off the shelves and sobed and they are still trying -- soaked and they are still drying out i think. can you talk to me about -- you work in a field which is truly global. yet ou have to deal with you to deal with variations and dissonance on these regimes. >> i think what david hit one of the key issues was coming out of the g-20, there was a sense there was going to be global cooperation amongst the regulators. there was a view there were some tents of stability that was needed. -- tenets that was needed. people understood coming out of the crisis that the world was

actually connected and that you have to work together. unfortunately, the concepts were agreed to. now comes the execution. it has gotten to such a level of specificity that a level of opportunity has been lost. we run something called the global raid repository. o.t.c. swaps. having a single view into the o.t.c. global market was a good thing to have. baving fundamental. you can slice the pie. you may not see all of it. you can see risks building up. you can see the know of the collateral. a simple concept but a very powerful one. what you're seeing in the execution process, we have had three in the u.s. the european process is starting between eight and 12 applicants.

how is that going to work in a stress situation? i think a microcosm of what's happening what's happening is in the rush to get the registrationlations in, the mandates are out there, they have to go national. they are worried about their own marketplace. this whole sense has disappeared. in the u.s., you see the conflicts within the regulatory -- which is unfortunate. at the end of the day, all it means is -- how is it going to work in the next crisis? for me, that is one of the biggest issues. you're taking a very complex system and in the mere process of adding safeguards, you're adding to the complexity. when you think about this. >> so what is the solution? does it give you an a monopoly? >> i think it is stepping back and separating the market. there is a public good aspect. some of these things have to be looked at. >> you know the simple concept

of rolling out -- everybody can say here is morgan stanley's london operations or here is goldman satches. -- sachs. >> we have gotten more cloudy. >> you're right. >> when we talked last week on the phone i was struck by a comments you made having worked in washington and then gone into bridgewater. you were struck by how little people in washington understand how markets actually work. and wondered if you could talk about that divide and just elaborate a little bit. >> i think that is someone who now realizes how little he knew. yes, i think, thrnk there is two big takeaways. the one is the -- is the motion of good afternoon larity.

-- granularity. understanding how the economic machine is working. how the flow is working and how it drives market action. you're talking about confidence. vague concepts. a good example of this was leading up to 18 months ago talking to some european policy makers and we had done an analysis of the spanish sovereign debt and essentially the buyers and suppliers. who owns the debt. who sells the debt. what is the likely outcome? what is the gap potential going to be? we have the conversations to keep up with europe on this. it is a math issue. they would say we'll just take steps. we'll make announcements and we'll be confident. wait a second, there is a math problem. the problem doesn't change. that granularity is a real challenge.

the as challenge in the u.s. system and in other systems. that is one. i think the second thing that is more apparent to me now than it was then is the degree in how to design destiny in terms of how the policy is making. i contrast -- the u.s. case in terms of the response of the financial crisis, you would literally have pahlsson and bernanke sorting through what they thought the options were. they would go to congress and talk to four key people. they would go talk to president. if they agreed where they were headed, that was policy and they pushed it through and moved forward. compare and contrast that to europe and the challenges structural of getting alignment among the members. so you see that playing out in very obvious ways in the two ways those systems are responding. on the other end is china which

is able to snap their fingers and roll out -- >> we only have two parties. a s nice to to see a republican and a democrat -- bridging that political divide. >> i would not read too much into that. >> gary, can you just talk a bit more about this gap, if you perceive it to be in understanding between washington and wall street about how things actually work? >> >> we're so much the detail of dodd frank has little to do with the soundness of the financial system. >> i'm always amused when dodd frank was being rolled out and we were too worried about too big to fail. the capital debit fees. >> you just traced through dodd

frank. the disconnect on if you want to address an issue, being the financial crisis and how to not have it again, there is some merit. i come back to what is being proposed now. let's go back to the core issue, capital. another one i find interesting, during the financial crisis, i've been on the other side helping companies involved in that. i found it interesting. if you take defense, the defense department of the united states or most any other government, do scenario testing. they think through war games. if this, then this, then this. all kind overp scenarios. i don't think if it -- of scenarios. if it exists, at least i know it wasn't there five years ago. also a real process for having fought three. if this and this, we take different actions. the fear is about the disconnect in washington. we do not want the government to step in again. if there is a financial crisis or financial difficulty.

and actually it is critically important that you know there is a lender of last resort for a system. this i would look back over hundreds of years and say it is not just the last five years. if you don't have somebody standing at the very back as a lender of last resort to deal with the crisis, you have an issue. you have a problem. there is two disconnects. one is -- >> i was struck as a journalist during the financial crisis and i started at bloomberg the weak collapsed.tearns i was struck by a lapse not just in washington but also in wall street about the consequences of what it was going to be. everybody sitting around that weekend said welling we can manage this. it turned out it was a lot more complicated than people realize. money marks were freeing up. what is the government going to do at this.suspect in obviously

the government has to step in. bail out the banks or else what are the consequences? i guess my question is have we really learned anything from that? you talk about scenario planning. >> the system is a lot safer now. >> safe enough? >> we were clear going into that weekend, and the government was clear. we did not know how it would unwind. it does not freeze in bankruptcy court. we knew we did not have a solution to that. and we did not know how to settle the net. we knew there were major problems, trillions of dollars a we cannot deal with. so there had to be a solution. the government with very -- was very quick to fix those issues. let's can all the data, let's get common source. there was a belief that the two primary problems had been

addressed by the time of lehman. the problem that had not been addressed with confidence in the money market. i think that issue, working you have not had enough time to think through every scenario, if this, then this, who response come out of a do, you will never contemplate everyone in this life. >> the pentagon scenarios are also based on the left work. like regulation. >> right. one of the lessons you thought people learn coming out of the 2008 crisis is you can chop up risk, but risk does not disappear. now we are seeing on our side of the world, while you're taking a a risk, you're concentrating it. you will be a will to