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The Path to Total Dictatorship: America's Shadow Government and Its Silent Coup

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The Path to Total Dictatorship: America's Shadow Government and Its Silent Coup
written by john w. whitehead
monday october 24, 2016
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“Today the path to total dictatorship in the US can be laid by strictly legal means,unseen and unheard by Congress, the President, or the people. Outwardly we have a Constitutional government. We have operating within our government and political system … a well-organized political-action group in this country, determined to destroy our Constitution and establish a one-party state.... The important point to remember about this group is not its ideology but its organization… It operates secretly, silently, continuously to transform our Government.... This group ... is answerable neither to the President, the Congress, nor the courts. It is practically irremovable.”— Senator William Jenner, 1954 speech

Unaffected by elections. Unaltered by populist movements. Beyond the reach of the law.

Say hello to America’s shadow government.

A corporatized, militarized, entrenched bureaucracy that is fully operational and staffed by unelected officials who are, in essence, running the country, this shadow government represents the hidden face of a government that has no respect for the freedom of its citizenry.

No matter which candidate wins the presidential election, this shadow government is here to stay. Indeed, as recent documents by the FBI reveal, this shadow government—also referred to as “The 7th Floor Group”—may well have played a part in who will win the White House this year.

To be precise, however, the future president will actually inherit not one buttwoshadow governments.

The first shadow government, referred to as COG or Continuity of Government, is made up of unelected individuals who have been appointed to run the government in the event of a “catastrophe.” COG is a phantom menace waiting for the right circumstances—a terrorist attack, a natural disaster, an economic meltdown—to bring it out of the shadows, where it operates even now. When and if COG takes over, the police state will transition to martial law.

Yet it is the second shadow government—also referred to as the Deep State—that poses the greater threat to freedom right now. Comprised of unelected government bureaucrats, corporations, contractors, paper-pushers, and button-pushers who are actually calling the shots behind the scenes, this government within a governmentis the real reason “we the people” have no real control over our government.

The Deep State, which “operates according to its own compass heading regardless of who is formally in power,” makes a mockery of elections and the entire concept of a representative government.

So who or what is the Deep State?

It’s the militarized police, which have joined forces with state and federal law enforcement agencies in order to establish themselves as a standing army. It’s the fusion centers and spy agencies that have created a surveillance state and turned all of us into suspects. It’s the courthouses and prisons that have allowed corporate profits to take precedence over due process and justice. It’s the military empire with its private contractors and defense industry that is bankrupting the nation. It’s the private sector with its 854,000 contract personnel with top-secret clearances, “a number greater than that of top-secret-cleared civilian employees of the government.” It’s what former congressional staffer Mike Lofgren refers to as “a hybrid of national security and law enforcement agencies”: the Department of Defense, the State Department, Homeland Security, the CIA, the Justice Department, the Treasury, the Executive Office of the President via the National Security Council, the Foreign Intelligence Surveillance Court, a handful of vital federal trial courts, and members of the defense and intelligence committees.

It’s every facet of a government that is no longer friendly to freedom and is working overtime to trample the Constitution underfoot and render the citizenry powerless in the face of the government’s power grabs, corruption and abusive tactics.

These are the key players that drive the shadow government.

This is the hidden face of the American police state that will continue long past Election Day.

Just consider some of the key programs and policies advanced by the shadow government that will continue no matter who occupies the Oval Office.

Domestic surveillance.No matter who wins the presidential popularity contest, the National Security Agency (NSA), with its $10.8 billion black ops annual budget, will continue to spy on every person in the United States who uses a computer or phone. Thus, on any given day, whether you’re walking through a store, driving your car, checking email, or talking to friends and family on the phone, you can be sure that some government agency, whether the NSA or some other entity, is listening in and tracking your behavior. Local police have been outfitted with a litany of surveillance gear, from license plate readers and cell phone tracking devices to biometric data recorders. Technology now makes it possible for the police to scan passersby in order to detect the contents of their pockets, purses, briefcases, etc. Full-body scanners, which perform virtual strip-searches of Americans traveling by plane, have gone mobile, with roving police vans that peer into vehicles and buildings alike—including homes. Coupled with the nation’s growing network of real-time surveillance cameras and facial recognition software, soon there really will be nowhere to run and nowhere to hide.

Global spying.The NSA’s massive surveillance network, what theWashington Post refers to as a $500 billion “espionage empire,” will continue to span the globe and target every single person on the planet who uses a phone or a computer. The NSA’s Echelon programintercepts and analyzes virtually every phone call, fax and email message sent anywhere in the world. In addition to carrying out domestic surveillance on peaceful political groups such as Amnesty International, Greenpeace and several religious groups, Echelon has also been a keystone in the government’s attempts at political and corporate espionage.

Roving TSA searches.The American taxpayer will continue to get ripped off by government agencies in the dubious name of national security. One of the greatest culprits when it comes to swindling taxpayers has been the Transportation Security Administration (TSA), with its questionable deployment of and complete mismanagement of millions of dollars’ worth of airport full-body X-ray scanners, punitive patdowns by TSA agents and thefts of travelers’ valuables. Considered essential to national security, TSA programs will continue in airports and at transportation hubs around the country.

USA Patriot Act, NDAA. America’s so-called war on terror, which it has relentlessly pursued since 9/11, will continue to chip away at our freedoms, unravel our Constitution and transform our nation into a battlefield, thanks in large part to such subversive legislation as the USA Patriot Act and National Defense Authorization Act. These laws completely circumvent the rule of law and the rights of American citizens. In so doing, they re-orient our legal landscape in such a way as to ensure that martial law, rather than the US Constitution, is the map by which we navigate life in the United States. These laws will continue to be enforced no matter who gets elected.

Militarized police state. Thanks to federal grant programs allowing the Pentagon to transfer surplus military supplies and weapons to local law enforcement agencies without charge, police forces will continue to be transformed from peace officers into heavily armed extensions of the military, complete with jackboots, helmets, shields, batons, pepper-spray, stun guns, assault rifles, body armor, miniature tanks and weaponized drones. Having been given the green light to probe, poke, pinch, taser, search, seize, strip and generally manhandle anyone they see fit in almost any circumstance, all with the general blessing of the courts, America’s law enforcement officials, no longer mere servants of the people entrusted with keeping the peace, will continue to keep the masses corralled, controlled, and treated like suspects and enemies rather than citizens.

SWAT team raids. With more than 80,000 SWAT team raids carried out every year on unsuspecting Americans by local police for relatively routine police matters and federal agencies laying claim to their own law enforcement divisions, the incidence of botched raids and related casualties will continue to rise. Nationwide, SWAT teams will continue to be employed to address an astonishingly trivial array of criminal activity or mere community nuisances including angry dogs, domestic disputes, improper paperwork filed by an orchid farmer, and misdemeanor marijuana possession.

Domestic drones. The domestic use of drones will continue unabated. As mandated by Congress, there will be 30,000 drones crisscrossing the skies of America by 2020, all part of an industry that could be worth as much as $30 billion per year. These machines, which will be equipped with weapons, will be able to record all activities, using video feeds, heat sensors and radar. An Inspector General report revealed that the Dept. of Justice has already spent nearly $4 million on drones domestically, largely for use by the FBI, with grants for another $1.26 million so police departments and nonprofits can acquire their own drones.

School-to-prison pipeline. The paradigm of abject compliance to the state will continue to be taught by example in the schools, through school lockdowns where police and drug-sniffing dogs enter the classroom, and zero tolerance policies that punish all offenses equally and result in young people being expelled for childish behavior. School districts will continue to team up with law enforcement to create a “schoolhouse to jailhouse track” by imposing a “double dose” of punishment: suspension or expulsion from school, accompanied by an arrest by the police and a trip to juvenile court.

Overcriminalization. The government bureaucracy will continue to churn out laws, statutes, codes and regulations that reinforce its powers and value systems and those of the police state and its corporate allies, rendering the rest of us petty criminals. The average American now unknowingly commits three felonies a day, thanks to this overabundance of vague laws that render otherwise innocent activity illegal. Consequently, small farmers who dare to make unpasteurized goat cheese and share it with members of their community will continue to have their farms raided.

Privatized Prisons. States will continue to outsource prisons to private corporations, resulting in a cash cow whereby mega-corporations imprison Americans in private prisons in order to make a profit. In exchange for corporations buying and managing public prisons across the country at a supposed savings to the states, the states have to agree to maintain a 90% occupancy rate in the privately run prisons for at least 20 years.

Endless wars. America’s expanding military empire will continue to bleed the country dry at a rate of more than $15 billion a month (or $20 million an hour). The Pentagon spends more on war than all 50 states combined spend on health, education, welfare, and safety. Yet what most Americans fail to recognize is that these ongoing wars have little to do with keeping the country safe and everything to do with enriching the military industrial complex at taxpayer expense.

Are you getting the message yet?

The next president, much like the current president and his predecessors, will be little more than a figurehead, a puppet to entertain and distract the populace from what’s really going on.

As Lofgren reveals, this state within a state, “concealed behind the one that is visible at either end of Pennsylvania Avenue,” is a “hybrid entity of public and private institutions ruling the country according to consistent patterns in season and out, connected to, but only intermittently controlled by, the visible state whose leaders we choose.”

The Deep State not only holds the nation’s capital in thrall, but it also controls Wall Street (“which supplies the cash that keeps the political machine quiescent and operating as a diversionary marionette theater”) and Silicon Valley.

This is fascism in its most covert form, hiding behind public agencies and private companies to carry out its dirty deeds.

It is a marriage between government bureaucrats and corporate fat cats.

As Lofgren concludes:
[T]he Deep State is so heavily entrenched, so well protected by surveillance, firepower, money and its ability to co-opt resistance that it is almost impervious to change… If there is anything the Deep State requires it is silent, uninterrupted cash flow and the confidence that things will go on as they have in the past. It is even willing to tolerate a degree of gridlock: Partisan mud wrestling over cultural issues may be a useful distraction from its agenda.
In other words, as I point out in my book Battlefield America: The War on the American People, as long as government officials—elected and unelected alike—are allowed to operate beyond the reach of the Constitution, the courts and the citizenry, the threat to our freedoms remains undiminished.

So the next time you find yourselves despondent over the 2016 presidential candidates, remember that it’s just a puppet show intended to distract you from the silent coup being carried out by America's shadow government.

Reprinted with permission from the Rutherford Institute.

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*****************************************************

SECRETARY HILLARY RODHAM CLINTON
SPEAKER AT GOLDMAN SACHS
BUILDERS AND INNOVATORS SUMMIT
Ritz-Carlton Dove Mountain
Marana, Arizona
Tuesday, October 29, 2013

*****************************************************



Reported by: Carolyn T. Sullivan, RPR







ELLEN GRAUER COURT REPORTING CO. LLCC
126 East 56th Street, Fifth Floor
New York, New York 10022
212-750-6434
REF: 105182










MR. BLANKFEIN: That's the first of a ten-minute spiel, but let me introduce somebody who needs no introduction. Secretary Hillary Clinton.
(Applause.)
MR. BLANKFEIN: Now, when I say I want no introduction, I'm really only kidding because I want a real introduction and long.
SECRETARY CLINTON: I was waiting for it.
MR. BLANKFEIN: Well, I'll tell you, I'm more interested in the future. So, anyway, why don't we just start.
If you don't mind, can we start with a little bit of a tour of the world and say, you know, if you were -- if you were -- let's take a hypothetical. Let's say you were Secretary of State.
(Laughter.)
MR. BLANKFEIN: What would you be focused on? What would you be focused on today? And tell a little bit about how your priorities would be and how you would deal with some of it now.
SECRETARY CLINTON: Well, gee, I'll just have to cast my mind back.
(Laughter.)
SECRETARY CLINTON: Well, first, thanks for having me here and giving me a chance to know a little bit more about the builders and the innovators who you've gathered. Some of you might have been here last year, and my husband was, I guess, in this very same position. And he came back and was just thrilled by --
MR. BLANKFEIN: He increased our budget.
SECRETARY CLINTON: Did he?
MR. BLANKFEIN: Yes. That's why we --
SECRETARY CLINTON: Good. I think he -- I think he encouraged you to grow it a little, too. But it really was a tremendous experience for him, so I've been looking forward to it and hope we have a chance to talk about a lot of things.
But clearly, what's going on in this complicated world of ours is on the top of a lot of people's minds. And, you know, let me just briefly say that one of the ways I look at domestic as well as international issues is by trying to focus not just on the headlines, although those are insistent and demand your attention, but to keep an eye on the trend lines. And many of you in this room are masters of the trend lines. You see over the horizon, you think about products that nobody has invented, and you go about the business of trying to do that.
Well, in diplomacy or politics and national security, foreign policy, it's somewhat similar. You have to keep your eye on the trend lines even while you're dealing with all of the crises because the trend lines will eventually materialize and could be the crisis of next year or in five years. And if you're taken totally by surprise, it could be a crisis of long-lasting and severe impacts.
So on the headlines, if you look around right now, obviously people are focused on the Middle East, which is a perennial crisis. In Syria, what's happening with the charm offensive by Iran and the negotiations that are taking place on the nuclear program. The somewhat slow but I think glib signs of some economic activity finally in parts of Europe, but that's combined with the huge brouhaha over surveillance and the fights that are incumbent upon the United States and our intelligence services to respond to.
But you also have, if you look a little farther afield, some of the fastest growing economies in the world now. In sub-Saharan Africa, an area that I still think has more promise and potential than is realized by many American businesses and entrepreneurs. You've got the continuing problems in Afghanistan and Pakistan, South Asia. In broad terms, particularly Pakistan remains a very difficult, complex challenge for the United States. And with the withdrawal from Afghanistan, it's going to continue to be so. The situation in East Asia, it was an unfortunate consequence of the government shutdown that the President had to cancel his trip to two major events in Asia, the Asia Pacific Economic Community that the United States actually started and has served as a very good convening forum around economic issues, and the East Asia Summit, which we joined two years ago. And the fact that the President of the United States couldn't be there because literally the people who manage government travel for the President had been furloughed was not exactly a smart message to send to those who are looking to see how reliable the United States is, whether it's economic or strategic or any other aspect. So it's a constantly challenging environment because things are changing so rapidly.
But the trend lines are both positive and troubling. There is a still continuing movement toward open markets, toward greater innovation, toward the development of a middle class that can buy the products. As Lloyd was talking in his intro about the work that you do creating products and then making sure there's markets by fostering the kind of inclusive prosperity that includes consumers is a positive trend in many parts of the world now. Democracy is holding its own, so people are still largely living under governments of their own choosing. The possibilities of technology increasing lifespan and access to education and so many other benefits that will redound to not only the advantage of the individual but larger society.
At the same time, you've got other trend lines. There is an increasing cooperation among terrorist groups. They're, unfortunately, not defeated because they were driven largely out of Afghanistan and have been decimated in Pakistan, and they've taken up residence in Somalia and North Africa. The Arab Spring, which held such great promise, has not yet been realized. And the situation in Syria posits a very difficult and dangerous Sunni-Shiite divide that would have broad repercussions across the region. You've got all kinds of threats from weapons of mass destruction. One of the positives of the last month is getting ahold of the Syria chemical weapons program, which in and of itself is a good, even though it doesn't stop the civil war and the increasing radicalization of a lot of the groups fighting Assad.
So we can go down the list, Lloyd, and you can see that, you know, it's like anybody's balance sheet. There are promising, positive developments, opportunities that you want to take advantage of and you want to push toward and expand. And then there are threats and negative developments that you want to try to contain insofar as possible, eliminate in the rare instance, and try to keep that balance more on the positive side of the ledger so that it does promote and protect the values that the people in this room represent, freedom and opportunity as well as other underlying aspirations, that so many people around the world still look to our country to try to help them realize.
MR. BLANKFEIN: Just on that, is another trend, perhaps the isolationist may be too strong, but let's say the isolationist tendency now. I think the President might well have lost his vote on Syria, got a little bit bailed out, may turn out to be for the best, may have been the best outcome, but it doesn't augur well. There may be a lot of factors. It may be that because maybe the Syrian situation is so complicated that we just don't know what to do. So, therefore, doing nothing. But, you know, from the left side of the Democrat Party, the right side of the Republican Party, it seems like there's a kind of a antipathy now for intervention. What do you think the trend line is for the United States [unintelligible]?
SECRETARY CLINTON: Well, I'm an optimist, so I think the trend line continues to be positive, but I think you have highlighted one of the issues that, you know, concerns me on the -- you know, if you look at the -- the Syria vote is a bit of a challenging one to draw large conclusions from because it is a wicked problem. There are so many factors at play there. But the underlying rejection of a military strike to enforce the red line on chemical weapons spoke more about, you know, the country's preoccupation with our own domestic situation, the feeling that we need to get our own house in order, that we need to get that economy that everybody here is so deeply involved in producing more, getting back to growth, dealing with the unemployment figures that are still unacceptably high in too many places.
So it was both a rejection of any military action in the Middle East right now and a conclusion that, you know, people of considerable analytical understanding of the region could also reach that, you know, you -- we're in -- we're in a time in Syria where they're not finished killing each other, where it's very difficult for anybody to predict a good outcome and maybe you just have to wait and watch it. But on the other side of it, you can't squander your reputation and your leadership capital. You have to do what you say you're going to do. You have to be smart about executing on your strategies. And you've got to be careful not to send the wrong message to others, such as Iran.
But I think in this particular instance, it was primarily the feelings that I see as I travel around the country speaking at college campuses, speaking at other business kinds of events, different audiences, people are nervous about what we're doing here at home. The gridlock, the government shutdown, flirting with defaulting on our debt. You know, just really focused people's attention on our own shortcomings. And I think that had as much to do with it as anything.
MR. BLANKFEIN: Do you think when -- again, another trend, which is a surprising, shocking trend, but nevertheless a trend, the energy sufficiency of the United States. What does that mean for, you know, I guess the geopolitical politics, implications that will play out over decades. But how much are we going to invest in defending the ceilings between Iran and China when we're not tied to the oil from the Middle East. China is now importing more oil from the Middle East than we are.
SECRETARY CLINTON: Right.
MR. BLANKFEIN? So what does that augur for our own commitment?
SECRETARY CLINTON: Well, look, I think it's mostly, again, on the balance sheet metaphor of where we are in the world today. I think it's mostly a positive that we are more energy sufficient. Obviously it's imperative that we exploit the oil and gas in the most environmentally careful way because we don't want to -- we don't want to cause problems that we also will have to deal with taking advantage of what is a quite good windfall for us in many other respects.
We were never dependent upon Iranian oil, but the fact that we are now moving toward and not only energy independence but potentially using that energy to bring more manufacturing back to the United States as well as possibly creating an export market from the United States, it just changes the whole equation. It puts a lot of pressure on China, in particular, to continue to exploit as many energy sources. And I would argue that even though we are not worried about getting as much energy from the Middle East as perhaps we were in the past that the United States still has to keep those ceilings open.
48 percent of the world's trade, obviously that includes energy but includes everything else, goes through the South China Sea. Some of you may have seen the long article in the New York Times Magazine on the South China Sea this past weekend, an issue that I worked on for the entire time was in the State Department because China basically wants to control it. You can't hold that against them. They have the right to assert themselves. But if nobody's there to push back to create a balance, then they're going to have a chokehold on the sea lanes and also on the countries that border the South China Sea.
MR. BLANKFEIN: It's an unfortunate name.
SECRETARY CLINTON: What, the South China Sea?
MR. BLANKFEIN: Yeah.
SECRETARY CLINTON: Yeah, well, it's an unfortunate position they've taken.
MR. BLANKFEIN: Yeah.
SECRETARY CLINTON: They have --
MR. BLANKFEIN: Ours is called the Caribbean. We don't call it the South United States Sea.
(Laughter.)
SECRETARY CLINTON: Well, you may be forgetting James Madison.
I think that -- you know, one of the greatest arguments that I had on a continuing basis was with my Chinese counterparts about their claim. And I made the point at one point in the argument that, you know, you can call it whatever you want to call it. You don't have a claim to all of it. I said, by that argument, you know, the United States should claim all of the Pacific. We liberated it, we defended it. We have as much claim to all of the Pacific. And we could call it the American Sea, and it could go from the West Coast of California all the way to the Philippines. And, you know, my counterpart sat up very straight and goes, well, you can't do that. And I said, well, we have as much right to claim that as you do. I mean, you claim it based on pottery shards from, you know, some fishing vessel that ran aground in an atoll somewhere. You know, we had conveys of military strength. We discovered Japan for Heaven sakes. I mean, we did all of these things.
MR. BLANKFEIN: These are more technical conversations than I thought they would be.
(Laughter.)
SECRETARY CLINTON: Yes, yes. And then he says to me, well, you know, we'll claim Hawaii. And I said, yeah, but we have proof we bought it. Do you have proof you brought any of these places you're claiming? So we got into the nitty-gritty of --
MR. BLANKFEIN: But they have to take New Jersey.
(Laughter.)
SECRETARY CLINTON: No, no, no. We're going to give them a red state.
(Laughter and applause.)
MR. BLANKFEIN: I'll discuss that after I leave here. Let me ask you another question because this is also a topical question.
Let's say, hypothetically, that one country was eavesdropping on another country.
(Laughter.)
MR. BLANKFEIN: And I didn't hear the crisp denials, but I didn't hear any confirmation of it. How would you -- would you be looking forward to giving that explanation? How do you go -- what do you do now?
SECRETARY CLINTON: So, all right. This is all off the record, right? You're not telling your spouses if they're not here.
MR. BLANKFEIN: Right.
SECRETARY CLINTON: Okay. I was Secretary of State when WikiLeaks happened. You remember that whole debacle. So out come hundreds of thousands of documents. And I have to go on an apology tour. And I had a jacket made like a rock star tour. The Clinton Apology Tour. I had to go and apologize to anybody who was in any way characterized in any of the cables in any way that might be considered less than flattering. And it was painful. Leaders who shall remain nameless, who were characterized as vain, egotistical, power hungry --
MR. BLANKFEIN: Proved it.
SECRETARY CLINTON: -- corrupt. And we knew they were. This was not fiction. And I had to go and say, you know, our ambassadors, they get carried away, they want to all be literary people. They go off on tangents. What can I say. I had grown men cry. I mean, literally. I am a friend of America, and you say these things about me.
MR. BLANKFEIN: That's an Italian accent.
SECRETARY CLINTON: Have a sense of humor.
MR. BLANKFEIN: And so you said, Silvio.
(Laughter.)
SECRETARY CLINTON: So, fast forward. Here we are. You know, look, I have said, and I will continue to say, we do need to have a conversation with and take a hard look at the right balance that we could strike between, you know, privacy and security because there's no doubt, and I've seen this and understand it, there's no doubt that much of what we've done since 9/11 has kept us safer. That's just a fact. It's also kept our friends and our partners and our allies safer, as well. The sharing of intelligence requires the gathering of intelligence and the analysis of intelligence.
And so as we have alerted our friends and worked with them on plots and threats that we had information about, they've done the same for us. And, clearly, they have their own methods of collection. So it's not good enough to say, everybody does it, because we should hold ourselves to the highest standards, and we should have the right checks and balances in this whole system.
MR. BLANKFEIN: We should do better.
SECRETARY CLINTON: Well, we do better. I mean, that's the problem. We have a lot of information. And not the kind of information that most of our citizens are worried about because I really have no evidence and have no reason to believe that, you know, we've got people listening to American citizens' conversations. But the collection of the metadata is something that has proven to be very useful.
And anybody who has ever traveled in other countries, some of which shall remain nameless, except for Russia and China, you know that you can't bring your phones and your computers. And if you do, good luck. I mean, we would not only take the batteries out, we would leave the batteries and the devices on the plane in special boxes. Now, we didn't do that because we thought it would be fun to tell somebody about. We did it because we knew that we were all targets and that we would be totally vulnerable.
So it's not only what others do to us and what we do to them and how many people are involved in it. It's what's the purpose of it, what is being collected, and how can it be used. And there are clearly people in this room who know a lot about this, and some of you could be very useful contributors to that conversation because you're sophisticated enough to know that it's not just, do it, don't do it. We have to have a way of doing it, and then we have to have a way of analyzing it, and then we have to have a way of sharing it.
And it's not only on the government side that we should be worried about. I mean, the cyber attacks on businesses, and I'm sure many in this room have experienced that, is aimed at commercial advantage. In some instances, when it's aimed at defense businesses, it's aimed at, you know, security and strategic advantage. But, you know, the State Department was attacked hundreds of times every day, some by state-sponsored groups, some by more independent operators. But it was the same effect. People were trying to steal information, use it for their own purposes.
So I think maybe we should be honest that, you know, maybe we've gone too far, but then let's have a conversation about what too far means and how we protect privacy to give our own citizens the reassurance that they are not being spied by their own government, give our friends and allies the reassurance that we're not going beyond what is the necessary collection and analysis that we share with them and try to have a mature conversation.
MR. BLANKFEIN: Maybe embedded you've already given part the answer, but how serious, how bad was it what Snowden and Assange did? What are the -- I mean, Assange -- if this were a destroyer and innovator conference, we might have had Assange here.
SECRETARY CLINTON: I wouldn't be here.
MR. BLANKFEIN: But how much did that hurt us? Aside from the embarrassment, clearly some avenues now, some things we relied on that, have been closed off for us. I know it was very important to try to get some legislation that would have made it legal to get some more of this metadata that's been very helpful without having the carriers face liability. That's probably been put on the back burner. What are the consequences long term for this in terms of our own safety and the safety of the Republic.
SECRETARY CLINTON: Well, separate the two. The WikiLeaks problem put at risk certain individuals. We had to -- we had to form a kind of investigative team that looked at all the names and all the documents, which was quite a challenge, to make sure that identities that were either revealed or described in enough detail that they could be determined would not put people who were at risk. I mean, without going into detail, you know, maybe they're -- let's just hypothetically say there was somebody serving in a military in a certain country who was worried about some of the activities of the military that he served because he thought they were doing business with rogue states or terrorist networks, and so he would seek out an American diplomat to begin a conversation. And the American diplomat would report back about the concerns that were being expressed about what was happening in this country. And then it's -- you know, it's exposed to the world. So we had to identify, and we moved a number of people to safe -- to safety out of where they were in order for them to be not vulnerable.
So on the WikiLeaks, there was the embarrassment factor, there were the potential vulnerability factors that individuals faced. The WikiLeaks issue was, you know, unfortunate. Private Manning should have never had access to a lot of what he did have access to. So, in effect, it was a problem. But it didn't expose the guts of how we collect and analyze data.
A lot of -- without knowing exactly because I don't think we yet have an accurate picture of what Snowden put out. You saw where Clapper and Alexander and others were testifying that reporters didn't understand what they were looking at. That's totally possible. I don't discount that at all. A lot of the information that is conveyed is difficult to understand without some broader context. So Alexander and Clapper said, look, a lot of what Snowden had, which has been interpreted by the press, is not accurate. I can't speak one way or the other on that. But what I think is true, despite Snowden's denials, is that if he actually showed up in Hong Kong with computers and then showed up in Mexico with computers, why are those computers not exploited when my cellphone was going to be exploited.
So I do think that there has been a real loss of important information that shouldn't belong to or be made available to people who spend a lot of their time trying to penetrate our government, our businesses. And even worse, you know, some who are engaged in terrorist activities. I mean, the Iranians did a disruption of service attack on American banks a year ago. The Iranians are getting much more sophisticated. They run the largest terrorist networks in the world.
So, you know, if Snowden has given them a blueprint to how we operate, why is that in any way a positive. We should have the debate. We should have the conversation. We should make the changes where they're necessary. But we shouldn't put our systems and our people at risk. So I think that WikiLeaks was a big bump in the road, but I think the Snowden material could be potentially much more threatening to us.
MR. BLANKFEIN: Let me just introduce one more topic with you, and I'll urge everybody to think of some questions if we have time for that.
But just a general question to start you off on the domestic situation. Is the American political system just hopeless? Should we just throw it away, start over? You know, go home. Get a parliamentary system. Is it -- because I will tell you -- I'm kidding. We -- talking here, and I didn't do this in a formal survey, but when we ask entrepreneurs, whether they were social entrepreneurs, the people who were talking represented the work they're doing in the cities and the businesses represented here, every conversation referred to either what the government was doing or what the government wasn't doing that it was obvious that they should be doing.
And then I guess a corollary question to my first approach, should we chuck it away, will the elections make a difference. Is the system so gummed up where a single senator can so gum up appointments and basically extort legislation or stop legislation, is the system so screwed up now that really that we just have to have some cataclysm that just gets everybody so frustrated that we de facto start over, you know, or practically start over.
SECRETARY CLINTON: Well, look, I -- I think that everyone agrees that we're in a bad patch in our political system and in Washington. It's -- you know, there's a lot of good things happening elsewhere in the country. There are a lot of mayors, you had Mitch Landrieu here, I was with Rahm Emanuel yesterday. There's a lot of innovative, interesting, new ideas being put into practice by mayors, by some governors. So I think when we talk about our political system, we're really focusing more on what's happening in Washington. And it is dysfunctional right now. And it is for a variety of reasons, some of them systemic, as you suggested.
You know, I really have come to believe that we need to change the rules in the Senate, having served there for eight years. It's only gotten more difficult to do anything. And I think nominees deserve a vote up or down. Policies deserve a vote up or down. And I don't think that a small handful of senators should stand in the way of that, because, you know, a lot of those senators are really obstructionist. They should get out. They should make their case. They should go ahead and debate. But they shouldn't be able to stop the action of the United States Senate. So I think there does have to be some reworking of the rules, particularly in the Senate.
I think that, as has been discussed many times, the partisan drawing of lines in Congressional districts gives people -- gives incumbents certainly a lot more protection than an election should offer. And then they're only concerned about getting a challenge from the left of the Democratic Party or a challenge from the right in the Republican Party. And they're not representing really the full interests of the people in the area that they're supposed to be.
California moved toward this non-partisan board, and I think there should be more efforts in states to do that and get out of the ridiculous gerrymandering that has given us so many members who don't really care what is happening in the country, don't really care what the facts are. They just care whether they get a primary opponent.
And then it comes down to who we vote for and what kind of expectations we set and who we give money to. Those who help to fund elections, I think it's important that business leaders make it clear, why would you give money to somebody who was willing to wreck the full faith and credit of the United States. I mean, that just makes no sense at all because the economic repercussions would have been very bad, and the long-term consequences with, you know, the Chinese saying, let's de-Americanize the world and eventually move to a different reserve currency wouldn't be, you know, beneficial, either.
So I think there are steps that citizens have to take. It's not just about how we rearrange the levers of power and the institutions in Washington.
But there has to be a new ethos. I mean, we can't let people, as you say, be extortionists. And the President was absolutely right not to negotiate with people who were acting the way that the minority of the minority was acting on the shutdown and the debt limit issue.
But it's going to take a concerted effort --
MR. BLANKFEIN: Does it have to get worse first in order for the -- because, obviously, in America, we've gone through cycles. Somebody said, boy, politics have never been this bad. It's so poison. And I said, well, we did have the Civil War, and we got through that. And we had the McCarthy era. And so we've gotten into and out of these cycles before. But do you need to bounce off some bottom? In other words, does it have to get so bad that the electorate rallies to want the spirit of compromise instead of sending -- because ultimately, it's really the vote -- you know, we blame the legislators, but it's the voters. The voters have to realize that the only stable, sustainable government is one in which the moderates compromise and the fringes get rejected, not the other way around.
SECRETARY CLINTON: That is exactly. And, you know, post the shutdown/debt limit debacle, you know, the Republican Party's ratings dropped dramatically. You can see it in Virginia where the Democratic candidate has opened a big lead and in part because the Republican candidate for governor looks as though he's of the extremists. He's of the Tea Party-like Republicans, and he's being punished for it.
MR. BLANKFEIN: Utah, also.
SECRETARY CLINTON: Yeah. So you're seeing people say, wait a minute. Enough. You know. I may be conservative, but I'm not crazy. And I don't want to be represented by people who are crazy and who are threatening, you know, the entire structure --
MR. BLANKFEIN: "I'm not crazy." That's going to be the new rallying cry.
SECRETARY CLINTON: I think it would be. I like when people say, you know, I may be conservative, but I'm not crazy. I'm very reassured.
MR. BLANKFEIN: Prove it.
SECRETARY CLINTON: Yeah. You want them to prove it by saying, you know, we're going to act differently in our voting and our giving. And it could make a very big difference.
Now, some of the Republicans are also fighting back. I mean, somebody like Lamar Alexander, who's been a governor and a senator of Tennessee, and they're mounting a Tea Party challenge against him. He's going right at it. He is not afraid to take them on. And more moderate Republicans have to do that as well. Take back their party from the extremists and the obstructionists.
And you're right, we've gone through these periods before. We have always had this kind of streak of whether it's know-nothingism or isolationism or, you know, anti-Communism, extremism. Whatever. We've had it forever from the beginning. So it's important that people speak out and stand up against it, and especially people who are Republicans, who say, look, that's not the party that I'm part of. I want to get back to having a two-party system that can have an adult conversation and a real debate about the future.
MR. BLANKFEIN: Yeah, and one thing, I'm glad -- I'm proud that the financial services industry has been the one unifying theme that binds everybody together in common.
(Laughter.)
MR. BLANKFEIN: So with that, let me -- you notice how I don't make that a question.
Questions from the audience? I think we have microphones coming your way.
MALE ATTENDEE: Madam President --
(Laughter and applause.)
MALE ATTENDEE: My question is, as entrepreneurs, we risk a lot. And Mike Bloomberg had 30 billion other reasons than to take office. Do we need a wholesale change in Washington that has more to do with people that don't need the job than have the job?
SECRETARY CLINTON: That's a really interesting question. You know, I would like to see more successful business people run for office. I really would like to see that because I do think, you know, you don't have to have 30 billion, but you have a certain level of freedom. And there's that memorable phrase from a former member of the Senate: You can be maybe rented but never bought. And I think it's important to have people with those experiences.
And especially now, because many of you in this room are on the cutting edge of technology or health care or some other segment of the economy, so you are people who look over the horizon. And coming into public life and bringing that perspective as well as the success and the insulation that success gives you could really help in a lot of our political situations right now.
MALE ATTENDEE: How about in the Cabinet?
SECRETARY CLINTON: Yeah. Well, you know what Bob Rubin said about that. He said, you know, when he came to Washington, he had a fortune. And when he left Washington, he had a small --
MR. BLANKFEIN: That's how you have a small fortune, is you go to Washington.
SECRETARY CLINTON: You go to Washington. Right.
But, you know, part of the problem with the political situation, too, is that there is such a bias against people who have led successful and/or complicated lives. You know, the divestment of assets, the stripping of all kinds of positions, the sale of stocks. It just becomes very onerous and unnecessary.
MR. BLANKFEIN: Confirmation.
SECRETARY CLINTON: The confirmation process is absurd. And it drives out a lot of people. So, yes, we would like to see people, but it's a heavy price for many to pay and maybe not one that they're ready to pay.
MR. BLANKFEIN: Garrett.
MALE ATTENDEE: Madam Secretary, thank you for everything you've done for the country. I think I speak on behalf of most of the entrepreneurs here, we're optimists. Understandably, post 9/11, most of our framing of United States with respect to the rest of the world has been about fear and threat. I can speak for myself and a lot of people in this room. For us from outside of the country before we immigrated here, America was a symbol of hope.
How do we reframe what we talk about in terms of the good that America does in the world and bringing about the message of hope. Even in this discussion what we talked about, we talk mostly about fear and threat. Can you speak to us about the hope and the good that we bring to the world.
SECRETARY CLINTON: Well, yes. I mean, you have to blame Lloyd for the questions.
(Laughter.)
MR. BLANKFEIN: I'm more associated with fear than hope.
SECRETARY CLINTON: Well, you're absolutely right. And that still is the American character. It's in our DNA. We are a generous, hopeful, optimistic, confident people. As you know, I was a senator from New York on 9/11. And, you know, the comeback of New York City, its resilience, its confidence in the face of a devastating attack was one of the most inspiring chapters of American history.
So there's no doubt that we have a great story to tell. I think, understandably, there was a lot of overreaction as well as appropriate reaction following 9/11, which is why now, you know, 12 years on, we're talking about having a conversation about getting into the right balance on privacy and security, but it would also be fair to say, you know, on optimism and skepticism. We've got to get back on the optimist scale.
And, you know, I see it everywhere I go. I mean, a lot of the people I meet with and talk to are excited about the future. They want to make a contribution, whether it's, you know, in business or in some kind of non-profit. There's an enormous amount of pent-up excitement and anticipation.
But a lot of people are worried that there's another shoe that's going to drop. That somehow our government, our culture is going to not reflect that sense of forward movement. So yes, we do have to get back to telling the American Story and telling it to ourselves first and foremost. That's why immigration reform is so important. I mean, get immigration reform done you. It sends exactly the signal you're talking about.
(Applause.)
SECRETARY CLINTON: Get it fixed so that the people who have been here working hard, building futures, are given the chance to become American citizens. There's no requirement that they do, but they would be given that path to citizenship.
So it still is the case that more people want to come here than anywhere else in the world. People still, despite all of the problems of the last decade, see through it and see the underlying reality of what a life in America can offer them and their children.
But we need to get back to believing our own story. We need to jettison a lot of the skepticism. I mean, there's not a skeptic among you when it comes to being an entrepreneur. You couldn't get up in the morning. You couldn't face how hard it was. You couldn't do the work that's required. You have to believe you're going to make it, you're going to get that breakthrough, you're going to be successful, you're going to get those investors. I mean, that is a representation of what America has stood for, and we have to champion that.
And I tell you, I see any society like a three-legged stool. You have to have an active free market that gives people the chance to live out their dreams by their own hard work and skills. You have to have a functioning, effective government that provides the right balance of oversight and protection of freedom and privacy and liberty and all the rest of it that goes with it. And you have to have an active civil society. Because there's so much about America that is volunteerism and religious faith and family and community activities. So you take one of those legs away, it's pretty hard to balance it. So you've got to get back to getting the right balance.
And what I really resent most about the obstructionists is they have such a narrow view of America. They see America in a way that is no longer reflective of the reality of who we are. They're against immigration for reasons that have to do with the past, not the future. They can't figure out how to invest in the future, so they cut everything. You know, laying off, you know, young researchers, closing labs instead of saying, we're better at this than anybody in the world, that's where our money should go. They just have a backward-looking view of America. And they play on people's fears, not on people's hopes, and they have to be rejected. I don't care what they call themselves. I don't care where they're from. They have to be rejected because they are fundamentally unAmerican. And every effort they make to undermine and obstruct the functioning of the government is meant to send a signal that we can't do anything collectively. You know, that we aren't a community, a nation that shares values.
I mean, American was an invention. It was an intellectual invention, and we have done pretty well for all these years. And these people want to just undermine that very profound sense of who we are. And we can't let them do that.
So it's not just about politics or partisanship. It really goes to the heart of what it means to be American. And I'll just say that I've been reading a lot of de Tocqueville lately because he was a pretty smart guy, and he traveled around and looked at this country and came up with some profound observations about us. But he talked about how unique early Americans were because they mixed a rugged individualism with a sense of, you know, community well being. So the individual farmer would quit farming for a day to go somewhere to help raise a barn, for example. People understood that the individual had to be embedded in a community in order to maximize -- if you were a merchant, you needed people to sell to. If you were a farmer, you needed people to buy your products. And he talked about the habits of the heart. And he said, that's what set us apart from anybody else. And, you know, I think there's a lot of truth to that. We are a unique breed, and people come here from all over and kind of sign on to the social compact of what it means to be an American.
And we can't afford to let people, for their own personal reasons, whether they be political, commercial, or whatever, undermine that. So, yeah, there's a lot of to be said. And we need to say it more, and it doesn't just need to come from, you know, people on platforms. It needs to come from everybody.
(Applause.)
MALE ATTENDEE: Madam Secretary, what is the most important competitive advantage that you think the U.S. will keep as compared to a country like China?
SECRETARY CLINTON: Freedom. I think freedom. Freedom of the mind, freedom of movement, freedom of debate, freedom of innovation. You know, I just -- I don't think we fully value -- we sometimes take it for granted, and we sometimes even dismiss it, how much stronger we are. Because in addition to that individual freedom that we have in great abundance compared to China, for example, we do have checks and balances. We have constitutional order. We have protection of intellectual property, we have a court system that we use for that purpose. We have a lot of assets that support the free thinking and free acting of individuals. And in the long run, that's what I would place my bet on. I think that is what gives us such a competitive advantage.
Now, in the short run, we have to protect ourselves, not in protectionism, but in, you know, protecting intellectual property, for example, from every effort to undermine what you all do every single day, and we have to be smart about it. We have to invest better in education, starting at zero, not starting in even kindergarten, because we have to better prepare kids to be competitive in a global economy. There's a lot of problems that we have to solve that are community, national problems.
But fundamentally, you know, it's that feeling that, you know what, if you really work hard and you have a good idea, you can make something of yourself, you can produce something. You know, we have traditionally been a country that invented things and made them. Now, we don't do that as much, but I think there's a little bit of an understanding we've got to get back to doing more of that because that ultimately will give us more jobs, give you more opportunities for producing things without fear of being taken advantage of in other markets. So I just think the freedom is just absolutely priceless.
MR. BLANKFEIN: The best people in the world still want to come here.
SECRETARY CLINTON: Well, and we need to let them. That's the other part of the immigration piece. You know, we shut down our borders, we build fences. We were talking at the table, you know, we ask people and entice them to come here and do their undergraduate and graduate work. And then as soon as they get their degree, we tell them we don't want them anymore because our system is so messed up that we can't even keep the people we helped educate and want to stay here.
So we have a lot of work to do to fix the systemic bumps in the road that we're dealing with, but our underlying strengths are so much greater than anybody else. And we need to start celebrating those. Not in some kind of empty rhetoric, arm-waving, carrying on which is not rooted in any tough decisions, but in a really, you know, positive assessment about what we do well and what we can do better and what we need to fix and how we go about fixing it, whether it's immigration or education or anything else.
MR. BLANKFEIN: I don't know what the statistic is this year because I just don't know it, but I bet it's the same as last year. I know last year, for the entrepreneurs that we had, more than a quarter were born outside the United States. And we didn't recruit them for being outside the United States. They were going to build their companies in the United States. But over a quarter were born outside the United States.
SECRETARY CLINTON: Well, I think there's even a higher percentage of that on the -- what was it, the Fortune list or the Forbes list.
FEMALE ATTENDEE: Secretary Clinton, I'm Patty Greene from Boston College's Goldman Sachs 10,000 Small Businesses. And first off, thank you for all the work you've done with women entrepreneurs both domestically and globally over your career. That's really meant a lot.
My question is more domestic based. We have the rather unusually organized Small Business Administration, we have the Department of Commerce, and we have programs for entrepreneurs with small business pretty much scattered across every single other agency. How do you see this coming together to really have more of a federal policy or approach to entrepreneurship and small businesses?
SECRETARY CLINTON: I would welcome your suggestions about that because I think the 10,000 Small Business Program should give you an opportunity to gather a lot of data about what works and what doesn't work. Look, neither our Congress nor our executive branch are organized for the 21st Century. We are organized to be lean and fast and productive. And I'm not -- I'm not naive about this. It's hard to change institutions no matter who they are. Even big businesses in our country are facing competition, and they're not being as flexible and quick to respond as they need to be.
So I know it wouldn't be an easy task, but I think we should take a look at how we could, you know, better streamline the sources of support for small businesses because it still remains essential. You know, one of the things that I would love to get some advice coming out of the 10,000 Small Businesses about is how do we get more access to credit in today's current system for small businesses, growing businesses, because that's one of the biggest complaint I hear everywhere as I travel around the country. People who just feel that they've got nowhere to go, and they don't know how to work the federal system. Even if they do, they don't feel like they've got a lot of opportunities there. So we doo -- this is something we need to look at.
You know, I don't think -- I don't think our credit access system is up to the task right now that is needed. I mean, there are a lot of people who would start or grow businesses even in this economic climate who feel either shut out or limited in what they're able to do. So we need to be smarter about both private and public financing for small businesses.
MR. BLANKFEIN: I think this may well be our last question, so No. 1. That must be the best.
FEMALE ATTENDEE: Great. Lots of pressure. Thank you so much.
My question is, you know, we've talked a lot over the last couple of days about how more and more young people are looking to start their own businesses and moving to entrepreneurship as a career. And I run a company that connects a lot of millennials to meaningful work, and I see this interest in technology careers, finance careers, non-profit careers, but we don't see as much in government careers. And I guess my question is, do you think government is a great place for young people to begin their career? And if so, how do we make sure that more of our so-called best and brightest consider that as a path?
SECRETARY CLINTON: Well, I do think it is, but I can understand why people would be turning away. I mean, it's not a pretty site what's going on when people get furloughed and governments shut down and, you know, the jobs are not as rewarding because of all kinds of restrictions. I mean, it's a tough environment right now.
Personally, having, you know, lived and worked in the White House, having been a senator, having been Secretary of State, there has traditionally been a great pool of very talented, hard-working people. And just as I was saying about the credit market, our personnel policies haven't kept up with the changes necessary in government. We have a lot of difficulties in getting -- when I got to the State Department, we were so far behind in technology, it was embarrassing. And, you know, people were not even allowed to use mobile devices because of security issues and cost issues, and we really had to try to push into the last part of the 20th Century in order to get people functioning in 2009 and '10.
And I think we need to make it clear that if we're going to have young people of talent who have different choices going into government service where they can learn a lot, where they can get a lot of responsibility, there has to be a more welcoming environment, there has to be support for young people to feel like they're making a meaningful contribution, and that requires, you know, changes in some of those same systems that currently don't offer that.
But, yeah, I do think there are great places in the federal government to learn a lot of about substantive issues, about maneuvering through difficult systems, about political trade-offs, and I would encourage people to look at that.
MR. BLANKFEIN: Madam Secretary, thank you very much for coming here this evening. And I just want to echo the comments that a couple of people have made. Just thank you so much for your service. America is so lucky to have had you, to have you, and to continue to have you as a servant for us. Thank you very much.
SECRETARY CLINTON: Thank you, sir.
(Applause.)
(Concluded at 9:

goldman sachs clinton speech 1

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GOLDMAN SACHS, CO.

2013 IBD CEO ANNUAL CONFERENCE

KEYNOTE SPEAKERS:
FORMER UNITED STATES
SECRETARY OF STATE
HILLARY RODHAM CLINTON and
LLOYD BLANKFEIN
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The Inn at Palmetto Bluff
Bluffton, South Carolina

June 4, 2013
8:05 P.M.



Before Patricia T. Morrison, Registered
Professional Reporter and Notary Public of the
State of South Carolina.



ELLEN GRAUER COURT REPORTIN CO. LLC
126 East 56th Street, Fifth Floor
New York, New York 10022
212-750-6434
REF: 104014



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MS. CLINTON: Let's start with the
chairman.
MR. BLANKFEIN: China. We're used to
the economic team in China. We go there all the
time. The regulations -- and then every once in a
while you hear about South China, the military
side.
How do you from the state department
point of view -- less familiar to us -- think about
China, the rise of China, and what that forebodes
for the next couple of decades?
MS. CLINTON: Well, you start off with
an easy question, but first let me thank you.
Thanks for having me here and giving me an
opportunity both to answer your questions and maybe
later on some of the questions that some of the
audience may have.
I think it's a good news/maybe not so
good news story about what is going on right now in
China. On the good news side I think the new
leadership -- and we'll see more of that when Xi
Jinping gets here in the United States after having
gone to Latin America. He's a more sophisticated,
more effective public leader than Hu Jintao was.
He is political in the kind of generic
sense of that word. You can see him work a room,
which I have watched him do. You can have him make
small talk with you, which he has done with me.
His experience as a young man coming to the United
States in the 1980s -- going to Iowa, spending time
there, living with a family -- was a very important
part of his own development.
MR. BLANKFEIN: His daughter is at
Harvard?
MS. CLINTON: Yes. They don't like you


3


to know that, but most of the Chinese leadership
children are at American universities or have been.
I said to one very, very high ranking
Chinese official about a year, year and a half ago
-- I said: I understand your daughter went to
Wellesley. He said: Who told you? I said: Okay.
I don't have to punish the person then.
So I think that the leadership -- and
for me that's important, because you've seen the
clever moves that he's made already. He not only
went to Russia on the first trip, he went to Africa
and then to South Africa. Now in Latin America.
Some of it is the same old commodity
hunt, but some of it is trying to put a different
phase on that and to try to assuage some of the
doubts and some of the concerns that have been
bubbling up over the last couple of years about
Chinese practices, both governmental and
commercial.
So he's someone who you at least have
the impression is a more worldly, somewhat more
experienced politician. And I say that as a term
of praise, because he understands the different
levers and the constituencies that he has to work
with internally and externally. That's especially
important because of the recent moves he's making
to consolidate power over the military.
One of the biggest concerns I had over
the last four years was the concern that was
manifested several different ways that the PLA, the
People's Liberation Army, was acting somewhat
independently; that it wasn't just a good cop/bad
cop routine when we would see some of the moves and
some of the rhetoric coming out of the PLA, but
that in effect that were making some foreign


4


policy. And Hu Jintao, unlike Jiang Zemin before
him, never really captured the authority over the
PLA that is essential for any government, whether
it's a civilian government in our country or a
communist party government in China.
So President Xi is doing much more to
try to assert his authority, and I think that is
also good news.
Thirdly, they seem to -- and you all
are the experts on this. They seem to be coming to
grips with some of the structural economic problems
that they are now facing. And look, they have
them. There are limits to what enterprises can do,
limits to forcing down wages to be competitive, all
of which is coming to the forefront; limits to a
real estate bubble. All of the cyclical business
issues that they're going to have to confront like
every other economy, and they seem to be making
steps to do so.
On the not so good side there is a
resurgence of nationalism inside China that is
being at least condoned, if not actively pushed by
the new Chinese government. You know, Xi Jinping
talks about the Chinese dream, which he means to be
kind of the Chinese version of the American dream.
There has been a stoking of residual anti-Japanese
feelings inside China, not only in the leadership
but in the populace. It's ostensibly over the
dispute that is ongoing, but it's deeper than that
and it is something that bears very careful
watching. Because in my last year, year and a half
of meetings with the highest officials in China the
rhetoric about the Japanese was vicious, and I had
high Chinese officials in their 60s and 50s say to
me: We all know somebody who was killed by the


5


Japanese during the war. We cannot let them resume
their nationalistic ways. You Americans are naive.
You don't see what is happening below the surface
of Japan society.
Riots that were not oppressed by the
police against Japanese factories, against the
Japanese ambassador's car -- those kinds of actions
that were acting out in the sense of nationalism,
which could well be a tool that the new government
uses to try to manage some of the economic changes.
Divert people's attention. Get them upset at the
Japanese. Not upset the party.
We're a little concerned about that.
MR. BLANKFEIN: Does it make any of the
other Asian countries nervous and therefore
gravitate closer to the US?
MS. CLINTON: There is a lot of
anxiety, but it's a schizophrenic, I guess is the
way I put it. On the one hand, no nation wants to
be viewed as hostile to China. That's not in their
interests. They have -- if you're Japan or South
Korea in particular, you have a lot of business
that you have to do. So you're going to want to
keep the relationship on an even keel at the same
time this assertiveness, which we first saw most
particularly around the South China seas starting
in 2010, kind of ended the charm offensive that
Chinese were conducting with all of their neighbors
in Southeast Asia and the assertion of control over
the entire sea.
If you Goggle up what the Chinese claim
is, it's the entire South China sea. And I would
have these arguments with the state counselor, Dai
Bingguo, with the foreign minister, Yang Jiechi,
and I would say: You know, if you believe this,


6


take it to arbitration.
MR. BLANKFEIN: An unfortunate name.
MS. CLINTON: Which one?
MR. BLANKFEIN: The South China sea.
MS. CLINTON: Yes, it is. And there
are a lot of people who refuse to call it that
anymore. The Filipinos now call it the Filipino
sea and the East China Sea is called the Japanese
Sea.
So yeah. We've got all these
geographic and historic challenges that are coming
to the forefront, which seems a little strange when
you think about the economic development and growth
that has gone on in the last 30 years, to be
harkening back to the 1930s and the second world
war at a time when you've surpassed Japan.
You're now the second biggest economy
in the world. It really does raise questions about
what is going on in the calculus of the leadership
that would encourage them to pursue this kind of
approach. Nationalism, of course. Sovereignty, of
course. And if you want to go into it there is --
I can give you their side of the question on what
the Japanese called the -- you know, you can go
into why they are so agitated about it. But the
fact is, they have bigger fish to fry in the South
China Sea and elsewhere.
So why are they intent upon picking
this fight and asserting this at this time? Why
are they slamming into Filipino fishing vessels?
You know, a poor country that is just desperately
trying to get its growth rate up and making some
progress in doing that. So it bears watching, and
obviously it matters to all of us.
MR. BLANKFEIN: The Japanese -- I was


7


more surprised that it wasn't like that when you
think of -- all these different things. It's such
a part of who they are, their response to Japan.
If you bump into the Filipino fishing boats, then I
think you really -- while we're in the
neighborhood, the Chinese is going to help us or
help themselves -- what is helping themselves?
North Korea? On the one hand they wouldn't want --
they don't want to unify Korea, but they can't
really like a nutty nuclear power on their border.
What is their interests and what are
they going to help us do?
MS. CLINTON: Well, I think their
traditional policy has been close to what you've
described. We don't want a unified Korean
peninsula, because if there were one South Korea
would be dominant for the obvious economic and
political reasons.
We don't want the North Koreans to
cause more trouble than the system can absorb. So
we've got a pretty good thing going with the
previous North Korean leaders. And then along
comes the new young leader, and he proceeds to
insult the Chinese. He refuses to accept
delegations coming from them. He engages in all
kinds of both public and private rhetoric, which
seems to suggest that he is preparing himself to
stand against not only the South Koreans and the
Japanese and the Americans, but also the Chinese.
So the new leadership basically calls
him on the carpet. And a high ranking North Korean
military official has just finished a visit in
Beijing and basically told: Cut it out. Just stop
it. Who do you think you are? And you are
dependent on us, and you know it. And we expect


8


you to demonstrate the respect that your father and
your grandfather showed toward us, and there will
be a price to pay if you do not.
Now, that looks back to an important
connection of what I said before. The biggest
supporters of a provocative North Korea has been
the PLA. The deep connections between the military
leadership in China and in North Korea has really
been the mainstay of the relationship. So now all
of a sudden new leadership with Xi and his team,
and they're saying to the North Koreans -- and by
extension to the PLA -- no. It is not acceptable.
We don't need this right now. We've got other
things going on. So you're going to have to pull
back from your provocative actions, start talking
to South Koreans again about the free trade zones,
the business zones on the border, and get back to
regular order and do it quickly.
Now, we don't care if you occasionally
shoot off a missile. That's good. That upsets the
Americans and causes them heartburn, but you can't
keep going down a path that is unpredictable. We
don't like that. That is not acceptable to us.
So I think they're trying to reign Kim
Jong in. I think they're trying to send a clear
message to the North Korean military. They also
have a very significant trade relationship with
Seoul and they're trying to reassure Seoul that,
you know, we're now on the case. We couldn't pay
much attention in the last year. We've got our own
leadership transition. But we're back focused and
we're going to try to ensure that this doesn't get
all the rails.
So they want to keep North Korea within
their orbit. They want to keep it predictable in


9


their view. They have made some rather significant
statements recently that they would very much like
to see the North Koreans pull back from their
nuclear program. Because I and everybody else --
and I know you had Leon Panetta here this morning.
You know, we all have told the Chinese if they
continue to develop this missile program and they
get an ICBM that has the capacity to carry a small
nuclear weapon on it, which is what they're aiming
to do, we cannot abide that. Because they could
not only do damage to our treaty allies, namely
Japan and South Korea, but they could actually
reach Hawaii and the west coast theoretically, and
we're going to ring China with missile defense.
We're going to put more of our fleet in the area.
So China, come on. You either control
them or we're going to have to defend against them.
MR. BLANKFEIN: Wouldn't Japan --
I mean, isn't the thinking now what is going to
happen? But why wouldn't Japan at that point want
to have a nuclear capability?
MS. CLINTON: Well, that's the problem
with these arms races.
MR. BLANKFEIN: Nuclear technology --
MS. CLINTON: But they don't have a
military. They have a currently somewhat
questionable and partially defunct civilian nuclear
industry. So they would have to make a huge
investment, which based on our assessments they
don't want to have to make.
You know, there is talk in Japan about
maybe we need to up our economic commitments to our
military forces. Maybe we have to move from
basically a self-defense force to a real military
again, which would just light up the sky in terms


10


of reactions in China and elsewhere.
So the Japanese have not -- and with
Abe trying to focus on the economy and deal with
the political problems with the structural reforms,
he doesn't want to have to do that. But there are
nationalistic pressures and leaders under the
surface in governship and mayor positions who are
quite far out there in what they're saying about
what Japan should be doing. And part of the reason
we're in the mess on the Senkakians is because it
had been privately owned. And then the governor of
Tokyo wanted to buy them, which would have been a
direct provocation to China because it was kind of
like: You don't do anything. We don't do
anything. Just leave them where they are and don't
pay much attention to them. And the prior
government in Japan decided: Oh, my gosh. We
can't let the governor of Tokyo do this, so we
should buy them as the national government.
And I watched the most amazing argument
-- you know, Hu Jintao was always so impassive in
public, especially around us. And I was in
Vladivostok last September representing the
president at the APEC meeting, and they had the
leaders in a holding room, and we were all in there
waiting to go out to some event. And you had Hu
Jintao in a corner screaming at them, and we all
were listening because their interpreters could
translate from Chinese to English to English to
Japanese and vice versa. So we got to hear the
whole thing. And so we tried to prevent the
problem. That's why we bought it. That is
unacceptable. We never should have done it. The
national government should never own these things.
But we can control it better. It wouldn't be in


11


the hands of a nationalist.
I don't care. This is breaking the -- it was
really fascinating.
You can actually have four translators
in your home. This is something that most
families --
MR. BLANKFEIN: The next area which I
think is actually literally closer to home but
where American lives have been at risk is the
Middle East, I think is one topic. What seems to
be the ambivalence or the lack of a clear set of
goals -- maybe that ambivalence comes from not
knowing what outcome we want or who is our friend
or what a better world is for the United States and
of Syria, and then ultimately on the Iranian side
if you think of the Korean bomb as far away and
just the Tehran death spot, the Iranians are more
calculated in a hotter area with -- where does that
go? And I tell you, I couldn't -- I couldn't
myself tell -- you know how we would like things to
work out, but it's not discernable to me what the
policy of the United States is towards an outcome
either in Syria or where we get to in Iran.
MS. CLINTON: Well, part of it is it's
a wicked problem, and it's a wicked problem that is
very hard to unpack in part because as you just
said, Lloyd, it's not clear what the outcome is
going to be and how we could influence either that
outcome or a different outcome.
So let's just take a step back and look
at the situation that we currently have in Syria.
When -- before the uprising started in Syria it was
clear that you had a minority government running
with the Alawites in lead with mostly the other
minority groups -- Christians, the Druze, some


12


significant Sunni business leaders. But it was
clearly a minority that sat on top of a majority.
And the uprisings when they began were fairly mild
in terms of what they were asking for, and Assad
very well could have in my view bought them off
with some cosmetic changes that would not have
resulted in what we have seen over the now two
years and the hundred thousand deaths and the
destabilization that is going on in Lebanon, in
Jordan, even in Turkey, and the threat throwing to
Israel and the kind of pitched battle in Iran well
supported by Russia, Saudi, Jordanians and others
trying to equip the majority Sunni fighters.
I think that we have tried very hard
over the last two years to use the diplomatic tools
that were available to us and to try to convince,
first of all, the Russians that they were helping
to create a situation that could not help but
become more chaotic, because the longer Assad was
able to hold out and then to move offensively
against the rebels, the more likely it was that the
rebels would turn into what Assad has called them,
terrorists, and well equipped and bringing in
Al-Qaeda and its affiliates.
The Russian's view of this is very
different. I mean, who conceives Syria as the same
way he sees Chechnya? You know, you have to
support toughness and absolute merciless reactions
in order to drive the opposition down to be
strangled, and you can't give an inch to them and
you have to be willing to do what Assad basically
has been willing to do.
That has been their position. It
pretty much remains their position, and it is a
position that has led to the restocking of


13


sophisticated weapon systems all through this. The
Russians' view is that if we provide enough weapons
to Assad and if Assad is able to maintain control
over most of the country, including the coastal
areas where our naval base is, that's fine with us.
Because you will have internal fighting still with
the Kurds and with the Sunnis on the spectrum of
extremism. But if we can keep our base and we can
keep Assad in the titular position of running the
country, that reflects well on us because we will
demonstrate that we are back in the Middle East.
Maybe in a ruthless way, but a way that from their
perspective, the Russian perspective, Arabs will
understand.
So the problem for the US and the
Europeans has been from the very beginning: What
is it you -- who is it you are going to try to arm?
And you probably read in the papers my view was we
should try to find some of the groups that were
there that we thought we could build relationships
with and develop some covert connections that might
then at least give us some insight into what is
going on inside Syria.
But the other side of the argument was
a very -- it was a very good one, which is we don't
know what will happen. We can't see down the road.
We just need to stay out of it. The problem now is
that you've got Iran in heavily. You've got
probably at least 50,000 fighters inside working to
support, protect and sustain Assad. And like any
war, at least the wars that I have followed, the
hard guys who are the best fighters move to the
forefront.
So the free Syrian Army and a lot of
the local rebel militias that were made up of


14


pharmacists and business people and attorneys and
teachers -- they're no match for these imported
toughened Iraqi, Jordanian, Libyan, Indonesian,
Egyptian, Chechen, Uzbek, Pakistani fighters that
are now in there and have learned through more than
a decade of very firsthand experience what it takes
in terms of ruthlessness and military capacity.
So we now have what everybody warned we
would have, and I am very concerned about the
spillover effects. And there is still an argument
that goes on inside the administration and inside
our friends at NATO and the Europeans. How do
intervene -- my view was you intervene as covertly
as is possible for Americans to intervene. We used
to be much better at this than we are now. Now,
you know, everybody can't help themselves. They
have to go out and tell their friendly reporters
and somebody else: Look what we're doing and I
want credit for it, and all the rest of it.
So we're not as good as we used to be,
but we still -- we can still deliver, and we should
have in my view been trying to do that so we would
have better insight. But the idea that we would
have like a no fly zone -- Syria, of course, did
have when it started the fourth biggest Army in the
world. It had very sophisticated air defense
systems. They're getting more sophisticated thanks
to Russian imports.
To have a no fly zone you have to take
out all of the air defense, many of which are
located in populated areas. So our missiles, even
if they are standoff missiles so we're not putting
our pilots at risk -- you're going to kill a lot of
Syrians. So all of a sudden this intervention that
people talk about so glibly becomes an American and


15


NATO involvement where you take a lot of civilians.
In Libya we didn't have that problem.
It's a huge place. The air defenses were not that
sophisticated and there wasn't very -- in fact,
there were very few civilian casualties. That
wouldn't be the case. And then you add on to it a
lot of the air defenses are not only in civilian
population centers but near some of their chemical
stockpiles. You do not want a missile hitting a
chemical stockpile.
We have a big set of issues about what
is going to happen with those storehouses of
chemicals since a lot want their hands on them.
The Al-Qaeda affiliates want their hands on them,
and we're trying to work with the Turks and the
Jordanians and NATO to try to figure out how we're
going to prevent that. The Israelis are --
MR. BLANKFEIN: Israel cares about it.
MS. CLINTON: Israel cares a lot about
it. Israel, as you know, carried out two raids
that were aimed at convoys of weapons and maybe
some other stuff, but there was clearly weapons.
Part of the tradeoff that the Iranians negotiated
with Assad.
So I mean, I've described the problem.
I haven't given you a solution for it, but I think
that the complexity of it speaks to what we're
going to be facing in this region, and that leads
me to Iran.
Our policy -- and President Obama has
been very clear about this. Our policy is
prevention, not containment. What that means is
that they have to be prevented from getting a
nuclear weapon.
Now, the definition of that is debated.


16


I have a very simple definition. If they can
produce the pieces of it and quickly assemble it,
that's a nuclear weapon, even if they keep three
different parts of it in different containers
somewhere. If they do that it goes back to Lloyd's
first point. The Saudis are not going to stand by.
They're already trying to figure out how they will
get their own nuclear weapons. Then the Emirates
are not going to let the Saudis have their own
nuclear weapons, and then the Egyptians are going
to say: What are we? We're the most important
Arab country in the world. We're going to have to
have our own nuclear weapons. And then the race is
off and we are going to face even worse problems in
the region than we currently do today.
MR. BLANKFEIN: What do you -- I've
always assumed we're not going to go to war, a real
war, for a hypothetical. So I just assumed that we
would just back ourselves into some mutually
assured destruction kind of -- you know, we get
used to it. That it's hard to imagine going to war
over that principle when you're not otherwise being
threatened.
So I don't see the outcome. The
rhetoric is there, prevention, but I can't see us
paying that kind of a price, especially what the
president has shown. We're essentially withdrawing
from Iraq and withdrawing from Afghanistan. It's
hard to imagine going into something as open ended
and uncontainable as the occupation of Iran. How
else can you stop them from doing something they
committed to doing?
MS. CLINTON: Well, you up the pain
that they have to endure by not in any way
occupying or invading them but by bombing their


17


facilities. I mean, that is the option. It is not
as, we like to say these days, boots on the ground.
MR. BLANKFEIN: Has it ever worked in
the history of a war? Did it work in London during
the blitz or --
MS. CLINTON: No. It didn't work to
break the spirit of the people of London, but
London was a democracy. London was a free country.
London was united in their opposition to Nazi
Germany and was willing to bear what was a terrible
price for so long with the blitz and the bombings.
Everybody says that Iran, you know, has
united --
MR. BLANKFEIN: Many -- they held out
for an awful --
MS. CLINTON: They wanted -- yeah. But
I mean, people will fight for themselves. They
will fight for themselves, but this is fighting for
a program. I mean, the calculation is exactly as
you described it. It's a very hard one, which is
why when people just pontificate that, you know, we
have no choice. We have to bomb the facilities.
They act as though there would be no consequences
either predicted or unpredicted. Of course there
would be, and you already are dealing with a regime
that is the principal funder and supplier of
terrorism in the world today.
If we had a map up behind us you would
be able to see Iranian sponsored terrorism directly
delivered by Iranians themselves, mostly through
the Revolutionary Guard Corps, the operatives, or
through Islah or other proxies from to Latin
American to Southeast Asia. They were caught in
Bulgaria. They were caught in Cyprus. They were
caught in Thailand. They were caught in Kenya. So


18


it's not just against the United States, although
they did have that ridiculous plot of finding what
they thought was a drug dealer to murder the Saudi
ambassador.
They really are after the sort of
targets of anyone they believe they can terrorize
or sort of make pay a price because of policies.
So the fact is that there is no good alternative.
I mean, people will say, as you do, mutually
assured destruction, but that will require the gulf
states doing something that so far they've been
unwilling to do, which is being part of a missile
defense umbrella and being willing to share their
defense so that if the best place for radar is
somewhere that can then protect the Saudis and the
Emirates, the Saudis would have to accept that.
That is not likely to happen.
So mutually assured destruction as we
had with Europe in the '40s, '50s, '60s, '70s, '80s
until the fall of the Soviet Union is much harder
to do with the gulf states and it will be unlikely
to occur because they will think that they have to
defend themselves. And they will get into the
business of nuclear weapons, and these are -- the
Saudis in particular are not necessarily the
stablest regimes that you can find on the planet.
So it's fraught with all kinds of problems.
Now, the Israelis, as you know, have
looked at this very closely for a number of years.
The Israelis' estimate is even if we set their
program back for just a couple of years it's worth
doing and whatever their reaction might be is
absorbable. That has been up until this recent
government, the prior government, their position.
But they couldn't do much damage themselves.


19


We now have a weapon that is quite a
serious one, and it can do a lot of damage and
damage that would --
MR. BLANKFEIN: Two miles before it
blows up or something?
MS. CLINTON: Yes. It's a penetrator.
Because if you can't get through the hardened
covering over these plants into where the
centrifuges are you can't set them back. So you
have to be able to drop what is a very large
precision-guided weapon.
Nobody wants either of these outcomes.
That's the problem. And the supreme leader,
Khamenei, keeps going around saying: We don't
believe in nuclear weapons. We think they are
anti-Islam. But the fine print is: We may not
assemble them, but we'll have the parts to them.
That's why we keep testing missiles. That's why we
keep spinning centrifuges. That's why we are
constantly looking on the open market to steal or
buy what we need to keep our process going.
So that's what you get paid all these
big bucks for being in positions like I was just in
trying to sort it out and figure out what is the
smartest approach for the United States and our
allies can take that would result in the least
amount of danger to ourselves and our allies going
forward, a contained Iran or an attacked Iran in
the name of prevention? And if it were easy
somebody else would have figured it out, but it's
not. It's a very tough question.
MR. BLANKFEIN: Isn't it amazing that
we can go through and think of Europe as an
afterthought?
MS. CLINTON: Our allies?


20


MR. BLANKFEIN: Our allies. The US is
now oriented towards the Pacific and looking that
way. It's another surprise, having grown up as we
did, that our attention would be so focused on
Asia. But I guess we have a training issue with
the EU.
MS. CLINTON: Yes.
MR. BLANKFEIN: Of course everybody
here in the financial service industry is very
focused on trying to harmonize different -- but
from our point of view what is incomprehensible is
the governance of Europe and the consequences of
Brussels and the single currency that no one has
any account of, and the fact is they may not be as
important if they don't get their economy in shape
and they don't grow over the course of the next --
any observations there?
MS. CLINTON: Well, certainly we are
always looking to Europe as our allies of first
resort. Our common values, our common history.
All of that is really just baked into the DNA of
how we think about our future, and NATO remains the
most important and really remarkable military
alliance, I think, in human history.
So there is a lot that we are still
very attentive to and working on. There is no
doubt that Europe is going through -- you know
better than I -- some serious readjustments. Where
they will come out I don't think any of us are in a
position yet to predict. It may be in Europe what
Winston Churchill used to say about us: The
Americans will finally get to the right answer
after trying nearly everything else, and maybe they
will stumble and work their way toward more
accommodation in recognizing the realities of what


21


it means to have a common currency without a common
system to back up that currency.
So I would certainly not count the
Europeans out, but I think they have a lot of work
to do. And I'm actually more concerned from
another perspective. I think that unless the
national leaders and the European union and
Eurozone leaders get their act together, you will
see some pretty unpredictable leaders and political
parties coming to the forefront in a lot of
countries.
You'll see a lot of nationalism. You
will see a lot of chauvinism. You'll see UK
parties that is -- winning elections in UK is going
to push Cameron and his coalition government to the
right as it moves towards an election -- I think in
2015. What does that mean for Europe? What does
that mean for our relationship?
You've got the NATO military alliance
already being starved of necessary funds because of
all the budgets, and most of the European countries
have been so decimated. So I think that -- it's
not clear to me where it's going to come out yet.
They have to take a lot of really unpleasant
medicines, and some are more willing to do that
that others and see whether or not they have the
political will to make these hard decisions
individually and collectively, and right now I
think the jury is out.
But on the trade and regulatory
harmonization, we are very serious about that and
something that I strongly supported. The
discussions are ongoing. It will come down, as it
often does, to agriculture, particularly French
agriculture, and we'll just have to see how much we


22


can get done by that process. And there is no
doubt that if we can make progress on the trade
regulatory front it would be good for the
Europeans. It would be good for us. And I would
like to see us go as far as we possibly can with a
real agreement, not a phony agreement. You know,
the EU signs agreements all the time with nearly
everybody, but they don't change anything. They
just kind of sign them and see what comes of it.
I think we have an opportunity to
really actually save money in our respective
regulatory schemes, increase trade not only between
ourselves but also be more effective in helping to
keep the world on a better track for a rural spaced
global trading system by having us kind of set the
standards for that, along with the TPC, which we
didn't mention when we talked about Asia, which I
think is also still proceeding.
MR. BLANKFEIN: I think we need to open
it up to some questions now, and if there is a
pregnant pause I know what to follow up with.
PARTICIPANT: One question for you.
MR. BLANKFEIN: Do me a favor? Why
don't we introduce ourselves to the secretary when
you ask a question.
PARTICIPANT: Secretary, Jeff Gordon
with Diverse Technologies.
As you examine the global situation, if
you were to turn back toward the domestic side and
look here at the US and after the 2012 elections
and give your own kind of third-party assessment of
what do we have to do on each side of the aisle to
get America back to a functional government.
Because we've heard a lot even today that the
government has really gotten to a point of


23


dysfunctionality that may be almost unprecedented.
So just stepping back a little while
and just saying: What do you think? What is your
perspective on where the parties are and what we
have to do to kind of solve the problems here
domestically so that we can come up with a unified
approach?
MS. CLINTON: I know -- I heard Leon
was here and was his usual shy and reluctant self
to express an opinion and certainly never to use
any colorful language, but I'm sure "dysfunctional"
was probably the best of the words he used to
describe what is going on in Washington.
Look, I think there is a couple of
things. One, I talk a lot about it, and I talked
about it when I was a senator. I talked about it
as Secretary. I'm talking about it now.
You know, we have to get back to at
least trying to make evidence based decisions.
I know that sounds so simplistic, but the
ideological partisan position on all sides --
because there are people who refuse to look at
facts and deal with them, coming from many
different perspectives -- really undermines
confidence in the people. The American people are
smart. They may not be living and breathing
politics, but they're looking and they're thinking:
Come on, guys. Get it together. You ought to be
able to make a deal of some sort.
You know, when my husband spoke at the
the Democratic Convention he basically touted the
virtues of arithmetic. Can you imagine a major
speech having to be made about how arithmetic needs
to be used as the basis for budgetary discussions?
But in fact, we do need more of an outcry and


24


pressure from the rest of the American system, not
just the politicians but business leaders and
others who are saying: Let's try to figure out how
we're going to move forward based on as near an
evidence-based foundation as we possibly can
manage.
Secondly, you know, people get rewarded
for being partisan, and that's on both sides. The
biggest threat that Democrats and Republicans face
today, largely because of gerrymandering in the
House, is getting a primary opponent from either
the far right or the far left.
You know, there is no reason you would
have noticed this, but there was a woman in the
Senate -- and I think it was Kentucky -- recently
who had an A plus rating from the NRA. A
plus rating. She was a country legislator, highly
regarded, and she was a chairman of a committee in
the state legislature. And somebody introduced a
bill with -- you know, it's not too much
exaggeration to say that you should have your gun
in your car at all times and it should be visible.
And she said: Let's table it for a minute and
think about the consequences.
So the NRA recruited an opponent for
her who beat her. They put a lot of money into it
and basically: You couldn't be reasonable. You
couldn't say let's try to reason this out together.
You had to tow the line, and whether it's a
financial line or gun control line or whatever the
line might be. But people let that happen. Voters
let that happen.
I mean, the number of people who ask me
questions very similar to what you asked I'm sure
is representative of millions of people who feel


25


the same way. If you look at the polling and all
the rest of it that's clear. But you need people
who will stand up and say: I want somebody who
exercises some judgment. I want somebody who is
not just a mouthpiece for one point of view or
another. I may have my own opinions, but let's
have a debate here. That's what we were always
good at in the past.
MR. BLANKFEIN: Wasn't it a virtue
compromise at one point?
MS. CLINTON: Yes.
MR. BLANKFEIN: A compromise --
MS. CLINTON: Because in a democracy,
especially as diverse as this one, which is not a
theocracy or an autocracy. We don't think anybody
or any party or any interest group has a lock on
the truth. We actually think people bring their
experience, their ability to think to the table,
and then you hammer it out. And the compromise may
not be perfect. In fact, it rarely is, but it
represents the big thinking and the political will
that is currently available in order to make a
decision.
And I was in Hong Kong in the summer of
2011 and I had a preexisting program with a big
business group there, and before we had a reception
and there were about a hundred business leaders,
many of them based in Hong Kong, some of them from
mainland China, some of them from Singapore and
elsewhere. They were lining up and saying to me:
Is it true that the American Congress might default
on America's full faith and credit, their standing,
that you won't pay your bills?
And you know I'm sitting there I'm
representing all of you. I said: Oh, no. No.


26


No. That's just politics. We'll work it through.
And I'm sitting there: Oh, boy. I hope that is
the case.
So for all of their efforts to take
advantage of whatever mistake we might make or
whatever problem we might have, they know right now
at least in 2013, the beginning of this century,
the United States isn't strong at home and abroad.
They've got problems, and it is for me pretty
simple. If we don't get our political house in
order and demonstrate that we can start making
decisions again -- and that takes hard work. I
mean, don't -- I've served. I've been an elected
official, an appointed official. There is nothing
easy about working toward a compromise. I give a
lot of credit to the eight senators, four
Republicans and four Democrats in the Senate. You
go from very conservative to what we would call
very liberal. And they have sat down and they
hammered out a compromise, and then they made a
pledge they would stick to it as it went through
the regular order of the committee hearing. How
unusual. That used to be what we did in Congress.
You know, people would get together and they would
have hearings and then they would introduce bills
and then they would mark them up, and you would win
some and you would lose some, and then you go to
the floor. And we need to get back to doing that,
but the American people need to demand that that is
what is expected.
And I don't care if you're a liberal
icon or a conservative icon. If you are not
willing to be active in your democracy and do what
is necessary to deal with our problems, I think you
should be voted out. I think you should just be


27


voted out, and I would like to see more people
saying that.
PARTICIPANT: Secretary, Ann Chow from
Houston, Texas. I have had the honor to raise
money for you when you were running for president
in Texas.
MS. CLINTON: You are the smartest
people.
PARTICIPANT: I think you actually
called me on my cell phone, too. I talked to you
afterwards.
I think the biggest question in this
room is: Do you think you're going to run for
president again?
MR. BLANKFEIN: I was going to bet that
wouldn't come up.
MS. CLINTON: I don't believe you.
Well, look. I don't know. I'm
certainly not planning it. I've been out of the
state department for what, four months? Four
months.
MR. BLANKFEIN: You look like you are
ready to get back.
MS. CLINTON: I am ready to continue to
kind of think through what I'm doing and what I
want to do. So I haven't made any decision and I'm
not prepared to make any decision. I mean, on the
one hand, as you could probably tell from my
answers, I feel very strongly about our country and
what is happening, and for me it just defies reason
that we are in this paralysis at a time when we've
got so much going for us and we could be so strong
again and we could deal with so many of our
problems.
We were talking at dinner. I mean, the


28


energy revolution in the United States is just a
gift, and we're able to exploit it and use it and
it's going to make us independent. We can have a
North American energy system that will be
unbelievably powerful. If we have enough of it we
can be exporting and supporting a lot of our
friends and allies. And there are other ways that
we can put ourselves on a better footing, like
passing a decent immigration law and dealing with
our budget and being smart about it and realizing
there is two sides to the equation. You've got to
have spending restraints and you've got to have
some revenues in order to stimulate growth.
I happen to think that part of the
reason we are coming out of where we were a few
years ago in part is because we did do that, unlike
some of the choices the Europeans made. So I mean,
we have teed up well if we just keep going and make
these hard political decisions.
And so I very much want to watch and
see what happens in the next couple of years before
I make any decision. Because honestly, it's kind
of nice being on my own schedule. It's kind of
nice living in my own house.
MR. BLANKFEIN: In South Carolina?
MS. CLINTON: Yeah. Right. Here in
South Carolina. Just traveling around. It's the
first time I've been traveling in my own country
for four years. It's kind of nice.
So I'm just taking it kind of easy, but
thank for what you did for me in two 2008.
MR. BLANKFEIN: Just as a hypothetical,
if someone were going to eventually have an entry
in this and given that people line up and other
people test the waters and people put their hat in


29


and start to raise money but they wouldn't want to
do the impossible or intervene -- you know, at what
point would somebody -- not you, but would somebody
have to manifest some interest? Or would it start
to become clear or would the observer start to say:
This was some critical moment we see what she did
here. For example, our very own governor declared
that he was going to wait. You can't let people
wait forever.
MS. CLINTON: You think not?
MR. BLANKFEIN: In his case it might be
the best thing to wait.
MS. CLINTON: Well, this is just
hypothetical and not about me.
MR. BLANKFEIN: I'm saying for myself.
MS. CLINTON: If you were going to run
here is what I would tell you to do --
MR. BLANKFEIN: Very hypothetical.
MS. CLINTON: I think you would leave
Goldman Sachs and start running a soup kitchen
somewhere.
MR. BLANKFEIN: For one thing the stock
would go up.
MS. CLINTON: Then you could be a
legend in your own time both when you were there
and when you left.
MR. BLANKFEIN: Enough about me.
MS. CLINTON: Look, I am of the mind
that we cannot have endless campaigns. It is bad
for the candidates. It's bad for the country.
I mean, part of the reason why it's difficult to
govern is because an election ends and then the
next day people start jockeying for the next -- do
your job. Get up and do the job you were elected
to do. I believe that doing your job actually is


30


the right thing to do.
So I mean, I am constantly amazed at
how attention deficit disordered the political
punditry is. Because there is a lot to cover.
There is so much that you could actually be
educating people about. The difference that I
experienced from running for the Senate, being in
the Senate, running for president and being
Secretary of State is that the press which covered
me in the state department were really interested
in the issues. I mean, they would drill them.
They would have asked a hundred more questions
about everything Lloyd has asked in the time that
they had with me because they really cared about
what I thought, what the US government was doing in
these issues.
Our political press has just been
captured by trivia. I mean, to me. And so you
don't want to give them any more time to trivialize
the importance of the issues than you have to give
them. You want to be able to wait as long as
possible, because hopefully we will actually see
some progress on immigration, for example. Maybe
circumstances will force some kind of budget deal.
It doesn't look too promising, but stranger things
have happened.
So let's give some space and some
attention to these issues instead of who is going
to run and what they're going to do and: Oh, my
gosh. What is happening tomorrow? But if someone
were going to run, given the process of raising
money, given the -- you know, for better or worse I
apparently have about a hundred percent name
recognition. Most of it my mother would say is not
true, but I live with it.


31


So for me it might be slightly
different than for somebody else, but you certainly
would have to be in raising money sometime next
year or early the following year.
MR. BLANKFEIN: It's like the traffic
in New York. No rush hour.
MS. CLINTON: Well, you know, I really
admire Peter King. He's a Republican
representative from Long Island. He and I did a
lot of work together after 9/11 on terrorism and
all of that. But when the vote on Sandy came up --
and a lot of Republicans voted against aid for New
York and New Jersey, Peter King said to the New
York funders: Don't give any of them any money
because somehow you have to get their attention.
So I thought it was pretty clever. I know what
it's like. I mean, everybody is New York on
Mondays.
MR. BLANKFEIN: All the senators
declined to give aid to New York.
MS. CLINTON: Which ones?
MR. BLANKFEIN: The senator from
Oklahoma.
MS. CLINTON: Yeah, I know, but that's
what I mean. Peter King said: Don't give any of
them money.
Emergency aid used to be off what was
called off budget. You would go in with an
appropriations request for a hurricane, like
hurricane Andrew, I remember, back in '92 or
whatever. You would have floods in the midwest and
you would have tornadoes and you would have forest
fires and on and on. And there are some people who
as a matter of principle say: We shouldn't do it
like that. We should not do it off budget. But


32


it's very hard to budget for disasters. I mean,
you can fund FEMA, you can have a pool of money,
but given what we're going through right now with
one thing after another it's a difficult challenge.
So I think that we're going to have to
take seriously how we fund disasters, but I think
Peter's point was a larger one, which is -- you
know, New York is kind of an ATM machine for both
Democrats and Republicans, and people come up and
they visit with many of you and they ask for money,
and often they're given -- if they're coming
they're going to get it. And at some point the
American public -- and particularly political
givers -- have to say: Here -- and it's not just
about me. It's not just about my personal
standings. Here are things I want you to do for
the country and be part of that debate about the
country.
MR. BLANKFEIN: I have to say we
Republicans -- we obviously reach out to both sets.
To a person -- a person regarded as someone who may
be expected to be more partisan and has spent so
much time is is very, very well liked by the
Republicans.
PARTICIPANT: First off I would like to
thank you for all the years. Of course, I'm on the
other side.
MS. CLINTON: The dark side?
PARTICIPANT: It's the dark side right
now, but otherwise the sun does come through. You
have to be an optimist. But you have to put a
great, great effort, and I commend you for it. But
I would like two things. No. 1, you just talked
about Sandy. And since you were First Lady and a
senator -- forget the Secretary. But what is wrong


33


with our politicians -- I served in the Corps of
Engineers. Whether it's in Iraq, Iran -- anyplace
outside the US you can build bridges overnight.
You could have gone into Sandy. You could have
gone into New Orleans.
The actual problem is the law from the
1800s. No military, which is the only force, not
the National Guard. They don't have crap. It's
the military. Like down in New Orleans. If we
would just change the dumb law -- because it hasn't
been changed because politicians have no say once
the president declares it martial law. Put the
military up. They would have cleaned up that
coast. You wouldn't have the frigging mess you
have today. But we can do it for everybody else in
the world, but we don't do it because the state
judges don't have no authority. The mayor don't
have no authority, because you're going to put a
military officer in charge. That's one question
why you haven't looked at --
MR. BLANKFEIN: They did that in New
Orleans.
PARTICIPANT: Forget the -- the second
thing you mentioned about Afghanistan. Most people
don't realize the Russians were there before us for
ten years and whatever, and we supported Tannenbaum
to beat the hell out of them. A lot of our
problems is because we have a competition with the
Russians. If we would -- the Russians by nature
hate the Chinese, but forget that.
If we were more or less kind of like
forget that superpower, superpower, and work with
them -- two superpowers equal a hell of a lot more
in the world. You wouldn't have an Iranian
problem, we wouldn't have the Syrian problem, and


34


why don't we just cut Israel loose? Give them the
frigging bomb and just blow the thing up. That's
my question to you.
MS. CLINTON: Those are interesting
questions for sure.
First, I think you're referring to the
posse comitatus, which has been actually in
existence -- if not from the end of the 18th
century, the very beginning, as you said, of the
19th century. And it is a law that really limits
what the military, the US military, can do on our
soil, and it has been supported all these years in
part because there is a great suspicion by many of
US government power -- and there is no more obvious
evidence of that than the US military.
However, we do call out the National
Guard, which is under the control, as you know, of
the governor and the adjutant general. But it is
clearly in the line of command as well from the
Pentagon. So although it took some difficulties
with Katrina we did get the National Guard out.
With Sandy we got the National Guard out. But
you're right, that if you were to want to have the
military, the actual US military involved in
disaster recovery, you would have to change the
law. And it's something that would be a big fight
in Congress because a lot of people would not vote
to change a law that would give any additional
authority to any president, Republican or
democratic, to order the US military to go anywhere
in the United States.
We kid about it, but I used to see it
all the time when I was a senator. There is this
great fear that the US military is going to show up
and take away your guns and confiscate your


35


property. I think it's --
MR. BLANKFEIN: Was the last time that
happened with Eisenhower?
MS. CLINTON: Yes. That was to enforce
a court order.
MR. BLANKFEIN: It was shocking,
jarring.
MS. CLINTON: It was. Wasn't it the
82nd? I mean, they flew through to desegregate the
central high school, and it was viewed as a very
provocative action.
PARTICIPANT: The fact is it proved
what was right. Not what the politicians think.
It's a case of sometimes the politicians, which
includes --
MS. CLINTON: The politicians for more
than 200 years have been united on this issue.
There was a posse comitatus law before that. But
the sensitivity about it was heightened and new
regulations were put in after the Civil War, but --
PARTICIPANT: No disrespect, but if you
were right you could not have had Illinois,
Oklahoma, California join you. You had governors
that were appointed there. Military law.
MS. CLINTON: Well, you can declare
martial law. You can declare martial law.
PARTICIPANT: Military was always --
MS. CLINTON: Well, I personally could
not favor turning control over to the United States
military as much as I respect the United States
military. I guess I'm on the other side of this
with you.
I think that the civilian rule has
served us well, and I don't want to do anything
that upsets it even though I have a very personal


36


experience. You remember when Castro opened the
prisons and sent all the criminals to the United
States?
MR. BLANKFEIN: The --
MS. CLINTON: A lot of those prisoners
were ordered to go to a fort in Ft. Smith,
Arkansas, Ft. Chaffee, and my husband was governor
of Arkansas at the time. It was a military fort,
so the United States military ran it. So if you
were on the fort you were under US military
authority, but if you stepped off the fort you were
not. And the result was there was a riot where
prisoners were breaking through the gates, and the
US military would not stop them.
So my husband as governor had to call
out the state police. So you had the military
inside basically saying under the law we can't do
anything even to stop prisoners from Cuba. So it
is complicated, but it's complicated in part for a
reason, because we do not ever want to turn over to
our military the kind of civilian authority that
should be exercised by elected officials. So I
think that's the explanation.
And finally on Afghanistan and Russia.
Look, I would love it if we could continue to build
a more positive relationship with Russia. I worked
very hard on that when I was Secretary, and we made
some progress with Medvedev, who was president in
name but was obviously beholden to Putin, but Putin
kind of let him go and we helped them get into the
WTO for several years, and they were helpful to us
in shipping equipment, even lethal equipment, in
and out of out of Afghanistan.
So we were making progress, and I think
Putin has a different view. Certainly he's


37


asserted himself in a way now that is going to take
some management on our side, but obviously we would
very much like to have a positive relationship with
Russia and we would like to see Putin be less
defensive toward a relationship with the United
States so that we could work together on some
issues.
We've tried very hard to work with
Putin on shared issues like missile defense. They
have rejected that out of hand. So I think it's
what diplomacy is about. You just keep going back
and keep trying. And the President will see Putin
during the G20 in Saint Petersburg, and we'll see
what progress we can make.
MR. BLANKFEIN: Secretary, all of us
thank you for our service, but I think almost --
maybe all of us are hungry for more.
MS. CLINTON: Well, I'm not sure about
all of us, but thank you.
(Event concluded at 9:15 P.M.)

















38


CERTIFICATE OF REPORTER

I, Patricia T. Morrison, Registered
Professional Reporter and Notary Public for the
State of South Carolina at Large, do hereby certify
that the foregoing transcript is a true, accurate
and complete record.
I further certify that I am neither related
to nor counsel for any party to the cause pending
or interested in the events thereof.
Witness my hand, I have hereunto affixed by
official seal this 5th day of June 2013 at
Charleston, Charleston County, South Carolina.





___________________________
Patricia T. Morrison
Registered Professional Reporter
My Commission Expires
October 19, 2015