Down For Debate: Hillary Clinton Goldman Sachs Speech Transcript #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

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

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

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

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,

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

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

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

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

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

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

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

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

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

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.

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

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

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.

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?

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

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

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

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

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

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.

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

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

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

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

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.

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

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

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

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

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

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

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.)

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

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Saturday, October 15, 2016

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