The election took place on the first Tuesday of November. There are some very famous stories about Bentsens war experience. Today, Evercore is the fourth-largest investment banking advisory firm in the world, with more than 130 partners and over 2,100 employees. But its just one of those periods in Washington when partisanship is at a peak. So I would get, from Mike Levy, typically, what my assignments were. Would I have considered moving to Switzerland if he did become President? First of all, the actual role of the Deputy Secretary as defined in the Treasury mission statement is to do what the Secretary of the Treasury asks him to. I dont know why we were the earliest on the list. Well, how do you know? Bentsen never lost an election, period, on which he was head of the ticket, ever. I was not involved in the decision as to the sequencing of healthcare versus welfare reform. How are people in the future to understand why this became such a polarized situation with Congress? Yes, but typically you wouldnt resort to that with relative stability in the exchange markets, and we did have relative stability. So that the link in Clintons mind between deficit reduction and stimulus disappeared when it got into the political arena. The entire gamut. Was there awareness at that time, I mean, in the perspective of 2003, I recognize the world looks different. But Clinton went for it, Clinton listened, Clinton deserves tremendous credit. No, it was not at all. It wasnt so much between the political peopleReich wasnt a political person; he wasnt a campaign operator. I didnt devise them on my own. Fortunately Secretary Bentsen said, No, not fine. He may be forever seen in the middle. Now, of course, as far as working the Hill was concerned, I would take my cues from the constant and joint planning of the White House and Treasury legislative liaison staffs. Youre only there because he allowed you to be, and you owe him a debt of gratitude for that because without him no service, and without service your life is less. Might have been established by Washington. That was absolutely true also of Secretary Brady and all of his people, couldnt have been more cooperative. Some of them, yes. And that was fairly late, right, when Bowles came in? I dont. Many people consider him, many of his opponents considered him to be setting new heights of insincerity and to have misrepresented a lot of his past. It wasnt between the political people and the policy people, it was among the policy people and involving some of the political people. So its a free vote, ideologically and politically. That was in July or June or something. Does that resonate with you? He wanted me to go see Bentsen. There were people like Senator [Phil] Gramm saying it would usher in a new depression. I also think it is wrong politically. The number of possible votes at that stage had dwindled down to a tiny number, votes that were undecided. Presidents should be presented with options that have been carefully developed, really carefully vetted, and those options should be written down in the usual way, and that wasnt the case here. My own view on that is that American history is filled with examples of severe and indeed brutal partisanship. Phil Gramm, Ill never forget, predicted that it would usher in a new depressionI mean depression, not recession. So there are the four main elements. Not likely, and was not the case in 92. Did it come from DAmato, or what? Is that a fair assessment? So by the time I had to do it again I wasnt particularly concerned. Clinton was offered a compromise by Senators [John] Breaux and [David] Boren. This would have been before you were in the transition office? It is high, because the toll it takes on your life is high and you either run out of money or you just burn yourself out, or you get separated from your family, or whatever it is. Clinton is nothing if not rigid. If you go to Monticello, to his actual tombstone, then you know that he drafted his own epitaph: Governor of Virginia, founder of the University of Virginia, and author of the Declaration of Independence. Yes, that was bad advice. Until there had been hearings and so forth you dont get much of a sense of that. He had tried to offer every imaginable olive branch to the Iranian leadership. She figured in some bumper stickers also. A little bit. If you look at the history of American reform, at that scale of change, usually you have a little bit more consensus than a 43 percent electoral. So obviously by inauguration day hed largely assimilated them. So I felt very chastened by what Gene had said. I have to tell my most famous Bentsen story because it really illustrates what an extraordinary person Bentsen was. Ill never forget, it was just a few days after the election and Carter, of course, had been beset by the Iranian hostage crisis and the failure of Desert One and so forth, the rescue effort. I think it was obvious to Clinton that there were several serious people there in New York whose support he wanted to get who felt strongly about what I would call a centrist economic policy, perhaps right of center economic policy. How big a group was doing this recasting? All the groundwork had been done before the storm broke, so there were probably three to four hundred people. Did you stay in Little Rock for a while afterward? I didnt say anything to that. I guess that again leads to the question about the uncertainty and anxiety of a transition period, trying to figure out which person. The country needs it, the Democratic Party needs it, I need it. Its always a mistake to critique the Federal Reserve. I started having to respond with a standard boilerplate response to the effect that the RTC has these procedural options and we were choosing among them. It was a mixture of people and some of the names I recall of course were George Stephanopoulos and Gene Sperling, Bob Rubin, Bob Reich, Rob Shapiro, myself. No, but Clintons clear priority was, and was going to be, steps to stimulate the economy and indeed, as soon as he took office, he submitted a package of measures which constituted his stimulus program and they rather promptly went down to defeat. Were you involved in discussions at this point about what would be next in the queue for the administration, because there were some other. Well, when we actually re-did Putting People First, we went to Little Rock and worked on it for a few days. Well, there was, like most administrations, kind of a running shakeup. I dont really think Whitewater, at least this part of it, was terribly different from some of the other such situations that weve all seen, whether its the John Tower hearings or its Bert Lance or whatever it is. As I recall, Al Gore wanted it, cared a great deal about it, to some considerable degree got his way on it. No I dont. We had a good discussion and I went back to the airport and flew home. Thats a very important difference, because it addressed healthcare, various items on childrens policy, crime initiatives, urban policythe full span of domestic policy issues, of which economic policy was just one element. The thing was televised, nonstop. I believe, as I say, it was either the day of or the day after Gennifer Flowers had given her press conference. Who was the coordinator, if any, in the first follow up? Casey resigned and it was vacant. I would actually like to hear you answer that question too. So he didnt have the luxury of saying, Lets do it a year from now, as you often do with other things. Its very puzzling to me how that could happen when the man had such an obvious gift for feeling peoples pain and a very strong public presence. And it was very effective because a lot of the people who came were opinion makers and he made a tremendous impression. I worked in the White House another three or four months, worked on, for example, the bailout of Washington, D.C., and then the passage of the new control board type legislation and then my kids got out of school in June. Well, it was just a strange evening. The time for horse-trading was over. He did quite well. My assumption is that you must have been doing that from two perches, your first perch being in the Treasury Department and then eventually the war room was opened up, and then you at some point were moved into the war room. Nobody knew, especially in the White House. He wanted to focus on a few important things at any particular time. I wasnt sitting all by myself with him, but sure, there were various opportunities to be in relatively small groups with him. Japan accepted a series of goals that we wanted them to accept, but the teeth, in terms of enforcement, werent there. There was very little interest in that. Yes, actually there was a big debate about healthcare, welfare reform, and NAFTA. I have to admit I didnt. But its just a reality that in an economy of that size, spending changes arent going to have much effect on the economy; monetary changes can. Can you tell us a little bit about the second role? Then there was the other dynamic, which istheir personalities could not have been more different. At this point youre working on policy questions primarily? But the student radical movement had not penetrated? Were still in the transition period, and now may be the appropriate time to talk about the process by which deficit reduction becomes a clear priority item over some of the other things that were talked about during the course of the campaign. Was there a group of people who were helping him on the policy side respective to economics? Was it his personality that won, or was he able to? Im not sure that was what they originally intended, I suppose it was, but I wasnt involved in the planning of the summit, I just went to it and had a role on one of the panels and sat around for a couple of days, really. We havent exhausted the topic of budgets and we want to talk further about that, but since youve already opened the door on this question about historical opposition and so forth, I thought that you might want to discuss your perceptions about how the existence of that institution changes the dynamic in Washington. I dont really think Bentsen knew me at all. I traveled to Japan a lot on business. I did not have a crystal ball to the effect that he was going to make it and that the dominos were somehow going to fall in a certain way that enabled him to do so. Secretary Bentsen was too important and had other things to do than to go down to Waco, Texas, and try to figure out what was going on there. Of course, the fact of a summit means you have to have some agreement, and we had an agreement. President Clinton, in retrospect, his disavowals on some of his private life were almost certainly false and the way he handled the Lewinsky matter was about as bad as it could be because heessentially swore before the American people that he didnt do it, and of course then recanted. And presided over eight years of peace. Of course, there was Leon Panetta, and Bob Rubin and Lloyd Bentsen, Alice Rivlin, Laura Tyson, myself, Gene Sperling, those were really the main members. The second point is the nature of the key individuals chosen. But, first, right at the outset, it was a terribly flawed idea to have a full-time member of the administration serving also as the head of an independent regulatory agency and that should have dawned on me in the earliest going, just the inherent conflict there. Its always a mistake to challenge the Federal Reserve. and the period of time during whichtheres a window during which it had to be submitted for a vote. Do you have any recollections of seeing anything different in him as a candidate at that point for that position? But it coincided, I think more importantly than that, with the onset of huge political problems for Clinton in the context of Vince Foster, Whitewater, and the entire beginning of that. No, but it wasnt just entirely that. I was struck from the beginning that Clinton was blessed with a very weak field, which, for example, is not the case today. The next thing is a free-trade agreement, which I think the President could have dodged, he didnt have to go all out on that. In other words, Clinton believed that he could charm anyone if he wanted to and Bush believes the same thing. We went back to square one. Clinton made an error, didnt take it. Theres some story that he demanded a commission on entitlement reform as a price. The Office of Government Ethics came to its conclusion and the Treasury Inspector General as you know is an independent party and came to the same conclusions, the White House counsel came to the same conclusion. So the swing votes were the object of our attention. You were responsible for organizing the war room. So Fiske came to the conclusion that nothing had happened, Starr came to the conclusion nothing had happened, and certainly, if he could have found anything, I think he would have been motivated to push it. I suppose you could have strengthening of the yen, coordinated G7 action to do that. It used to be, I believe, that they were graded on grounds of competent scholarship and so forth. It wasnt a great agreement. It should have, but it hasnt. So you wouldnt have had any involvement on Capitol Hill or anything like that at the time? Clintons very first initiative was his stimulus program. He must have had enough of a political antenna to realize this was going to be a tough call in a Democratic constituency in Pennsylvania or Michigan. But I didnt unilaterally choose all the members of it. Im not sure he would have known me really at all. But, in any event, the presentations were very effective and that was, I think, the most important single day in the evolution of that original policy. I sat next to Mrs. Clinton at dinner. There was a stimulus package that dwindled, right? It was a bit of a love fest. Ive never either been attracted to that approach nor felt that it was an effective one. I was just going to make an observation about history, historians and non-historians who study Presidents past and present. And author of the Statute of Religious Freedom for the State of Virginia. They were done among the United States, Mexico, and the Congressional parties involved. That was a period during which [Boris] Yeltsin was just coming onto the stage. So the dynamic between the two was quite an interesting dynamic and quite quicklyto come to your pointafter the stimulus plan went down, Clinton began deferring to Bentsen on everything. There was a whole bunch of work going on on that but I was completely preoccupied with the Presidents economic program and trying to get it passed, not just during the war room period but before that. Anyway, that was the high point, by far, of my own service, both in terms of the drama and the sense of having contributed something important. Then President Clinton went out on the balconythe front porch of the White House, on the Pennsylvania Avenue side, and had a press conference. Bentsen could tell you, within 4 percent accuracy, what was going to happen to every one of these bills. We knew each other, but we turned out to be the first two to go down and I dont know why that was. I mean, I just thought he was such a hero. Its been a big help to us and again, we know how extremely busy you are. I believe Greenspan went to Little Rock. Theyd review it and youd go to a meeting where you received a 900-page memo, three quarters of which you didnt understand. But as to whether it was an innovation, I doubt it. I think its wrong from a policy point of view. You had some experience with Japan before? I then had the brilliant ideaIm saying this, obviously sarcastically, that I should inform the White House what those procedural alternatives were. That certainly, in terms of social assistance to low-income working age people, that was a transformative administration. I believe Stan Shuman was there. It was a very simple letter that was done up for me and I sent it to everybody saying, Just so you know, the RTC has only these procedural options in matters like this, and we will be reaching a decision on which of them to do before the statute of limitations expires. Bentsen had told me from the first moment this thing was going nowhere. I think it was over two days. I want to come back to something that we had touched upon earlier, and that was this question about the administrations prioritizations, because you had suggested that there were some internal discussions, even at the time that NAFTA was taken on, as to what to do next. No. But part of our efforts were to get the Japanese to agree to certain pump-priming measures at home to lift domestic demand, increase the Japanese demand for imports, and better balance the current account relationship. I should have said Larry Summers was an important part of that too. The questions from all these different parts of the countryOregon, Louisiana, Michiganwere all the same. The feelings of people along the wayside were just very endearing. He got Republican ex-Presidents to sign on, though, as I recall. You know, theres another element of this. Help us understand why he would elect to move NAFTA at this point? He was very disciplined and he went to bed at a certain time and he went home. Bentsen only talked to about five or six Senators. I had no background for that. But in any event, Madison Guaranty had failed. Not giving it a lot of thought, frankly, I said, Sure. I didnt have a background in healthcare of any kind, and I began to see that it was overloading the circuits to try to do as much as some wanted to. So those ideas were developed during the campaign. Sure. Then maybe half of them we discussed about this person, that person. Well, I recall particularly how weak the field was. The reason I posed the question the way I did is that since World War II theres been bipartisanship in Presidential leadership on free trade. You asked me when the most important policy development occurred and I would say there are several answers to that but number one would be post election, not pre-election. He was not, no. Well, let me stop. I had a certain background but it didnt include experiences like that. You indicated that the President did it right with Treasury. Yes, he did. I really believe it was that day that his view changed. The President made a decision he was going toand he discussed this during the campaign at lengthbe more aggressive with Japan to have a fairer, more level playing field. It was absolutely breathtaking, profoundly dramatic and unforgettable, absolutely unforgettable. Talking out of turn you mean? Altman made a point to carry shoes as tiny as size 5 and mammoth as size 20, with widths ranging from super skinny AAAA to 6E and kept 23 basement storage I dont think thats a very good answer to your question, but I dont think I have a better one. That is foolish because history provides lessons on these matters. You asked me about Bentsen because of his unavailability. I think part of him saw an embrace of NAFTA as an opportunity to reestablish that he was a person of conviction, that he wasnt just in the pocket of the old traditional Democratic constituencies, wasnt just a tax-raiser and spender. He was named the first week of December. But in 1987, I think it was, the Democrats in this case, I must say, rewrote the rules and decided that ideology should be the grounds on which this was decided, and Mr. Bork may have had great credentials, may have been a scholar of great distinction but his ideology was unacceptable. So Im sure therell be another independent counsel. I certainly have every reason to want him to. I was often at the National Economic Council meetings that deliberated on those. In general, no. It was easy. For example, the Btu tax and the raising of the highest rate, highest bracket. Japanese discussions were harder, but the G7 summit was fine, it was easy. He knew how every member would vote. That raises the question then of the people he was meeting with here. For some people the idea was, a southern Governor almost by definition has a better chance than a lot of other candidates. We had an autos task force with certain members of the Clinton administration and certain Japanese counterparts on that. There was quite a discussion that day about long-term interest rates, as I said the credit markets rather than the Fed. Thats true, yes. Lets divide concessions into two: actual changes in the bill, and then offering a Congressman something in another area to help make it easier for him to vote for this. I view that as a very unfortunate decision the Democrats made, but that was a new low, or a new high, however you look at it, in partisanship. Lets take five minutes and well come back for the rest of the morning session. Ill just go to the highlight reel, but reality is that on the day of the vote, we didnt think that we had the votes. I think this had to be artfully crafted in order to get through. Thats something we dont have a lot of information about. I ran for president of the student body in the spring of my junior year, and he did the same in the spring of his junior year, which was one year following mine. In 1991 it was not organized. I just want to make one point. I guess we have to just win then. President Clinton gave you the opportunity to serve your country, its a privilege to serve your country. No, Im sorry, it didnt have the power to do that, but there were ways of achieving that outcome. Wasnt that a state-chartered institution? So I think Clintons own behavior did play a role in it and that in retrospect there would have been better ways for Clinton to have dealt with some of these things. Mostly because Clinton put everyone in a room, for endless hours, to the point where most people wanted to drop and everybody was sitting there around the table. Well, health insurance reform was going to be very complicated, no matter how you cut it, because 85 percent of the people are already insured and only 15 percent are not, but welfare reform is something where huge numbers of people have opinions, even though they dont collect welfare. Can you tell us about that? If you can think of a great President, a President who is seen as really great, who didnt have such a crisis, Id like to hear it, because I dont think there is one. But in any event, it hasnt ended with President Clintons leaving. @ 34.032138, -118.722249. I did too. I think as a general matter the perception, which has become the accepted wisdom, of those dueling camps, is much overstated. In a curious way hed compromised his own position. I said to him, If I should resign, then thats what I want to do. I had the benefit of having the office next to Lloyd Bentsen, and maybe there are some people around, even in American history, that have had a better grasp of the American Congress than Lloyd Bentsen, but I never met one. But thats what Congress guys wanted. I didnt do any work on personnel until Secretary [Lloyd] Bentsen was designated Treasury Secretary. People trooped down and sat around and briefed Carter, but he was sitting there figuring out do I want to appoint this guy or that person, and so forth. He was shot eight times, mostly in the chest. The reason it didnt succeed a lot more than that is because its really macro factors that drive this. One of the reasons it was bloodless was because the Soviets knew what they had and didnt have and what we had and they didnt have. So theres no reporting responsibility, its treated as one office, a little bit like a corporate office of the chairman which includes the chairman, and the CEO, and the President and chief operating officer, and maybe even one or two others. And there were obviously a whole host of people who were against it from day one and you werent going to change anybodys mind in the latter category. Sometimes without him and sometimes with him, but if Mrs. Clinton was there, everybody else was. We didnt know if we were going to win. 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