Wikileaks promises new release of information on Hilary.

[Magda Hassan]

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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

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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

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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

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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,

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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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?

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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