We can all speculate. President Bush was very vulnerable, and so Clinton was attacking on the economy and basically saying, if you remember, this rather famous line, he was going to focus like a laser on the economy. Obviously Sam Rayburn. Two questions, one of which was minor. It became obvious to me that it was just untenable to keep trying to shout into this hurricane. In a curious way hed compromised his own position. There was no surprise. Yes, and Im sure that any number of opponents to the Presidents plan were sincere in their expectation that it wouldnt work. In the last 48 or 72 hours, because that vote was also a cliffhanger, although not as close. Everyone understood there was a lag factor. Here we are in June 2003 and the election as we all know is November 04, so its 16 months or so It wasnt as simple as that, lay the groundwork for a new agreement. You ultimately get into a room like this and you say, youd better start to train me, tell me how this happened. Did you think that they took those claims seriously, or was this pure politics? You havent told us about your own appointment. By that late stage of the budget battle, all the concessions and fine-tuning that could be made to the bill had already been done, so you had a package at that point that wasnt going to be reopened. We cant afford to lose it, that type of stuff. There were some folks from the White House Press Secretarys office who were in it. There have been a lot of great American Presidents. But was there any perspective then that in fact, the Japanese economy was weak relative to the other G7? I was just there to do the best job I could. I think Henry Kissinger would still be Secretary of State if people had allowed him to be, whatever he thought of who he was serving. We had lunch. I also learned that when I saw that, it wasnt likely to ultimately succeed. Did you get the sense that this is true? The IRS employs 120,000 people or so. There are some people who wouldsome of the George H. W. Bush people date the partisanship from the budget deal. 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. I believe it was a five-year statute of limitations and the expiration date was January 94 or February or something like that. Yes. That raises the question then of the people he was meeting with here. Im an economist in the Brookings Institution in Washington. I dont really think Bentsen knew me at all. I just remember that being contemporaneous with the real beginning of an organized effort here. Yes, we could have had that. Ira Magaziner himself, whom I had known for some time, was a gigantic intellect. He didnt think much of the Btu tax. Actually, as often happens in Washington, accounts of that testimony appeared in a lot of newspapers and mostly on page D20. Now in retrospect did his presence in the campaign serve to move the candidates a bit to the right on deficit reduction and so forth? Im not joking. When we took office and took a hard look at the deficit estimates, they were considerably worse than we had thought. I dont recall having a meaningful role at the convention. The questions from all these different parts of the countryOregon, Louisiana, Michiganwere all the same. I think the Japanese have ultimately realized its in their own interests to make a lot of these changes. Lets step back and just recall who the members of the senior economic team were because there was an entire team of people doing this. I think the answer to your question was, Yes, it was, but the RTC was charged with the responsibility of cleaning up all S and Ls [Savings and Loans]. Its mostly things I learned that dont work. We were the easy solution for the press. Well, Theodore Roosevelt is a fascinating President, mostly by dint of his gargantuan personality and the way that he bestrode the country like some titanic figure. But from their vantage point, thats when they experienced intense partisanship. I traveled to Japan a lot on business. I did, not before Congress, before the grand jury. While at the University, Did you do anything else? Erskine Bowles had to testify and so forth. We had to be sure Mexico could live with it. When it came to responding within the same news cycle to an allegation or some criticism of the program, we were able to respond immediately, and rapid response became a part of the political lexicon. Im just saying that Im a little too close to it because I recall so many of those battles, and I recall so many people feeling that, as you remember, the administration, in some form or other, lost three times, and each time came back with a more conservative version. The great Presidents that you mentioned, the ones that loom large, as you said, are all crisis Presidents. But thats what Congress guys wanted. Sure. Im Gary Burtless. It was just not very well run, as I recall it, until that time. The buzz on Clinton, even then, among those few following it, was positive. No. The hearings process really kind of kicks it off. Of course, any situation like that always has its humor. So that was the revelation, so to speak, that occurred that day. 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. 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. I respected him, but I never identified with him and I didnt see him being a successful Democratic nominee. In general, no. Ill never forget that, he was a good guy, a real good old boy, I cant recall his name now, hes not in Congress any longer, but I arrived at the airport and he meets me and he says, Look, just get one thing straight, youre not going to say a word today about guns, nothing. He would explain to me the problems with the particular pieces, but, I dont know if you had to be Bentsen, did you? He just determined each time that what he had to do was get through this chapter and somehow live to fight for the next one and didnt take the longer view. Was it defined initially as a Democratic Party issue and Republicans were cut out, or how did that happen? The second point is the nature of the key individuals chosen. His popularity had sunk to low levels. And that was fairly late, right, when Bowles came in? That has historically been, or at least in the modern era, a successful approach. But that was what one did as Deputy Secretary of the Treasury. That was pretty damn effective. That was the all-time low for the dollar. Bentsen had told me from the first moment this thing was going nowhere. Dont ever talk down your currency; dont ever quarrel with the Federal Reserve Board. Now, it may last five or six more years, it may last 25 more years, I dont know. No. But also the role of the media had been changing a lot and that role I think manifested itself very vividly in the Clinton years. So maybe among the so-called populists there was a lot of anxiety as they saw this axis, the Bentsen-Rubin axis, develop and recognizing that both were relatively conservative. You may not have been conscious of it. Was there a group of people who were helping him on the policy side respective to economics? Actually it was mundane. You should have asked me about the vote, unless youve already talked to enough people about it. So, in August whatever it was the final vote was cast and the economic bill became lawwell, with the Presidents signature it became lawwe didnt really know what we were going to do on NAFTA. Was Bernard Nussbaum involved in the financing in this early period? In 1987, Mr. Altman joined The Blackstone Group as vice chairman, head of advisory business, and investment committee member. Well, not really. He has his own views in private, of course. Exactly. I did too. A few questions about that. Were there follow-up meetings with Japan that you were involved in after the summit? But thats the type of thing the Deputy Secretary sometimes does, or when there are problems with the IRS. There were so many different Japanese Prime Ministers in that period I cant remember which one we had at that moment. Those things were at a peak in 94, just at the time healthcare was on the table. I was not involved in the decision as to the sequencing of healthcare versus welfare reform. Why didnt that work, from your perspective? There were some enormous differences. We met for six or seven hours in the Governors mansion there. He was a classic, in my book, excellent chief executive. So again, it wasnt all about President Clinton. But its the economy, stupid doesnt communicate a set of priorities within the administration about what steps they will take. Yes. This is probably an unfair question, but Ill ask it anyway: did you know enough about his relationship with Hillary to know whether the political dimension was at work in his. Its very difficult to do that during a campaign. Its always a mistake to critique the Federal Reserve. Its a famous meeting in the sense that Woodward wrote a lot about it, other people have written about it. He did a version of what Carter did earlier, which was end up positioned to the right of most of his opponents in the Democratic primaries. There were, however, many people who thought, I would say this was the majority view: well ask for this, were going to end up with this. He talked about a middle-class tax cut and, of course getting the economy moving. I dont believe Yeltsin attended the summit, but there was a lot of focus on Russia and what the G7 could do for Russia at that summit, so it was all kind of nice, uplifting stuff. But in retrospect he basically decided in his simple-minded way that he was going to grind the Soviet Union right into the dust, and he did. It begins I think with the economic and fiscal circumstances that the administration faced, and two in particular. I stayed down there for a day and a half, maybe 24 hours. That was in recognition of that. You know, Bushs approach to international diplomacy is, Here are my buddiesall of whom he seems to nickname. 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. But in any event, there I was, and this guy, as I say, was a master of the game. Does that mean that the first initiative of the new President, should he, she, be a Democrat be healthcare? Although the President really thought he could convince more Democrats of the merits of NAFTA than he ultimately did. So anyway, within a few days, all of us who had anything to do with the RTC from the point of view of the Treasury were subpoenaed by Fiske. So there were a couple of weeks of high anxiety, maybe more than that, maybe everybody was in a state of anxiety between the election and yes, it wasnt at all clear who the Secretary of Treasury would be. Bob Rubin was the ultimate financial market person, knew the role of the Federal Reserve so well. I guess we have to just win then. TR, extraordinarily colorful President. 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. Having said that, I dont believe that affected the partisan approach to it. So I think you had a President who was seen as very slickand he had that reputation before he became Presidentand then this upsurge in partisanship generally. For example, much has been made of the dueling camps, the deficit hawks versus the populists. Lets recast the question a bit. I dont think this is what it really says, but I suppose in the distant lens of history, Ronald Reagan ended the Cold War. Before the grand jury before Starr, and how was that experience? I was in Tokyo with President Clinton, the Tokyo Economic Summit and Id made several trips to Tokyo paving the way for that. Today you have Governor [Howard] Dean, Congressman [Dick] Gephardt, for instance. In the Carter administration, there was no real sense of what the Federal Reserve really was, what it did, how to deal with it. And it was very effective because a lot of the people who came were opinion makers and he made a tremendous impression. 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 it was just a very unusual evening. I wasnt telling him anything he didnt know, God knows, but that we were going to enter now a different phase in terms of the laser light of press scrutiny on policies and that we had to deepen the entire effort, and there was agreement on that. Im not sure it makes entire sense, however, to judge or to assess a Presidents contribution by the standard of those who are given, in effect, a free gift of power to deal with a crisis. and I had no previous knowledge of it at all. Also, strong figures, not weak figures. It struck outsiders as the administration never passed up an opportunity to say, This is the preserve of the Federal Reserve. Mexico was looking for the freedom for its trucks to cross the border and continue to deliver in the United States. But it wasnt clear that he was going to do so until not long before he did. We believed that by maintaining the highest standards of excellence we could create a firm unlike any other in terms of capabilities to advise on highly complex strategic transactions, dedication to our client and our experience and professionalism. Bentsen managed himself with extraordinary skill. It was very stirring. It was a very costly enterprise upfront and, as I recall from testimony we had from others, there was a big problem in that whatever savings would have been recorded as a part of this enterprise had actually been absorbed into the earlier budget deal. So I knew early on, but only because Lloyd Bentsen was in effect telling me. Yes, I believe the charter of the RTC transcended whether it was a state chartered or federally chartered S and L. Well, the guarantees were not Federal if they were state chartered. Rather than ask about the mundane, I think it makes sense to go right to the next dramatic thing. But at the end it was breathtaking. And that kind of input isnt available during the campaign. He was quite an unknown in New York, wasnt he, until he came, appeared, and talked? So that went on with mounting intensity over a series of months after the President had actually laid it out. I do believe it was able to make a difference. You wouldnt choose to go before a grand jury instead of, say, going to Yankee Stadium to see the Yankees playAt that point I was already out of the administration and I had no real concerns. Maybe there was, I wasnt privy to that or exposed to that. By the time 94 was over, the Congress was in Republican hands. Mostly the latter. You raised this issue with respect to the designation of sub-Cabinet officers. You couldnt do that. I dont think its wholly right becauseand this may sound strange coming from mePresident Reagan I think will be seen very favorably by historians, mostly because hell be seen as the man who ended the Cold War, and Reagan didnt have to take the position of aggressive anti-Soviet behavior, but he did. No. I did. Ive seen Washington battles and that wasnt one of them. Also fifth, to some degree, Alan Greenspan weighed in, and a view developed that if we tightened fiscal policy, there would be the opportunity to loosen monetary policy. For other people it was Clintons legendary one-on-one prowess and his effectiveness in small groups, but I dont think theres any one reason why this person or that. It was an astounding speech. Who was the New York group that helped him with fundraising and maybe also with policy? Thats true, yes. Yes. I didnt. What was different about it was that it worked, because most of them had been somewhat dysfunctional. But I think in Washington, except in dire emergencies, politics rules, and most Republicans had the view that they would rather die than vote for a tax increase. That by choosing Panetta, and Bentsen, and Rubin, he chose economic conservatives. But I think one misunderstood aspect of his embracing NAFTA wasat that point he was being widely criticized for lacking in principle, lacking in conviction, a weathervane all over the place politically. So it wasnt invisible. There was not a war going on. Earlier in Little Rock, was she in attendance at any of these meetings? I remember that day. Thomas Jefferson is under-appreciated as a President. Hes not focusing on it, he doesnt particularly care about it. So its funny how reality quickly returns. No, I dont remember the actual moment when we met. We came into office, the trade imbalance of payments deficit with Japan had risen to very high levels. How early were you beginning to get a sense that the Republicans were going to be an historically difficult problem for this President? Sure, sure. There is a So, third, economic policy was number one. That was the fundamental choice they made in devising the reform. You had made your choice to support him before it was clear that he was going to wow a lot of people in New York. In other words, all the work that goes in before its actually sent to the Hill. So, for example, the partisanship in Washington hasnt particularly declined since President Clinton left office. But it was a rather fluid, floating group. I attended Georgetown University and I was a year ahead of him. But youd been doing transition work for a month. My own view on that is that American history is filled with examples of severe and indeed brutal partisanship. So it became effectively a simultaneous multilateral and bilateral summit because it became the setting for Clintons direct discussions with the Japanese Prime Minister. Altman Thats true, yes. We nominated this guy, thought he was quite capable and in one of the wonderful ironies of Washington, the quixotic ironies of Washington, the Democrats defeated the nomination. They talked all the time. You asked me about Bentsen because of his unavailability. One is that it had a very rocky beginning in New Hampshire, and Im wondering if you have recollections about your reaction to the news events that occurred and to the electoral results in New Hampshire and how the President was able to deal with those things. What are the lasting accomplishments, the lasting legacies of this administration, regardless of whether the historians are going to pick up these strains as being historically important or flamboyantly important enough to elevate Clinton into an upper- echelon Presidency? Ive never either been attracted to that approach nor felt that it was an effective one. Well, Im not actually trying to establish whether these were particularly important in the campaign. WebRoger Altman is Founder and Senior Chairman of Evercore, the most active independent investment bank in the world today. Well, about ten minutes later President Clinton called me. So my wife and I flew down to Little Rock and I met with Clinton for about two hours. But all Im trying to say is if you look at Lloyd Bentsens background, Rob Rubins background, and even to a much lesser extent my background, we knew about monetary policy and we knew about the role of the Fed. He knew what the House would do. You dont want to start your Presidency off with a legislative defeat. But Clinton did care quite a bit about it. But then Senator [Daniel Patrick] Moynihan spoke to Kerrey late in the day and I thought that was, if not decisive, very influential. Right off the bat in the administration, a group of us were deputized to try to lay the groundwork for a productive summit. You didnt have to spend a lot of time with Lloyd Bentsen to know that he wasnt going to be shunted aside. I dont think hes going to make it into the pantheon of heroes, as I said. Thats one where the Federal role is much bigger and one of the things we didnt discuss is why the administration did not latch onto that early on, even though the President was on the populist side of reform. What specifically arose was that the statute of limitations on any prosecution involving the failure of an S and L was about to expire.

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