As prepared for delivery "RESPONSIBLE ECONOMIC GROWTH"
Thank you, Dean Coatsworth, for that kind introduction. Good afternoon distinguished faculty, parents, family, friends and the class of 2010. Congratulations on your graduation. I welcome the opportunity to return to campus and be part of this very special occasion. You may be surprised, but bankers don't often get invited to speak. That is, unless they are in front of Congress. I know the invitation for me to speak here today stirred up some controversy. That's a healthy sign. I would be surprised – even disappointed – if some of the most intense debate and criticism of the financial industry were not coming from this university. The Columbia I experienced was always that way. So let me start by acknowledging that Americans have the right to be angry about the financial crisis. People should question the financial system and those who run it. The severe impact of the financial crisis demonstrates that, even in the 21st Century, we have not learned how to achieve a healthy balance between private economic power and the public interest. We need significant change. We need to hit the reset button and get society working once again for the common interest. We cannot live without the financial system. But we do not have to accept its excesses. SIPA's purpose is to help solve the toughest public policy dilemmas. Your education here equips you to understand how private economic power and public interest can coalesce – or clash. How the intersection of the two can be either a destructive or a constructive force, in America and around the world. So, whether you go from SIPA to the public sector or the private sector, your broad education has prepared you to play a very special role as we hit the reset button. You are entering the workplace at an extraordinary time. I must compliment you on your sense of timing. I've got to admit -------- I wouldn't have minded spending the last two years in school. Let me be clear: there are significant challenges ahead of us. But we have the ability to embark on a new cycle of prosperity full of opportunity for you. However, that requires society to work for common interests with common goals. That is why I wanted to speak with you today. The effects of the financial crisis are still very much with us. The crisis has generated much fear and uncertainty. It has also been a humbling experience for the developed nations of the world, including our own. With 10 percent unemployment, there are questions about where jobs and growth are going to come from. With a $1.3 trillion deficit, there are significant questions on the sustainability of current fiscal and monetary policies. There are some who question capitalism, doubt the competitive strength of our country and fear what lies ahead for the U.S. in a dramatically changing global order. From where I sit, however, I cannot help but be optimistic. The 200-year history of my bank has stretched through every financial crisis in America since the War of 1812. Entrepreneurship and creativity have propelled America for over 200 years. If you look at U.S. economic history, every time there is a crisis, there is a breakthrough – of new businesses, new models, new growth. From all of that, plus my own training and experience, I have a firm conviction that America has the ability to embark on a new era of growth– a new beginning. In the U.S., capital finds its way to the right places fast. We make capital work, quickly and efficiently. The public and private sectors have repeatedly been able to work together to connect talented people with opportunities and to connect capital with entrepreneurs to drive economic regeneration. Time and time again, that's what has given birth to the Googles of the world and improved life for millions. This has been America's magic formula. But keep in mind, it is no longer America's secret. We need to remember, too, that the U.S. generates approximately 23 percent of global economic activity, and therefore, addressing U.S. growth is necessary to promote growth around the world. Whether you go to an NGO, the public sector or private enterprise, we have a common goal: to preserve and enhance the creativity of American economic ingenuity while controlling its excesses – in effect, letting America's magic formula work once again, but with full incorporation of the expensive lessons learned from this crisis. As we debate public policy, and as we reinvent the structure and governance of our economy, we must preserve and re-energize our model of growth. That is in society's common interest. So, what does it take? I believe there are 3 critical dynamics that must operate together:
First, the financial system We need a financial system that works, a financial system that returns to its basic role of supporting and driving the economy. America's growth and vitality – plus its capacity to improve people's lives– depend on it. A healthy financial system is absolutely indispensable to generate capital and move it efficiently to entrepreneurs who create jobs and growth that benefit everyone. Without comprehensive financial reform, there's little hope our markets can serve the common good. I have been outspoken about this and believe in several principles to help restore trust in the system: I believe banks should be banks, focused on serving clients. I believe we must have a level playing field– the same rules for everybody. We should end once and for all the phenomenon of "too big to fail." We need a strong federal consumer authority to protect consumer interests. And, most importantly, we need real transparency into financial transactions to strengthen our system for natural checks and balances. Think about this: in our age of Facebook and Twitter, you can easily learn the details of your neighbor's personal life, but virtually nothing about a $100 million, market-moving trade in Triple AAA corporate bonds! There's something fundamentally out of whack in that picture. Technology is a great equalizer. We should be using it to make crucial financial information available, not hidden behind firewalls. Second, America's need to compete in a new global order Thinking about America's role in the global economy requires simple first steps. For instance, we can no longer define "common interest" in national terms alone. In fact, we cannot afford not to define it in global terms. Economic cycles and systemic failures have profound, fast-moving global consequences. The U.S. is both a transmitter and a receptor of those consequences. To act in accordance with global realties also means we have to ensure U.S. global competitiveness and promote our export economy. This implies globally competitive industrial policies, tax policies, and energy policies. The growing urban middle class in the emerging economies represents an important export market for our companies. And of course, America must remain the world's best place for the world's best talent to be. Our universities and borders must remain open to – and attract – the world's best minds. This need is a very special one to me. I came to the United States almost four decades ago. I received a great education, was able to pursue professional success, and most importantly, my children now have those same opportunities. That's only because our nation's policies have reflected what America has long stood for. Now is not the time to retrench in this vital area. And, third, a culture of responsibility. America came to believe in the existence of a bottomless pool of credit. We developed an addiction to consumption and debt. Both were intoxicating, even to some of our country's best financial minds. Together, consumption and debt became a foundation of quicksand for the American success story. As we can see with 20/20 hindsight, neither individuals nor institutions behaved responsibly. Entrepreneurship and creativity were distorted to serve selfish ends, with no understanding of – or regard for – their impact on society. Self-interest unapologetically trumped public interest. To promote responsibility, we do need legal and regulatory reform. But the 21st century has once again illustrated that there is no iron-clad correlation between the enactment of more regulations and the end of major financial crises. Smart people, with new technologies, can always find a way around the letter of the law. We have no choice but to learn how to internalize a strong sense of responsibility – in both individuals and institutions. That is the surest way to change behavior. It will not make the U.S. model immune to periodic excesses. However, it can mitigate their frequency and severity. That means we must have a new commitment to responsibility:
I'll speak for one institution. We ask ourselves three questions constantly:
The answers to all three questions must be "yes." I have pledged to hold myself accountable for making sure we ask the questions that lead to the right decisions. They are the foundation of a changing culture I call Responsible Finance. But cultural change is easier to proclaim than to live up to. Every day there are intense pressures in the financial industry – from competitors, shareholders and the large sums of money with which we are entrusted. Similarly, in public service there are pressures to enact policies because of political compulsion rather than true concern for common interest. Such pressures in the private and public sectors demand never-ending examination of what serves the common good – relentless questioning of what we are doing and how we are doing it. People have to speak up and act resolutely. That takes courage and leadership. This may be the most difficult requirement of all. When I left Columbia, I had no idea that training in engineering or economics would lead me to questions of culture or responsible behavior. I started out not knowing exactly what I would do. Plato once said, "The direction in which education starts a man will determine his future in life." Like you, I left Columbia with a great education from a great university, knowing what I liked to do, and I plunged into it passionately. Since then, I have always felt I am continuing my education. From my own experiences with America, Columbia and my industry, I believe your education at SIPA has superbly prepared you to tackle one of our most important priorities: how to unleash all that is creative and good in the American economic model while reigning in its worst impulses. This is a challenge of enormous consequences. It cuts across every facet of American life. Indeed, how we address it will affect the entire world. But, it is also our greatest opportunity. As I said before, I can't help but be optimistic about the future. I only have to look at all of you to know we have what it takes. I know you have the knowledge, leadership and courage to confront this historic challenge and take advantage of its many opportunities. I expect to come back here in, say, 20 years and hear one of you tell the graduates of SIPA about the great progress your class made in shaping a world where private economic power serves the common good. Thank you for inviting me to speak today. Congratulations, again, on your graduation. Please accept my very best wishes in all that you do from this day forward. |