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Fareed Zakaria GPS

Interview With Egypt's Ambassador to United States; Interview With Mohamed ElBaradei

Aired February 13, 2011 - 10:00   ET


FAREED ZAKARIA, HOST: This is GPS, THE GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

I'll give you my take on the extraordinary events in Egypt in just a minute. But first, let tell you what's coming up.

Egyptian ambassador Sameh Shoukry was President Mubarak's top representative in the U.S. Whom does he represent now? And what is their plan to transition to democracy?

Next up, one of President Mubarak's strongest opponents, Mohamed ElBaradei. What's next for the opposition?

Then, the heart of the story, the Egyptian military. Can we expect them to make way for democracy after 50 years in power? We have a panel of experts.

And finally, Jamie Dimon, the CEO of JPMorgan Chase. He's one of the few bankers to emerge from the financial crisis with his reputation enhanced. Some have even called him a hero. He rarely talks in front of a camera, but you'll hear him defend his profession and offer his take on the American economy.

But before we begin, let me give you my take on American foreign policy over these last few weeks. We watched history being made last Friday as the dictatorship yielded to peaceful protests, but barely had that ended that we began our grand national tradition as Monday morning quarterbacks.

The administration has been behind the curve, people said. It was divided, others report. It should have embraced democracy much sooner and wholeheartedly.

I think this is unfair. The Obama administration faced a genuinely difficult balancing act. On the one side was Hosni Mubarak's regime, which have been a staunch American ally for 30 years. It kept the peace with Israel, fought al Qaeda and other Islamic terrorists, blockaded Hamas, confronted Hezbollah -- in other words, it did everything Washington asked of it. On the other hand was the vital need to support the people of Egypt in their morally justified and politically powerful quest for democracy.

So let's look at what other presidents in such situations did. Ronald Reagan faced a similar dilemma with the Philippine dictator, Ferdinand Marcos. Marcos ran a repressive and rapacious regime, but was staunchly anti-communist and an ally of America. Unrest in the Philippines began in August, 1983, when Marcos' goons assassinated an opposition leader. It took Ronald Reagan three years to decide to push Marcos to leave office.

Bill Clinton faced a somewhat similar problem with Indonesia's Suharto in 1997, and for months all the administration did was issue calls for reform. Finally, a year and a half after the protests began, the Clinton admission acquiesced as the IMF pushed Suharto out of office.

It took Barack Obama one week to shift from a policy of supporting Mubarak to publicly calling for a transition to democracy. Now, maybe that's an eternity in the world of cable news, but it's pretty fast by my clock.

It's easy for pundits to say that Washington should have pushed Mubarak out. First, that exaggerates Washington's power. Imagine if the president had asked Mubarak to leave and he hadn't. Secondly, it doesn't acknowledge the real tradeoff that Washington confronted, ensuring that other American allies didn't watch and decide that if they ever faced protest, Washington would throw them overboard at the drop of a hat.

Given all these pressures, I think that the Obama administration found a responsible way to junk a decades-old policy and get on the right side of history.

Let's get started with the show.


ZAKARIA: Joining me now, the Egyptian ambassador to the United States, Sameh Shoukry. Ambassador, thank you for joining us.


ZAKARIA: Ambassador, I'm just looking at this fifth communique from the military council, the most recent one, and it seems to lay out a set of -- a set of guidelines that the constitution has been deactivated, parliament is dismissed, the council will run the country, the prime minister will stay in place until a new government is formed.

Is that new government, as far as you know, going to be formed in some kind of coalition with the opposition groups or is it just another new government that will be formed with the existing people in the regime?

SHOUKRY: It will depend on the duration, whether the -- that new government will be formed after the parliamentary elections, or it might be formed before the parliamentary elections. And then, of course, it will depend on the outcome of those elections. So I think it's a little bit early to define when that might happen.

But, in any case, for the time being, the current government will run the day-to-day activities of governance.

ZAKARIA: And point eight in this nine-point communique is conducting elections, but it does not say over what period, nor does it say whether they will first be parliamentary or presidential elections. Can you -- can you shed light on that?

SHOUKRY: Well, the communique has just been issued so we need to look into it a little bit more carefully. I believe there was a timeframe of a six-month period for parliamentary elections to be held, if I'm not mistaken, and within that timeframe I believe those are the -- that is the first priority.

ZAKARIA: Do you believe that this transitional government will be able to incorporate members of the opposition or is it going to have to be -- is it going to have to wait until the elections are held?

SHOUKRY: One would presume it would wait until the elections are held. Its current composition is basically a technocratic government to run the day to day affairs, to take care of the security void that has happened and to also address the issues related to the economy.

The Egyptian economy has suffered during this period of unrest and was suffering from the global recession with a rising unemployment rate. That is -- those are the two priorities.

ZAKARIA: Tell me, Ambassador, as an Egyptian citizen, how do you react to last week's events?

SHOUKRY: These are unprecedented events, certainly a matter of pride for all Egyptians, that the people have spoken in such an organized and peaceful manner, were able to -- to present their aspirations and to affect the -- effect change. This is a matter of a small point in the history of Egypt in terms of its long civilization and it's contribution to its region, but a very major event in terms of how Egyptians will forge their future.

ZAKARIA: Do you think that it will have a greater impact beyond Egypt?

SHOUKRY: Egypt has always been a trendsetter in -- in its region. The region looks to it in many aspects that I'm sure also in this regard many lessons will be learned.

ZAKARIA: Do you worry about some of the concerns that people raised, the Muslim Brotherhood using the ballot box to gain power and create some kind of an Islamic republic?

SHOUKRY: I believe that the people of Egypt will rely on their history, their previous experience, some -- the diverse nature of the composition of the population. Egypt has been a secular country. It has a strong cultural background and will rely in forging ahead for the future on its experiences of the past. So I believe that all varying political ideologies will be represented within a free and fair elections and it will be up to the people to decide who serves their best interest.

ZAKARIA: Now, for now you are maintaining the -- the treaty with Israel. That has been made clear in both communiques, both recent communiques by the military.

But is it not fair to point out that if there were a new parliament and a new elected national assembly, it could, by democratic vote, aggregate this treaty?

SHOUKRY: Egypt is a country of institutions and has always made it a point to honor its legal commitments as a legal commitment and undertaken, one which -- one would expect, and rightfully so, that it would be upheld.

The peace treaty has benefited Egypt, has benefited the region in terms of creating stability and peace and giving an opportunity for Egypt to concentrate on its development. It is in -- has been in the best interest of the Egyptian people.

ZAKARIA: What about the blockade of -- of Gaza? This is something that the Mubarak regime enforced quite vigorously. Many people in Egypt, I would venture to guess, a majority, feel otherwise, feel that Gaza should not be blockaded.

Will that blockade be enforced now?

SHOUKRY: Egypt has never blockaded Gaza. The blockade of Gaza was an Israeli policy. Egypt has only one crossing with the Gaza, which is a rougher crossing. It's a crossing for individuals and has been operated all through this last six months on a very regular basis to provide assistance, humanitarian assistance, when need arose to the people of Gaza and to also provide them freedom of access as individuals for educational purposes, medical treatment and general purposes of travel.

So the -- the status of our crossing is -- is operational and will I'm sure continue to be so within the confines of its -- the legal terms under which the -- the crossing is a -- is manned.

ZAKARIA: Ambassador, thank you very much for joining us.

SHOUKRY: Thank you.

ZAKARIA: Back in a moment with a view from the other side, the opposition.




ZAKARIA: For the last two weeks, right here on this show, Egyptian Nobel Laureate Mohamed ElBaradei has been clear about one thing -- President Mubarak must go. Now that's happened. So what next?

We decided to check in with Mohamed ElBaradei. Thanks you for joining us.

MOHAMED ELBARADEI, LEADING OPPOSITION FIGURE: Fareed, it's always a pleasure to be with you.

ZAKARIA: You must be a happy man, Mohamed.

ELBARADEI: Oh, extremely happy man, Fareed. I can't even begin to describe my feeling and the feeling of every Egyptian here, that we got rid of this nightmare that has been there for 30 years.

ZAKARIA: Now what next? A lot of people worry, Mohamed, that -- that you have an opposition that is divided, that the regime will -- will play to that and at the end of the day you will not really get what you want.

ELBARADEI: Fareed, I am frankly -- started to get worried, and people are becoming to be -- to be apprehensive because we thought that we would lay out the -- the roadmap for the transitional period. So far we have done nothing of that.

They -- they have been talking to each other. They haven't talked to the people. And, as you can see, people are still in the streets, and I was told today that by Friday, if we do not see a -- you know, the -- the roadmap, then people will go back to the street.

I -- I understand that the army might need some time, but they need to lay out what -- what they are up to. We need clearly a transitional period. We need heavy participation by -- by the civilian with the -- with the army. It could not be just the army running -- running the show.

We haven't even seen one of them on -- on the -- on television. It's just simply periodical statements by a spokesman for the army, very short and terse statement saying we are for legitimacy, we are for transition, but we need more than that, Fareed.

ZAKARIA: What about clarity, Mohamed, from the opposition? What -- you know, can -- can you unify and present a set of demands? And are you empowered to speak for the opposition?

ELBARADEI: Well, I think -- I think the opposition, as you said, Fareed, clearly is fragmented after 60 years of oppression. But -- but I think the opposition is all of one mind. We need -- we need to, you know, co-manage the transition. We need to -- to reach within a year a -- a country that is ready for a free and fair election and to elect a president and -- and a new parliament. On all this, I think there is no disagreement, Fareed.

So we -- all we need (INAUDIBLE) army to reach out to us right now.

ZAKARIA: And if by Friday there isn't a meaningful roadmap to -- for a transition, you would call for the protests to begin again?

ELBARADEI: I think that's what people are saying, and I think they're making already preparations, the protests would go back into the street by Friday.

But -- but they need to come out of their headquarters and start talking to -- to the people and tell us what -- what is in store for us.

ZAKARIA: Mohamed ElBaradei, thank you very much.

ELBARADEI: Thank you, Fareed, for having me.


ZAKARIA: Back in a moment with a look at who holds all the power in Egypt -- the military.


ZAKARIA: You're looking at Tahrir Square in Cairo. Today it's filled with traffic instead of tens of thousands of protesters. But while some things have changed, much else in Egypt remains the same.

The Egyptian military took power in a coup more than 50 years ago and it still has power today. So what makes anyone think the generals will hand over power to democratic forces? That's what I want to get to the bottom of.

Joining me here in New York are Richard Haass and Steven Cook, both of the Council on Foreign Relations, Richard of course being the president. Both have deep knowledge of the inner workings of the Egyptian military.

And joining me from Sharm el-Sheikh, Egypt, Nic Robertson, CNN's senior international correspondent.

Nic, what is your sense about the trust factor between the public and the military? Does the military have the public's trust?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: It does at the moment, Fareed, and we've seen that so many times, most poignantly, perhaps, when the police fled from the streets, beaten back by the crowds on the 28th of January, that very violent Friday afternoon clash as the army arrived a couple of hours later. And since then we've seen people shaking the hands of the soldiers, rushing up and kissing them after President Mubarak stepped down.

So -- so that -- that trust hasn't been lost with the majority of the people. That's something that the army has managed to maintain. And, really, that's golden for them at the moment.

It is in a way, there's the squander. Obviously there have been demands that there should be a speedier transition for them to move to a civilian administration, speedier than the six months that they've announced. But at the moment the majority do seem to support the military and they see them, unlike the police, as not being corrupt.

They are, after all, a conscript army. People describe them as being their sons, their brothers, their husbands. So there's a close connection with the people. So, at the moment, that trust really does seem to exist, Fareed.

ZAKARIA: Always a pleasure, Nic.

Steven, you -- you wrote a book in which you talked about the Egyptian military, and your pointed out they prefer to rule from the back. They -- they do not like to actually have -- because in strange way that allows them to say inflation, unemployment, those are problems of the civilian government. They just maintain power in the back.

Does this -- this must be an awkward moment for them.

STEVEN COOK, COUNCIL ON FOREIGN RELATIONS: This is an incredibly awkward moment for the Egyptian military. They went back into the barracks after the shattering defeat of June 1967 and have preferred to stay there with a brother officer in charge.

Now, suddenly, after 40 years, they've been thrust into direct politics, and it's uncomfortable. And Egyptian politics are a difficult, difficult place to be. And it is -- remains an open question, how Field Marshal Tantawi and the people around him, none of whom are politicians. They're soldiers, and who prefer order, how they're going to deal with the rough and tumble world of Egyptian politics?

ZAKARIA: And they've got huge equities at stake here. The Egyptian military owns factories. They operate toll roads. I mean, they have a kind of commanding position over the Egyptian economy. They're not going to want get -- to let go of this very easily.

RICHARD HAASS, COUNCIL ON FOREIGN RELATIONS: Of course not. It's a -- it's a good life if you're an Egyptian general with several stars on your shoulder.

On the other hand, the fact that they've moved forward now, they suddenly increased the stakes for themselves. They've put themselves in quite a risky situation, and as you're -- your report earlier made clear, now the really hard part begins.

As difficult as it was, if you will, to oust Mubarak, now the really tough start happens. The pace of reform, the sequencing reform, constitutional change, elections for what -- when, political opening, all the difficult stuff. And the opposition, which agreed on getting rid of, if you will, modern day furrow (ph), now the opposition begins to split. Not just one or two ways but in perhaps dozens of ways.

So all these people out there, all the jubilation, very quickly, we're going to see it turn to frustration and disagreement.

My sense is the happiest days of this revolution are over. And it's like, you study so much history, Fareed, very few revolutions end as positively as they begin and I would be surprised if this were an exception.

ZAKARIA: You talk about, in your book, Turkey and Algeria, and it struck me as a very interesting set of examples because in Turkey the generals ultimately do seek power. In Algeria they have stubbornly clung to power.

COOK: That's right.

ZAKARIA: In the Turkish cased, it was really because the European Union forced them to. They didn't voluntarily --

COOK: Right.

ZAKARIA: -- go back into the --

COOK: Turkey has begun a transition to democracy not because of the generals but despite the generals. Really, the European Union created a whole range of constraints on the ability of the military to actually go in and intervene.

The Turkish generals were opposed to these kinds of reforms. That's why some of the discussion about a Turkish model for -- for Egypt seems misplaced.

The military in Egypt is going to have to deal with, as Richard said, an opposition that is splitting, an opposition that has different demands. If you look at the military's five statements thus far, they haven't tracked too far from when President Mubarak said in his three statements to the country.

ZAKARIA: Well, I want to talk about when we come back, what all of this means for the rest of the Arab world. And we'll get to that in a moment with our great panel, looking at Egypt's future.


ZAKARIA: And we're back with Nic Robertson in Sharm el-Sheikh, Richard Haass and Steven Cook here with me in New York.

Richard, protests in Algeria's -- Yemen of course has had some instability, a very unusual thing where a group of tribal leaders sign a petition in Jordan. Do you think this is going to spill over?

HAASS: The Jordan one was the most surprising. My general way of saying is I thought their traditional monarchies, the real monarchies were probably secure -- Jordan, Morocco, Saudi Arabia -- and we were looking more at the Yemens, the Algerias, where we thought this be the -- something that would trigger something.

Jordan is the most interesting because you do have the first signs of some disaffection -- crumbling is too big of a word, but some splintering of the Bedouin, if you will, non-Palestinian base of Jordan. That's the place to watch most. I still think that what will matter even more is what happens in Egypt. So my way -- the reason I wouldn't answer your question yet, people are going to see what happens in Egypt. If it goes badly, like in Iraq, when democracy, quote-unquote, "broke out" there after it was imposed, it was so messy, it led to such violence, it actually set back the cause.

So I think Egypt's implications, its consequences, will depend very much on how it proceeds. Does it go well? Does it go smoothly? Does Egypt six months from now or a year from now look better, more peaceful, more prosperous, more open, or does Egypt in some ways, does it -- is the military still there? Is it messy?

I think that will ultimately have the biggest effect.

ZAKARIA: Steven, I -- I kind of make a distinction in -- in the Arab world between the societies that use mass repression and the ones that use mass bribery. And I think of the ones that use mass bribery -- Saudi Arabia, the Gulf States, is more stable. Is that fair, do you think?

COOK: Well, it seems to be the case that Saudi Arabia certainly has more resources than Mubarak ever had in order to buy political quiescence. But you do see in one Gulf state, in Bahrain, a situation where there is a tremendous amount of disaffection with the ruling family and in fact they are now trying to buy political quiescence. The King of Bahrain has authorized every Bahraini get $2,700 this week.

So what you'll see throughout the region is this maneuvering in order to do the best they can to buy political quiescence, while like in Algeria, reinforcing the iron fist.

HAASS: In Bahrain, like Syria, the places where very small minorities rule the country.

COOK: That's right.

HAASS: And those are two places perhaps to look at for just that reason.

ZAKARIA: When you look at U.S. foreign policy, what is the lesson you draw from all of this?

HAASS: So much of the debate has been on the tactics, but the administration got it right. I think you were fair. This is awfully tough.

To me, what this does, though, Fareed, is it brings to the floor what in some ways is the biggest single question about American foreign policy, how central should democracy promotion be to what it is we do in the world? And what you see now is this once again the split between the traditionalists who basically say we really ought to focus on those from what the Egypts of the world do beyond their borders to support through peace process, opposition to terrorism, as opposed to those who say, we really ought to focus on democracy. That ought to be the centerpiece.

And I would simply say for those who will take from this, the democracy ought to be at the center of our foreign policy, slow down. Not only do we not know what Egypt is going to look like in six months to a year, we don't know what the foreign policy consequences of this. And whether it's China or Russia or a lot of other non-democracies, the United States has an awful lot of equities out there that we simply can't afford to put on the back burner while we try to do perhaps the most difficult thing in foreign policy, which is to try to engineer the trajectory of another society. We ought to have some humility about this.

ZAKARIA: The one caveat I would make of that, Richard, which however I would imagine you'd agree to this, the reason in Egypt it was worth while to support democracy was supporting Mubarak and supporting these dictatorships had been breeding a very extreme violent religious opposition that was all directed at the United States, because they said you're supporting the dictators whom we hate. So there was a cost to the -- to the stability in Egypt, under the direct foreign policy cost to the U.S. They were killing Americans because of that.

HAASS: Fair enough. And Egypt had become so polarized, the total absence of political reform is a dangerous thing.

And what the lesson of this is not necessarily all or nothing, but reformism ought to be a part of American foreign policy. And that's the challenge now in Egypt. What you don't want to have there is what you might call Mubarakism, without Mubarak. So the question is, can we bring about a gradualism in the direction of a more open society?

We have to be very careful. It may not look like the federalist papers. Egyptian, quote-unquote, "democracy" may frustrate people in the street. It may frustrate people in the White House. We've got to be smart and we've got to be careful about how far, how fast.

ZAKARIA: Yes. And you look at Indonesia and you look at Nigeria, these places that run through it, it takes a while and the struggle to get power from the military takes a while, but over time if you have a democratic leader like the parliament, that gives them a platform from which they get things as well.

Nic, I want to ask you about this question of America. Does America figure in the debate any more in Egypt? Are they looking to Washington or -- and do they think Obama did enough?

ROBERTSON: Well, certainly we've heard from the army saying that they're going to provide continuity in terms of their international policies and internal policies as well. So, obviously, part of that international continuity must involve the United States.

But there are probably two principle sensitivities here. One is how any U.S. involvement is manifested with Egypt as far as it's viewed in the region, particularly from the United States principle allies here, Saudi Arabia and Jordan, how will they view how the United States handles the situation. And perhaps more critically for the army and for the United States is how it's perceived here in Egypt.

Because during the demonstrations, particularly in the early days, the refrain that we continue to hear many, many days from the protesters was President Obama is not supporting us. He's staying with the side of President Mubarak, even as President Obama was shifting his position. So there is a perception that the United States didn't move fast enough by some of the protesters.

There will also be a perception among President Mubarak supporters who were many who will say that the United States shouldn't have been involved and foreign powers influence what happened here. Undoubtedly, that may be an over reading and a misreading of the situation.

But these are the sensitivities. So however the United States plays its hand with the army and in Egypt right now, it will -- it will necessarily need to be, I would say, cautious and do it behind the scenes. Because there will be many sensitivities about how it is perceived to be maneuvering. Everyone knows the United States relationship with Egypt is critical in the region and people will be aiming to score points off of it and pull it apart in any way they can, Fareed.

ZAKARIA: Nic, thank you very much.

And that's all the time we have for our panel. Richard Haass, Steven Cook, Nic Robertson.

We will be right back with Jamie Dimon, America's top banker by some people's estimation.


JAMIE DIMON, CHAIRMAN AND CEO, JPMORGAN CHASE: Not all bankers are the same. And I just think this constant refrain -- bankers, bankers, bankers, it's just -- it just doesn't -- it's really an unproductive and unfair way of treating people.



ZAKARIA: At the recent World Economic Forum in Davos, I presided over a panel of some of the world's top businessmen. They were all extremely thoughtful, but I was most taken by what Jamie Dimon said. He's, of course, the Chairman and CEO of JPMorgan Chase. Dimon and his company emerged unscathed from the financial crisis, in fact, with both their reputations enhanced.

If you want to hear what Jaime Dimon had to say about the state of the U.S. economy, the job problem, Europe and why he thinks he and his fellow bankers get a bad rap.

(BEGIN VIDEOTAPE) ZAKARIA: There is still, as you know, if you look at polls -- polls in the United States, still a widespread feeling in the United States that the taxpayers bailed out the banks and the banks are not helping the taxpayers, they're paying themselves big bonuses, but that lending has actually contracted in aggregate. You may be up over the last year, but overall, if you look at the amount of lending, which is $7 trillion, you're still at about 2005 levels.

What do you say to the average American taxpayer who says, guys, we bailed you out, now -- now give us, you know, do something in return?

DIMON: OK. In the United States of America, only one-third of credit is provided by banks. Bank lending actually went up after Lehman Brothers failed, not down. It's a huge misconception. Two- thirds of credit is provided by individuals, corporations, pension plans, you know, et cetera. The huge reduction in credit supplied was the credit supplied in directly to the marketplace. In fact, if you go to any place around the world, you ask people, did you do something more conservative with your money after Lehman went down? Which everyone says, yes.

I would say, well, you caused the crisis. You got scared. You ran. It's perfectly legitimate as an individual protecting yourself. And JPMorgan last year lent or financed $1.4 trillion for corporations, individual around the world, up pretty substantially from the year before and I believe substantially from the year before that.

Most banks are lending quite a bit. But remember, some of them are gone. The ones who are gone are no longer lending. So obviously there's been a reduction. So you may talk to people saying, I can't get money and they be that standards have loosened up in the last year, but they have not -- they have not tightened up.

So banks are -- we are lending aggressively into corporates, to middle market, small business lending up 30 percent. There is, if you talk to most, there's a demand issue. A lot of them don't need the money because they're not -- because they're not building inventory, not building plans, they're not building -

You know, a lot of these people have tons of cash. They're not -- they don't need to call up their banks because they've got plenty of money right now. So -

ZAKARIA: Let me ask you about one more consequence of the crisis, if I may, which is -

DIMON: There's a huge misconception, in which not all banks needed that T.A.R.P. You know, not all banks would have failed. And right here, a lot of policy makers and regulation makers -- that one assumption drive so much the anger that they would have failed. I can tell you a lot of banks were stabilizing this problem.

JPMorgan bought Bear Stearns because the United States government asked us to. We bought -- we bought not because we wanted to. Wells Fargo bought Wachovia. HSBC was (INAUDIBLE). And I can go bank after bank who's a stabilizing force, trying to make up for the fact that there are other failures.

So we -- we lump everyone together like -- and I think it is a terrible thing to do. I don't lump all media together. There's good and there's bad. There's irresponsible and ignorant and there are really smart media.

Well, not all bankers are the same. And I just think this constant refrain -- bankers, bankers, bankers, it's just -- it just doesn't -- it's really an unproductive and unfair way of treating people. And I just think people should stop doing that. I think that denigrates everything. Not all companies are the same, not all CEOs are the same, not all media is the same. And so I -- we try to do the best we can every day.

ZAKARIA: Let me ask you about another consequence of this -- of this crisis. It has been to concentrate assets among the top banks. JPMorgan, Citigroup, Bank of America now represent 30 percent of all assets. You have about $2 trillion in deposit.

It strikes me that the net effect of the -- of what has happened, is you're not too big to fail, you're way too big to fail.

DIMON: Yes. So it's 30 percent of all deposits in America. America is far less concentrated than Europe, Asia, Canada, Australia, France, U.K., Italy, I mean, way less concentrated. There are reasons for -- it kind of just scale (ph), stuff like that.

I wish -- I believe that when we start talking about resolution authority, that we should, the governments, the regulation should be able to take down a JPMorgan in a way that doesn't damage citizens of the world. I also think the banks should pay for that. Like in the FDIC, when banks fail, the FDIC takes them over and kind of liquidates them and the rest of the banks pay for that. We're going to pay $5 billion, the FDIC, if a failure of other banks.

I -- instead of calling it resolution, I think we should have called it minimally damaging bankruptcy for big dumb banks. Take them down, wipe them out, full bankruptcy, unsecured creditors pay. And that's -- that's what they're trying to get to, which is a little complex. It can be done. That's what the FDIC did with big banks for many years. Now we've become global.

So I understand, if you're a regulator, you need to say, OK, what can I do in the U.K.? What can I do in France? Can I protect myself? The answer is you can. It's a little complicated, but it can be done and that's the better way to do it. Let these companies fail. Put them in a position they can all fail and the world is fine.

ZAKARIA: Could JPMorgan fail without systemic risk in the United States today?

DIMON: Yes. If it's set up properly, the answer is yes. So -- and the other thing I remembered, Lehman -- if the Lehman Brothers had failed in 2000 -- there's the thing about complex systems. If Lehman Brothers have failed in 2005, I don't think it would have caused this crisis.

I guess it was cumulative trauma after -- you had problems in Germany, you had problems in Britain, you had problems in the United States, and the United States was the epicenter. I'm not going to deny that. But it was -- AIG, WaMu, mortgage brokers and it was around the world. And so things would be very different if -- if they were set up so that they could be handled.

Lehman Brothers had $200 billion of unsecured debt. If at the point of failure that unsecured debt had been turned into equity, Lehman would have 200 billion of equity and 600 billion of assets and it would have been fine.

ZAKARIA: Larry Summers on my program said financial industry fought this reform tooth and nail. They've spent a million dollars on each congressman, four lobbyists for every congressmen. Is this financial reform change things?

DIMON: You know, I love Larry. A ridiculous statement, OK?

First of all -- first of all, it's a free -- I remind these people all the time that's it's a in a democracy you have the right to petition your government. It's in the number one amendment in the U.S. Bill of Rights. Most of that lobbyists are own people. When I go to Washington, it counts as lobbying time and they have to add it up and, you know, whatever -- how they would calculate and stuff like that.

We didn't fight financial reform, OK? We wanted resolution authority. We thought there should be oversight committees. We thought (INAUDIBLE) should go to clearing houses. We thought there should be better consumer protection. We fought the parts of the reform we thought were irrational. That's all.

You know, it's not like you were for or against reform. There's a -- I complete -- we completely acknowledge (ph) the need for massive reform after what happened. Totally, absolutely. But, you know, some of the stuff that got done which is not rational. So we at first to say we're supposed to bend down and accept it because we're a bank, I say that's not fair.

So -- and Larry knows the detail too. He knows some of these things. That he didn't support all of the reform. If he would stand up here, he would agree with me, there are a lot of things that -- that had nothing to do with him, which is, you know, people in Congress coming up with their own ideas and what would make sense.

ZAKARIA: All right. Jamie Dimon's proposed resolution authority, for those of you who didn't catch it is the MDBBDB, minimally damaging bankruptcy for big dumb banks. Somehow I feel, Jamie, that you're a great banker, but you haven't come up with a good acronym for legislation.


ZAKARIA: Back in a moment. What keeps Jamie Dimon up at night? (COMMERCIAL BREAK)

ZAKARIA: And we're back with more from Jamie Dimon, the CEO of JPMorgan Chase, perhaps America's top banker. I asked him about what keeps him up at night? What's the next crisis to worry about?


ZAKARIA: Jamie, when you look out at -- at the world, do you worry about the easy money and the low cost of capital and what it can do?

The reason I ask this is, of course, many people believe we got into the problems we did in the financial crisis because there was too much easy money, the cost of capital had collapsed. It was too easy to get loans, too easy to -- to get leverage and people are borrowing too much. Banks were giving too much credit.

Now, the solution to this problem has been easy money, allowing people to take lots of debt, encouraging people to take mortgages. In other words, the solution is the very set of factors which were supposed to have caused the problem. Is this a danger?

DIMON: So I do think it's a danger, but to put in a little historical context, that we've had -- I think when you plan for risk at all, you've got to assume there are going to be issues you don't always understand. And you don't always know what the path is going to take. In fact, the problem that low interest rates caused last time may not be the problem it causes this time. And so I think wise people prepare for tough times.

It does not mean that mankind should accept them. My guess is 500 years from now, we'll be looking back at how we manage economies a little bit like we look at medicine today like how they need to bleed people when they had certain problems. We are -- we are very -- we're not particularly good at it. And I think we're still learning enormous lessons. And I think the actual risk from some of it is lower. Corporations from low rates and leverages way down, hedge funds are less leveraged, private equities are less leveraged, banks were less leveraged and corporations have a lot of money.

So I think the leverage issue has been reduced and it's kind of -- you look, it's gone to the -- it's gone to the governments who now have too much kind of leverage which you see in this sovereign crisis.

So I do think it did cause part of the problems from last time, but only because there was a mound of other problems waiting to be exposed. You know, from bad mortgage underwriting to certain bad accounting, through gaps in the regulatory system. Some of those things are not there today. So I think it's very different if it happens.

ZAKARIA: What is the danger from municipal default by a state, California, New Jersey or a locality, and if I can add to that, this one for the complexity? You have a large number of people who come into Congress from the Tea Party who say the one thing they're sure of, there are no more bailouts.

So is there -- you know, what people would call tail risks, is there some risk here that you have pressure on some U.S. state or city and the federal government actually doesn't come through because of this anti-bailout atmosphere in Congress?

DIMON: OK. So, completely separate the states from municipalities. States have a lot of wherewithal, when you talk about this huge deficit, the deficit in California is equal to one percent of the GDP in California, so if they raise taxes one percent, they could pay their deficit. And that's true for some of the other states and they have the wherewithal.

There are 14,000 municipalities. And you are unfortunately going to see some bankruptcies. The 14,000 go from very small to obviously some very large. And it will be an issue for some. And they have built up these -- these obligations, pensions, kind of snuck up on people because a lot of these -- like governments, you know, when like corporations used to until they change accounting, you give things away today, they don't cost until later and you have to write -- you have to put it in the books today.

So I think you'll see some municipalities use bankruptcy court to try to renegotiate some of those contracts. But $3 trillion of total state and municipality debt is -- with all of the -- and some a fraction of the problems. And I don't think it's going to cause a systemic issue in the United States. It'll be in the headlines, you'll see kind of some to-ing and fro-ing and the total deficit of all states and all municipalities is 200 billion, relative to the total U.S. deficit of 1.5 trillion. So that is really kind of small relative to that.

It's there. It's a concern. It's going to have to be fixed. I just don't think it's going to stop growth in 2011 or 2012. It's just a negative factor overlying the American system.

ZAKARIA: OK. Can we close by getting one thought -- and what is the thing that worries you the most? And if you can keep it too one sentence, just, you know, what is the shock to the system that you're most worried about? What keeps you up at night?

DIMON: So I'm going to use the word "bad policy", but before I use that word, I want to say that I think the governments of the world did a tremendous amount of things that saved it from getting far worse.

But if you read a lot of economic history, and particularly this book, I know -- I know Ken Rogoff is here. You know, Reinhart and Rogoff wrote a book "This Time is Different", about eight major crises, that financial crises take a long time getting out of., but it's not a given that it has to take place. Very often it take a long time getting out of this, because policies in the middle of the crises, not from -- sometimes for venal purposes but often just a lack of knowledge and lack of understanding actually make it worse. And I would love to get people back to work, employed and growing. I think it's the most important thing that we have to do. And, you know, I know there are unknown -- and I agree with you, but to my attitude, geopolitics, I don't know -- it's always there and it will always going to hit us somewhere where we least expect it, so we've got to be prepared for those.


ZAKARIA: That was Jamie Dimon.

Back with my final thoughts on Egypt in just a moment.


ZAKARIA: Before we go, I want to recommend a book, this week it's George W. Bush's memoir, "Decision Points." I read it recently on a plane. I have to say it's surprisingly well written and frank. You will not agree with all of his decisions. You might not think he's super smart, but he comes across as an agreeable frank human being and I found it a good read.

Some final thoughts. News moves fast and we've already moved past that heady evening in Cairo just two days ago when a dictatorship was toppled by people power. We moved on to discussing the problems that remain, the military in power, the divided -- divided oppositions, the weak economy, all totally valid concerns.

But can we take a moment to marvel at the courage and the discipline of those crowds in Egypt, those people who risked their lives and created history. In Shakespeare's "Henry V," the young king tells the crowd on the eve of the Battle of Agincourt that they would remember being on that battle field on that day, St. Crispin's Day. For the rest of their lives, that they would tell their children they were there, that they would show off the wounds they suffered that day. "People now in bed," Henry V said, "would feel themselves cursed that they were not hereupon St Crispin's Day."

Well, I think people in Cairo in Tahrir Square will remember this day for the rest of their lives and tell their children and grandchildren that this was Egypt's St. Crispin's Day.

Thank you all for being part of my program this week. I will see you next week.