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| TIME | SPEAKER | TEXT |
|---|---|---|
| 00:00:33 |
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I'D LIKE TO CALL THIS MEETING OF THE CAPITAL MARKET SUBCOMMITTEE TO ORDER. THE CAPITAL MARKET SUBCOMMITTEE... |
| 00:06:07 |
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MR. CHAIRMAN, WE MEET TODAY FOR WHAT MIGHT WELL BE OUR LAST HEARING THIS YEAR. OUR FIRST HEARING OF... |
| 00:10:51 |
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THANK THE GENTLEMAN FOR HIS STATEMENT. |
| 00:10:53 |
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CHAIRMAN. |
| 00:10:54 |
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THANK YOU FOR HOLDING THIS HEARING ON THE RECENTLY RELEASED REPORT, FROM SPECIAL EXAMINATION OF FANNIE... |
| 00:15:41 |
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THANK YOU, MR. CHAIRMAN, FOR YOUR INTERAND LEADERSHIP IN THIS MATTER. RANKING MEMBER FRANK. |
| 00:15:45 |
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THANK YOU, MR. CHAIRMAN. FIRST, I WANT TO ADDRESS A LITTLE HISTORY HERE. THE COMMITTEE WAS WELL ON... |
| 00:20:51 |
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MR. SHAYS. |
| 00:20:52 |
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THANK YOU. I AM NEW TO THIS COMMITTEE, AND I WAS ABSOLUTELY SHOCKED WHEN WE LOOKED AT ENRON AND WORLD... |
| 00:23:36 |
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GENTLEMAN YIELDS BACK. MR. SCOTT. |
| 00:23:41 |
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THANK YOU VERY MUCH, MR. CHAIRMAN. THIS IS, INDEED, AN IMPORTANT HEARING. I AM VERY MUCH CONCERNED... |
| 00:26:45 |
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CAN THE GENTLEMAN WRAP UP? |
| 00:26:47 |
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TO ACT ON THIS REPORT ACCIDENT AND THE METHOD BY WHICH THE REPORT WAS RELEASED. I CERTAINLY LOOK FORWARD... |
| 00:27:01 |
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I THANK THE GENTLEMAN. THE CHAIR TO THE BEST OF ABILITY WILL TRY TO KEEP MEMBERS' OPENING STATEMENTS... |
| 00:27:14 |
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THANK YOU, MR. CHAIRMAN. THE ISSUE BEFORE US IS IMPORTANT TODAY. I SHARE THE CONCERNS OF A LOT OF ... |
| 00:29:42 |
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I THANK THE GENTLEMAN. THE LETTER WILL BE INCLUDED IN OFFICIAL RECORD. I AM ADVISED MY STAFF, OPENING... |
| 00:29:53 |
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THANK YOU, CHAIRMAN. MR. CHAIRMAN, WE ARE RUSHING TO JUDGMENT TODAY. OFAO HAS RELEASED A PRELIMINARY... |
| 00:32:42 |
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GENTLEMAN YIELD BACK? |
| 00:32:46 |
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MR. ROYCE. |
| 00:32:47 |
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THANK YOU, MR. CHAIRMAN. I THANK YOU FOR HOLDING THIS HEARING ON THE OFAO REPORT. ALLEGATIONS OF ACCOUNTING... |
| 00:36:24 |
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CAN THE GENTLEMAN BEGIN TO WIND UP? |
| 00:36:26 |
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I WILL WIND UP RIGHT NOW BY SAYING THERE'S DIFFERENCE OF OPINION, ON WHICH APPROACH TO TAKE, IF WE... |
| 00:36:39 |
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I THANK THE GENTLEMAN. |
| 00:36:41 |
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THANK YOU VERY MUCH, MR. CHAIRMAN. AND RANKING MEMBERS. THANK YOU FOR HOLDING THIS HEARING TODAY.... |
| 00:39:50 |
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I THANK THE GENTLEMAN. |
| 00:39:51 |
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THANK YOU, MR. CHAIRMAN. AND THANK YOU FOR HOLDING THE HEARING. ALSO WANT TO THANK, OF COURSE, THE... |
| 00:43:06 |
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THANK THE GENTLEMAN. |
| 00:43:09 |
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I JUST WANTED TO FOLLOW UP, RANKING MEMBER TALKED ABOUT WHEN YOU TALK ABOUT EVALUATING THIS, WE ARE... |
| 00:44:13 |
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THANK THE GENTLEMAN. MISS KELLY. |
| 00:44:15 |
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THANK YOU VERY MUCH, MR. CHAIRMAN. I HAVE NO STATEMENT AT THIS TIME. I LOOK FORWARD TO THESE WITNESSES.... |
| 00:44:25 |
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MR. TOOMEY. |
| 00:44:27 |
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THANK YOU, MR. CHAIRMAN. I WANT TO CONGRATULATE YOU FOR YOUR LONG WORK IN THIS AREA AND FOR HOLDING... |
| 00:45:48 |
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I THANK THE GENTLEMAN. |
| 00:45:49 |
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THANK YOU, MR. CHAIRMAN. I WILL HAND IN MY STATEMENT, AND I CERTAINLY DO APPRECIATE HEARING FROM THE... |
| 00:46:13 |
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I THANK THE GENTLE LADY. |
| 00:46:16 |
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I THANK THE CHAIRMAN. FIRST OF ALL, CHAIRMAN, THERE HAVE BEEN SEVERAL REMARKS MADE THAT WE WOULD HAVE... |
| 00:49:24 |
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COULD THE GENTLEMAN BEGIN TO WRAP UP? |
| 00:49:27 |
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SO I WOULD SIMPLY SAY THAT I THINK THERE ARE SOME TOUGH QUESTIONS FOR FANNIE MAE, BUT I THINK THERE... |
| 00:49:51 |
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GENTLEMAN'S TIME HAS EXPIRED. |
| 00:49:58 |
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CHAIRMAN BAKER, OVER THE LAST FOUR YEARS, THE UNITED STATES HAS SUFFERED FROM IMMENSE JOB LOSS. WE... |
| 00:51:40 |
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THANK THE GENTLEMAN. |
| 00:51:42 |
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THANK YOU VERY MUCH, MR. CHAIRMAN. THANK YOU FOR YOUR LEADERSHIP IN PROVIDING THIS OPPORTUNITY FOR... |
| 00:53:48 |
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I THANK THE GENTLE LADY. MR. LUCAS OF KENTUCKY. |
| 00:53:51 |
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MR. CHAIRMAN, I LOOK FORWARD TO HEARING FROM THE WITNESSES. |
| 00:53:56 |
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THANK THE GENTLEMAN. MR. LYNCH. |
| 00:54:01 |
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THANK YOU, MR. CHAIRMAN. I WANT TO BE BRIEF. THE ONE THING I DON'T WANT TO FORGET IS THE GOOD THINGS... |
| 00:55:01 |
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THANK THE GENTLEMAN. |
| 00:55:06 |
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MY STATEMENT INTO THE RECORD. THANK YOU, MR. CHAIRMAN. |
| 00:55:09 |
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THE MEMBER'S STATEMENTS, AND ALL MEMBERS' STATEMENTS WILL BE MADE OFFICIAL PART OF THE RECORD. |
| 00:55:15 |
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THANK YOU, MR. CHAIRMAN. I WOULD LIKE TO THANK YOU FOR ENSURING SAFETY AND SOUNDNESS OF SECONDARY MARKET.... |
| 00:58:20 |
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MR. FORD? |
| 00:58:22 |
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I'M SORRY, I DON'T HAVE ANYTHING TO SAY. I BELIEVE WHEN YOU HOLD HEARINGS, YOU SHOULD LET THE WITNESSES... |
| 00:58:30 |
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WE HAVE TWO MEMBERS ARE WHO -- MEMBERS OF THE SUBCOMMITTEE WHO ARE MEMBERS OF FINANCIAL SERVICES I... |
| 00:58:38 |
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THANK YOU VERY MUCH, MR. CHAIRMAN. I WOULD ASK UNANIMOUS CONCEPT TO MAKE A BRIEF OPENING STATEMENT.... |
| 00:58:44 |
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WITHOUT OBJECTION, PLEASE PROCEED. |
| 00:58:46 |
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I APPRECIATE THE OPPORTUNITY TO BE HERE TODAY. I MUST SHARE THAT I FEEL LIKE I'M IN ANOTHER ROUND... |
| 01:02:54 |
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MR. FORD? EXCUSE ME, MR. WATT? |
| 01:02:57 |
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THANK YOU, MR. CHAIRMAN. I JUST WANT TO EXPRESS MY THANKS TO THE CHAIRMAN FOR ALLOWING MEMBERS WHO... |
| 01:04:44 |
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I THANK THE GENTLEMAN. IF THERE'S NO OPENING STATEMENT BY A MEMBER AT THIS TIME, I WOULD PROCEED TO... |
| 01:05:47 |
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NOT AT ALL, MR. CHAIRMAN. |
| 01:05:50 |
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IT'S MY UNDERSTANDING THAT YOU ARE ACCOMPANIED BY STAFF. WILL THEY BE TESTIFYING AND ANSWERING QUESTIONS... |
| 01:06:01 |
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THEY WILL NOT HAVE TESTIMONY, BUT THEY WILL BE AVAILABLE TO THE COMMITTEE TO ANSWER ANY TECHNICAL... |
| 01:06:10 |
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IN THAT LIGHT, IT WOULD BE MY OPINION THAT EACH OF YOU TAKE THE OATH. DO EITHER OF YOU HAVE ANY OBJECTION... |
| 01:06:21 |
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NO. |
| 01:06:24 |
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IF THAT IS THE CASE, I WOULD ASK THAT YOU NOW STAND AND RAISE YOUR RIGHT HAND AND AFFIRM THE OATH.... |
| 01:06:39 |
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THANK YOU. EACH OF YOU IS HOW CONSIDERED TO BE UNDER OATH. MR. FALCON, I WOULD RECOGNIZE YOU, GIVEN... |
| 01:07:08 |
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THANK YOU, MR. CHAIRMAN. AND THANK YOU AND THANK THE RANKING MEMBERS, FOR INVITING ME TO TESTIFY.... |
| 01:16:43 |
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YOUR FULL TESTIMONY AND THE REPORT CONTENT THEREOF WILL BE INCLUDED IN THE OFFICIAL RECORD OF THE... |
| 01:17:12 |
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THOSE ARE THE FINDINGS, MR. CHAIRMAN. |
| 01:17:15 |
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DID YOU FIND IN 19 8 THAT MANIPULATION OF ACCOUNTING METHODS RESULTED IN AN E.P.S. CALCULATION WHICH... |
| 01:17:33 |
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THAT IS THE SITUATION WE DESCRIBED IN 1998, YES. |
| 01:17:35 |
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IS IT CORRECT THAT IN REACHING THE EARNINGS PER SHARE TRIGGER OF $3.23 THAT THE CALCULATION OF 3.23... |
| 01:17:51 |
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YES. |
| 01:17:53 |
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HAS IT LISTEN ESTABLISHED WHY THE DECISION WAS MADE TO DEFER $200 MILLION OF A $400 MILLION UNEXPECTED... |
| 01:18:09 |
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WE HAVE NOT RECEIVED AN ADEQUATE EXPLANATION AS TO WHY THAT WAS DONE. WE DO KNOW THAT THE EXTERNAL... |
| 01:18:19 |
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IS IT CORRECT THAT IN AT LEAST PRELIMINARY RESPONSE THAT THE MODELING UTILIZED BY THE ENTERPRISE WAS... |
| 01:18:44 |
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THEIR OWN INTERNAL MODELING FOR AMATEURIZATION DEMONSTRATED THAT THEY HAD TO TAKE THIS $400 MILLION... |
| 01:18:58 |
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DID THEY BELIEVE THAT MODEL TO BE ACCURATE? |
| 01:19:02 |
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YES, YES. |
| 01:19:04 |
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THEN THERE IS NO JUSTIFICATION. MY UNDERSTANDING WAS THE $200 MILLION HAD BEEN DEFERRED BECAUSE OF... |
| 01:19:28 |
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LET ME SAY SOMETHING. I CAN'T SPEAK TO WHAT THE COMPANY BELIEVED AS FAR AS THEIR -- THIS AMATEURIZATION... |
| 01:19:50 |
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IS IT CORRECT THAT THERE ARE -- BECAUSE MANY WILL ALLEGE OR SUSPECT TO ALLEGE THAT THIS WAS A ONE-TIME... |
| 01:20:10 |
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YES. |
| 01:20:13 |
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ISN'T IT CORRECT THAT THERE WERE OTHER ACCOUNTING IRREGULARITIES IDENTIFIED IN OTHER REPORTING YEARS... |
| 01:20:30 |
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I'M SORRY? |
| 01:20:31 |
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LET ME RESTATE. IS IT CORRECT THAT YOU IDENTIFIED IN THE COURSE OF YOUR EXAMINATION OTHER ACCOUNTING... |
| 01:20:54 |
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YES. |
| 01:21:00 |
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GOING FORWARD, AND I WISH TO REITERATE THIS IS AN INTERIM REPORT, NOT A FINAL REPORT. YOU ENGAGED... |
| 01:21:56 |
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I THINK I CAN'T AT THIS TIME, MR. CHAIRMAN, BUT I CAN TELL YOU THAT WE VIEW THIS AS A TWO-STEP PROCESS... |
| 01:22:07 |
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LET ME DO THIS. I HATE TO CUT YOU OFF. BUT MY TIME HAS EXPIRED AND I'M GOING TO TRY TO HOLD OTHER... |
| 01:22:55 |
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THIS COMES DOWN TO A QUESTION OF WHETHER OR NOT WE HAVE SUFFICIENT CONFIDENCE IN MANAGEMENT TO PROPERLY... |
| 01:23:36 |
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I REGRET OUR TIME IS SO LIMITED. MR. KENJORSKI? |
| 01:23:44 |
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LET ME ASK THE FIRST QUESTION. IS THERE A SYSTEMIC RISK PROBLEM IN FANNIE MAE IN YOUR OPINION AT THIS... |
| 01:23:54 |
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I THINK THAT WE HAVE MANAGED THIS PROCESS IN A WAY SUCH THAT THERE IS NOT SYSTEMIC RISK HERE, SUBSTANTIAL... |
| 01:24:18 |
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SO WE CAN INFORM THE INVESTING PUBLIC AND OTHERS THAT HOLD SECURITIES OF FANNIE MAE, IS THERE ANY... |
| 01:24:34 |
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I'M NOT QUITE COMFORTABLE TALKING ABOUT THE -- RECOMMENDING WHETHER OR NOT INVESTORS SHOULD OR SHOULD... |
| 01:24:43 |
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I'M NOT ASKING TO MAKE A RECOMMENDATION. IS THERE ANYTHING IN YOUR FINDING IN OTHER WORDS AS A RESULT... |
| 01:25:13 |
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THE -- IN THE WORST CASE SCENARIO, THE COMPANY COULD BE UNDERCAPITALIZED BELOW CAPITAL SPENDING REQUIREMENT.... |
| 01:25:28 |
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AND CAN YOU GIVE US A MAXIMUM AMOUNT OF UNDERCAPITALIZATION THAT YOU MAY HAVE DISCOVERED? IN OTHER... |
| 01:25:39 |
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WELL, LET ME SAY, AND ANSWER THE QUESTION, NOW WE HAVE DETERMINED THAT THE ACCOUNTING POLICIES WERE... |
| 01:26:47 |
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MAKING THE WORST CASE SCENARIO ASSUMPTION, HOWEVER, THAT DOES NOT CONSTITUTE IN YOUR MIND SYSTEMIC... |
| 01:26:54 |
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YES. THE SOLVENCY OF THIS COMPANY IS NOT THREATENED BY THE FINDINGS WE HAVE TO DATE. |
| 01:27:03 |
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OK. I WANT TO MOVE YOU ALONG BECAUSE FEW QUESTIONS. I DON'T UNDERSTAND WHAT YOU DO AS A REGULATOR,... |
| 01:27:17 |
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YES, SIR. |
| 01:27:20 |
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AND I ASSUME THAT AUDIT DIFFERENCES, IF YOU INDICATED HOW THEY HANDLE THE $400 MILLION OR THE $200... |
| 01:27:36 |
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WHAT WE DO -- |
| 01:27:38 |
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NOT WHAT YOU DO, I WANT TO KNOW WHAT PAPERS YOU EXAMINED. WHAT I'M ASKING IS DID YOU EXAMINE THE AUDIT... |
| 01:27:59 |
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WE WERE NOT AWARE OF THIS AUDIT DIFFERENCE UNTIL WE BEGAN THIS ACCOUNTING EXAMINATION. |
| 01:28:05 |
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WHY WERE YOU NOT AWARE OF IT? |
| 01:28:08 |
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WE HAVE NOT TRADITIONALLY LOOKED AT THE WORK OF THE EXTERNAL AUDITOR TO ENSURE THAT THEY WERE PROPERLY... |
| 01:28:23 |
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YOU MEAN THE REGULATOR DOES NOT GET THE OUTSIDE AUDIT REPORT AND EXAMINE IT BEFORE IT PASSES OR EXAMINES... |
| 01:28:37 |
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LET ME ASK OUR CHIEF ACCOUNTANT ABOUT THIS QUESTION, MR. CHAIRMAN. |
| 01:28:44 |
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YOU NEED TO HIT YOUR BUTTON THERE AND PULL IT REALLY CLOSE TO YOU. |
| 01:28:48 |
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IS THAT BETTER? |
| 01:28:49 |
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MUCH. THANK YOU. |
| 01:28:51 |
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WE'RE CERTAINLY TAKING THAT APPROACH AT THIS POINT. |
| 01:28:56 |
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I'M NOT WORRIED ABOUT 2004. I'M ASKING ABOUT 1998. I'M TRYING TO GET AN ESSENCE OF JUST WHAT IR--... |
| 01:30:07 |
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I ASK THE GENTLEMAN THAT BE THE LAST QUESTION. PLEASE RESPOND, SIR. |
| 01:30:12 |
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YES. WE LOOK AT THIS, CONGRESSMAN, AS A TEAM EFFORT. THE COMPANY IS DEPENDENT ON US DOING OUR JOB... |
| 01:30:42 |
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I JUST WANT TO FOLLOW THIS LINE OF QUESTIONING. AT THIS POINT IN TIME YOU DON'T KNOW WHETHER OR NOT... |
| 01:30:52 |
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LET ME ASK MR. DICKERSON TO ADDRESS THIS. |
| 01:30:55 |
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WE HAD SYSTEM FROM THE CONTROLLER AND THE C.F.O. THAT THERE WAS THIS $200 MILLION AUDIT DIFFERENCE... |
| 01:31:12 |
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AND LISTED AS AN AUDIT DIFFERENCE BY THE OUTSIDE AUDITOR IN 1998? |
| 01:31:16 |
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RIGHT. AND WE LEARNED THAT THROUGH TESTIMONY THAT WE OBTAINED. |
| 01:31:23 |
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IT TOOK YOU SIX YEARS AND DEPOSITIONS TO DISCOVER SOMETHING THAT WAS ON AN AUDIT DOCUMENT? |
| 01:31:30 |
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WE NEED TO FIND OUT IF THIS WAS INCLUDED IN ANY DOCUMENTS THAT WERE PROVIDED TO THE AGENCY. IF WE... |
| 01:32:19 |
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BUT YOU DON'T READ THE BOOKS OF THIS COMPANY, IT DOESN'T MATTER. IT WOULD SEEM THAT THIS COMMITTEE... |
| 01:33:01 |
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THE GENTLEMAN'S TIME HAS REALLY EXPIRED. I WANT TO TRY TO HOLD MEMBERS -- WE HAVE MUCH MORE TO DO TODAY.... |
| 01:33:13 |
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THANK YOU, MR. CHAIRMAN. EVEN BY WASHINGTON STANDARDS, IS A TANGLED WEB THAT WE'RE DEALING WITH HERE... |
| 01:34:05 |
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WE HAVE NOT HIRED AN OUTSIDE AUDITOR TO ASSIST US PRIOR TO THE INITIATION OF THIS SPECIAL ACCOUNTING... |
| 01:34:14 |
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BUT WAS IT BECAUSE YOU HAD UNSUFFICIENT FUNDS TO DO SO? |
| 01:34:18 |
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WE'VE BEEN TRYING TO -- WE HAVE NOT UNDERTAKEN A SPECIAL ACCOUNTING REVIEW LIKE THIS PRIOR TO THIS... |
| 01:34:40 |
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LET ME ASK YOU ANOTHER QUESTION. CAN YOU TELL ME WHY, AND I CAN ONLY JUDGE THIS THROUGH PRESS STATEMENTS,... |
| 01:35:03 |
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WE FEEL STRONGLY THAT THESE ARE BLACK AND WHITE ACCOUNTING ISSUES. THESE ARE NOT ISSUES OF INTERPRETATION,... |
| 01:35:24 |
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SO I.E., KPMG IS STANDING -- IN STANDING BY THIS IS AT FAULT IN TERMS OF THE CLEAR ACCOUNTING PRINCIPLES... |
| 01:35:34 |
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IF THEY ARE STANDING MIND THIS ACCOUNTING TREATMENT, THEN YES, THEY ARE WRONG AS WELL. |
| 01:35:41 |
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DO YOU HAVE SUFFICIENT POWERS TO CARRY OUT YOUR RESPONSIBILITIES? I KNOW THERE'S BEEN A LOT OF DISCUSSION... |
| 01:36:16 |
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I THINK THERE ARE SEVERAL KEY AREAS WHERE WE WOULD LIKE THE SAME POWERS THAT ARE GIVEN TO EVERY OTHER... |
| 01:37:08 |
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I WROTE DOWN A COUPLE COMMEANLTS, AND I DON'T KNOW IF I WROTE THEM DOWN CORRECTLY. BUT THAT YOU MADE... |
| 01:37:20 |
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YES. |
| 01:37:23 |
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WHAT DO YOU MEAN, FANNIE MAE? DO YOU MEAN THEIR BOARD OF DIRECTORS, THEIR OFFICERS, WHAT DO YOU MEAN... |
| 01:37:37 |
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I THINK WHAT WE MEAN IS THIS ISN'T A MATTER WHERE THE RULES WERE TOO COMPLEX AND THE COMPANY DIDN'T... |
| 01:37:51 |
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ACCOUNTING RULES. AND WHEN YOU SAY THEY, YOU'RE REFERRING TO WHOM? |
| 01:37:56 |
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THOSE RESPONSIBLE IN THE COMPANY FOR SETTING ACCOUNTING POLICIES. |
| 01:38:01 |
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SO IT COULD BE OFFICERS OR DIRECTORS OR A COMBINATION OF |
| 01:38:04 |
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YES. |
| 01:38:06 |
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AND THEN YOU SAID IT'S PLAIN WRONG AND MUST BE FIXED AND JOT OVERLOOKED. I ASSUME THAT'S A FOLLOW... |
| 01:38:28 |
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THAT'S THE LAST QUESTION. PLEASE RESPOND, SIR. |
| 01:38:31 |
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IT MEANS MAKING SURE THE PROPER ACCOUNTING POLICIES ARE PUT IN PLACE GOING FORWARD. AND IF THERE WAS... |
| 01:38:48 |
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THANK YOU, SIR. |
| 01:38:50 |
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I THANK THE GENTLEMAN. RANKING MEMBER FRANK HAD TO STEP OUT AND I HAVE COMMITTED TO ON HIS RETURN... |
| 01:39:01 |
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THANK YOU, MR. CHAIRMAN. MR. FALCON, WHEN YOU AND MEMBERS OF OFEO'S STAFF CONDUCTED INTERVIEWS AND... |
| 01:39:17 |
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THEY WERE ALLOWED TO PARTICIPATE IN THOSE SESSIONS. I'M NOT AWARE OF IF THEY REQUESTED SUCH OPPORTUNITY.... |
| 01:39:38 |
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WHY WERE FANNIE MAE OFFICIALS NOT PROVIDED THE OPPORTUNITY TO RESPOND TO FINDINGS OR CONCLUSIONS REACHED... |
| 01:39:50 |
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I THINK BECAUSE WE FOLLOWED A REGULAR ORDER HERE. WE FOLLOWED AN ACCEPTED PRACTICE OF REGULATORS.... |
| 01:40:17 |
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WELL, IS THIS DUE PROCESS? |
| 01:40:19 |
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THIS IS SAFETY AND SOUNDNESS REGULATION, WHICH IS -- REQUIRES PROMPT ACTION TO ENSURE THAT THE COMPANY... |
| 01:40:28 |
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IS THIS THE WAY YOU HAVE HANDLED INTERNAL INVESTIGATIONS IN THE PAST? |
| 01:40:33 |
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THIS IS -- OTHER THAN THE FREDDIE MAC SPECIAL ACCOUNTING REVIEW, THIS IS ONLY THE SECOND SPECIAL EXAMINATION... |
| 01:40:52 |
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IN MAY AND JUNE OF 2003, YOU -- OFEO PUBLISHED ITS 2002 ANNUAL REPORT GIVING BOTH COMPANIES FANNIE... |
| 01:41:24 |
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NO, CONGRESSMAN. I HAVE TESTIFIED BEFORE THIS COMMITTEE BEFORE THAT I HAD NO REASON TO BELIEVE THAT... |
| 01:41:55 |
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LET'S GO BACK TO THE PROCESS THEN. YOU KNOW, EXAMINERS DISCUSS PRELIMINARY CONCERNS AND POSSIBLE... |
| 01:42:12 |
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WE DID HAVE A DISCUSSION, BUT IT WAS WITH THE BOARD, CONGRESSMAN. IN THE SITUATION WHERE WE HAVE ... |
| 01:42:53 |
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YOU KNOW, YOU DID NOT PROVIDE FANNIE MAE WITH A DRAFT EXAMINATION REPORT. BANKS ARE GIVEN AN OPPORTUNITY... |
| 01:43:06 |
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WE DID DO THAT. IN THE COURSE OF OUR NORMAL ANNUAL EXAMINATION OF THE COMPANY, WE DO DO THAT. BUT... |
| 01:43:15 |
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AND YOU CLAIM THEY WERE HOSTILE TO THE EXAMINERS. IN WHAT WAY? |
| 01:43:20 |
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I'M SAYING THEY WERE RESISTANT TO COMPLIANCE WITH OUR REQUEST FOR DOCUMENTS, DIFFICULTY IN SCHEDULING... |
| 01:43:46 |
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DON'T YOU THINK THAT ALL INTERESTS ARE BEST SERVED BY ENSURING THAT ALL RELEVANT DATA IS AVAILABLE... |
| 01:43:57 |
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I'M SORRY, CONGRESSMAN THAT ALL RELEVANT DATA IS AVAILABLE TO? |
| 01:44:02 |
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TO YOUR AGENCY AND THAT THERE ARE NO MISUNDERSTANDINGS OF |
| 01:44:05 |
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YES. |
| 01:44:08 |
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AND THAT WILL NEED TO BE THE GENTLEMAN'S LAST QUESTION. |
| 01:44:11 |
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DID HE ANSWER? |
| 01:44:12 |
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HE DID RESPOND I BELIEVE, YES. |
| 01:44:14 |
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THANK YOU, MR. CHAIRMAN. |
| 01:44:17 |
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I THANK THE GENTLEMAN. CHAIRMAN OXLY? |
| 01:44:22 |
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THANK YOU, MR. CHAIRMAN. DIRECTOR FALCON, THREE YEARS AGO OUR COMMITTEE WAS HEAVILY INVOLVED IN SOME... |
| 01:45:20 |
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I THINK IT HAS BEEN A VERY USEFUL TOOL, BECAUSE THE SPIRIT OF SARBANE-OXLY IS ACCOUNTABLE, ACCOUNTABILITY... |
| 01:46:22 |
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HOW DOES YOUR JOB WORKING WITH THE REGULATED ENTITY THAT IS FANNIE MAE AND IN THE CONTEXT OF THIS... |
| 01:46:45 |
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WELL, WE ARE WORKING WITH THE S.E.C. AS WE FIND -- NOW THAT FANNIE MAE IS A REGISTERED COMPANY UNDER... |
| 01:47:28 |
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DIRECTOR FALCON, FANNIE MAE IS ONE OF THE LARGEST USERS OF DERIVATIVES IN THE WORLD. AS SUCH, FANNIE... |
| 01:47:58 |
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I THINK IT'S BOTH, MR. CHAIRMAN. ONE, THEY WANTED TO MAINTAIN ACCOUNTING PRINCIPLES THAT THEY THOUGHT... |
| 01:48:57 |
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WELL, THE ACT CLEARLY SPELLS THAT OUT RATHER CLEARLY. SO YOU'RE SAYING THAT BASICALLY THIS WAS A SELECTIVE... |
| 01:49:26 |
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THAT'S RIGHT. THEY DID NOT COMPLY WITH G.A.P. BECAUSE COMPLIANCE WOULD HAVE SHOWN MORE VOLATILTY IN... |
| 01:49:57 |
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SO, OK, SO THE ISSUE IS A SELECTIVE INTERPRETATION OF G.A.P. I WOULD ASSUME THAT FANNIE MAE WILL... |
| 01:50:31 |
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IT WOULD NOT SURPRISE ME, MR. CHAIRMAN, THAT THAT WOULD BE THEIR POSITION. WE HAVE FOUND NOT JUST... |
| 01:51:26 |
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AS YOU KNOW, THIS WILL BE MY LAST QUESTION, SORRY, MR. CHAIRMAN. AS YOU KNOW, IN SARBANE-ZOXLEY, WE... |
| 01:51:57 |
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WE HAVE BEEN MONITORING THE SALES OF INDIVIDUALS WITHIN THE COMPANY. AND WE ARE JUST NOW BEGINNING... |
| 01:52:35 |
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IT WOULD SEEM THAT THAT WOULD BE THE S.C.C.'S ROLE, BECAUSE THE ACT REQUIRED THEM, THE INSIDER WHOSE... |
| 01:52:59 |
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YES. THEY ARE PUBLICLY DISCLOSED AND THE S.E.C. WOULD HAVE A ROLE IN THAT. MR. CHAIRMAN, THERE IS... |
| 01:53:11 |
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THEY WOULD HAVE THE PRIMARY ROLE, WOULD THEY NOT? |
| 01:53:14 |
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THEY WOULD HAVE A PRIMARY ROLE, BUT SAFETY AND SOUNDNESS REQUIRES THAT WE ALSO TAKE ACTION. THERE... |
| 01:53:30 |
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THE PURPOSE OF THE PROVISION, OF COURSE, AS THE CHAIRMAN BAKER KNOWS AND OTHERS ON THE COMMITTEE,... |
| 01:54:21 |
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I THANK THE CHAIRMAN. MR. SCOTT? |
| 01:54:24 |
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THANK YOU, MR. CHAIRMAN. MR. FALCON, THERE HAVE BEEN SOME QUESTIONS RAISED AS TO THE TIMING OF THE... |
| 01:54:57 |
|
WE'VE KEPT A TIGHT LID ON THIS AS WE'VE GONE THROUGH THE PROCESS. AND I THINK THE FIRST COMMUNICATIONS... |
| 01:56:08 |
|
LET ME ASK YOU THIS THEN. AT WHAT POINT DID YOU RELEASE IT TO THE PRESS IN THAT ORDER OF EVENTS, WHEN... |
| 01:56:19 |
|
WE DID THAT ON WEDNESDAY. I HAD A COMMITMENT TO THE BOARD THAT WE WOULD NOT RELEASE THE REPORT AS... |
| 01:56:59 |
|
OK. DID YOU CONSULT WITH THE SECURITIES EXCHANGE COMMISSION PRIOR TO MAKING THE REPORTS FINDING PUBLIC... |
| 01:57:20 |
|
WE SPOKE TO THE S.E.C. ABOUT THIS ON FRIDAY BEFORE WE WENT TO SEE THE BOARD, AND PRIOR TO THAT TIME,... |
| 01:57:51 |
|
OK. TWO LITTLE COURT POINTS HERE. HOW ARE THE PROBLEMS WITH ACCOUNTING FOR DERIVATIVES AT FANNIE?... |
| 01:58:15 |
|
WE'VE SEEN THE SAME CULTURAL ISSUES. WE'VE SEEN THE SAME MOTIVATION IN TERMS OF SMOOTHING EARNINGS,... |
| 01:58:50 |
|
NOW, WHY DO YOU THINK FANNIE MAE ALTERED THEIR EARNINGS? WHAT WAS THE UNDERLYING PURPOSE, FROM YOUR... |
| 01:58:58 |
|
THE PRIMARY RATIONALE AS WE SEE IT WAS A STRONG DESIRE THAT THE COMPANY HAD TO PRESENT ITSELF TO THE... |
| 01:59:27 |
|
AND DO YOU THINK THAT THIS ACTIVITY WAS GENERATED ON THE PART OF FANNIE MAE SO THAT THEY COULD INCREASE... |
| 01:59:38 |
|
THAT WOULD NEED TO BE THE GENTLEMAN'S LAST QUESTION BECAUSE TIME'S EXPIRED. PLEASE RESPOND, SIR. |
| 01:59:44 |
|
IT CERTAINLY APPEARS THAT WAY TO US. GIVEN THIS ONE INSTANCE IN 1998, AND GIVEN THE FACT THAT FOR... |
| 02:00:06 |
|
THANK YOU VERY MUCH. |
| 02:00:07 |
|
I THANK THE GENTLEMAN. MR. ROY. EXCUSE ME. MR. SHEA IS NEXT. I'M SORRY. |
| 02:00:14 |
|
THANK YOU. |
| 02:00:17 |
|
YOU'RE ALMOST BECOMING A SYMPATHETIC FIGURE IN YOUR ORGANIZATION. I MEAN, YOU'VE ISSUED A REPORT ... |
| 02:01:09 |
|
WE ISSUED THE ADMINISTRATOR SUBPOENAS TO GET INFORMATION THAT WE NEEDED FOR THE SPECIAL EXAMINATION,... |
| 02:01:17 |
|
WHY WOULD YOU HAVE TO ISSUE ADMINISTRATIVE SUBPOENAS? WHY CAN'T YOU JUST ASK FOR IT? |
| 02:01:22 |
|
WE DID INITIALLY. BUT WE DIDN'T GET SUFFICIENT COMMINES, CERTAINLY NOT TIMELY COMPLIANCE, PARTIAL... |
| 02:01:36 |
|
SO, THE BOTTOM LINE IS NOT ONLY HAVE YOU FOUND THIS COMPANY NOT IN COMPLIANCE, YOU'RE TELLING US THEY... |
| 02:01:52 |
|
THAT WAS OUR FEELING, AND THAT'S WHY WE MOVED TOWARDS THE MORE FORMAL PROCESSES. |
| 02:01:58 |
|
AND YOU'VE STATED TO US THAT THESE FINDINGS ARE VERY SERIOUS. CORRECT? |
| 02:02:02 |
|
YES. |
| 02:02:04 |
|
ARE INVESTORS IMPACTED? I MEAN, ISN'T IT POSSIBLE THAT INVESTORS, BASED ON REPORTS, WILL HAVE MADE... |
| 02:02:16 |
|
UNFORTUNATELY, THAT VERY MUCH IS THE CASE WHEN YOU HAVE FINANCIAL STATEMENTS ISSUED UNDER ACCOUNTING... |
| 02:03:00 |
|
DIDN'T IT ALSO ENABLE THEM TO SAY THEY WERE A LOW-RISK ENTERPRISE? |
| 02:03:05 |
|
THE LACK OF VOLATILITY CERTAINLY CONVEYED THAT IMPRESSION. |
| 02:03:18 |
|
NOW, HAVING DISCOVERED WHAT YOU'VE DISCOVERED WITHOUT THE COOPERATION OF THE ORGANIZATION, ARE THEY... |
| 02:03:32 |
|
I FEEL LIKE THE BOARD HAS BEEN COOPERATIVE IN WORKING WITH US TO ADDRESS THESE |
| 02:03:39 |
|
RIGHT. AND THEY SAID THAT THEY WILL CHANGE THEIR BEHAVIOR. CORRECT? |
| 02:03:44 |
|
THEY SAID THEY WILL CHANGE THEIR BEHAVIOR GOING FORWARD. THEY'RE GOING TO DO THE CALCULATIONS FOR... |
| 02:03:56 |
|
SO, WE'RE -- |
| 02:03:58 |
|
WHAT CONCERNS ME IS WHEN MR. RAINES COMES AND TESTIFIES, HE'S NOT GOING TO GIVE US THE FEELING THAT... |
| 02:04:10 |
|
I CAN'T SPECULATE ON THAT. I JUST KNOW THAT OUR FINDINGS, WE FEEL VERY STRONGLY ABOUT WHAT WE FOUND.... |
| 02:04:26 |
|
IT IS WRONG AND THERE'S GOING TO BE NO DOUBT ABOUT THE FACT THAT IT'S WRONG. NOW, THEIR AUDITORS PAID... |
| 02:04:48 |
|
WE ARE NOW FOCUSING MORE ON THE WORK OF THE EXTERNAL AUDITOR, AND WE HAVE HAD CONCERN ABOUT POTENTIALLY... |
| 02:05:11 |
|
WELL, I CONGRATULATE YOU ON THE WORK YOU'VE DONE. I CONGRATULATE YOU FOR TRYING TO PROTECT THE PUBLIC.... |
| 02:05:44 |
|
THE GENTLEMAN'S TIME'S EXPIRED. RANKING MEMBER FRANK. |
| 02:05:48 |
|
THANK YOU, MR. CHAIRMAN. I WAS PLEASED AND I UNDERSTAND WHAT THE GENTLEMAN SAID AND I GUESS IF YOUR... |
| 02:07:00 |
|
THAT WOULD BE CERTAINLY NOT APPROPRIATE AND NOT CONSISTENT WITH THE WAY I WOULD LIKE TO DEAL WITH... |
| 02:07:15 |
|
WAIT. STOP. THE PRESS. THE PRESS MISREPORTED IT. ALL RIGHT. MAYBE THAT WILL MAKE ITS WAY INTO THE... |
| 02:07:30 |
|
YES. I JUST WANT TO CONFIRM, I DON'T KNOW WHERE THE REPORT GENERATED. I WAS NOT ETHR BY S.E.C. OR... |
| 02:07:41 |
|
I WOULD JUST CAUTION PEOPLE, AND WE NOW HAVE AN AGREEMENT FROM ALL PARTIES THAT THE ASSERTION THAT... |
| 02:08:05 |
|
WE HAVE NOT MADE A FORMAL CRIMINAL REFERRAL. ALL WE HAVE DONE IS GIVEN A COPY OF THE REPORT -- |
| 02:08:10 |
|
TO EVERYBODY. SO, YOU HAVE NOT MADE A CRIMINAL REFERRAL AS THAT IS DEFINED. |
| 02:08:15 |
|
RIGHT. WE HAVE NOT MADE A FORMAL CRIMINAL REFERRAL |
| 02:08:20 |
|
THAT'S ANOTHER ONE AGAIN. I THINK SUGGESTING THERE WAS A CRIMINAL REFERRAL IS, IT SEEMS TO ME, QUITE... |
| 02:08:40 |
|
YES. |
| 02:08:41 |
|
HOW DID YOU ARRIVE AT THE DECISION TO MAKE IT 30%? BECAUSE MY UNDERSTANDING IS AS I READ THIS, THE... |
| 02:09:30 |
|
THAT'S CORRECT. |
| 02:09:33 |
|
COULD IT HAVE BEEN AN UNDERESTIMATE AS WELL AS AN OVERESTIMATE? |
| 02:09:37 |
|
POTENTIALLY. |
| 02:09:38 |
|
SO, YOU DISAGREED WITH THE WAY THEY DID THEM. I WOULD UNDERSTAND -- I WOULD REQUEST YOU TO PUT IN... |
| 02:10:28 |
|
IT'S BECAUSE OF THE MANAGEMENTS AND OPERATIONS RISK AS WELL AS THE UNCERTAINTY ABOUT THEIR FINANCIAL... |
| 02:10:34 |
|
HOW DID YOU CALCULATE 30%? WHAT WERE THE FIGURES? |
| 02:10:38 |
|
BECAUSE OF THE RISK-BASE CAPITAL STANDARD REQUIRES A 30% ADD-ON FOR MANAGEMENT AND CAPITAL RISK BUT... |
| 02:10:52 |
|
AND THE 30% IS THE REQUIREMENT. WHERE IS THAT REQUIREMENT? THAT WAS A PRE-EXISTING FIGURE YOU DECIDED... |
| 02:10:59 |
|
THAT'S IN THE STATUTE. |
| 02:11:00 |
|
I THINK WE OUGHT TO BE CLEAR, THE DECISION TO REQUIRE A 30% INCREASE IN CAPITAL WAS NOT BASED AT ALL... |
| 02:11:18 |
|
MR. ROYCE. |
| 02:11:20 |
|
THANK YOU, MR. CHAIRMAN. I'D LIKE TO LEARN A LITTLE MORE ABOUT FAS-133. AND ONE OF THE THINGS I WANTED... |
| 02:13:18 |
|
SURE. LET ME -- ON THE TECHNICALITIES OF THIS 133, MY CHIEF ACCOUNTANT IS MUCH MORE QUALIFIED THAN... |
| 02:13:38 |
|
LET'S START WITH THAT BECAUSE I'M INTERESTED IF THERE IS A CONSIDERABLE DIFFERENCE IN APPROACH. LET... |
| 02:13:52 |
|
CAN YOU HEAR ME? |
| 02:13:53 |
|
YES. |
| 02:13:56 |
|
ACTUALLY, BEFORE FREDDIE'S RESTATEMENT, THE APPLICATION OF 133 BETWEEN THE TWO COMPANIES WAS SUBSTANTIALLY... |
| 02:14:15 |
|
YOU CAN'T MAKE THAT COMPARISON BECAUSE THEY WERE APPLYING A COMPLETELY DIFFERENT APPROACH IN TERMS... |
| 02:14:24 |
|
I WOULDN'T SAY COMPLETELY DIFFERENT BUT SUBSTANTIALLY DIFFERENT. |
| 02:14:27 |
|
COULD YOU HELP ME OUT AND JUST INDICATE IF INITIALLY ONE APPROACH IN YOUR VIEW WAS MORE CONSERVATIVE... |
| 02:14:41 |
|
IN BOTH INSTANCES THERE WERE MISAPPLICATIONS, THEY WERE JUST APPLIED IN DIFFERENT WAYS. |
| 02:14:46 |
|
OK. THAT ANSWERS MY FIRST QUESTION TO SOME EXTENT. GO AHEAD. |
| 02:14:53 |
|
MR. VICKERSON, IF YOU DON'T MIND, WOULD LIKE TO ADD TO |
| 02:14:56 |
|
OK. |
| 02:14:57 |
|
FREDDIE MAC HAD A PROBLEM WHERE THEY WERE APPLYING THEIR DERIVATIVE HEDGES DIRECTLY TO THE MORTGAGES... |
| 02:15:11 |
|
OK. |
| 02:15:13 |
|
THAT WAS ONE BIG DIFFERENCE BETWEEN FANNIE MAE AND FREDDIE MAC. |
| 02:15:17 |
|
AND LET'S GO TO THE QUESTION OF WHY THE AUDITOR, WHY KPMG, DIDN'T PICK THIS UP. I MEAN, THIS WAS --... |
| 02:15:44 |
|
WE ARE NOW LOOKING INTO THE DETERMINATIONS OF KPMG ON THESE MATTERS, BUT LET ME MAKE CLEAR THAT THE... |
| 02:15:57 |
|
I THINK THAT'S A GOOD POINT. |
| 02:15:59 |
|
IT IS NOT SUFFICIENT TO SIMPLY SAY THAT THE AURD OR THE SIGNED OFF. |
| 02:16:03 |
|
I UNDERSTAND THAT. I WONDER, DID THE COMPANY AT THE TIME FEEL IT WAS IN COMPLIANCE OR DO WE HAVE ... |
| 02:16:45 |
|
LET ME ADDRESS THAT. JUST KIND OF BACKING UP A SECOND, AND LET'S TALK ABOUT 133 BECAUSE I THINK IT'LL... |
| 02:17:13 |
|
RIGHT. |
| 02:17:14 |
|
-- AND WHAT WE'RE LOOKING AT THERE IS THAT YOU'RE GOING TO GO THROUGH AND MAKE AN ASSESSMENT TEST... |
| 02:18:16 |
|
AND ONE LAST QUESTION. IS THAT BECAUSE THEY DON'T, IN YOUR OPINION, HAVE THE ABILITY OR THE EXPERTISE... |
| 02:18:29 |
|
THEY FULLY UNDERSTOOD THE RULES. YOU KNOW, THAT'S NOT IN DOUBT. THEIR SYSTEMS ARE NOT CAPABLE AT... |
| 02:18:47 |
|
I SEE. |
| 02:18:56 |
|
THANK YOU, GENTLEMAN. |
| 02:18:58 |
|
THANK YOU, MR. CHAIRMAN. DIRECTOR FALCONE, I UNDERSTAND THAT YOUR REPORT HINGES ON THE ACCOUNTING... |
| 02:19:16 |
|
LET ME CLARIFY, CONGRESSMAN, THAT THIS WORK IS -- AND THE JUDGMENTS IN THIS ARE THE PRODUCT OF OFAO.... |
| 02:19:46 |
|
SO, IT WAS YOUR JUDGMENT AND THEY HAVE SIGNED OFF ON THE OFAO FINDINGS. CORRECT? |
| 02:19:50 |
|
YES, CONGRESSMAN. |
| 02:19:52 |
|
YOU ALSO MENTIONED THAT YOU DID SPEAK TO NOR REVIEW THE WORKING PAPERS OF KPMG ACCOUNTING FIRM WHILE... |
| 02:20:10 |
|
DELOITTE FULLY SUPPORTS THE FINDINGS AND CONCLUSIONS OF THIS REPORT. THEY ALSO VIEW THESE ACCOUNTING... |
| 02:20:24 |
|
AREN'T THE VIEWS OF THE KPMG AUDITORS CRITICAL TO YOUR REPORT? THEY'RE A VERY REPUTABLE FIRM. THEY... |
| 02:20:36 |
|
WELL, THEY ARE REPUTABLE. KPMG MAY DISAGREE WITH US, BUT IT'S NOT UNLIKE ARTHUR ANDERSEN. THEY SUPPORTED... |
| 02:20:50 |
|
I YIELD BACK THE BALANCE OF MY TIME. |
| 02:20:53 |
|
THANK YOU, GENTLEMAN. MR. NAY. |
| 02:20:55 |
|
THANK YOU, MR. CHAIRMAN. FOLLOWING A LITTLE BIT IN THE LINE OF THE QUESTION THE GENTLEMAN JUST ASKED,... |
| 02:22:07 |
|
I THINK THE WAY THIS WOULD WORK IS THE S.E.C. WOULD DETERMINE WHAT IS APPROPRIATE FOR PURPOSES OF... |
| 02:22:54 |
|
WHEN YOU PRESENTED TO THE FANNIE BOARD IS FACT THAT THEY WILLFULLY MISAPPLIED GENERAL ACCOUNTING PRACTICE,... |
| 02:23:20 |
|
WELL, KPMG WAS NOT IN THE MEETING WITH THE BOARD WHEN WE SAT DOWN WITH THE BOARD AND PRESENTED OUR... |
| 02:23:48 |
|
IF KPMG SIGNED OFF ON THIS AND IF OFAO HASN'T HAD ANY DISCUSSIONS OR YOUR STAFF WITH KPMG AS TO WHY... |
| 02:24:06 |
|
WE ARE NOW BEGINNING WORKING ON THE PROCESS OF ASSESSING KPMG'S WORK PAPER, HAVING DISCUSSIONS WITH... |
| 02:24:35 |
|
I JUST WONDERED THROUGH THE PROCESS -- AND IT WAS FROM THE GENTLEMAN'S QUESTION BEFORE -- IT SEEMS... |
| 02:25:12 |
|
RIGHT. WE WILL HAVE THOSE DISCUSSIONS AND LET ME ASK MR. VICKERSON ABOUT WHAT HAPPENED IN THE PAST... |
| 02:25:21 |
|
I KNOW YOU'RE GOING TO HAVE THOSE DISSCUGSES, BUT DELOITTE'S IT THING THERE IN A WAY SAYING, YES,... |
| 02:25:42 |
|
WE AT OFAO REQUESTED WORK PAPERS FROM KPMG AND HAD TALKED TO THEIR PARTNERS ABOUT GETTING THOSE WORK... |
| 02:26:12 |
|
MR. CHAIRMAN, MY TIME HAS EXPIRED. AT SOME POINT IN TIME DOWN THE ROAD I'D LIKE TO GET YOUR OPINION... |
| 02:26:22 |
|
THANK YOU, MR. CHAIRMAN. MR. CAPUANO. |
| 02:26:29 |
|
THANK YOU, MR. CHAIRMAN. I'D LIKE TO ASK A FEW GENERAL QUESTIONS ABOUT FAS-133, WHICH I'M NOT TERRIBLY... |
| 02:26:41 |
|
IT WENT INTO EFFECT IN 2001. |
| 02:26:45 |
|
SO, RELATIVELY NEW FOR THE DEFENDANT. THANKS. AM I RIGHT TO UNDERSTAND THAT IT IS BETWEEN THE REGULATION... |
| 02:27:00 |
|
YES, CONGRESSMAN. SO, IT'S A RELATIVELY NEW 900-PAGE REGULATION. IN THE NORMAL COURSE OF EVENTS, ... |
| 02:28:05 |
|
I THINK THAT DEPRACE PERIOD YOU'RE DESCRIBING OCCURS -- GRACE PERIOD OCCURS PRIOR TO THE EFFECTIVE... |
| 02:28:26 |
|
I UNDERSTAND HOW RULES ARE MADE. BUT EVEN AFTER RULES ARE MADE, ARE YOU TELLING ME IN THE NORMAL COURSE... |
| 02:28:46 |
|
THE RULES APPLY AS THE EFFECTIVE DATE. |
| 02:28:49 |
|
I UNDERSTAND. BUT HOW ARE THEY INTERPRETED? YOU'RE TELLING ME THEY'RE CLEAR, CONCISE, UNEQUIVOCAL... |
| 02:30:08 |
|
IF IT HAPPENS, IT'S WRONG. IT'S NOT PROPER TO SMOOTH OUT EARNINGS VIOLATING ACCOUNTING RULES. |
| 02:30:13 |
|
YOU DNLT HEAR THE QUESTION. WITHIN THE RULES OF ACCOUNT, WITHIN THE RULES ALLOWED BY REGULATORS. ... |
| 02:30:22 |
|
IF THE IT'S WITHIN THE RULES OF ACCOUNTING, IT'S NOT IMPROPER. |
| 02:30:26 |
|
THAT'S WHAT I ASKED. THE CONCEPT OF SMOOTHING OUT EARNINGS IS NOT A VIOLATION. UNDERSTANDING FULL... |
| 02:30:42 |
|
NO. WE'RE STARTING, AS WE SAID, TO OBTAIN THE WORK PAPERS OF KPMG AND WILL DISCUSS WITH THEM |
| 02:30:48 |
|
OK. BECAUSE IT STRIKES ME AGAIN -- I KNOW IT'S VERY COMPLICATED AND I UNDERSTAND THAT, BUT, YOU KNOW,,... |
| 02:31:27 |
|
NO. |
| 02:31:30 |
|
SO, KPMG AS AN AUDITOR HAS SAID, LOOK, WE DON'T BASICALLY AGREE BUT IT'S A MINOR POINT, IT'S IN THE... |
| 02:31:39 |
|
THIS WILL HAVE TO BE THE GENTLEMAN'S FINAL QUESTION. |
| 02:31:42 |
|
THANK YOU, MR. CHAIRMAN. CLEARLY THERE ARE SERIOUS QUESTION, YOU'VE RAISED SERIOUS CONCERNS AND IF... |
| 02:32:08 |
|
AT THIS TIME, THE CHAIR WILL RECOGNIZE THE GENTLELADY FROM NEW YORK. |
| 02:32:12 |
|
THANK YOU VERY MUCH. I APPRECIATE THE FACT THAT YOU'VE DELIVERED A PARTIAL REPORT. IT'S BEEN VERY... |
| 02:33:43 |
|
WE DO THINK IT IS IMPORTANT THAT KEY FUNCTIONS BE SEPARATED SO THAT THERE ISN'T THE CONFLICT OF INTEREST... |
| 02:34:45 |
|
I WANT TO GO BACK TO -- ON PAGE 160 OF YOUR REPORT, I DON'T KNOW HOW TO PRONOUNCE SAM -- IS IT RA... |
| 02:34:57 |
|
RAJAPA. |
| 02:35:04 |
|
THANK YOU. TIM HOWARD NOTES THAT SAM REPORTS DIRECTLY TO THE AUDIT COMMITTEE BUT FOR THE LAST 2 1/2... |
| 02:35:57 |
|
RIGHT. THAT'S A GOOD QUESTION. AND WE FOUND THAT THIS WAS A BIG WEAKNESS IN THE WAY THESE ACCOUNTING... |
| 02:36:27 |
|
RIGHT. WE FOUND IN THE EXAMINATION AREA THERE WAS ONE INDIVIDUAL IN CHARGE OF THE ACCOUNTING FOR ... |
| 02:36:56 |
|
IS THERE NOW IN PLACE A STRUCTURE? BECAUSE I UNDERSTAND FROM MR. FALCONE, FROM WHAT HE JUST SAID,... |
| 02:37:10 |
|
IT WILL TAKE A LITTLE TIME TO FIX ALL THESE PROBLEMS, TO DO THE REORGANIZATION WITHIN THE COMPANY,... |
| 02:37:30 |
|
THANK YOU. |
| 02:37:34 |
|
THE GENTLELADY YIELDS BACK. MR. LYNCH. |
| 02:37:36 |
|
THANK YOU, MR. CHAIRMAN. I KNOW IT'S LATE IN THE HEARING, BUT I DO WANT TO THANK YOU FOR COMING TODAY... |
| 02:39:04 |
|
NO. THE BUSINESS MODEL OF THE |
| 02:39:08 |
|
REMAINS SOUND. THANK YOU. I DON'T HAVE MUCH TIME, SO I'M GOING TO HAVE TO -- THAT'S JUST ONE THING... |
| 02:39:16 |
|
OK. |
| 02:39:17 |
|
WE HAD 19 CRIMINAL INDICTMENTS. WE HAD 96 CRIMINAL CHARGES. WE HAD 78 FRAUD COUNTS AGAINST THE PEOPLE... |
| 02:39:37 |
|
I -- WE'VE DEFERRED ANY OPINIONS, RESOLUTIONS OF ANY CRIMINAL CONDUCT TO THE JUSTICE DEPARTMENT. ... |
| 02:40:08 |
|
THANK YOU. AND IN TERMS OF THE GROSS MANIPULATION THAT OCCURRED IN THE CALIFORNIA POWER MARKET BY... |
| 02:40:33 |
|
UNTIL THE ENTIRE REVIEW IS OVER, I WITHHOLD MAYBE BROAD CATEGORICAL STATEMENTS ABOUT THIS. CERTAINLY,... |
| 02:41:11 |
|
SO, YOU'RE SAYING THEY COULD BE DEFRAUDING THE PUBLIC AND THE INVESTORS AND THE EMPLOYEES JUST LIKE... |
| 02:41:21 |
|
I DON'T KNOW. I HAVE NO -- |
| 02:41:23 |
|
YOU JUST SAID THERE WAS A SOUND BUSINESS MODEL HERE. |
| 02:41:26 |
|
EXACTLY. A SOUND ECONOMIC BUSINESS MODEL. BUT AS FAR AS ANY CRIMINAL INTENT OR ANY DESIRE TO BREAK... |
| 02:41:39 |
|
OK. THANK YOU. THAG YOU, MR. CHAIRMAN. |
| 02:41:42 |
|
I THANK THE GENTLEMAN. MR. TOOMEY. |
| 02:41:46 |
|
THANK YOU, MR. CHAIRMAN. WHAT I'D LIKE TO DO IS ADDRESS THIS QUESTION OF WHETHER WE'RE REALLY TALKING... |
| 02:42:23 |
|
EXCUSE ME. I HATE TO INTERRUPT YOUR TRAIN. I'LL LET YOU RESTART. JUST BY WAY OF ANNOUNCEMENT FOR ... |
| 02:43:00 |
|
I'D LIKE TO PROCEED WHEN WE GET BACK. |
| 02:43:02 |
|
OK. GREAT. THE COMMITTEE WILL STAND IN RECESS UNTIL 1:30. |
| 02:46:58 |
|
AT THIS TIME I WOULD LIKE TO RECONVENE THE HEARING. AT THE TIME, THE COMMITTEE RECESSED MR. TOOMEY... |
| 02:47:09 |
|
THANK YOU, MR. CHAIRMAN. I WOULD LIKE TO TAKE UP WHERE WE LEFT OFF ON THIS DISCUSSION ABOUT WHETHER... |
| 02:47:51 |
|
YES, THE $200 MILLION. |
| 02:47:53 |
|
SO I THINK IT'S VERY CLEAR THAT WE ESTABLISH NUMBER ONE, THEIR AUDITORS AGREE WITH YOU, NOT THE WITH... |
| 02:48:44 |
|
YES. |
| 02:48:47 |
|
SO IT'S NOT A RANGE, IT'S NOT A BALLPARK, THERE'S A NUMBER. AND IF YOU CARRY IT OUT FAR ENOUGH, IT... |
| 02:48:53 |
|
YES. |
| 02:48:55 |
|
AND MY UNDERSTANDING IS WHEN THE NEXT QUARTER COMES AROUND, INTEREST RATES WILL BE DIFFERENT THAN... |
| 02:49:24 |
|
YES. THEY'RE REQUIRED TO MAKE THOSE ADJUST MINTS. I WOULDN'T USE THE WORD CATCHUP IN THE SAME SENSE... |
| 02:49:34 |
|
BUT THEY ARE REQUIRED TO REFLECT THE CUMULATIVE DIFFERENCE BETWEEN WHAT WAS PROJECTED AND WHAT IN... |
| 02:49:45 |
|
YES. |
| 02:49:48 |
|
AND THE RULES ARE THEY -- DO THEY SAY THAT DESPITE THE FACT THAT A PRECISE NUMBER IS CALCULATED, YOU... |
| 02:50:02 |
|
LET ME ASK YOUR CHIEF ACCOUNT TANT TO GIVE YOU THE ANSWER. |
| 02:50:05 |
|
NO. |
| 02:50:07 |
|
DOES FAZ 91 SUGGEST THAT YOU CAN ROUND THIS NUMBER TO SOME DEGREE? |
| 02:50:11 |
|
NO. |
| 02:50:12 |
|
OK. IT DOESN'T ALLOW THAT. I'M LOOKING A THE TESTIMONY FROM MR. REIGNS AND MR. HOWWARD AND IT TALKS... |
| 02:50:32 |
|
THAT'S CORRECT. |
| 02:50:33 |
|
OK. THE ALLEGED INPRECISIONS ARE USED IN MR. REIGN'S TESTIMONY AS A JUSTIFICATION FOR CREATING A ... |
| 02:50:47 |
|
NO. THE RANGE DOESN'T HAVE ANYTHING TO DO WITH IT. |
| 02:50:52 |
|
THE RANGE WAS AN ARBITRARY INVENTION OF THE COMPANY, IS |
| 02:50:55 |
|
CORRECT. |
| 02:50:58 |
|
AND THE RANGE OF $100 MILLION PLUS OR MINUS FOR THESE ADJUSTMENTS IS NOT EVEN CONTEMPLATED MUCH LESS... |
| 02:51:08 |
|
THERE'S NOTHING UNDER F.A.Z. 91 THAT WOULD ALLOW FOR A RANGE. |
| 02:51:13 |
|
SO IT'S NOT AS THOUGH THERE'S A DISPUTE OVER HOW MUCH, THERE'S NO SUCH CONCEPT. BUT YOU MAKE A FURTHER... |
| 02:51:56 |
|
CORRECT. |
| 02:51:58 |
|
SOME HAVE SEEMED TO SUGGEST THAT THIS IS NOT REALY MATERIAL. FANNIE MAE IS A BIG COMPANY, HAS A LOT... |
| 02:52:13 |
|
PLUS OR MINUS 1%, BUT BASICALLY ROUNDS TO $100 MILLION. |
| 02:52:17 |
|
AND IT WAS NOT A ROUNDING, AN EFFORT TO ROUND THIS NUMBER, IT WAS DERIVED FROM A TOTALLY DIFFERENT... |
| 02:52:39 |
|
PROBABLY IN THE NEIGHBORHOOD OF A BILLION. |
| 02:52:41 |
|
ABOUT A BILLION. |
| 02:52:43 |
|
I WOULD SAY $750 MILLION. |
| 02:52:46 |
|
SO WE'RE TALKING OVER 10% OF THE REPORTED INCOME IN A GIVEN QUARTER. |
| 02:52:50 |
|
ACTUALLY, IT COULD WORK OUT LARGER THAN THAT. |
| 02:52:55 |
|
SO BY VIRTUE OF THE SHEER MAGNITUDE, I DON'T UNDERSTAND HOW SOMEONE TOWLED SAY IT'S MATERIAL. BUT... |
| 02:53:12 |
|
I WOULD COMPLETELY AGREE WITH THAT. |
| 02:53:15 |
|
AND I REGRET YOUR TIME IS EXPIRED. MR. MEEKS? |
| 02:53:21 |
|
THANK YOU, MR. CHAIRMAN. LET ME JUST MAKE SURE -- I THINK THAT IT'S -- WITH REFERENCE TO SOME OF THE... |
| 02:54:01 |
|
WITH? |
| 02:54:03 |
|
WITH THE STATUS THAT FANNIE MAE AND FREDDIE MAC CURRENTLY HAS IN THE MARKET? |
| 02:54:07 |
|
CONGRESSMAN, I DON'T SUPPORT PRIVATIZATION OF THESE COMPANIES. |
| 02:54:10 |
|
I DIDN'T ASK YOU WHETHER YOU DID OR NOT. I SAID I THINK WE CAN ALL AGREE THAT WE KNOW FROM EVEN SOME... |
| 02:54:27 |
|
OH, YES, THERE ARE INDIVIDUALS THAT ADVOCATE THAT. |
| 02:54:32 |
|
AND IT IS ALSO TRUE THAT IN FACT YOU, WHEN YOU'VE CAME HERE PREVIOUSLY TO TESTIFY ON OTHER OCCASIONS,... |
| 02:54:52 |
|
YES, CONGRESSMAN. |
| 02:54:53 |
|
IN FACT, THEY WERE SO UPSET WITH YOU AT THAT PARTICULAR TIME THERE WAS BELLS PUT FORWARD THAT UNDER... |
| 02:55:06 |
|
YES. |
| 02:55:08 |
|
OK. AND IT'S ALSO THAT THIS IS A SPECIAL EXAMINATION, AND THIS IS A SPECIAL EXAMINATION ACTUALLY ... |
| 02:55:22 |
|
NO. |
| 02:55:24 |
|
THIS WAS NOT A SPECIAL EXAMINATION? |
| 02:55:26 |
|
YES, IT WAS A SPECIAL EXAMINATION, BUT -- YES. |
| 02:55:29 |
|
AND UNDER ORDINARY PROCEDURES, WOULDN'T IT ALSO BE A SITUATION WHEREAS, YOU KNOW, THERE WERE QUESTIONS... |
| 02:55:50 |
|
IN THE EXAMINATION FOLLOWS A PATTERN WHERE IT'S A NORMAL EXAMINATION, LIKE OUR ANNUAL RISK BASE EXAMINATION,... |
| 02:56:15 |
|
AND SOME OF THAT IS SUBJECTIVE, BECAUSE AS WE INDICATED AND I THINK WHEN SOMEONE WAS TALKING BEFORE,... |
| 02:57:01 |
|
CONGRESSMAN, WE HAVE NOT -- WE DID NOT RELEASE THIS REPORT PRIOR TO THE BOARD AGREEING WITH US THAT... |
| 02:57:28 |
|
BEFORE THEY OBJECTED, THINGS WERE LEAKING OUT AND I DON'T KNOW IF CONGRESS HAS EVER ASKED FOR IT,... |
| 02:58:42 |
|
IT'S OUR JUDGMENT BASED ON THE EVIDENCE WE SAW THAT THIS COMPANY, IN 1998, IN THAT INSTANCE, WHEN... |
| 02:59:08 |
|
THE GENTLEMAN'S TIME HAS EXPIRED. DID YOU HAVE A WRAP UP? I THANK THE GENTLEMAN. MR. BOCKUS. |
| 02:59:18 |
|
THANK YOU. DIRECTOR, DERIVATIVES HAVE BEEN USED TO HEDGE RISKS AND ACTUALLY BEEN USED SUCCESSFULLY.... |
| 02:59:44 |
|
THE DERIVATIVES PORTFOLIO, THEY WERE CLASSIFYING ALL BUT $43 BILLION AS ELIGIBLE FOR HEDGE ACCOUNTING... |
| 02:59:58 |
|
TO FLESH IT OUT? |
| 02:59:59 |
|
YES. |
| 03:00:02 |
|
TO THE UNDERLINING SECURITY WHATEVER THE DERIVATIVE WAS BASED ON? |
| 03:00:06 |
|
WHATEVER CHANGE OF VALUE OCCURRED IN THE DERIVATIVE WOULDN'T FLOAT THEIR EARNINGS TO THE BALANCE SHEET... |
| 03:00:16 |
|
OK. DID THAT AFFECT FANNIE MAE FROM A SAFETY AND SOUNDNESS STANDPOINT? IN YOUR OPINION? |
| 03:00:25 |
|
I THINK OVERALL -- EXCUSE ME. EVERYTHING WE FOUND IN THIS REPORT DOES RAISE CONCERNS ABOUT THE COMPANY'S... |
| 03:00:58 |
|
JUST ASSUMING THAT THEY HAD APPLIED WITH F.A.Z. 133 IN THEIR RISK MANAGEMENT, DO YOU BELIEVE THAT... |
| 03:01:21 |
|
THEY USE THEIR DERIVATIVES TO HEDGE AGAINST THE INTEREST RATE RISK ASSOCIATED WITH THIS RETAINED PORTFOLIO... |
| 03:02:20 |
|
HOW LONG HAVE -- HOW LONG HAVE -- I MEAN, YOU'VE BEEN CRITICAL OF THEIR INTERNAL CONTROLS AND THEIR... |
| 03:02:37 |
|
THE INTERNAL CONTROLS I GUESS WE FOUND THAT THESE -- THE POLICIES ON F.A.S. 91 WE THINK DATE BACK... |
| 03:03:03 |
|
NOW, Y'ALL EXAMINE THEM ON A REGULAR AND CONSTANT BASIS, |
| 03:03:05 |
|
YES. |
| 03:03:07 |
|
WHY DID YOU JUST NOW DISCOVER THOSE THINGS? WHY DID IT TAKE THIS LONG? |
| 03:03:15 |
|
WE LOOK AT MANY ISSUES RELATED TO CREDIT RISKS, INTEREST RATE RISK, MANAGEMENT AND OPERATIONS RISK,... |
| 03:04:03 |
|
OK. DID Y'ALL CONSULT WITH -- KMPG WAS THEIR OUTSIDE AUDITOR AND DELOITTE TOUSCHE WAS YOUR OUTSIDE... |
| 03:04:22 |
|
WE HAVE BEGUN THE PROCESS OF OBTAINING KPMG'S WORK PAPERS, DISCUSSING THIS WITH KPMG, BUT WE'VE NOT... |
| 03:04:45 |
|
BUT YOU WERE TOTALLY UNAWARE THEY WERE DOING THIS UNTIL RECENTLY? |
| 03:04:50 |
|
WE HAVE NOT CUCKED AN INDEPTH EXAMINATION LIKE THIS PREVIOUSLY. |
| 03:04:54 |
|
HAD YOUR CRITICIZED THEIR INTERNAL CONTROLS PRIOR TO THIS? YOU'RE THEIR REGULATOR, AND INTERNAL CONTROLS... |
| 03:05:12 |
|
I WOULD HAVE TO GO BACK AND LOOK AT YOUR PREVIOUS EXAMINATION REPORTS, BUT IF WE DIDN'T IDENTIFY THESE... |
| 03:05:22 |
|
YOU PROBABLY SHOULD HAVE, RIGHT? |
| 03:05:24 |
|
I WOULD HAVE LIKED TO HAVE DONE IT PREVIOUSLY, YES, NOW THAT WE KNOW WHAT WE KNOW. |
| 03:05:29 |
|
ONE MORE QUESTION, SIR. |
| 03:05:32 |
|
ON SEPTEMBER 20, YOU WERE MEETING WITH THE FANNIE MAE BOARD. Y'ALL WERE GOING TO PRESENT TO |
| 03:05:37 |
|
YES. AND YOU HAD NOT MADE THAT KNOWN TO THE PUBLIC AT THAT TIME, HAD YOU? |
| 03:05:42 |
|
RIGHT. |
| 03:05:44 |
|
AND I KNOW EVERYBODY WAS WAITING ON THAT MEETING AND THEN THAT MORNING I RECALL PICKING UP "THE WALL... |
| 03:06:00 |
|
RIGHT. WE DID NOT AUTHORIZE -- I DID NOT AUTHORIZE THE RELEASE OF ANY INFORMATION ABOUT WHAT WE WERE... |
| 03:06:32 |
|
BUT SOMEBODY DISCLOSED NONPUBLIC INFORMATION, A VIOLATION OF YOUR RULES. Y'ALL'S GUIDELINE PROHIBITS... |
| 03:06:56 |
|
-- WOULD THEY NOT? |
| 03:06:58 |
|
IF IT WAS SOMEONE WITHIN THE AGENCY. |
| 03:07:00 |
|
OR ANOTHER AGENCY. |
| 03:07:02 |
|
OUR GUIDELINE ONLY APPLIES TO US. IF YOU'RE CITING OUR GUIDELINE, IT ONLY APPLIES TO OFEO. |
| 03:07:10 |
|
HAVE YOU DONE ANYTHING -- WERE YOU CONCERNED ABOUT THAT WHEN YOU SAW THAT NONPUBLIC INFORMATION HAD... |
| 03:07:18 |
|
I'M ALWAYS CONCERNED ABOUT INFORMATION THAT SHOWS UP IN THE PUBLIC DOMAIN. |
| 03:07:23 |
|
HAVE YOU TRIED TO IDENTIFY THE INDIVIDUAL OR INDIVIDUAL WHOSE VIOLATED THESE RULES? |
| 03:07:29 |
|
I'M NOT SURE, CONGRESSMAN, WHAT SHOWS UP IN THE NEWSPAPER WHETHER IT'S CONJECTURE, SPECULATION. THERE... |
| 03:07:38 |
|
IT WAS SPECIFIC IN WHAT THEY -- |
| 03:07:42 |
|
IT'S HARD FOR ME TO DISCERN WHAT IS SPECULATION AND WHAT IS BASED ON A LEAK OR BASED ON SOME AUTHORIZED... |
| 03:07:49 |
|
BUT YOU SAW THAT REPORT? IT WAS PRETTY APART THAT THEY HAD TO HAVE INSIDE INFORMATION. |
| 03:07:55 |
|
I'VE SEEN SPECULATION ABOUT WHAT WE MIGHT DO FOR MONTHS AND MONTHS NOW BASED ON WHAT KNOWLEDGE PEOPLE... |
| 03:08:04 |
|
YOU'VE USED ALMOST TWICE YOUR TIME. |
| 03:08:06 |
|
I'M SORRY. |
| 03:08:08 |
|
YOU'RE NOT GOING TO GET AN ANSWER NO MATTER HOW HE ASKS. SO YOU MIGHT AS WELL MOVE ON. |
| 03:08:15 |
|
LET'S SEE, MR. WATT, I THINK YOU'RE NEXT. MISS WATERS IS NEXT. MISS WATERS? |
| 03:08:21 |
|
THANK YOU VERY MUCH, MR. BAKER. MR. FALCON, YOU'VE BEEN BEFORE THIS COMMITTEE BEFORE AND YOU WERE... |
| 03:09:04 |
|
NO, I'VE ACTUALLY SUPPORTED A REGULATOR WITH ALL THE AUTHORITIES AND POWERS AND RESOURCES TO DO HIS... |
| 03:09:13 |
|
DID YOU SEEK SUPPORT FOLLOWING THE CRITICISM THAT WAS WREEPED UPON YOU IN THIS COMMITTEE, DID YOU... |
| 03:09:20 |
|
YES, I HAVE. |
| 03:09:22 |
|
ALL RIGHT, THANK YOU. I WOULD ALSO LIKE TO KNOW A LITTLE BIT MORE ABOUT WHAT HAS HAPPENED SINCE THE... |
| 03:09:55 |
|
I RECALL QUESTIONS FROM VARIOUS MEMBERS OF CONGRESS IN THE SENATE -- |
| 03:09:59 |
|
DID YOU TALK TO ANY MEMBERS OF CONGRESS OR THEIR STAFFS ABOUT THIS INVESTIGATION SEEKING ADVICE, GETTING... |
| 03:10:14 |
|
ASKING ADVICE? NOT FOR THE PURPOSES OF TRYING TO GET ADVICE FROM A MEMBER OF CONGRESS ABOUT WHAT WE... |
| 03:10:21 |
|
SO YOU DID TALK WITH SOME MEMBERS OF CONGRESS OR THEIR STAFFS ABOUT WHILE YOU WERE IN THE PROCESS... |
| 03:10:29 |
|
YES. |
| 03:10:32 |
|
ALL RIGHT. DID ANY MEMBER OF CONGRESS OR THEIR STAFF OFFER SUPPORT FOR OFEO OR YOU IN EXCHANGE FOR... |
| 03:10:48 |
|
ABSOLUTELY NOT. |
| 03:10:51 |
|
DID YOU REPORT TO THE CHAIRMAN OF THIS COMMITTEE, THE SUBCOMMITTEE, OR THE CHAIRMAN OF THE OVERALL... |
| 03:11:06 |
|
ABSOLUTELY NOT. |
| 03:11:10 |
|
LET ME GO ONE BY ONE. DID YOU AT ANY TIME REPORT TO THE CHAIRMAN OF THIS ENTIRE COMMITTEE, MR. OXLY,... |
| 03:11:19 |
|
ANSWER THE CONTENTS, NO. |
| 03:11:20 |
|
ABOUT THE INVESTIGATION, ANYTHING THAT YOU WERE DOING OR UNDERTAKING IN THE |
| 03:11:24 |
|
NO. |
| 03:11:27 |
|
DID YOU AT ANY TIME TALK WITH MR. BAKER ABOUT WHATEVER WAS GOING ON IN THE INVESTIGATION, DID YOU... |
| 03:11:38 |
|
I HAVE NOT SOUGHT ANY ADVICE ANY GUIDANCE ABOUT HOW -- FROM ANY MEMBER OF CONGRESS. |
| 03:11:43 |
|
DID YOU TALK WITH MR. BAKER ABOUT THE INVESTIGATION AT ANY |
| 03:11:47 |
|
NO. IT WOULD HAVE BEEN IMPROPER -- |
| 03:11:50 |
|
THAT'S ALL I WANT TO KNOW. DID YOU TALK WITH MR. BAKER OR HIS STAFF AT ANY TIME DURING THIS INVESTIGATION... |
| 03:12:08 |
|
LET ME ANSWER THE QUESTION. I DID SPEAK TO SEVERAL MEMBERS OF CONGRESS ABOUT THE INVESTIGATION, ABOUT... |
| 03:12:16 |
|
BUT I SPECIFICALLY ASKED ABOUT MR. BAKER. |
| 03:12:19 |
|
YES, AND OTHER MEMBERS OF CONGRESS, INCLUDING OTHER SENIOR MEMBERS OF THE COMMITTEE ABOUT THE INVESTIGATION... |
| 03:12:26 |
|
WOULD YOU YIELD? I WANT TO MAKE CLEAR THAT I WAS NEVER TOLD OR INFORMED MY UNDERSTANDING WAS THE REPUBLICAN... |
| 03:12:47 |
|
TAKING BAKE MY TIME, THIS IS NOT ABOUT NOTIFYING ABOUT THIS HEARING, THIS IS ANT WHAT WAS GOING ON... |
| 03:13:01 |
|
NO. AS I SAID, I DIDN'T NOTICE THAT OTHERS GOT THAT IT WAS HAPPENING. SO WE NEVER HEARD ANYTHING.... |
| 03:13:07 |
|
OK. THEN THAT POINT IS WELL MADE. NOW, DID YOU DISCUSS THE 30% RESERVE WITH ANY MEMBERS OF CONGRESS... |
| 03:13:27 |
|
NO. |
| 03:13:28 |
|
DID YOU TALK WITH ANY STAFF MEMBER? |
| 03:13:30 |
|
NO. |
| 03:13:34 |
|
THIS, AGAIN, BASED ON THE QUESTIONING OF MR. BARNEY FRANK WAS AN AMOUNT THAT YOU CAME UP WITH BUT... |
| 03:13:59 |
|
WE ARRIVED AT THE 30% REQUIREMENT BECAUSE WE THOUGHT THAT WAS PRUDENT FROM A SAFETY AND SOUNDNESS... |
| 03:14:10 |
|
DID YOU PULL IT OUT OF THE AIR? DID YOU PULL IT OUT OF AIR, DID YOU HAVE DOCK MEN CASE, DID YOU HAVE... |
| 03:14:20 |
|
THAT WOULD BE NEED TO BE THE LATINO QUESTION, IF YOU'LL RESPOND, BECAUSE SHE HAS EXCEEDED HER TIME... |
| 03:14:31 |
|
CONGRESSWOMAN, I BASED THAT DECISION, USING MY JUDGMENTS ABOUT WHAT WAS APPROPRIATE, IN ORDER TO ENSURE... |
| 03:15:06 |
|
HAVE NO DOCUMENTATION. THANK YOU. I YIELD BACK THE BALANCE OF MY TIME. |
| 03:15:12 |
|
MR. WATT? |
| 03:15:14 |
|
MR. CHAIRMAN, MR. DAVIS FROM ALABAMA HAS A BILL ON THE FLOOR. AND I'D LIKE TO DEFER TO HIM, IF IT'S... |
| 03:15:23 |
|
OH, I'M SORRY. MR. MAN DUALO, YOU'VE BEEN PATIENTLY WAITING. I SHOULD GO TO MR. MAN ZULO FIRST. THEN... |
| 03:15:31 |
|
THANK YOU. I -- I'M READING PAGE 11 ABOUT THE ACTUAL AMOUNT OF THE BONUSES. MR. JOHNSON GOT $1.9... |
| 03:16:23 |
|
YES. |
| 03:16:26 |
|
AND SO THIS IS WHAT THEY MAKE. THIS IS JUST FOR 1998. IS THAT CORRECT? |
| 03:16:31 |
|
YES. THIS IS -- WAS THE AMOUNT OF THE A.I.P. AWARD AND BONUS. |
| 03:16:38 |
|
AND THEN -- THIS IS -- WHAT YOU STATE ON PAGE 11 IS NOTHING LESS THAN STAGGERING. BECAUSE YOU STATE... |
| 03:18:06 |
|
THAT'S RIGHT, CONGRESSMAN. |
| 03:18:07 |
|
WELL, WHAT ARE YOU SAYING HERE? ARE YOU SAYING THIS IS COINCIDENCE, OR DID SOMEBODY COOK THE BOOKS... |
| 03:18:20 |
|
I THINK WHAT WE'RE SAY SOMETHING THERE'LL ARE VERY STRONG APPEARANCES THAT THE MANAGEMENT DID UNTIL... |
| 03:18:42 |
|
SO THE MAIN PURPOSE WAS SO THEY COULD GET THEIR BONUSES. THAT'S WHAT YOU SAID. |
| 03:18:49 |
|
YES, IN ADDITION TO THE APPEARANCES OF SMOOTHING EARNINGS. THERE WAS THE BEGINNING OF THE IMPLEMENTATION... |
| 03:19:13 |
|
I FIND THIS STAGGERING. THIS IS ABSOLUTELY ASTONISHING. WHEN THE OVERSIGHT ORGANIZATION SAYS THAT... |
| 03:19:43 |
|
THAT'S CERTAINLY HOW IT APPEARS TO US, YES. |
| 03:19:47 |
|
AND DID YOU LOOK AT BONUSES FOR ANY OTHER YEARS BESIDES 1998? |
| 03:19:53 |
|
WE HAVE INFORMATION ABOUT BONUSES FOR THE YEARS, YES, AND IT'S ACTUALLY INCLUDED IN THE INFORMATION... |
| 03:20:07 |
|
DO YOU -- CAN YOU TELL US WHAT THE BONUSES WERE FOR SUBSEQUENT YEARS TO 1998? |
| 03:20:13 |
|
I BELIEVE FOR THESE -- FOR THE TOP FIVE INDIVIDUALS, IT IS A MATTER OF PUBLIC RECORD BECAUSE OF DISCLOSURES... |
| 03:20:28 |
|
WERE THEY SIMILAR AMOUNTS? DO YOU RECALL OFFHAND. |
| 03:20:32 |
|
I BELIEVE THEY WERE SIMILAR, YES. |
| 03:20:38 |
|
DID -- DID YOUR RESEARCH, INVESTIGATION, LOOK AT ANY OTHER YEARS BESIDES 1998 TO SEE IF YOU CAME UP... |
| 03:20:52 |
|
WE HAVE NOT TO DATE, I BELIEVE, FOUND A TRANSACTION LIKE THE ONE IN 1998, WHICH SO -- WAS DEFERRED... |
| 03:21:30 |
|
AND THIS IS ALL BASED UPON THE FACT THAT YOU'RE PAID ACCORDING TO THE -- YOU GET YOUR BONUS ACCORDING... |
| 03:21:40 |
|
THAT'S THE METRIC THAT IS CONTAINED IN THEIR COMPETITION PROGRAM. |
| 03:21:50 |
|
MR. MANZULO, YOU'VE EXPIRED YOUR TIME. IF YOU HAVE WRAP-UP? |
| 03:21:53 |
|
I DO HAVE ONE FINAL QUESTION, AND THAT SPEAKS FOR ITSELF. I BELIEVE ON PAGE 12 THAT SAYS THAT, IF... |
| 03:22:06 |
|
YES, THAT'S RIGHT. |
| 03:22:07 |
|
THANK YOU. |
| 03:22:10 |
|
THANK THE GENTLEMAN, MR. DAVIS. |
| 03:22:11 |
|
LET ME THANK YOU, MR. CHAIRMAN. LET ME THANK MY FRIEND FROM NORTH CAROLINA FOR YIELDING. MR. FALCON,... |
| 03:22:33 |
|
YES. |
| 03:22:35 |
|
AND THAT SOUNDS LIKE A GOOD GOAL. AND I THINK THAT THAT'S EXACTLY THE STANCE WE WOULD WANT. LET ME... |
| 03:23:12 |
|
IT IS. |
| 03:23:13 |
|
AND SECOND OF ALL, IF I COULD CONTINUE AS MY TIME IS LIMITED YOU MADE THE OBSERVATION OR RESPONSE... |
| 03:23:31 |
|
WOULD THERE -- WOULD IT BE IN INTERESTS -- |
| 03:23:34 |
|
YOU WERE ASKED IF IT WOULD BE IN THE INTERESTS IF THERE WAS A CHANGE IN THE FANNIE MAE STRUCTURE. |
| 03:23:38 |
|
YES. |
| 03:23:40 |
|
AND I THINK YOUR ANSWER WAS IN THE AFFIRMATIVE. |
| 03:23:44 |
|
I THINK THE QUESTION BEFORE US WAS WHETHER OR NOT WE HAD SUFFICIENT CONFIDENCE IN THIS MANAGEMENT... |
| 03:24:03 |
|
BUT YOU RAISED QUESTIONS ABOUT THE MANAGEMENT STRUCTURES. |
| 03:24:05 |
|
YES, I DID. |
| 03:24:08 |
|
ISN'T THAT A PRETTY BROAD AND CATEGORICAL STATEMENT TO RAISE QUESTIONS ABOUT THE MANAGEMENT STRUCTURE.... |
| 03:24:11 |
|
IT IS. |
| 03:24:12 |
|
THIRD OF ALL, YOU MAKE A PRETTY BROAD STATEMENT IN YOUR REPORT, IN FACT, I THINK I'M QUOTING FROM... |
| 03:24:23 |
|
YES. |
| 03:24:25 |
|
IS THE REFERENCE TO A PERVASIVE AND WILLFUL MISAPPLICATION A PRETTY BROAD AND CATEGORICAL STATEMENT?... |
| 03:24:31 |
|
IT IS ABOUT THESE TWO ACCOUNTING ERRORS. |
| 03:24:34 |
|
SO LET ME PUT THIS IN PERSPECTIVE. BECAUSE I AGREE WITH YOUR HONESTY ON ALL FOUR OF THOSE ANSWERS... |
| 03:25:28 |
|
THERE'S SOME OVERLAP. |
| 03:25:29 |
|
THERE IS SOME OVERLAP, BUT DO |
| 03:25:31 |
|
YES. |
| 03:25:34 |
|
SO GIVEN THAT, A CONCERN THAT I HAVE, I WANT TO GIVE YOU A CHANCE TO RESPOND TO IT, BUT A CONCERN... |
| 03:26:58 |
|
CONGRESSMAN, I APPRECIATE THE TIME TO RESPOND. THE QAT GORE CAL STATEMENTS THAT I WAS REFERENCING... |
| 03:27:15 |
|
NO, SIR, YOU SAID YOU HAD A PROBLEM WITH MAKING BROAD AND CATEGORICAL STATEMENTS. YOUR INSTINCT IS... |
| 03:27:55 |
|
WELL, FIRST OFF, WE MAY DISAGREE ON THIS, BUT THAT WASN'T WHAT I WAS TELLING THE CONGRESSMAN ABOUT... |
| 03:28:02 |
|
NO, PLEASE ANSWER THE LAST QUESTION I'M GOING TO ASK YOU. |
| 03:28:05 |
|
IF YOU WOULD, SIR, BEGIN TO |
| 03:28:06 |
|
I WILL. THEN I'LL WRAP UP. BUT I DON'T WANT YOU TO ANSWER ANY QUESTION OTHER THAN THE ONE I JUST... |
| 03:28:32 |
|
OUR ACTIONS ARE ALL DESIGNED TO -- |
| 03:28:34 |
|
IS THAT POSSIBLE? |
| 03:28:35 |
|
IF WE DID OUR JOB PROPERLY, PERHAPS. BUT WE HAVEN'T. CONGRESSMAN, LET ME JUST SAY, I UNDERSTAND THERE... |
| 03:28:46 |
|
NO, I'M JUST ASKING IF IT'S POSSIBLE. |
| 03:28:47 |
|
-- YOU CAN QUESTION MY MOTIVES, MY JUDGMENT -- |
| 03:28:50 |
|
THAT'S NOT THE QUESTION. WITH ALL DUE RESPECT, MR. CHAIRMAN, THAT'S NOT THE QUESTION I'M ASKING. |
| 03:28:56 |
|
BUT THAT WILL NOT CHANGE THE CONTEXT OF THIS REPORT. |
| 03:28:57 |
|
IS IT POSSIBLE THE MARKET STANDING OF FANNIE MAE COULD BE WEAKENED BY YOUR TESTIMONY? |
| 03:29:02 |
|
AND THAT'S THE GENTLEMAN'S LAST QUESTION. PLEASE BE RESPONSIVE TO IT. |
| 03:29:05 |
|
IT'S POSSIBLE. |
| 03:29:07 |
|
THANK YOU, YOU'VE ANSWERED IT. |
| 03:29:08 |
|
BECAUSE OF WHAT THE COMPANY HAS DONE AS WE HAVE OUTLINED IN THIS REPORT. |
| 03:29:15 |
|
GENTLEMAN'S TIME IS EXPIRED. MISS HART, DID YOU NOW HAVE QUESTIONS? |
| 03:29:21 |
|
THANK YOU PLB CHAIRMAN. WE'VE BEEN WATCHING THIS SORT OF DRAMA PLAY OUT A LITTLE BIT AS YOU KNOW. ... |
| 03:30:16 |
|
YES, THE AGREEMENT DOESN'T SPECIFICALLY COVER THE SEPARATION OF THE CHAIR AND C.E.O. POSITIONS. IT... |
| 03:31:44 |
|
IF THAT'S SUCH AN IMPORTANT POINT, WHY IS YOUR INSTRUCT IN THE AGREEMENT WITH FANNIE SO GENERAL? |
| 03:31:49 |
|
WELL, BECAUSE WE INTEND TO DEAL WITH THIS THROUGH CORPORATE GOVERNS REGULATION WHILE THE OVERALL ISSUES... |
| 03:32:04 |
|
OK. THANK YOU, MR. CHAIRMAN. |
| 03:32:08 |
|
THANK YOU, MISS HART. IN THE INTERIM, MR. CROWLEY APPEARED AND HE WAS AHEAD OF YOU. |
| 03:32:16 |
|
THANKS, MR. CHAIRMAN. THANK YOU, MR. FALCON. THANK YOU ALL FOR TESTIFYING. I JUST WANT TO GO BACK... |
| 03:32:47 |
|
I THINK POTENTIAL HARM EXISTS BECAUSE OF INACCURATE FINANCIAL STATEMENTS BEING ISSUED BY THE COMPANY.... |
| 03:32:54 |
|
IS THAT AN OBSERVATION OF YOURS, OR IS THAT IN THE REPORT ITSELF? |
| 03:32:58 |
|
IT'S IN THE REPORT. |
| 03:32:59 |
|
WHERE IN THE REPORT IS THAT? |
| 03:33:01 |
|
THE FACT THAT WE THINK THAT THE COMPANY HAS ISSUED INACCURATE FINANCIAL STATEMENTS AS A RESULT OF... |
| 03:33:12 |
|
IF YOU DON'T MIND, I WOULD LIKE TO KNOW, IF YOU CAN, MAYBE YOUR STAFF CAN LET MY STAFF KNOW WHERE... |
| 03:33:20 |
|
ABSOLUTELY. |
| 03:33:21 |
|
JUST ON MR. DAVIS' LINE OF QUESTIONING, WHICH I THOUGHT WAS EXCELLENT, WHAT EFFECT DO YOU THINK THIS... |
| 03:33:34 |
|
I THINK -- WELL, WE'VE SEEN TO DATE IS THAT THE MORTGAGE MARKET HAS FUNCTIONED WELL. THERE IS CONTINUED... |
| 03:33:51 |
|
DO YOU ANTICIPATE THERE WILL BE ANY DISRUPTIONS IN THE MORTGAGE MARKET BECAUSE OF THIS REPORT? |
| 03:33:56 |
|
BECAUSE -- AS LONG AS THE MARKETS AND THE PUBLIC SEES THAT WE ARE WORKING TO TAKE PROMPT CORRECTIVE... |
| 03:34:01 |
|
YES OR NO. |
| 03:34:03 |
|
NO. |
| 03:34:05 |
|
NO, YOU DO NOT. OK. DO YOU BELIEVE THAT THIS REPORT SHOWS ANY EVIDENCE THAT FANNIE MAE MAY BE DEPARTING... |
| 03:34:19 |
|
THE REPORT DIDN'T ADDRESS THAT POINT. |
| 03:34:23 |
|
FOR EXAMPLE, I KNOW MR. RAINES HAS PLEDGED TO CREATE 6 MILLION NEW HOMEOWNERS INCLUDING 1.8 MILLION... |
| 03:34:39 |
|
I DON'T THINK SO -- |
| 03:34:41 |
|
I'LL ASK MR. RAINES THE SAME QUESTION. BUT -- |
| 03:34:46 |
|
THE -- AS LONG AS THE COMPANY IS -- MAINTAINS ADEQUATE CAPITAL, AS LONG AS WE HAVE TAKEN PROPER STEPS... |
| 03:35:02 |
|
THANK YOU. LET ME FINALLY ASK YOU, WHILE THERE ARE SOME THING IN THIS REPORT THAT ARE DAMAGING IN... |
| 03:35:22 |
|
YES, ULTIMATELY, THE S.E. CRECHLT HAS TO DECIDE WHETHER THEY WERE ACCURATE. |
| 03:35:27 |
|
AND SOME ARGUED TO ME THAT EVEN -- THE S.E.C. MAY DISAGREE WITH SOME OF THE MOST DAMAGING ALLEGATIONS... |
| 03:35:42 |
|
I GUESS SOME HAVE PREDICTED THAT. I CAN'T SEE WHAT OTHERS MIGHT PREDICT. ALL I KNOW IS WE FIND THESE... |
| 03:36:02 |
|
THANK YOU. I YIELD TO THE GENTLEMAN. |
| 03:36:07 |
|
I APPRECIATE THE ANSWERS, BUT IT MAKES ME EVEN MORE DISTURBED THAT BOTH IN THE WRITTEN STATEMENT AND... |
| 03:37:12 |
|
JUST THE VERY FACT THAT WE HAVE SERIOUS DOUBTS ABOUT THE ACCURACY OF THE FINANCIAL STATEMENTS AND... |
| 03:37:24 |
|
LET ME ASK YOU THIS QUESTION. ANY INACCURACY THREATEN SAFETY AND SOUNDNESS? THAT'S WHAT BOTHERS ME.... |
| 03:37:53 |
|
WELL, I THINK INTERNAL CONTROLS ARE A VERY SERIOUS SAFETY AND SOUNDNESS CONCERN. A BREAKDOWN OR A... |
| 03:38:00 |
|
DO YOU THINK THE SAFETY AND SOUNDNESS IS AT RISK RIGHT NOW? |
| 03:38:03 |
|
MR. CROWLEY, THAT WILL HAVE TO BE YOUR LAST QUESTION IF YOU |
| 03:38:05 |
|
HE ACCEPTS THAT. |
| 03:38:08 |
|
THAT WAS MY FIRST QUESTION. |
| 03:38:09 |
|
YEAH, LET ME -- I MEAN, YOU JUST TOLD MR. CROWLEY IT DIDN'T IMPLICATE SAFETY AND SOUNDNESS. DOES IT?... |
| 03:38:20 |
|
NO, I THINK OUR REPORT ABSOLUTELY DOES IMPLICATE SAFETY AND SOUNDNESS. |
| 03:38:24 |
|
NO. WE HAVE AN AGREEMENT WITH THE BOARD IN PLACE THAT WE'RE GOING TO ADDRESS THESE PROBLEMS PROVIDING... |
| 03:38:31 |
|
THAT'S THE ANSWER. THE REST JUST RHETORIC. |
| 03:38:36 |
|
THE GENTLEMAN'S TIME HAS EXPIRED. MR.OSSIE. |
| 03:38:39 |
|
THANK YOU, MR. CHAIRMAN. I YIELD 15 SECONDS TO MR. SCHAYES. |
| 03:38:43 |
|
THANK YOU. I WOULD JUST LIKE TO SAY TO YOU, MR. FALCON, WHAT YOU HAVE DONE IS YOU HAVE EXPOSED ILLEGAL... |
| 03:39:26 |
|
WILL THE GENTLEMAN YIELD? |
| 03:39:27 |
|
IT'S MY TIME. |
| 03:39:29 |
|
WILL THE GENTLEMAN YIELD? WILL THE GENTLEMAN YIELD? |
| 03:39:32 |
|
IT'S MY TIME. |
| 03:39:34 |
|
I THINK HE WANTS TO RECLAIM IT. |
| 03:39:38 |
|
OH, HE'S RECLAIMING HIS TIME? |
| 03:39:39 |
|
MR. FALCON. I FOLLOW THIS STUFF VERY CAREFULLY BECAUSE HAVING WEATHERED THIS STORM ON THE GAMES PLAIN... |
| 03:40:47 |
|
THE BANKS HOLDINGS IN THE DEBT TO FANNIE MAE, IF THERE IS SOME -- MIGHT HAVE UNDUE CONCENTRATION IN... |
| 03:42:17 |
|
I BO JUST LIKE TO POINT TO THE GENTLEMAN, THERE'S APPROXIMATELY 8,400 INSURED FEDERAL DEPAUSTRY IRCHS... |
| 03:43:07 |
|
I YIELD BACK TO COUNSEL MY |
| 03:43:08 |
|
MR. WATT? |
| 03:43:09 |
|
THANK BLUB CHAIRMAN. AND AGAIN, THANK THE CHAIRMAN FOR ALLOWING THE NONMEMBERS OF THE COMMITTEE, SUBCOMMITTE,... |
| 03:43:56 |
|
I WILL. |
| 03:43:58 |
|
ARE YOU PRESENTLY -- OR YOU'RE PLANNING TO IN LIGHT OF THE COMMENTS THAT WERE RAISED TODAY? |
| 03:44:04 |
|
YES. |
| 03:44:05 |
|
OTHER. |
| 03:44:07 |
|
AND I GUESS I WOULD ALSO ADD -- |
| 03:44:09 |
|
THAT'S -- THAT'S NOT -- THAT'S ALL I NEED TO KNOW. SECOND, YOU MADE REFERENCE IN RESPONSE TO QUESTIONS... |
| 03:45:06 |
|
SURE, CONGRESSMAN. |
| 03:45:07 |
|
OK. NOW, LET ME KIND OF ZERO IN ON THE BOTTOM LINES AS I HAVE GATHERED THEM. AND CONTRARY TO WHAT... |
| 03:46:00 |
|
RIGHT, THE NEXT -- |
| 03:46:03 |
|
I'M -- I'M -- THIS -- IS THAT CORRECT? |
| 03:46:05 |
|
YES. |
| 03:46:06 |
|
OK. AND -- NOW, LET'S THEN SINCE WE'VE SEPARATED OUT THAT, WE DON'T KNOW WHAT THE FINANCIAL CONSEQUENCE... |
| 03:47:09 |
|
YES. |
| 03:47:10 |
|
OK. AND IN ORDER TO -- AND WHAT YOU ARE SAYING THAT -- IS THAT IN 1998, FANNIE MAE MADE A DECISION... |
| 03:47:35 |
|
OK. NOW, IS IT ALSO THEN TRUE THAT, FOR 1997, AND PRIOR YEARS, THERE WOULD HAVE HAD TO BE AN UNDERSTATEMENT... |
| 03:48:06 |
|
WELL, THE -- |
| 03:48:10 |
|
JUST -- I'M IN -- ISN'T THAT WHAT THIS MEANS WHEN YOU SAY THEY IMPROPERLY DELAYED THE RECOGNITION... |
| 03:48:33 |
|
I DON'T BELIEVE SO. I THINK IT WAS JUST A FUNCTION OF A -- |
| 03:48:38 |
|
YEAH, WELL, TELL YOUR CHIEF ACCOUNTANT TO TELL ME WHAT THIS MEANS BECAUSE -- |
| 03:48:44 |
|
THE COOKIE JAR IS A SECURITIES AND EXCHANGE COMMISSION TERM OF ART -- |
| 03:48:49 |
|
I DON'T CARE ABOUT THE TERM ITSELF. BUT YOU CAN'T CREATE A RESERVE IN A COOKIE JAR WITHOUT HAVING... |
| 03:49:14 |
|
YES. ANALYSIS IN OUR SPECIAL EXAMINATION DIDN'T GO BACK BEYOND -- |
| 03:49:17 |
|
I UNDERSTAND THAT. THAT'S NOT THE QUESTION I'M ASKING. BUT YOU CAN'T REALLY DETERMINE WHETHER THERE... |
| 03:49:37 |
|
WELL -- |
| 03:49:39 |
|
IF THEY WERE CREATING A RESERVE THAT WAS SUPPOSED TO LEVEL OUT EARNINGS, THEY HAD TO UNDERSTATE AT... |
| 03:49:50 |
|
WELL, CONGRESSMAN, OUR EXAMINATION FOUND THAT THERE WAS |
| 03:49:53 |
|
I UNDERSTAND THAT. I HAVE ACKNOWLEDGED THAT. I WENT THROUGH THAT IN SOME DETAIL. AND YOU WENT THROUGH... |
| 03:50:18 |
|
AND SOMEONE PLEASE TRY TO ANSWER HIS QUESTION. THE GENTLEMAN'S TIME HAS EXPIRED. |
| 03:50:22 |
|
I -- I THOUGHT IT WAS A PRETTY SIMPLE QUESTION MYSELF. |
| 03:50:28 |
|
AFTER THIS EXPERIENCE IN 1998 THAT FANNIE MAE IMPLEMENTED POLICIES TO CREATE THESE COOKIE JAR RESERVES... |
| 03:50:35 |
|
HOW CAN YOU SAY THAT AND YOU DON'T EVEN -- YOU DIDN'T EVEN LOOK AT 1997? YOU DON'T KNOW WHETHER THE... |
| 03:50:44 |
|
I CAN'T REALLY SPEAK TO THE YEARS BEFORE 1998, SIR. |
| 03:50:47 |
|
I THINK, CONGRESSMAN, I THINK WHAT YOU'RE GETTING AT IS WAS THIS THERE IN 1997. |
| 03:50:52 |
|
THEY JUST CARRIED IT FORWARD OR SOMETHING TO THAT EFFECT. THIS $400 MILLION SHOWED UP IN 1998 AS A... |
| 03:51:03 |
|
SO WHAT DID THEY OFFSET IT AGAINST IF THERE WASN'T ALREADY A RESERVE? AND HOW DID THEY GET THE RESERVE... |
| 03:51:27 |
|
THIS CAME UP AS A RESULT OF A CHANGE IN INTEREST RATES AND A CHANGE IN EXPENSE -- THE AMORTIZATION... |
| 03:51:43 |
|
BUT IS IT NECESSARILY WHAT YOU'RE SUGGESTING? THAT'S THE QUESTION. |
| 03:51:49 |
|
THE GENTLEMAN'S TIME REALLY HAS EXPIRED. MR. DIRECTOR, WOULD YOU CARE TO RESPOND TO HIS LAST COMMENT... |
| 03:51:56 |
|
SOMETHING CLEARCUT THAT'S PRETTY HARD IT EXPLAIN. |
| 03:52:00 |
|
MR. DIRECTOR, ON BEHALF OF THE COMMITTEE, WISH TO EXPRESS OUR APPRECIATION FOR YOUR COURTESY WITH YOUR... |
| 03:52:39 |
|
THANK YOU. |
| 03:52:42 |
|
AT THIS TIME, I WOULD LIKE TO ASK OUR SECOND PANEL OF PARTICIPANTS TO COME FORWARD WHEN IT'S POSSIBLE.... |
| 03:54:30 |
|
AT THIS TIME, COMMITTEE WELCOMES OUR NEXT TWO WITNESSES, MR. FRANKLIN D. RAINES AND MR. TIMOTHY HOWARD,... |
| 03:54:55 |
|
NO, SIR. |
| 03:54:57 |
|
I DO NOT. |
| 03:54:59 |
|
THE CHAIR ALSO IS REQUIRED TO ADVISE YOU THAT THE RULES OF THE COMMITTEE AND OF THE HOUSE ENTITLED... |
| 03:55:13 |
|
NO, SIR. |
| 03:55:15 |
|
GREAT. LET ME ASK YOU TO RISE AND RAISE YOUR RIGHT HAND TO AFFIRM THE OATH. DO YOU SWEAR THE TESTIMONY... |
| 03:55:31 |
|
I DO. |
| 03:55:32 |
|
CONSIDER YOURSELF SWORN IN, JAETHSMEN. THANK YOU. MR. RANGZ, WE WOULD CERTAINLY PROID WITH YOUR OPENING... |
| 03:56:02 |
|
WELL, THANK YOU, MR. CHAIRMAN. MY NAME IS FRANK RAINES. I'M THE SON OF IDA AND DELANO RAINES. I GREW... |
| 04:08:00 |
|
THANK YOU, SIR, FOR YOUR STATEMENT. OUR NEXT WITNESS IS MR. TIMOTHY HOWARD, VICE CHAIRMAN AND CHIEF... |
| 04:08:09 |
|
GOOD AFTERNOON, RANKING MEMBER FRANK -- |
| 04:08:11 |
|
MAKE SURE THAT MIC IS ON. OR PULL IT A LITTLE CLOSER. WE CAN'T HEAR YOU THE WAY WE SHOULD. |
| 04:08:15 |
|
IS IT ON NOW? |
| 04:08:16 |
|
WE, THANK YOU. |
| 04:08:17 |
|
GOOD MORNING. OR GOOD AFTERNOON, I SHOULD SAY. THANK YOU FOR INVITING ME TO BE HERE TODAY. I JOINED... |
| 04:12:20 |
|
THANK YOU, SIR. MR. RAINES, PRIOR TO THE DECISION BEING EXECUTED TO DEFER THE $200 MILLION IN EXPENSES... |
| 04:12:41 |
|
MR. CHAIR -- TRANSACTION? |
| 04:12:42 |
|
MR. CHAIRMAN, THERE WAS NO DECISION TO DEFER ANY EXPENSE FROM 1998 TO 1999. SECOND, AND MR. HOWARD... |
| 04:13:18 |
|
SO YOU DID -- |
| 04:13:20 |
|
MR. HOWARD MAY BE ABLE IT 0 |
| 04:13:21 |
|
SURE. SO YOU WERE INVOLVED IN A DISCUSSION ABOUT THE AMOUNT OF CATCHUP REQUIRED. IN YOUR VIEW, THAT... |
| 04:13:34 |
|
IT WAS A DISCUSSION THAT WE WOULD HAVE AT THE END OF EACH PERIOD DISCUSSING A VARIETY OF ISSUES RELATED... |
| 04:13:43 |
|
WERE THERE ANY DISCUSSIONS RELATED TO THE CONSEQUENCES OF THAT EXPENSE TREATMENT IN |
| 04:13:51 |
|
NO. |
| 04:13:52 |
|
WHEN DID YOU FIRST REALIZE THAT THE EARNINGS PER SHARE FIGURE WOULD BE $3.23? |
| 04:13:59 |
|
THE FIRST TIME THAT I WOULD KNOW WHEN THE -- WHAT THE EARNINGS FIGURE WOULD BE IS WHEN OUR CONTROLLER... |
| 04:14:21 |
|
WAS THERE ANY DISCUSSION IN WHICH YOU PARTIES PATTED RELATIVE TO THE A CATCHUP AMOUNT? -- DETERMINATION... |
| 04:14:28 |
|
NO,DY NOT PARTICIPATE IN DETERMINING THE AMOUNT OF CATCHUP. THAT WAS DONE, AS I MENTIONED, WITH, OUR... |
| 04:14:35 |
|
I KNOW YOU'RE KNOWLEDGEABLE THE FANNIE MAE'S CHALLENGE GRANT NISHIAIVE IT. BELIEVE THAT WASING SOMETHING... |
| 04:15:22 |
|
MR. CHAIRMAN, I DON'T UNDERSTAND WHAT YOU JUST SAID BECAUSE -- LET ME EXPLAIN WHY -- |
| 04:15:27 |
|
I WILL CLARIFY THE QUESTION FOR YOU. IN 1998 BONUSES REPORTED WERE $ 27 MILLION. I CAN GIVE YOU THE... |
| 04:15:57 |
|
YOU TOLD ME THE FACTS ABOUT BONUS. THE CHALLENGE GRANT HAS NOTHING DO WITH BONUSES. ABSOLUTELY NOTHING.... |
| 04:16:05 |
|
IT DOES IN THIS SENSE. IT INCENTIVIZES EXECUTIVES TO ENHANCE THE GROWTH OF THE CORPORATION'S PROFITABILITY.... |
| 04:16:21 |
|
YOU JUST CROSSED THE LINE. THE CHALLENGE GRANT HAS TO DO WITH STOCK OPTIONS. NOTHING TO WITH BONUS.... |
| 04:16:43 |
|
LET ME CLARIFY THEN. IN 2002 FANNIE MAE PAID OUT A TOTAL OF $51 MILLION IN BONUSES OF WHICH 12.4 WAS... |
| 04:17:34 |
|
I MAY BE BUT LET'S GO OVER THE DETAILED QUESTION. |
| 04:17:37 |
|
I WOULD LIKE TO BE HELPFUL. LET ME TRY TO ANSWER THE QUESTION -- |
| 04:17:41 |
|
I WOULD LIKE TO GIVE YOU THE RIGHT QUESTION TO ANSWER. DID THE $3.23 EARNINGS PER SHARE DETERMINATION... |
| 04:17:50 |
|
YES. |
| 04:17:51 |
|
THANK YOU. DOES THE EARNINGS PER SHARE HAVE ANY EFFECT ON ANY OF THE OTHER BENEFITS AWARDED THAT ARE... |
| 04:18:06 |
|
MR. CHAIRMAN THIS, IS YOUR CHART. THIS ISES THE FIRST TIME I HAVE SEEN YOUR CHART. IT HAS INFORMATION... |
| 04:18:26 |
|
ON THAT POINT -- |
| 04:18:28 |
|
NOW THAT YOU HAVE DISPLAYED IT BEFORE THE COMMITTEE -- |
| 04:18:30 |
|
BUT TO ANSWER YOUR LEGAL POINT I HAVE THE ABSOLUTE RIGHT TO DISPLAY IT DESPITE MR. KEN STARR'S STATEMENTS... |
| 04:18:45 |
|
I'MING IF TO, I'M GOING TO ANSWER THE QUESTION. I'M JUST POINTING OUT THE LEGAL STATUS OF THE INFORMATION.... |
| 04:18:58 |
|
I UNDERSTAND THAT. |
| 04:18:59 |
|
THE SECOND LINE YOU HAVE IS BONUS. BONUS IN ALL THESE YEARS, IF I'M CORRECT IN LOOKING AT THIS BECAUSE... |
| 04:19:31 |
|
I WASN'T RAISING THAT ISSUE. |
| 04:19:33 |
|
MR. CHAIRMAN, ARE WE ALL GOING TO GET THIS MUCH TIME? |
| 04:19:36 |
|
I WILL BE HAPPY TO CUT HIM OFF IF YOU WANT? |
| 04:19:39 |
|
I WANT TO GO INTO THE FIVE-MINUTE RULE. |
| 04:19:45 |
|
TO MOVE HEAD I WILL RECOGNIZE -- |
| 04:19:46 |
|
MR. CHAIRMAN, DOES HE HAVE A COPY OF THIS OTHER THAN READING OFF THE CHART? NO. |
| 04:20:03 |
|
I RECOGNIZED MR. -- |
| 04:20:05 |
|
HE DOES HAVE THE TIME THAT CAME FROM FANNIE MAE. |
| 04:20:08 |
|
I DIDN'T KNOW IF HE HAD THIS TABLE. |
| 04:20:21 |
|
SHOULD I WAIT AND HOLD MY TIME SO I HAVE THE SAME INFORMATION THE OTHER SIDE OF THE AVERL HAS? |
| 04:20:26 |
|
NO, LET ME GIVE YOU MINE. |
| 04:20:28 |
|
WHAT I'M SAYING IS DO THESE TWO GENTLEMEN HAVE THIS -- |
| 04:20:33 |
|
DO ALL THE MEMBERS HERE HAVE? |
| 04:20:34 |
|
EXAMPLES INDICATING HE DOESN'T HAVE IT. |
| 04:20:36 |
|
TIME OUT. |
| 04:20:38 |
|
I HAVE NOT SEEN IT. |
| 04:20:39 |
|
HOLD UP ONE MOMENT. WE WILL MAKE SURE THAT STAFF DISTRIBUTES IT TO EVERY MEMBER AND TO THE PANEL.... |
| 04:20:49 |
|
MR. CHAIRMAN -- |
| 04:20:52 |
|
PARLIAMENTARY INQUIRY. IS THIS ILLEGAL OR LEGAL. THAT WAS A LEGAL QUESTION RAISED. IS IT ILLEGAL... |
| 04:21:01 |
|
NO, MRS. WATERS IT IS NOT ILLEGAL. NOT IN THE COURSE OF THE COMMITTEE CONSIDERATION. I WOULD NOT... |
| 04:21:10 |
|
MR. CHAIRMAN. |
| 04:21:11 |
|
MR. FRANK. |
| 04:21:15 |
|
I JUST HAVE ANOTHER POINT BUT IF THE GENTLEMAN FROM PENNSYLVANIA WANTED TO STUDY THIS I WOULD BE GLAD... |
| 04:21:23 |
|
WOULD MR. KANJORSKI LIKE TO YIELD HIS TIME. |
| 04:21:27 |
|
ACTUALLY, MR. FRANK -- |
| 04:21:29 |
|
MR. CHAIRMAN I STILL DON'T THINK THAT THE PANELISTS HAVE THIS TABLE. |
| 04:21:33 |
|
YOUR POINT IS WELL TAKEN, MR. BACHUS. IT WILL BE DELIVERED. |
| 04:21:37 |
|
BUT -- |
| 04:21:39 |
|
IT WILL BE DELIVERED. |
| 04:21:40 |
|
YOU MEAN THERE WEREN'T SUFFICIENT COPIES PRODUCED TO THE COMMITTEE MEMBERS? |
| 04:21:44 |
|
I WANTED TO MAKE SURE THAT I RELEASED THIS INFORMATION. I'M ACCOUNTABLE FOR ITS RELEASE AND I PUT... |
| 04:22:08 |
|
WILL THE GENTLEMAN YIELD? |
| 04:22:09 |
|
EVERYBODY IN THE ROOM HAS ACCESS TO IT. |
| 04:22:11 |
|
LET ME MAKE A POINT BECAUSE I WAS TOUGH ON THE REGULATOR AND I PLAN TO BE TOUGH ON MR. RAINES AND... |
| 04:22:45 |
|
IF THE GENTLEMAN WOULD YIELD -- |
| 04:22:46 |
|
THAT RECOGNIZED. WHO IS RECOGNIZED MR. KANJORSKI OR MR. FRANK? |
| 04:22:52 |
|
DO YOU MIND IF I TAKE IT? DO I GET FIVE MINUTES? |
| 04:22:54 |
|
WE WILL START THE CLOCK. |
| 04:22:55 |
|
I HAVE BEEN TRYING TO GET TO THE REGULAR ORDER. |
| 04:22:58 |
|
THANK YOU, MR. FRANK. KEEP YOUR MEMBERS THIS ORDER AND WE WILL BE FINE. MR. KANJORSKI. |
| 04:23:04 |
|
MAYBE THIS GOES TO MR. HOWARD BUT NOT MR. RAINES REINS BUT EITHER ONE OF YOU -- MR. REINS. WHEN MR.... |
| 04:23:51 |
|
YES. |
| 04:23:53 |
|
AM I BEING INCORRECT IN EXAMINING MR. FALCON THAT THAT WOULD HAVE BEEN A FINDING OR DIFFERENCE IN... |
| 04:24:05 |
|
IT TYPICALLY WOULD HAVE BEEN IDENTIFIED BY THE AUDITOR AND DISCUSSED WITH THE AUDIT COMMITTEE, AND... |
| 04:24:11 |
|
OK. NOW THAT DOCUMENT, ALTHOUGH IT WASN'T THE FINAL AUDIT, SOMETHING APPEARED IN THE FINAL AUDIT... |
| 04:24:27 |
|
IT WAS MENTIONED IN THE ACCOUNTANT'S REPORT. |
| 04:24:29 |
|
IN THE FINAL AUDIT? YES. |
| 04:24:32 |
|
AND THE FINAL AUDIT, IT SEEMS TO ME IN 1998, WAS NOT ONLY AN INTERNAL DOCUMENT FOR THE CORPORATION... |
| 04:24:46 |
|
IT TYPICALLY IS SUMMARIZED IN OUR ANNUAL REPORT. IT IS NOT -- THE AUDIT ITSELF IS NOT PROVIDED TO SHAREHOLDERS.... |
| 04:24:51 |
|
IS IT A SECRET DOCUMENT AND NOT ALLOWED TO BE READ OR |
| 04:24:56 |
|
NOT TO MY KNOWLEDGE. |
| 04:24:59 |
|
I'M TRYING TO GATHER WHAT IN THE HELL DOES THE REGULATOR DO WHEN AT THE REGULATE ONLY TWO ENTITIES... |
| 04:25:27 |
|
MR. KANJORSKI, I DID SPEND A FULL DAY BEING INTERVIEWED BY THE SPECIAL COMMITTEE. THEY HAD AN OPPORTUNITY... |
| 04:25:40 |
|
I'M JUST TRYING TO UNDERSTAND. WHAT DOES THE REGULATOR DO IF HE DOESN'T START OUT WITH AUDIT DIFFERENCIS?... |
| 04:25:46 |
|
I CAN'T ANSWER THAT. |
| 04:25:47 |
|
IT SEEMS IT ME -- |
| 04:25:49 |
|
THE ACTUAL DOCUMENT YOU ARE REFERRING TO HAS OPINION, MY UNDERSTANDING, PROVIDED TO OFHEO. |
| 04:25:57 |
|
BUT IN 1998 DID HE HAVE |
| 04:26:00 |
|
YES. |
| 04:26:02 |
|
I'M TRYING TO FIGURE OUT WHETHER WE REALLY SHOULD GET WORRIED HERE AND WE HAVEN'T REALLY HAD CLOSE... |
| 04:26:43 |
|
MR. KANJORSKI, I WOULD SAY THERE WAS NOT EVEN A LITTLE DISPUTE. THE OUTSIDE AUDITOR HAD RECORDED ... |
| 04:27:08 |
|
WHAT DO WE HAVE TO DO SO THE REGULATOR DOESN'T SAY FIX MONTHS OR SIX YEARS LATER THERE WAS THIS DIFFERENCE... |
| 04:27:27 |
|
WELL, MR. KANJORSKI I'M NOT SURE THAT ANY, THERE'S ANYTHING THAT THE CONGRESS NEEDS TO DO. IT OUR... |
| 04:27:52 |
|
I'M NOT SUGGESTING THERE WAS SECRECY. I'M WORRIED ABOUT HOW SUPERFICIAL WAS THE REGULATORY AUTHORITY... |
| 04:28:08 |
|
WHAT I'M SAYING IS I DON'T KNOW THAT THEY MISSED IT BACK SIX YEARS. THE QUESTION IS HOW IS IT BEING... |
| 04:28:18 |
|
LET'S GO TO THIS POINT. FROM THAT TIME IN 1998 UNTIL NOW , IS YOUR TESTIMONY AS I UNDERSTAND IT THAT... |
| 04:28:41 |
|
YES. IN FACT I CAN READ TO YOU WHAT THEY SAID TO OUR AUDIT COMMITTEE . IN 1999 REGARDING 1998 THEY... |
| 04:29:13 |
|
WELL, THEIR NEW AUDITOR WENT IN THIS LAST YEAR. DID HE FIND OR DID THEY FIND AN AUDIT DIFFERENCE THERE... |
| 04:29:25 |
|
MR. KANJORSKI, LET ME ADD ONE ADDITIONAL FACT. AFTER 1998 WE WORKED TO DEVELOP A SPECIFIC METHOD THAT... |
| 04:30:00 |
|
THE GENTLEMAN HAS ONE MORE -- |
| 04:30:02 |
|
I WOULD LIKE BOTH OF YOU TO ANSWER THIS, A VERY SIMPLE QUESTION. IS THERE ANYTHING OF A SYSTEMIC ... |
| 04:30:12 |
|
ABSOLUTELY NOT, IN MY JUDGMENT. |
| 04:30:14 |
|
KNOWS AND THE REPORT DOESN'T INDICATE THINK -- NO, SIR, AND THE REPORT DOESN'T INDICATE ANY BECAUSE... |
| 04:30:30 |
|
MR. SHAYS, YOU ARE UP. |
| 04:30:31 |
|
I TOLD YOUR STAFF THAT I WOULD LIKE TO LISTEN TO SOME OF THE QUESTIONS BEFORE I BEGIN MY MINE. |
| 04:30:41 |
|
MR. WEISS. |
| 04:30:43 |
|
IN MY OPENING STATEMENT I SAID IN MY VIEW FANNIE MAE HAS A MORAL OBLIGATION TO CONDUCT ITS OPERATIONS... |
| 04:30:54 |
|
ABSOLUTELY. |
| 04:30:55 |
|
WELL, THE QUESTION I WOULD LIKE TO ASK IS HAS FANNIE MAE ACTED IN A WAY CONSISTENT WITH THAT BELIEF?... |
| 04:31:14 |
|
I BELIEVE WE DO CAN CONSERVATIVELY AND CONSISTENTLY APPLY ACCOUNTING RULES. WE EXERCISE JUDGMENT IN... |
| 04:31:42 |
|
I UNDERSTAND THAT. BUT THERE WAS AN AUDIT DIFFERENCE WITH YOUR OUTSIDE AUDITOR -- |
| 04:31:48 |
|
AND AUDIT DIFFERENCE IS SIMPLY A NOTATION, NOT A DIRECTION FOR US TO CHANGE THE WAY WE ACCOUNT FOR... |
| 04:31:58 |
|
AND -- |
| 04:32:00 |
|
THAT'S A FACT. |
| 04:32:03 |
|
THE QUESTION I HAVE THERE IS WHEN OFHEO BEGAN THE PROCESS OF GOING BACK THROUGH THE BACKS -- AND IN... |
| 04:32:32 |
|
I'M SORRY, WHICH ISSUE? |
| 04:32:37 |
|
THE FAS 133 ISSUE. THE OTHER QUESTION I WANTED TO ASK YOU WAS ALONG THE LINES OF WHAT I ASKED DIRECTOR... |
| 04:33:03 |
|
CONGRESSMAN ROYCE I BELIEVE WE MADE ONE MAJOR STEP THAT IS DIFFERENT FROM MOST INSTITUTIONS. AND... |
| 04:34:09 |
|
I THANK YOU, MR. HOWARD. THANK YOU, MR. CHAIRMAN. |
| 04:34:14 |
|
MR. FRANK. |
| 04:34:16 |
|
THANK YOU, MR. CHAIRMAN. FIRST I HAVE TO SAY TO MR. RAINES AND MR. HOWARD, IF WAS -- AND I TAKE THE... |
| 04:36:20 |
|
IF YOU ARE REFERRING TO THE INCIDENT REPORTED IN THE OFHEO REPORT FOR 1990, MR. RAINES MENTIONED WE... |
| 04:36:39 |
|
I'M GOING TO YOUR MOTIVES. YOU BOTH DENY THAT TRYING TO HIT A CERTAIN AMOUNT SO YOU COULD GET YOUR... |
| 04:36:50 |
|
IN -- |
| 04:36:52 |
|
WE BOTH DENY THAT. |
| 04:36:53 |
|
I THINK THAT IT IS IMPORTANT TO GET THAT. NEXT QUESTION, IN YOUR READING THESE AND I WILL REPEAT WAY... |
| 04:37:52 |
|
I DO NOT. |
| 04:37:54 |
|
WE COULDN'T TELL FROM READING THE REPORT. |
| 04:37:57 |
|
SO THEY HAVE NOT CONCLUDED. I DID NOTICE THE MERRILL LYNCH REPORT SAID GIVEN THIS CATEGORY THAT IT... |
| 04:38:14 |
|
THERE'S A CERTAIN TYPE OF DERIVATIVE USED THAT WHEN INTEREST RATES FALL IT DECLINES THIS VALUE AND... |
| 04:38:20 |
|
WHAT PERCENTAGE OF THE CONTESTED DERIVATIVES ARE IN THAT CATEGORY, DO YOU KNOW? |
| 04:38:25 |
|
TO BE HONEST, MR. FRANK, I'M NOT SURE WHICH DERIVATIVE -- |
| 04:38:30 |
|
BUT TO THE 10TH THEY ARE THERE WE WOULD EXPECT THERE TO BE AN INCREASE RATHER THAN A DECREASE IN THE... |
| 04:39:17 |
|
WELL, THE -- TO BE CLEAR, THE AGREEMENT WAS NEGOTIATED BY OUR BOARD. MY UNDERSTANDING IS THIS IS THE... |
| 04:39:29 |
|
AND AS HE SAID IT IS NOT BASED ON ANY SMAMENTE OR ANALYSIS OF INADEQUACY OF CAPITAL OR CONCLUSION... |
| 04:40:28 |
|
NOT IN CONVERSATION THAT INCLUDED ME. |
| 04:40:30 |
|
NO, THERE'S BEEN NO CONVERSATION THAT WE WERE AT RISK OTHER THAN WHAT IS INCLUDED IN THEIR REPORT.... |
| 04:40:45 |
|
RIGHT. THAT IS MY NEXT QUESTION AND -- |
| 04:40:49 |
|
I WANT TO KEEP REGULAR ORDER AS YOU SUGGESTED. |
| 04:40:50 |
|
I UNDERSTAND. I'M JUST TRYING TO KEEP YOU WITH YOU. |
| 04:40:54 |
|
START EARLIER. |
| 04:40:56 |
|
THANK YOU. WE HAD HUD LAST YEAR NOT EXERCISE ITS RIGHT TO INCREASE YOUR GOALS. AWE KNOW HUD HAD THE... |
| 04:41:41 |
|
WE DON'T KNOW YET. WE HAVE A 45-DAY PERIOD TO COME UP WITH A CAPITAL PLAN UNDER THE AGREEMENT, WHICH... |
| 04:42:08 |
|
SO THAT ARBITRARY 30% MAY RESULT IN A DIMINUTION IN YOUR AFFORDABLE HOUSING ACTIVITY? |
| 04:42:13 |
|
IF THE CAPITAL PLAN REQUIRES TO US REDUCE ACTIVITIES, YES, IT WOULD REDUCE THE IMPACT OF THE GOALS... |
| 04:42:25 |
|
THANK YOU, MR. CHAIRMAN. |
| 04:42:29 |
|
THANK YOU, SIR. MR. SHAYS DID YOUR WANT TO GO NOW? |
| 04:42:36 |
|
NO |
| 04:42:37 |
|
MR. NEY. |
| 04:42:39 |
|
ONE OF THE ISSUES I WANTED TO ASK ABOUT IS SOMETHING I WAS ASKING OFHEO TODAY. IT ON THE GENERAL ACCEPTED... |
| 04:43:31 |
|
I BELIEVE THAT THEY SHOULD HAVE SAT DOWN WITH THE AUDITORS AND ASKED THEM WHAT WAS THEIR REVENUE ON... |
| 04:44:23 |
|
I WILL SPEAK WHAT OFHEO SAID. IF I RECALL CORRECTLY THEY SAID DELOITTE TOUCHE CONCURRED WITH OFHEO.... |
| 04:44:46 |
|
NOT TO MY KNOWLEDGE NOR -- NOT TO MY KNOWLEDGE THAT THERE'S BEEN ANY CONTACT BY EITHER OFHEO OR BY... |
| 04:44:56 |
|
THANK YOU, MR. CHAIRMAN. |
| 04:45:05 |
|
THANK YOU. MR. SCOTT. |
| 04:45:13 |
|
THANK YOU, MR. CHAIRMAN. MR. RAINES AND MR. HOWARD, YOUR ACCUSER, OFHEO, HAS SPENT THE BETTER PART... |
| 04:46:26 |
|
WELL, THANK YOU FOR THAT OPPORTUNITY. THIS IS A VERY SERIOUS ALLEGATION AND I DENY THAT THAT OCCURRED.... |
| 04:47:03 |
|
WHY THEN WOULD OFHEO, IN YOUR OPINION, MAKE THAT CHARGE? |
| 04:47:10 |
|
WELL, CONGRESSMAN, I DON'T KNOW. THIS ENTIRE EXAMINATION HAS BEEN UNUSUAL. IT HAS BEEN THE MOST UNUSUAL... |
| 04:47:46 |
|
I ASKED YOUR ACCUSER THIS MORNING WHEN DID THEY MAKE THIS REPORT PUBLIC. AND WHEN DID THEY INFORM... |
| 04:48:16 |
|
LET ME WALK YOU THROUGH THE ENTIRE QUEENS SEQUENCE. WE BEGAN READING NEWSPAPER ACCOUNTS THAT OFHEO... |
| 04:49:15 |
|
LET ME ASK YOU, WHEN DID THE BOARD MAKE THE DECISION TO LINK -- AND THEY DID, I ASSUME -- MAKE THE... |
| 04:49:32 |
|
FANNIE MAE HAS A LINK OF BONUSES TO EARNINGS PER SHARE FOR AS LONG AS I HAVE BEEN AROUND THE COMPANY... |
| 04:49:43 |
|
I CANNOT RECALL WHEN THEY WERE NOT. |
| 04:49:47 |
|
RIVER COMPANY OF WHICH I'M AWARE VIRTUALLY LINKS SOME PART OF THEIR EXCEPTION TO EARNINGS PER SHARE.... |
| 04:49:57 |
|
THE POINT I WANTED ON THE RECORD WAS THAT THIS LINKAGE WAS MADE PRIOR TO YOU BEING CHIEF EXECUTIVE... |
| 04:50:05 |
|
ABSOLUTELY, PRIOR TO MY EVEN BEING AT THE COMPANY. |
| 04:50:09 |
|
SO THIS WAS NOT DONE ON YOUR WATCH. IT WAS DONE AND HAS BEEN NORMAL PROCEDURE -- |
| 04:50:15 |
|
YES, SIR. |
| 04:50:17 |
|
-- TO LINK. MR. HOWARD, ONE POINT. YOU ARE THE VICE CHAIRMAN OF THE |
| 04:50:22 |
|
YES. |
| 04:50:23 |
|
YOU ARE THE CHIEF FINANCIAL |
| 04:50:24 |
|
CORRECT. |
| 04:50:28 |
|
YOU ARE THE SUPERVISORY PERSON OVER INTERNAL AUDIT. |
| 04:50:31 |
|
THAT IS NOT CORRECT. THE INTERNAL AUDITOR REPORTS DIRECTLY TO THE CHAIRMAN OF OUR AUDIT COMMITTEE.... |
| 04:50:43 |
|
BUT DO YOU NOT APPROVE HIS SALARY? |
| 04:50:45 |
|
I DO NOT. I MAKE THE RECOMMENDATION ON HIS SALARY TO OUR SENIOR MANAGEMENT GROUP AND THE SALARY IS... |
| 04:50:58 |
|
BUT YOU DO SET THE FINANCIAL TARGETS FOR THE YEAR? |
| 04:51:02 |
|
EVEN THERE THE FINANCIAL TARGETS ARE SET COLLECT CRITICAL BIT SENIOR MANAGEMENT TEAM. |
| 04:51:07 |
|
BUT YOU DO HAVE THE AUTHORITY TO MEET THOSE TARGETS? |
| 04:51:11 |
|
NOT -- NO, I DON'T. |
| 04:51:12 |
|
OK. THAT'S GOOD TO KNOW BECAUSE THERE HAVE BEEN SOME REPORTS THAT YOU DO. |
| 04:51:17 |
|
THERE HAVE BEEN LOTS OF THINGS SAID INCORRECTLY. |
| 04:51:20 |
|
THAT'S WHAT I WANT TO MAKE SURE THAT YOU HAVE AMPLE OPPORTUNITY TO REFUTE THIS. THIS IS VERY SERIOUS... |
| 04:51:40 |
|
IF I MAY TAKE ADVANTAGE OF THAT OPPORTUNITY AND BE VERY CLEAR IN WHAT WE ARE SAYING, THERE IS NO LINKAGE,... |
| 04:52:05 |
|
THANK YOU. I YIELD THE BALANCE OF MY TIME. |
| 04:52:09 |
|
CHAIRMAN OXLEY. |
| 04:52:12 |
|
CHANGE YOU, MR. CHAIRMAN. MR. RAINES WELCOME BACK. I'M SORRY IF I INPLODDING OVER OLD GROUND BUT I... |
| 04:53:03 |
|
MR. CHAIRMAN, YOU KNOW, THEY TRIED TO GET ME HERE WITH NO CHARTS. I HAD TO HAVE ONE. THIS ILLUSTRATES... |
| 04:54:37 |
|
MR. CHAIRMAN, AS YOU CAN SEE FROM THE CHART EVEN THE CORE BUSINESS EARNINGS LINE IS NOT PARTICULARLY... |
| 04:55:05 |
|
LET ME ALSO ASK BOTH OF YOU, ON YOUR WEBSITE YOU CLAIM THAT THE HEDGE ACCOUNTING TREATMENT FOR EACH... |
| 04:55:46 |
|
FIRST OF ALL, MR. CHAIRMAN, THERE ARE TWO OPERATE ISSUES WHICH I WILL ADDRESS PREVAIL. THE FIRST SET... |
| 04:56:50 |
|
DOES THE SUPPORT CITE SPECIFICS? AND, IF SO, ARE THERE DISAGREEMENTS ON THE SPECIFICS OR IS THIS... |
| 04:56:58 |
|
THE REPORT MAY CITE SPECIFICS. I'M NOT INTIMATELY FAMILY WITH THOSE SPECIFICS SINCE I DON'T DEAL... |
| 04:57:06 |
|
MR. REINS REINS, DO YOU HAVE ANY COMMENTS THIS -- |
| 04:57:11 |
|
MR. REINS REINS DO YOU HAVE ANY COMMENT |
| 04:57:14 |
|
OUR WAY OF DOCUMENTING WITH THE COMBINATION OF COULD NOT PRECIPITATEOUS -- WE BELIEVE IT DOESN'T MEET... |
| 04:57:27 |
|
FINALLY, IN MY OPENING STATEMENT I TALKED QUITE A BIT ABOUT THE APPLICATION OF THE SARBANES-OXLEY... |
| 04:57:55 |
|
NO, SIR, I DON'T KNOW OF ANY. IN FACT, I THINK THE ACT HAS BEEN VERY HELPFUL TO US BECAUSE ONE OF... |
| 04:58:40 |
|
THANK YOU. |
| 04:58:42 |
|
MR. CLAY. |
| 04:58:45 |
|
THANK YOU, MR. CHAIRMAN. THANK YOU MR. RAINES. MR. RAINES IN MAY OF OF THIS YEAR DOW JONES INTERNATIONAL... |
| 05:00:11 |
|
WELL, MR. CLAY, AS I TESTIFIED, WE ARE A REGULATED COMPANY AND WE RECOGNIZE IT,. AND WE DO EVERYTHING... |
| 05:01:47 |
|
I KNOW THAT FANNIE MAE HAS AGREED TO THE INCREASE IN CAPITAL AND HOW MUCH IN DOLLARS IS THAT INCREASE?... |
| 05:01:56 |
|
WE DON'T HAVE AN EXACT ESTIMATE BUT IF YOU LOOK BACK AT THE MOST RECENT PERIODS IT WOULD REQUIRE SOMETHING... |
| 05:02:08 |
|
I COMMEND YOU FOR THIS AND AGREEING IT OTHER CHANGES THAT WILL MAKE FOR A BETTER TRANSPARENCY. NEVERTHELESS,... |
| 05:02:32 |
|
CONGRESSMAN, THE HONEST ANSWER IS I DON'T KNOW YET. WE HAVE 45 DAYS TO COME UP WITH A CAPITAL PLAN.... |
| 05:03:00 |
|
MR. CHAIRMAN, THAT'S ALL FOR ME. I YIELD BACK THE BALANCE. |
| 05:03:05 |
|
I THANK THE GENTLEMAN. MS. KELLY. |
| 05:03:09 |
|
THANK YOU. I HAVE VERY LITTLE TIME MR. RAINES AND I WOULD APPRECIATE IF YOU COULD ANSWER THE QUESTION... |
| 05:03:37 |
|
THERE'S NO ONE MEMBER RESPONSIBLE FOR ALL OF THOSE UNLESS YOU ARE THINKING OF ME BUT THERE'S NO ONE... |
| 05:03:43 |
|
IN THE OFHEO INTERVIEW WITH TIM HOWARD HE SAID HE HAD THOSE PORTFOLIOS. ARE YOU AWARE THAT AS THE... |
| 05:04:07 |
|
I THINK THE ANSWER IS YES. |
| 05:04:09 |
|
THANK YOU. ARE YOU AWARE AS SENIOR VICE PRESIDENT FOR FINANCIAL REPORTING AND PLANNING MRS. JANET... |
| 05:04:28 |
|
MRS. KELLY, SOMETIMES WHEN YOU PHRASE IT IN A WAY THAT IS NOT EXACTLY RIGHT GIVING AWE YES OR NO MAY... |
| 05:04:35 |
|
THAT IS IN THE OFHEO REPORT THAT WAY. |
| 05:04:38 |
|
THAT MAY WELL BE. |
| 05:04:39 |
|
IS THAT TRUE? DOES THIS WOMAN HAVE -- DOES SHE REPORT THAT INCOME AS -- NET INCOME AN FORECAST WHAT... |
| 05:04:49 |
|
IF YOU PUT THAT WAY, NO. BUT I WILL TRY TO BE HELPFUL BUT IF YOU PUT THAT WAY, THE ANSWER IS NO. |
| 05:04:55 |
|
I'M SORRY I HAVE A BILL ON THE FLOOR AND I HAVE TO GET BACK OVER AND I HAVE TO GET THROUGH THIS BECAUSE... |
| 05:05:22 |
|
NO, HE IS NOT RESPONSIBLE FOR AUDITING HIS PRIOR WORK AS CONTROLLER. |
| 05:05:27 |
|
OK. THAT IS AGAIN WAS IN HIS INTERVIEW. THAT APPARENTLY WHAT HE SAID HE WAS DOING IN THE OFHEO REPORT.... |
| 05:06:06 |
|
I CAN HELP THAT. HE WAS MOVED IN AS HEAD OF OPERATIONS RISK BUT THE AUDITOR AT THE TIME WAS A MAN... |
| 05:06:23 |
|
THANK YOU. ACCORDING TO, AGAIN, THE OFHEO REPORT, MR. RAJAPA REPORTS TO YOU, MR. HOWARD. IS THAT... |
| 05:06:39 |
|
SIR I NEED A YES OR NO ANSWER. |
| 05:06:40 |
|
HE HAS NOT -- |
| 05:06:43 |
|
NO HE REPORTS TO THE CHAIRMAN OF AUDIT COMMITTEE, NOT TO ME. |
| 05:06:47 |
|
OK. WHAT ABOUT THE MEMOS OF THE EXECUTIVE COMMITTEE? DO YOU MEET ACCORDING TO WHAT THE OFHEO BEAU... |
| 05:07:24 |
|
THIS IS HARD TO GIVE YES OR NO |
| 05:07:26 |
|
I UNDERSTAND WITH YOU -- |
| 05:07:28 |
|
I REFUSE TO TAKE THE RISK WITHOUT TELLING YOU THE REAL ANSWER BECAUSE IT IS SO GREAT. THE ANSWER IS... |
| 05:07:48 |
|
OK. MR. RAINES AS THE C.E.O. OF A MAJOR COMPANY THIS COMMITTEE AND I BELIEVE THE AMERICAN PEOPLE ... |
| 05:08:44 |
|
I THANK THE GENTLELADY. MR. BACA. MR. LYNCH. |
| 05:08:48 |
|
THANK YOU, MR. CHAIRMAN. WELL, I DON'T HAVE A BILL ON THE FLOOR AND I HAVE PLENTY OF TIME. SO IF EITHER... |
| 05:09:39 |
|
THEY DIDN'T INTERVIEW ME. THEY DID INTERVIEW ME ON TWO OCCASIONS. ONE TO DISCUSS IMPAIRMENTS ON CERTAIN... |
| 05:09:48 |
|
AND WHAT ABOUT SITTING DOWN WITH YOUR AUDITORS? DID THEY SIT DOWN WITH YOUR AUDITORS ABOUT THIS REPORT?... |
| 05:09:55 |
|
NOT TO MY KNOWLEDGE. |
| 05:09:57 |
|
I DO NOT BELIEVE THEY HAVE INTERVIEWED OUR AUDITORS. BUT TO BE CLEAR ON YOUR QUESTION , SINCE THEY... |
| 05:10:09 |
|
IT IS NOT SURPRISING THEN THAT THERE WOULD BE NO BRIGHT LINES ON THIS AND SOME OF THESE ACCOUNTING... |
| 05:10:53 |
|
FOR ME IS AN UNUSUAL RELATIONSHIP. |
| 05:10:56 |
|
I WOULD -- CONGRESSMAN, I WOULD AGREE THAT IT IS AN UNUSUAL RELATIONSHIP. I DID NOTE IN DIRECTOR FALCON'S... |
| 05:11:17 |
|
I WOULD LIKE YOU TO. |
| 05:11:19 |
|
I WOULD BE DELIGHTED. WE HAD OUR FIRST MEETING WITH OFHEO WITH REGARD TO THIS SPECIAL EXAMINATION... |
| 05:13:51 |
|
THANK YOU. THANK YOU FOR CLEARING THAT UP. IS THERE ANYTHING ELSE YOU WANT TO ADD THIS TERMS OF NOT... |
| 05:14:03 |
|
THERE'S ONE OTHER POINT I WOULD LIKE TO MAKE AND IT IS AN ISSUE THAT BEARS A PROUDER DISCUSSION. ... |
| 05:15:22 |
|
THANK YOU, GENTLEMEN. THANK YOU MR. CHAIRMAN. |
| 05:15:25 |
|
I'D LIKE TO GET TO THE SPECIFICS OF ONE OF THE ALLEGATIONS WITH REGARDS TO FAZ 91 IN PARTICULAR. ... |
| 05:17:40 |
|
I WOULD BE HAPPY TO ADDRESS THAT. IN ESTIMATING THE RATE AT WHICH WE AMORTIZE PREMIUMS AND DISCOUNTS,... |
| 05:17:50 |
|
UNDERSTOOD. |
| 05:17:52 |
|
INTEREST RATES AND PREPAYMENT ACTIVITY. BY MAKING ASSUMPTIONS THAT ARE REASONABLE AND DIFFERENT, ONE... |
| 05:18:57 |
|
MY POINT IS, DOES F.A.Z. 91 AUTHORIZE THAT? |
| 05:19:02 |
|
ACCORDING TO KPMG IT DOES. |
| 05:19:04 |
|
WHY DO THEY HAVE A DIFFERENCE? |
| 05:19:07 |
|
KPMG HAD A DIFFERENCE PRIOR TO 1998 BECAUSE WE DID NOT HAVE A POLICY IN PLACE THAT GOVERNED HOW MUCH... |
| 05:19:43 |
|
THEY WILL. BUT YOU HAVEN'T CITED ANYTHING IN F.A.Z. 91 THAT SAYS YOU'RE ALLOWED TO USE A NUMBER OTHER... |
| 05:20:15 |
|
LET ME BE VERY CLEAR. MY INTENT IN GETTING INVOLVED IN THE DEVELOPMENT OF THE POLICY WAS THAT ENSURE... |
| 05:22:09 |
|
MY TIME IS UP, BUT I HAVE TO SAY I'M VERY SKEPTICAL. IT IS SUCH A SUBSTANTIAL PORTION. |
| 05:22:17 |
|
IT IS NOT DISCRETION. |
| 05:22:21 |
|
THE REPORT QUOTES PEOPLE IN YOUR FORM AS CALLING IT DISCRETION. |
| 05:22:26 |
|
FOR A SMALL PERIOD OF TIME WE HAD DISCRETION. BUT FROM 2000, THERE HAS BEEN NO DISCRETION. |
| 05:22:34 |
|
YOU ARE DIRECTLY CONTRADICTING WHAT SOME PEOPLE IN YOUR FIRM SAID AFTER THE OH FAY YES REPORT. |
| 05:22:46 |
|
AFTER THE POLICY WAS ADOPTED, IN THE MIDDLE OF 2002, WE ELIMINATED ANY POTENTIAL FOR DISCRETION, WE... |
| 05:23:13 |
|
SO YOU'VE CEASED USING THIS METHODOLOGY? |
| 05:23:18 |
|
WHEN YOUR INCOME IS ROUGHLY PLUS OR MINUS 1%, WE DO NOT MAKE ANY ADJUSMENT AT ALL. WHEN IT'S OUTSIDE... |
| 05:23:29 |
|
AN THE ESTABLISHMENT OF THE RANGE, THESE WERE ALL DEVELOPED AND ESTABLISHED BY YOU, NOT UNDER THE... |
| 05:23:39 |
|
BY THE COMPANY. |
| 05:23:40 |
|
YES. |
| 05:23:42 |
|
THEY'RE CONSISTENT WITH 91. |
| 05:23:44 |
|
THAT'S WHAT WE'RE GOING TO FIND. |
| 05:23:48 |
|
THANK YOU VERY MUCH MR. CHAIRMAN. LET ME ASK THIS QUESTION OF MR. RAINES OR MR. HOWARD AND EITHER ... |
| 05:24:01 |
|
YES. |
| 05:24:04 |
|
THAT'S 12 YEARS. DURING THOSE 12 YEARS, THEIR RESPONSIBILITY IS NOT ONLY TO AUDIT YOU IS THAT CORRECT?... |
| 05:24:13 |
|
THEY EXAMINE US. THEY HAVE AN ANNUAL EXAMINATION. |
| 05:24:17 |
|
DURING THAT EXAMINATION, IF THEY FIND ANY DEFICIENCIES, IS IT THEIR RESPONSIBILITY TO LOTE YOU KNOW... |
| 05:24:32 |
|
YES, THAT WOULD BE THEIR RESPONSIBILITY. |
| 05:24:36 |
|
DID THEY EVER COME BACK AND TELL YOU THE DEFICIENCIES YOU HAVE, EITHER ONE OF YOU TWO? |
| 05:24:41 |
|
WITH REGARD TO THESE ISSUES? |
| 05:24:43 |
|
YES. |
| 05:24:45 |
|
NOT UNTIL WE SAW THE SPECIAL EXAMINATION REPORT. |
| 05:24:49 |
|
ISN'T THAT A NORMAL PRACTICE FOR ANY ACCOUNTING FIRM OR AUDITING FOIRM SIT DOWN WITH THE C.E.O. TO... |
| 05:25:03 |
|
WE DID SIT DOWN WITH THEM EACH YEAR. THEIR CHIEF EXAMINER MET WITH OUR BOARD AND NONE OF THESE ISSUES... |
| 05:25:15 |
|
IN ANY OF THOSE YEARS, DID THEY SIGN OFF IN TERMS OF YOUR POLL SIS AND PROCEDURES? |
| 05:25:22 |
|
WE MIGHT WANT TO TALK ABOUT THE F.A.Z. 133 EXAMINE. |
| 05:25:28 |
|
WHEN WE IMPLEMENTED THE PROCESS FOR 133, ALONG WITH THE SYSTEMS, OFHEO DID DO A REVIEW AND SAID THAT... |
| 05:25:43 |
|
THAT MEANT THEY HAD TO SIGN OFF AND THEY DIDN'T COME BACK AND TELL YOU YOU NEEDED TO FOLLOW A DIFFERENT... |
| 05:25:50 |
|
I WOULDN'T KNOW HOW TO ARGUMENTIZE IT. I CAN TELL YOU WHAT THEY DID. |
| 05:25:59 |
|
DID THEY COME BACK AND TELL YOU SOMETHING DIFFERENT? |
| 05:26:01 |
|
THANK YOU. THIS MORNING THE REGULATORS ALGATED THAT FANNIE MAE DID NOT RESPOND TO THE INITIAL REQUEST.... |
| 05:26:24 |
|
THE CONGRESSMAN, WE'VE BEEN RESPONSIVE TO OFHEO OVER THIS PERIOD WITH SPECIFICALLY RELATING TO SUBPOENAS.... |
| 05:26:57 |
|
SO YOU WERE WILLING TO BE COOPERATIVE? |
| 05:26:59 |
|
WE WERE COOPERATIVE, PROVIDING THOUSANDS OF PAGES OF MATERIAL AND ALMOST A MILLION PAGES OF EMAIL... |
| 05:27:09 |
|
DID OFHEO PERSONALLY CONTACT YOU REGARDING THE PRELIMINARY FINDINGS, EITHER ONE OF YOU? |
| 05:27:16 |
|
NO, NOT ME. |
| 05:27:20 |
|
IT SEEMS OTH ODD THEY WOULD NOT CONTACT YOU, THEY'VE GONE TO THE MEDIA, GONE TO EVERYONE ELSE, AND... |
| 05:27:47 |
|
CONGRESSMAN, THIS PROCESS HAS BEEN SO UNUSUAL, I CAN'T TELL YOU. KY TELL YOU WHAT WE'RE DOING. OUR... |
| 05:29:02 |
|
THANK YOU. I KNOW THAT I SERVED ON NUMEROUS BOARDS AND USUALLY WHEN AN AUDIT IS DONE BY ANY ACCOUNTING... |
| 05:29:56 |
|
MR. BECAUSE GUS? |
| 05:30:01 |
|
WE WERE TALK ABOUT A LOT OF THESE ISSUES A A LOT OF DISCUSSION ABOUT WHETHER YOU VIOLATED RULES OR... |
| 05:30:23 |
|
I HAVE TO SAY, CONGRESSMAN, SINCE THIS REPORT HAS COME OUT, OUR CREDIT RATINGS HAVE BEEN PUT ON CREDIT... |
| 05:31:00 |
|
BUT YOU'RE NOT IN JEOPARDY OF MEETING OUR ORDINARY COURSE OF BUSINESS, YOUR OBLIGATIONS. |
| 05:31:10 |
|
THE FUNDAMENTAL ECONOMICS OF THE COMPANY HASN'T CHANGED. |
| 05:31:15 |
|
WHEN YOU'RE PUT ON CREDIT WATCH THAT HAS IMPLICATIONS NOT ONLY FOR THE HOUSING MARKET BUT FOR THE... |
| 05:31:22 |
|
YES. |
| 05:31:23 |
|
AND I THINK WHAT WE HAD DISCUSSED THIS MORNING, YOU HEARD THE CHAIRMAN, DIRECTOR FALCON SAY Y'ALL... |
| 05:32:05 |
|
CONGRESSMAN, WHEN I WAS IN THE GOVERNMENT AS DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET, ONE... |
| 05:33:20 |
|
IT HAS BEEN ON THE PUBLIC STAGE, THE ENTIRE PROCESS. C.F.O. HOWARD, DO YOU WANT TO COMMENT? |
| 05:33:26 |
|
NO. |
| 05:33:28 |
|
I'M SORRY. LET ME ASK YOU THIS, THIS AGREEMENT, Y'ALL HAVE BASICALLY SAID THAT MOST OF WHAT THEY ... |
| 05:34:38 |
|
YES, THERE IS. OUR BOARD GAVE TREMENDOUS CONSIDERATION TO THIS. THERE WERE SEVERAL POINTS THEY WANTED... |
| 05:36:17 |
|
CAN YOU WRAP UP? |
| 05:36:19 |
|
THIS IS MY FINAL QUESTION. THIS IS FOR YOU, C.F.O. HOWARD. CAN YOU OUTLINE FOR US THE EXACT STEPS... |
| 05:36:48 |
|
WE, FIRST OF ALL, DO NOT BELIEVE WE DID DEPART FROM PRACTICE. IMPORTANTLY, OFHEO HASN'T CONTESTED... |
| 05:38:10 |
|
IT'S MY UNDERSTANDING THAT NONE OF THESE UNDERMINE THE SAFETY AND SOUNDNESS, SOME OF THEM ARE PRUDENT... |
| 05:38:26 |
|
THESE HEDGES WERE ALL DESIGNED TO REDUCE RISK. |
| 05:38:32 |
|
THE GENTLEMAN'S TIME HAS EXPIRE. MR. MEEKS? |
| 05:38:36 |
|
THIS MAY COME AS A SURPRISE TO YOU, BUT SOME PEOPLE JUST DON'T LIKE FANNIE MAE'S CURRENT STATUS IN... |
| 05:40:08 |
|
PRIOR TO THE SPECIAL EXAMINATION REPORT, ALL OUR EXAMS FOUND WE MET OR EXCEED SAFETY AND SOUNDNESS... |
| 05:40:40 |
|
WHEN OFHEO WAS MAKING THOSE RECOMMENDATION, ETC., IN THE PAST, HAD IT EVER BEEN SHARED WITH THE PRESS... |
| 05:40:51 |
|
NO, THE EXAMINES REPORTS REMAIN CONFIDENTIAL UNTIL OFHEO MAKES AN ANNUAL REPORT TO CONGRESS, USUALLY... |
| 05:41:18 |
|
SO THIS IS A RELATIVELY NEW PHENOMENON THAT'S TAKEN PLACE AS FAR AS YOUR RELATIONSHIP WITH YOUR REGULATOR?... |
| 05:41:25 |
|
THIS IS VERY NEW. |
| 05:41:28 |
|
LET ME ASK, I KNOW YOU'VE INDICATED IN YOUR TESTIMONY THUS FAR THAT YOUR BOARD AGREED TO THE 30% CAPITAL... |
| 05:41:52 |
|
AS A MANDATED SURPLUS? FREDDIE MAC -- |
| 05:41:55 |
|
OTHER THAN FREDDIE MAC |
| 05:41:59 |
|
NO, SIR, I'M NOT AWARE OF A FINANCIAL INSTITUTION THAT IS OTHERWISE SOLVENT THAT'S REQUIRED TO HAVE... |
| 05:42:14 |
|
MR. HOWARD, THIS IS MY LAST QUESTION. I'M JUST TRYING TO MAKE SURE I UNDERSTAND. ACCORDING TO OFHEO,... |
| 05:42:46 |
|
PRIOR TO 1998, ANY AMOUNT OF THIS SO-CALLED CATCH UP |
| 05:42:52 |
|
COMPARISON WE MADE AFTER THE FACT BETWEEN THE AMOUNT WE HAD BROUGHT INTO INCOME BASED ON AN OLD ASSUMPTION... |
| 05:44:21 |
|
YOUR TIME HAS EXPIRED. |
| 05:44:23 |
|
THANK YOU, MR. CHAIRMAN. MR. RAINES, I HAVE A LOT OF RESPECT FOR YOU. I THINK THAT YOU ARE ONE OF... |
| 05:45:55 |
|
IF I COULD, I'LL JUST ANSWER YOUR SUBPOENA QUESTION. |
| 05:45:57 |
|
THANK YOU. |
| 05:45:58 |
|
THERE'S A LOT OF OTHER THINGS THERE. |
| 05:46:00 |
|
THAT'S MY TIME. WITH REGARD TO THE SUBPOENAS. |
| 05:46:05 |
|
WITH REGARD TO THE SUBPOENAS OUR LAWYERS WERE TOLD BY OFHEO STAFF THAT THEY WERE ISSUING SUBPOENAS... |
| 05:46:30 |
|
CAN I JUST SAY, I'M A LITTLE CONCERNED WITH THAT ANSWER, BECAUSE IT CONFLICTS WITH WHAT WE HAD BEEN... |
| 05:46:54 |
|
THAT IS MY TESTIMONY. |
| 05:46:55 |
|
IS THAT YOUR TESTIMONY MR. HOWARD. |
| 05:46:57 |
|
TO THE BEST OF MY |
| 05:46:59 |
|
IN OTHER WORDS, THIS INFORMATION WAS ASKED FOR AND YOU WERE VOLUNTARILY GOING TO PROVIDE IT, BUT THEY... |
| 05:47:08 |
|
WE'D BEEN GOING THIS FOR QUITE A WHILE, SPECIAL EXAM HAD BEEN GOING ON FOR A WHILE BEFORE THE FIRST... |
| 05:47:20 |
|
DID YOU PROVIDE THE INFORMATION THEY WANTED? |
| 05:47:21 |
|
YES. WE PROVIDED AND WE TOLD THEM THEY'D GET IT WITH OR WITHOUT SUBPOENAS. |
| 05:47:28 |
|
I THINK IT'S IMPORTANT TO PUT ON THE RECORD BECAUSE THE INFORMATION IS THAT THEY HAD TO GET SUBPOENAS... |
| 05:47:36 |
|
I'VE TESTIFIED VERY CLEARLY THAT THAT WAS INACCURATE. |
| 05:47:38 |
|
OK. LET MANY ASK YOU, BESIDES THE BONUSES YOU OFFER STOCK OPTIONS AS WELL? |
| 05:47:46 |
|
WE ARE A SHAREHOLDER OWNED COMPANY AND WE PAY ACCORDING TO WHAT OUR STATUTE PROVIDES. |
| 05:47:57 |
|
WE PAY COMPARABLY TO OTHER COMPANIES. |
| 05:48:00 |
|
DO YOU DISPUTE THE AMOUNT OF $245 MILLION OTHER THE LAST FIVE YEARS AS BONUSES? THAT'S A LOT OF MONEY,... |
| 05:48:14 |
|
IT'S A NUMBER THAT CALL COOLABLE. |
| 05:48:18 |
|
DO YOU THINK IT'S IN THE BALLPARK? |
| 05:48:20 |
|
YESM YOU SAY IT'S A LARGE NUMBER, BUT IN THE LAST FIVE YEARS, WE'VE PROBABLY HAD AFTER-TAX INCOME... |
| 05:48:28 |
|
I KNOW YOU'RE A SUCCESSFUL COMPANY. |
| 05:48:31 |
|
THAT'S A TINY PERCENTAGE OF OUR REVENUE AND PROFIT. |
| 05:48:35 |
|
WHY SHOULD BANKS HAVE TO SET ASIDE BETWEEN 6% AND 8% OF THEIR PORTFOLIO AND YOU GUYS ARE IN THE RANGE... |
| 05:48:46 |
|
BANKS HAVE MORE RISKY PORTFOLIOS. WE CAN ONLY INVESTIGATION IN SINGLE FAMILY AND MULTIFAMILY MIAMIS.... |
| 05:48:53 |
|
SO IT'S YOUR TESTIMONY THAT YOU DON'T NEED TO HAVE MORE BECAUSE YOU DON'T FEEL IN YOUR INVESTMENTS... |
| 05:49:02 |
|
THAT'S WHY WE HAVE CAPITAL. |
| 05:49:07 |
|
NO, YOU SET ASIDE, YOU SET ASIDE A CERTAIN SUM IN CASE THE MARKET STARTS TO GO BAD AND THE RESIDENTIAL... |
| 05:49:33 |
|
THERE AREN'T ANY BANKS WHO ONLY HAVE MULTIFAMILY AND SINGLE FAMILY LOANEDS. BANKS ARE ARGUING THAT... |
| 05:49:52 |
|
LET ME ASK YOU THIS QUESTION. OFHEO WAS ASKED THIS. BEFORE OFAY OWE ISSUED ITS REPORT, DID ANY OF... |
| 05:50:04 |
|
WE DIDN'T KNOW ANYTHING ABOUT THEIR REPORT. WE'D NEVER SEEN THEIR REPORT. |
| 05:50:10 |
|
WHEN DID YOU SEEARY REPORT? |
| 05:50:12 |
|
WE SAW IT ON MONDAY. |
| 05:50:13 |
|
DID YOU KNOW OF THE REPORT, KNOW OF THE CONTENTS? |
| 05:50:17 |
|
NO. I HAD BEEN CALLING THE DIRECTOR, I HAD A MEETING SCHEDULED WITH THE DIRECTOR TO DISCUSS THE PROGRESS... |
| 05:50:32 |
|
I THANK THE CHAIRMAN TO VERIFY, WE'RE NOT PLAYING A WORD GAME HERE OF A DRAFT OR REPORT. |
| 05:50:39 |
|
THE REPORT WAS HANDED TO MANAGEMENT AS OFHEO WALKED INTO A MEETING WITH OUR BOARD. |
| 05:50:46 |
|
YOU WEREN'T GIVEN A DRAFT EARLIER. |
| 05:50:48 |
|
WE SAW NOTHING. |
| 05:50:50 |
|
SO THE ANSWER TO YOUR QUESTION IS THAT YOU NEVER SPOKE TO A MEMBER OF CONGRESS OR THE PRESS ABOUT... |
| 05:50:59 |
|
ABOUT THE CONTENTS OF THERER PORT? |
| 05:51:06 |
|
WE NEVER -- |
| 05:51:08 |
|
I HAD BEEN TOLD THAT FANNIE MAE HAS BEEN SPEAKING TO REPORTERS AND PRESS ABOUT THE. |
| 05:51:15 |
|
ARE YOU -- I WANT TO BE VERY CLEAR HERE. |
| 05:51:18 |
|
NOT THE CONTENT, JUST CONCERNS THERE WAS GOING TO BE A REPORT THAT CAME OUT, ETC., AND IT MIGHT NOT... |
| 05:51:24 |
|
WE HAVE TALKED ABOUT CONCERNS ABOUT THE REPORT BECAUSE WE'D BEEN READING ABOUT IT IN THE PAPER. THE... |
| 05:51:39 |
|
AND THAT'S THE EXTENT OF YOUR CONTACTS? YOU DIDN'T INITIATE ANY? |
| 05:51:44 |
|
WHY DON'T YOU GIVE ME THE EXAMPLE |
| 05:51:46 |
|
I DON'T WANT TO GIVE YOU THE EXAMPLE. I WANT TO KNOW IF YOU ALL AFFIRMATIVELY WENT OUT TO THE PRESS... |
| 05:51:57 |
|
THAT'LL HAVE TO BE THE GENTLEMAN'S LAST QUESTION. |
| 05:52:01 |
|
AND THE ANSWER IS A YES OR NO. DID EITHER YOU OR YOUR ORGANIZATION DO THAT. |
| 05:52:07 |
|
NO DOUBT WE TALKED TO THE PRESS ABOUT THE REPORT WE HAD NOT SEEN. NO DOUBT SOMEONE IN FANNIE MAE ... |
| 05:52:23 |
|
THE QUESTION I ASKED IS, DID YOU AFFIRMATIVELY INTERACT WITH THE PRESS PROACTIVELY CONTACT THE PRESS.... |
| 05:52:32 |
|
AND THAT'S THE GENTLEMAN'S LAST QUESTION. |
| 05:52:35 |
|
I'M NOT TRYING TO B DIFFICULT CONGRESSMAN BUT YOU'RE ASKING ME A QUESTION, DID WE EVER CALL A REPORTER... |
| 05:52:47 |
|
GENTLEMAN'S TIME HAS EXPIRED. MISS WATERS. |
| 05:52:50 |
|
THANK YOU VERY MUCH. I JUST WANTED TO CLEAR UP A LITTLE SOMETHING HERE. I FIND THE INFORMATION ABOUT... |
| 05:53:20 |
|
MY CONCERN ABOUT PROPRIETARY INFORMATION GOES TO NOT THE FIVE PEOPLE AT THE TOP, OUR INFORMATION IS... |
| 05:53:50 |
|
THE REASON I ASKED IS THAT OUR CHAIRMAN DID INDICATE HE HAD LEGAL OPINION. I DON'T HAVE A COPY OF THAT... |
| 05:54:21 |
|
MY ONLY GOAL WAS NOT TO WAIVE ANY RIGHTS WE HAVE. WE CONTINUE TO MAINTAIN ANY RIGHTS WE ASSERTED.... |
| 05:54:30 |
|
I THINK I KNOW WHAT TO DO WITH THAT. I KNOW YOU'VE REPEATED THIS ANY NUMBER OF TIMES BUT I THINK ... |
| 05:55:06 |
|
THE JUSTICE DEPARTMENT RESPONSE WAS THAT THEY INDICATED THIS WASANCE ISSUE THEY EXPECTED TO BE WORKED... |
| 05:55:24 |
|
EXCUSE ME ONE SECOND. MY COLLEAGUE MR. CHASE, THE QUESTION THAT YOU ASKED ABOUT WHETHER OR NOT THEY... |
| 05:55:57 |
|
LET ME READ TO YOU SPECIFICALLY SO YOU'VE GOT THE STATEMENT THAT HAS BEEN APPROVED. BOTH IN-HOUSE... |
| 05:56:22 |
|
THANK YOU VERY MUCH. I ALSO WOULD LIKE TO -- |
| 05:56:25 |
|
I DON'T KNOW WHAT THEY MEANS. |
| 05:56:29 |
|
I THINK WHAT THAT MEANS. |
| 05:56:30 |
|
THIS IS MY TIME. YOU MAY NOT ANSWER HIM ON MY TIME. HE CAN GET SOME ADDITION NALL TIME. LET ME JUST... |
| 05:56:47 |
|
THAT IS TRUE. I DID NOT SEE THE REPORT UNTIL THEY WENT INTO THE BOARD ROOM AND HANDED A REPORT WITH... |
| 05:57:03 |
|
WERE YOU TOLD WHY IT WAS IMPORTANT TO COME BEFORE THE BOARD WITH SUCH HASTE FROM THE TIME THE PREREPORT... |
| 05:57:27 |
|
IT WAS NOT EXPLAINED TO ME. OUR LEAD DIRECTOR WILL ALSO TESTIFY BEFORE YOU AND SHE CAN EXPLAIN. |
| 05:57:33 |
|
DID YOU EVER HEAR THAT THE TIMING OF THE BOARD MEETING HAD ANYTHING TO DO WITH THE FACT THAT THERE... |
| 05:57:46 |
|
I DID NOT HEAR THAT. |
| 05:57:52 |
|
FINALLY, LET ME ASK YOU THIS. FANNIE MAE IS A VERY SOPHISTICATED ORGANIZATION WITH A LOT OF SMART... |
| 05:58:51 |
|
WE DID INDEED DO THAT. WE ENGAGED OUTSIDE COUNSEL, WE ENGAGED ACCOUNTING, WE LOOKED AT EVERYTHING... |
| 05:59:20 |
|
FINALLY, I'M GOING TO ASK YOU SOMETHING YOU MAY NOT WANT TO ANSWER. SINCE ALL OF THIS HAS BEEN MADE... |
| 06:00:31 |
|
I HEARD THAT DISCUSSION. AS YOU KNOW, I'VE BEEN AROUND THIS TOWN A LONG TIME. IT'S VERY SAD. IT'S... |
| 06:02:05 |
|
WELL -- |
| 06:02:09 |
|
WHEN YOUR DAUGHTER FEELS SHE NEEDS TO SAY TO HER DAD, I SUPPORT YOU, I'M SUPPOSED TO BE SUPPORTING... |
| 06:02:20 |
|
WELL, WE'RE GOING TO BE OUT OF HERE WHEN WE GO ON RECESS AND ALL OF THIS TALK IS GOING TO FESTER.... |
| 06:02:55 |
|
MS. WATERS, YOUR TIME IS LONG EXPIRED. CAN YOU WRAP UP? |
| 06:02:59 |
|
WHAT WOULD YOU ASK THIS COMMITTEE TO DO IN THE INTEREST OF FAIRNESS THAT WOULD IN NO WAY ACCEPT OFHEO... |
| 06:03:21 |
|
MS. WATERS, WHAT I WOULD ASK THE COMMITTEE TO DO IS TO INSIST OF ALL THE AGENCIES WHEN WN YOUR OVERSIGHT,... |
| 06:03:34 |
|
I WAS TRYING TO HEAR HIM. |
| 06:03:36 |
|
YOUR TIME HAS EXPIRED. PLEASE BE SEATED. |
| 06:03:39 |
|
I WOULD ASK THIS COMMITTEE TO INSIST FOR ALL THE AGENCIES WITHIN YOUR OVERSIGHT THAT THEY OPERATE... |
| 06:04:35 |
|
THE GENTLELADY'S TIME IS LONG EXPIRED. WE HAVE A NUMBER OF OTHER MEMBERS WAITING TO BE HEARD. |
| 06:04:42 |
|
MR. HOWARD, AM I CORRECT IN UNDERSTANDING YOU'RE THE CHIEF NNSRBLE OFFICER FOR FANNIE MAE -- CHIEF... |
| 06:04:51 |
|
YES, YOU ARE. |
| 06:04:54 |
|
AM I CORRECT IN UNDERSTANDING THAT QUESTIONS OF HOW TO TREAT INCOME AND EXPENSES THAT WOULD GO THROUGH... |
| 06:05:03 |
|
IT WOULD TYPICALLY BE DISCUSSED WITH ME, DEPENDING ON THE LEVEL OF IMPORTANCE. |
| 06:05:07 |
|
AT WHAT LEVEL OF POSHES DO ISSUES COME TO YOUR OFFICE FOR FINAL DERGES? |
| 06:05:12 |
|
THAT DETERMINATION IS MADE BY THE PEOPLE WHO BRING THEM TO ME. |
| 06:05:17 |
|
IS THERE TYPICALLY A THRESHOLD DOLLAR AMOUNT? |
| 06:05:20 |
|
IT'S USUALLY HOW UNUSUAL, NEW THE ISSUE IS. |
| 06:05:27 |
|
IN FERMS OF SUCH UNUSUAL OR NEW SITUATIONS ARE YOU THE FINAL ARBITER OF SUCH DECISIONS? |
| 06:05:37 |
|
AGAIN, IT'S SITUATION NALL. IN SOME CASES IT COULD BE THE CHAIRMAN, WHOEVER THAT WOULD BE, OR IT COULD... |
| 06:05:47 |
|
I RECOGNIZE THAT THE REPORT IN QUESTION TODAY COVERED A PERIOD PRIOR TO SAR BANES-OX LEE BEING IN... |
| 06:06:04 |
|
PARTS OF IT DOES, YES. |
| 06:06:06 |
|
DOES THE AUDIT COMMITTEE OR THE BOARD OF DIRECTORS GET INVOLVED IN THESE QUESTIONS? |
| 06:06:11 |
|
WHICH QUESTIONS? |
| 06:06:13 |
|
QUESTIONS OF A NEW OR UNUSUAL SET OF CIRCUMSTANCES HAVING TO DO WITH HOW TO TREAT INCOME OR EXPENSE.... |
| 06:06:20 |
|
AGAIN, IT WOULD DEPEND ON THE SITUATION. SOMETIMES THEY ARE BRIEFED ON IT, THEY ARE TYPICALLY NOT... |
| 06:06:30 |
|
THE AUDIT COMMITTEE IS NOT CONSULTED FOR A DECISION OF ANY NATURE RELATED TO THIS KIND OF SITUATION?... |
| 06:06:42 |
|
IT IS, I'M ATTEMPTING TO RECALL OF AN INSTANCE WHERE THE AUDIT COMMITTEE MAY HAVE BEEN CONSULTED IN... |
| 06:06:51 |
|
SO IN EFFECT, WHAT YOU'RE SAYING IS THAT THE AUDIT COMMITTEE DOESN'T SET THE STANDARDS FOR THE DECISIONS,... |
| 06:07:09 |
|
WE'LL REPORT ON THE CONDITION OF THE COMPANY, ANYTHING WE THINK OUGHT TO BE BROUGHT TO THEIR ATTENTION,... |
| 06:07:33 |
|
IMPLICIT IN YOUR ANSWER IS THAT SUCH DECISIONS ARE THEN, THEREFORE MADE AT THE MANAGEMENT LEVEL RATHER... |
| 06:07:41 |
|
THAT IS CORRECT. |
| 06:07:43 |
|
OK. SO THE FINAL ARBITER FOR SUCH DECISION IS YOUR OFFICE? |
| 06:07:51 |
|
AGAIN, IT DEPENDS ON THE DECISION. IT COULD BE THE CONTROLLER, THE LEVEL BELOW THE CONTROLLER, COULD... |
| 06:08:00 |
|
THE DECISION MAY BE MADE WITHIN THE OPERATING UNITS OF FA FANNIE MAE. |
| 06:08:07 |
|
NOT ACCOUNTING DECISIONS. THEY WOULD NOT BE. ACCOUNTING POLICY DECISIONS ARE MADE BY THE ACCOUNTING... |
| 06:08:29 |
|
THEN THEY'RE RUN PAST YOU AS C.F.O. |
| 06:08:30 |
|
IT DEPENDS ON THE DECISION. MOST OF THEM DO NOT COME TO ME FOR THAT STEP. |
| 06:08:37 |
|
MR. CHAIRMAN, WE MAY HAVE THE WRONG GUY HERE TO ASK THESE QUESTIONS ON THE ACCOUNTING RULES OR MODIFICATIONS.... |
| 06:08:57 |
|
TYPICALLY NOT. |
| 06:08:59 |
|
AND YOU'RE ALSO TESTIFYING THAT THE AUDIT COMMITTEE, THE BOARD OF DELECTORS IS NOT INVOLVED -- BOARD... |
| 06:09:10 |
|
NOT AS TO MAKE THEM. INFORMED OF THEM. |
| 06:09:20 |
|
NOW, YOU'RE C.F.O. AND YOU'RE ALSO, AM I CORRECTLY ADVISED YOU'RE A C.P.A.? |
| 06:09:27 |
|
YOU ARE INCORRECTLY ADVISED. I AM NOT A C.P.A. |
| 06:09:30 |
|
YOU ARE NOT. OK. LET ME GO, LET ME ASK A DIFFERENT SET OF QUESTIONS IF I MIGHT. PRIOR TO THIS HEARING,... |
| 06:09:54 |
|
YES. YES. |
| 06:09:56 |
|
DID YOU OR ANY OF YOUR AGENTS OR EMPLOYEES OR COUNSEL PROVIDE QUESTIONS TO NOVES SUBCOMMITTEE FOR... |
| 06:10:08 |
|
I BELIEVE WE TALKED TO MEMBERS ABOUT OR STAFF ABOUT QUESTIONS THAT THEY MIGHT WANT TO POSE, YES. |
| 06:10:16 |
|
THE ONLY REASON I ASK THAT QUESTION IS THAT THE CHAIRMAN WAS ASKED, I THINK MR. FALCON WAS ASKED IN... |
| 06:10:45 |
|
MY ANSWER IS I DON'T KNOW. WE'LL HAVE TO TALK TO OUR COUNSEL OR OTHERS. MR. FALCON IS A GOVERNMENT... |
| 06:11:17 |
|
I'M GOING TO TAKE THAT AS A NO, MR. CHAIRMAN. |
| 06:11:21 |
|
MR. CHAIRMAN. |
| 06:11:23 |
|
YES, MR. FRANKS. |
| 06:11:24 |
|
WE HAVE A COLLEAGUE NOT ON THE COMMITTEE, THE YESWOMAN FROM FLORIDA -- THE JEWOMAN FROM FLORIDA WHO... |
| 06:11:43 |
|
MR. CHAIRMAN. I PLAN TO GO IN DIFFERENT DIRECTION, BUT I WOULD TO FOLLOW UP ON THOSE COMMENTS FOR... |
| 06:11:56 |
|
I'VE LIVED HERE ABOUT 20-SOMETHING YEARS. |
| 06:12:01 |
|
BUT IN TERMS OF YOUR WORK AT O.M.B. AND FANNIE MAE, YOU'VE BEEN PART OF THE INSTITUTION NALL LAYERS... |
| 06:12:07 |
|
YES, SIR. |
| 06:12:08 |
|
AND YOU'VE SEEN YOUR SHARE OF CONGRESSIONAL HEARINGS OVER |
| 06:12:11 |
|
YES, SIR. |
| 06:12:13 |
|
IS IT A FAIRLY COMMON PRACTICE FOR ALMOST EVERY SINGLE ENTITY TO HAVE SOME CONSULTATION OR TALK WITH... |
| 06:12:23 |
|
YES, SIR, I TYPICALLY DID THAT WHEN I WAS IN THE GOVERNMENT AND I'VE DONE IT SINCE I'VE BEEN OUT OF... |
| 06:12:30 |
|
THAT'S NOT AN UNUSUAL OR INSIDIOUS PRACTICE, IS IT? |
| 06:12:33 |
|
NO, SIR. |
| 06:12:35 |
|
ONE FINAL POINT. YOU WERE ASKED IF YOU OR MR. HOWARD HAD TALKED TO YOUR ATTORNEYS. ARE YOU AWARE FROM... |
| 06:12:47 |
|
I'M AWARE OF THAT FROM THE NEWSPAPER. BASED ON YOUR PROFESSION NALL EXPERIENCE IS IT NOT COMPLON ... |
| 06:13:01 |
|
YES, SIR, YOU'RE RIGHT. |
| 06:13:02 |
|
AND ESPECIALLY IF YOU'RE ABOUT TO GIVE PUBLIC TESTIMONY UNDER OATH, WOULDN'T A PRUDENT THING TO BE... |
| 06:13:09 |
|
YES, SIR. |
| 06:13:11 |
|
LET ME MOVE TO A MORE IMPORTANT SET OF QUESTIONS. ONE OF THE THINGS THAT OFHEO WAS CRITICIZING, AS... |
| 06:13:32 |
|
I DO. |
| 06:13:34 |
|
HOW LONG HAS OFAY OWE BEEN IN EXISTENCE? |
| 06:13:38 |
|
THE CONGRESS CREATED THEM IN 1992678 THEY CAME INTO EXISTENCE IN 1993. |
| 06:13:43 |
|
THE STRUCTURE THEY'RE QUESTIONING OR RAISING ISSUES ABOUT, HOW LONG HAS IT BEEN IN PLACE AT FANNIE... |
| 06:13:50 |
|
A VERSION OF THE CURRENT STRUCTURE HAS BEEN IN PLACE SINCE 1991 WHEN I SGROINED THE COMPANY. |
| 06:13:58 |
|
AT ANY POINT PRIOR TO SEPTEMBER OF 2004, HAS OFHEO RAISED ANY QUESTION ABOUT THE STRUCTURE OR ALIGNMENT... |
| 06:14:11 |
|
NOT TO MY KNOWLEDGE? |
| 06:14:12 |
|
NOR MINE. |
| 06:14:16 |
|
AND HAS OFHEO BEEN AWARE OF THAT STRUCTURE? |
| 06:14:19 |
|
YES, SIR, SHOULD HAVE BEEN. |
| 06:14:21 |
|
AND HAVE THEY GIVEN YOU EXPLANATION AS TO WHY THEY DIDN'T RAISE QUESTIONS IN THE PREVIOUS 12 YEARS?... |
| 06:14:27 |
|
NO, SIR. |
| 06:14:31 |
|
AND DOES THAT TELL YOU THAT THEY DIDN'T THINK IT WAS A MATTER NOT WORTH QUESTIONING? |
| 06:14:34 |
|
I'D BE SPECULATING. THEY'VE ASKED US LOTS OF QUESTIONS OVER THE PERIOD OF TIME, AND AS FAR AS I KNOW,... |
| 06:14:42 |
|
ONE OF THE, NEITHER OF YOU WAS IN THE ROOM WHEN I HAD A CHANCE TO QUESTION MR. FALCON EARLIER, BUT... |
| 06:15:02 |
|
ONE OF THE CONCERNS THAT MRS. WATERS HAS RAISED AND OTHERS HAVE RAISED, IT APPEARS THAT OFHEO HAS... |
| 06:15:23 |
|
CONGRESSMAN, I THINK THAT THERE HAS BEEN AN EVOLUTION IN THEIR THINKING THAT THEY BELIEVE THAT THEY... |
| 06:15:39 |
|
FOR THE RELATIONSHIP TO WORK SHOULDN'T THERE BE SOME ARM'S LENGTH BETWEEN OFHEO AND FANNIE MAE? |
| 06:15:45 |
|
YES, I BELIEVE WE SHOULD RUN THE COMPANY AND THEY SHOULD EXAMINE THE COMPANY. |
| 06:15:49 |
|
IS THAT RELATIONSHIP OR THAT DESIRABLE RELATIONSHIP UNDERMINED IF OFHEO BECOMES AN ADVOCATE AND IF... |
| 06:16:01 |
|
I THINK IT DOES RAISE SERIOUS QUESTIONS AS TO WHO IS ULTIMATELY RESPONSIBLE FOR THE OUTCOMES. IF... |
| 06:16:10 |
|
LET ME ASK YOU ONE FINAL SET OF QUESTIONS. THE ULTIMATE MISSION OF OFHEO IS TO PRESERVE THE SAFETY... |
| 06:16:41 |
|
I'M VERY CONCERNED ABOUT THAT. |
| 06:16:43 |
|
COULD YOU ELABORATE ON THAT MR. HOWARD? |
| 06:16:48 |
|
THE MARKET, AS MR. RAINES MENTIONED EARLIER REGULATORS HAVE ENORMOUS POWER AND THEY ARE PERCEIVED... |
| 06:17:05 |
|
ONE FINAL QUESTION IF THE CHAIR WILL INDULGE ME, ONE THING WE HEARD ABOUT IS THE OFHEO WENT TO THE... |
| 06:17:26 |
|
I DON'T THINK OF ANY. |
| 06:17:28 |
|
TO YOUR KNOWLEDGE DID OFHEO GIVE ANY EXPLANATION OF WHY IT WAS SO TIME SENSITIVE THAT THE BOARD OF... |
| 06:17:34 |
|
I BELIEVE WHAT THEY SAID TO THE BOARD WAS THAT THEY THOUGHT THE MATTERS WERE SERIOUS AND THEY WANTED... |
| 06:17:47 |
|
IS IT OPINION OFHEO'S CHART TO TEST THE SERIOUSNESS OF THE BOARD OF FANNIE MAE? IS THAT WRITTEN IN... |
| 06:18:02 |
|
IF YOU CAN MAKE THAT YOUR LAST QUESTION AND WE HAVE ANOTHER PANEL. PLEASE RESPOND IF YOU CHOOSE. |
| 06:18:07 |
|
I'M UNAWARE OF ANY SPECIFIC STATUTORY REFERENCE TO HAD. |
| 06:18:11 |
|
THE GENTLEMAN'S TIME HAS EXPIRED. MR. CASTLE. |
| 06:18:14 |
|
THANK YOU VERY MUCH, MR. CHAIRMAN. I -- IT FUNNY HOW YOU THINK YOU WILL ASK ONE LINE OF QUESTION ... |
| 06:19:44 |
|
CONGRESSMAN IF YOU ARE BEING ACCUSED OF A CRIME THAT IS DIFFERENT. |
| 06:19:48 |
|
THAT MAY BE RIGHT BUT THE JURY IS OUT ON ALL OF THIS BUT THE WHOLE POINT IS THAT SOME REVIEW I THINK... |
| 06:21:21 |
|
I WANT TO GO TO ANOTHER LINE OF QUESTIONING. I DON'T WANT TO ARGUE WITH THAT MUCH EXCEPT I SAY THERE... |
| 06:22:02 |
|
I BECAME C.E.O. AT THE BEGINNING OF 1999. |
| 06:22:05 |
|
SO THIS HAPPENED AT THE END OF 1998? |
| 06:22:08 |
|
IT WOULD HAVE BEEN 1999. THE BOOKS ARE CLOSED IN JANUARY. SO I WOULD HAVE BEEN THE C.E.O. |
| 06:22:14 |
|
WELL, WITH RESPECT TO THIS, THIS CHANGE REALLY BOTHERS ME AND I DON'T KNOW IF THIS IS SOMETHING THAT... |
| 06:23:30 |
|
IT IS A VERY SERIOUS ALLEGATION. THE REPORT STATES NO FACTS. DOESN'T CITE ONE PIECE OF PAPER, NOT... |
| 06:24:02 |
|
DID YOU FIND -- DID YOU FIND ANY FACTS THAT WOULD INDICATE THAT THE DECISION IS IN VIOLATION OF STANDARD... |
| 06:24:15 |
|
NO, WE DIDN'T FIND ANY OF THOSE FACTS. OUR AUDITORS LOOKED AT THE DECISION AT THE TIME AND THEY APPROVED... |
| 06:24:28 |
|
BUT KPMG APPARENTLY FOUND AN AUDIT DIFFERENCE, A TERM WHICH ACCORDING TO HIS TESTIMONY DISAGREED WITH... |
| 06:24:36 |
|
THERE WAS AN AUDIT DIFFERENCE IS WHAT IS CALLED A SUBJECTIVE DIFFERENCE, WHICH MEANS THAT THERE ARE... |
| 06:24:52 |
|
SO THE DECISION WAS MADE, THERE WAS AN ADJUSTMENT MADE AND THE QUESTION BECOMES WHAT WAS BEHIND THAT... |
| 06:25:03 |
|
WE LOOKED AT THE CONTEMPORANEOUS RECORDS AND YOU CAN SEE IN THE CONTEMPORANEOUS RECORD IN FACT THAT... |
| 06:25:39 |
|
LET ME SUGGEST. THAT I HAVE ONE MORE QUESTION I HAVE NOT HAD AN OPPORTUNITY TO SPEAK TO MR. HOWARD.... |
| 06:25:51 |
|
I WOULD LIKE TO GO NOW BECAUSE -- |
| 06:25:53 |
|
WE WOULD BE HAPPY IF YOU LEAVE NOW. |
| 06:25:56 |
|
I'M SORRY YOU WANT TO SAY SOMETHING FIRST IN I RECOGNIZE THE GENTLEMAN. |
| 06:26:00 |
|
I JUST WANT TO PUT ON THE RECORD MR. RAINES SAID IN COMMUNICATING AFTER YOUR COMMUNICATION THEY SAID... |
| 06:26:52 |
|
IF I MIGHT, FIRST OF ALL, WHAT I GAVE YOU WAS WHAT THE CONTEMPORANEOUS STATEMENT WAS, NOT WHAT IS... |
| 06:27:02 |
|
RIGHT, THEY DIDN'T NEED IT BECAUSE YOU WERE NOW COMPLYING. |
| 06:27:06 |
|
NO, AT THE TIME THE SUBPOENAS WERE ISSUED, NOT AT THE TIME THEY WENT TO JUSTICE THEY TOLD US THEY... |
| 06:27:26 |
|
THEY SAID AFTER THE SUBPOENA WAS PROVIDED THERE WAS MORE INFORMATION FLOWING. |
| 06:27:31 |
|
THAT NOT THE REASON FOR THE SUBPOENA IN THE FIRST PLACE. |
| 06:27:34 |
|
SO THERE'S A DISAGREEMENT WE WILL HAVE TO NAIL DOWN. YOU HAVE YOUR OPINION AND THEY HAVE THRAST. |
| 06:27:38 |
|
I THINK THAT RIGHT BUT THE SECOND ISSUE ON WHY THIS IS MADE PUBLIC, THE EXACT SAME KIND OF EXAMINATIONS... |
| 06:28:03 |
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YOU ARE UNDER THE 1934 ACT. PUBLIC DISCLOSURE. |
| 06:28:06 |
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THAT NOTHING TO DO WITH THE 1934 ACT. UNDER THE BANKING LAWS EXAMS ARE SECRET AND THAT HELPS THE ... |
| 06:28:48 |
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WHAT I WOULD LIKE TO DO IS WORK WITH CONGRESS TO GET A STRONGER ENFORCEMENT PROCESS. THAT'S WHAT I... |
| 06:28:56 |
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YOUR TIME HAS EXPIRED. MR. KANJORSKI, DID YOU HAVE A FOLLOW-UP? |
| 06:29:00 |
|
PART OF WHAT WE HAVE TO DO ULTIMATELY IS COME UP WITH A NEW REGULATORY SCHEME HERE. AND I HAVE BEEN... |
| 06:29:47 |
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CONGRESSMAN, WE ACTUALLY HAVE 40 OFHEO EXAMINERS RESIDENT AT FANNIE MAE. SO WE DO HAVE THEM IN CLOSE... |
| 06:30:16 |
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BUT WHY SHOULDN'T SOMEBODY IN THE NORMAL EXAMINATION PROCESS BE SITTING IN TO KNOW WHAT THIS AUDIT... |
| 06:30:24 |
|
MY PERFORM BELIEVE IS -- AND I WILL CHECK -- MY PERSONAL BELIEF IS OUR EXAMINERS WERE AWARE OF THIS.... |
| 06:30:30 |
|
YOU OUGHT TO EXAMINE YOUR RECORDS AND GET THE WORKSHEETS AND SEE WHETHER SHOULD BE BEFORE , YOU SHOULD... |
| 06:30:49 |
|
MY BELIEVE IS, MY BELIEF IS OUR COMMERCIAL HAVE BEEN AWARE OF EACH AND RIVER ONE OF THESE ACCOUNTING... |
| 06:31:24 |
|
MR. CASTLE, DID YOU HAVE ANOTHER TWO MINUTES? |
| 06:31:26 |
|
I JUST HAVE ONE COMMENT IF I MAY. I HEARD YOU SAY EARLIER BASED ON THIS LEVEL OF EXECUTIVE OFFICER... |
| 06:31:46 |
|
MRS. WATERS. |
| 06:31:50 |
|
S.E.C. HAS BEEN REFERENCED A NUMBER OF TIMES HERE TODAY. AND I GUESS MR. FALCON SAID THERE WERE OVERLAPPING... |
| 06:32:23 |
|
WELL, THE S.E.C. HAS BEEN ENORMOUSLY COOPERATIVE WITH US IN OUR PROCESS OF BECOMING A REGISTRANT.... |
| 06:33:16 |
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HAVE THEY BEEN IN TOUCH WITH YOU SINCE THIS INFORMATION BECAME PUBLIC? |
| 06:33:21 |
|
WE HAVE HAD CONTACT THROUGH COUNSEL WITH THE S.E.C. ENFORCEMENT DIVISION BUT ALSO CONTACT NOT THROUGH... |
| 06:33:54 |
|
I ONLY HAD ONE FURTHER REQUEST OF YOU, MR. HOWARD. IN ORDER TO BETTER UNDERSTAND YOUR EXPLANATION... |
| 06:37:11 |
|
OUR WITNESS FOR OUR THIRD PANEL, IF SHE IS ABLE TO MAKE IT TO THE DESK WE WOULD INVITE HER TO DO SO... |
| 06:38:24 |
|
THANK YOU FOR YOUR PARTICIPATION. WELCOME. THE PRESIDING DIRECTOR, BOARD OF DIRECTORS OF FANNIE MAE.... |
| 06:38:37 |
|
THAT IS CORRECT. |
| 06:38:38 |
|
IT WAS PREVIOUSLY DETERMINED BY MUTUAL DISCUSSION THAT ALL THOSE WHO WOULD TESTIFY BEFORE THE COMMITTEE... |
| 06:38:51 |
|
I DO NOT. |
| 06:38:53 |
|
IF YOU WOULD NOT, DO YOU SEEK THE ADVICE OF COUNSEL DURING YOUR TESTIMONY? |
| 06:38:57 |
|
I DO NOT. |
| 06:38:59 |
|
IF YOU WOULD NOT MIND RISING AND RAISING YOUR RIGHT BEHIND I WILL ADMINISTER THE OATH. DO YOU SWEAR... |
| 06:39:09 |
|
I DO. |
| 06:39:11 |
|
CONSIDER YOURSELF SWORN IN IN AND UNDER OATH. AS WE HAVE EXTENDED TO ALL WITNESSES IN THE COURSE OF... |
| 06:39:36 |
|
THANK YOU, MR. CHAIRMAN, AND I HOPE I CAN KEEP MORE OR LESS TO THE FIVE MINUTES. I KNOW IT HAS BEEN... |
| 06:50:26 |
|
THANK YOU VERY MUCH FOR YOUR STATEMENT. LET ME QUICKLY SAY THAT I HAVE NO QUESTION EITHER ABOUT YOUR... |
| 06:51:47 |
|
I DON'T KNOW THAT I'M EQUIPPED TO MAKE THAT JUDGMENT. I HAD THE OPPORTUNITY TO MEET WITH THE DIRECTOR... |
| 06:52:11 |
|
DO YOU BELIEVE, KNOWING WHAT YOU KNOW NOW FROM THE SUBSTANCE OF THE REPORT MADE AVAILABLE TO YOU,... |
| 06:52:31 |
|
DO YOU MEAN WITH REGARD TO THE AGREEMENT OR GENERALLY SPEAKING IN OUR -- |
| 06:52:36 |
|
GENERALLY SPEAKING IN YOUR CAPACITY AS AN INDIVIDUAL BOARD MEMBER DO YOU BELIEVE YOU HAVE BEEN GIVEN... |
| 06:52:47 |
|
I WOULD SAY THE REPORT RAISES ISSUES THAT ARE CLEARLY SERIOUS AND THAT WHY AGAIN WITH OFHEO'S ENCOURAGEMENT... |
| 06:53:06 |
|
MY NEXT QUESTION IS NOT TO LEAD TO YOU A STATEMENT THAT WOULD BE INTERPRETED INCORRECTLY. I HAVE... |
| 06:54:32 |
|
I THINK SO COMPLETELY. I WILL SAY THEY HAVE IN THE PAST. AND IF I MIGHT COMMENT SINCE I WAS ONE OF... |
| 06:55:54 |
|
WELL, AT LEAST AN EXPLORATION OF ALL THE ALLEGATIONS THAT OFHEO MAKES SHOULD BE THOROUGHLY VETTED... |
| 06:56:10 |
|
ABSOLUTELY. |
| 06:56:11 |
|
I THANK YOU FOR THAT. MR. KANJORSKI. |
| 06:56:14 |
|
MADAME SECRETARY, AM I CORRECT THAT YOU HAVE BEEN ON THE BOARD AT FANNIE MAE FOR 14 YEARS? |
| 06:56:20 |
|
YOU ARE MAKING ME OLDER THAN I AM. 10 YEARS. 11 THIS YEAR. |
| 06:56:26 |
|
SO YOU PREDATE MR. RAINES' TENURE? I DO, SIR. |
| 06:56:29 |
|
AND YOU PREDATE ONE OF THE ISSUES THAT WE HAVE HAD THE REGULATOR TESTIFY ABOUT TODAY, THE FAS 91 AUDIT... |
| 06:57:14 |
|
I DON'T HAVE A RECOLLECTION. I PRESUME IT WOULD COME THROUGH AN AUDIT COMMITTEE REPORT AND I CAN'T... |
| 06:57:32 |
|
I KNOW VERY LITTLE ABOUT HOW REGULATORS OPERATE, AND EVEN LESS ABOUT HOW MANY ANALYSTS THEY HAVE AT... |
| 06:58:08 |
|
I DO NOT BELIEVE THERE'S A SYSTEMIC RISK PROBLEM AT FANNIE MAE NOR HAVE I BEEN IN ANY GHEARGS WOULD... |
| 06:58:34 |
|
ONE OF THE THINGS THAT AMAZES ME IS THE REGULATOR, IN TESTIMONY EARLIER TODAY, INDICATED, OF COURSE... |
| 06:59:26 |
|
I HAVE TO SAY I ONLY LEARNED THAT FROM THESE HEARINGS TODAY AND IT STRIKES ME THE WAY IT STRIKES YOU,... |
| 06:59:39 |
|
ONE OF THE THINGS WE HAVE BEEN STRUGGLING WITH OVER THE LAST YEAR AND A HALF IS TWO CREATE A, AN INDEPENDENT... |
| 07:02:23 |
|
I DON'T FEEL SO. I FEEL THAT THE AGREEMENT THAT WE SIGNED PUTS US ON A VERY ACCEPTABLE PATH TO GIVING... |
| 07:02:48 |
|
WELL, MY SENSE -- ACTUALLY, I SHOULD DISCLOSE FOR THE RECORD WE HAD THE OCCASION TO MEET YESTERDAY.... |
| 07:03:48 |
|
THANK YOU. |
| 07:03:50 |
|
THE GENTLEMAN YIELDS BACK. MR. SCOTT. |
| 07:03:53 |
|
THANK YOU VERY MUCH, MR. CHAIRMAN. I WANTED TO GO BACK IT A LINE OF QUESTIONING I STARTED WITH MR.... |
| 07:06:02 |
|
I WOULD BE HAPPY TO. AGAIN I HAVE ONLY BEEN ON THE BOARD SINCE 1994, BUT IN BOTH MY EXPERIENCE AT... |
| 07:08:14 |
|
YOU HAVE SEEN THE REPORT THAT WAS PRESENTED BEFORE THE COMMITTEE -- |
| 07:08:17 |
|
I ACTUALLY DIDN'T SEE THE PAPER THAT WAS HANDED OUT YET, NO. |
| 07:08:20 |
|
BUT YOU ARE FAMILY WITH THE BONUS AND STRUCTURE AND COMPARISON? |
| 07:08:23 |
|
VERY MUCH. |
| 07:08:24 |
|
TO YOU STAND BY THAT -- |
| 07:08:26 |
|
I STAND BY WHAT WE DID. I CERTAINLY DO. AND I THINK THAT I HAVE FOUND AGAIN MY EXPERIENCE ON A NUMBER... |
| 07:08:43 |
|
I THINK THIS IS VERY IMPORTANT TO GET ON THE RECORD BECAUSE ACE SAID EARLIER, THERE HAVE BEEN SOME... |
| 07:10:22 |
|
AND MR. SCOTT, THAT WILL BE YOUR LAST QUESTION. |
| 07:10:25 |
|
LET ME ASSURE YOU TWO SIGNIFICANT THINGS. ONE THE AGREEMENT WE SIGNED ITSELF PERMITS US -- I THINK... |
| 07:13:08 |
|
THE GENTLEMAN'S TIME HAS EXPIRED. MRS. WATERS. |
| 07:13:13 |
|
THANK YOU VERY MUCH. WOULD YOU PLEASE GIVE ME THE CORRECT PROCEED NEWSPAPER SHATION OF YOUR NAME.... |
| 07:13:20 |
|
KOROLOGOS. |
| 07:13:23 |
|
I WOULD LIKE TO THANK YOU FOR COMING HERE TODAY. I DON'T KNOW HOW LONG YOU HAVE BEEN HERE BUT YOU... |
| 07:19:36 |
|
AND THAT WOULD BE THE GENTLELADY'S QUESTION BECAUSE HER TIME HAS EXPIRED. |
| 07:19:41 |
|
THANK YOU, MR. CHAIRMAN. YES, I -- IT WAS A VERY DIFFICULT, IMPORTANT PERIOD FOR THE BOARD TO BE PRESENTED... |
| 07:24:52 |
|
THANK YOU FOR YOUR APPEARANCE HERE TODAY AND YOUR TESTIMONY AND GIVE YOU AN ASSURANCE THAT DESPITE... |
| 07:26:21 |
|
THANK YOU VERY MUCH. MR. CHAIRMAN AND MAY I SHALL I DON'T KNOW IF I NEED UNANIMOUS CONSENT REQUEST... |
| 07:27:10 |
|
BY WAY OF DISCLOSURE FOR ALL INTERESTED STAKEHOLDERS IT WOULD BE MY INTENT AT THIS TIME TO DISCUSS... |
| 07:28:13 |
|
AM I TO UNDERSTAND THAT YOU ARE SAYING YOU POSSIBLY WILL BE WORKING ON REGULATORY REFORM BASED ON... |
| 07:28:22 |
|
NO, MY VIEW IS I HAVE BEEN WORKING ON REGULATORY REFORM ALL MY LIFE. THAT WILL JUST CONTINUE IN EARLY... |
| 07:29:28 |
|
IF I MAY, MR. CHAIRMAN, I CERTAINLY AGREE YOU HAVE BEEN WORKING ON REGULATORY REFORM FOR A LONG TIME... |
| 07:30:17 |
|
I DON'T SEE FURTHER ACTION BY THIS COMMITTEE UNTIL ADDITIONAL INFORMATION IS PROVIDED BY BOTH PERSPECTIVES.... |
| 07:30:54 |
|
I THINK I UNDERSTAND, MR. CHAIRMAN, AND I GUESS JUST TO WRAP THIS UP, WHAT I'M REALLY GETTING AT IS,... |
| 07:31:29 |
|
LA LEVEL OF ANALYSIS WOULD BE RELEGATED TO THE NEW REGULATOR. I DO NOT SEE THE COMMITTEE GETTING ENGAGED... |
| 07:32:01 |
|
THANK YOU. |
| 07:32:02 |
|
MR. SCOTT. |
| 07:32:03 |
|
JUST TO MAKE SURE WE ARE CLEAR, THERE WILL BE NO MOVEMENT WHATSOEVER ON ANY REGULATORY REFORM UNTIL... |
| 07:32:18 |
|
NOT EXACTLY. WHAT I SAID IS THERE WILL BE NO FURTHER ACTION OBJECT THE COMMITTEE UNTIL CONDITIONS... |
| 07:33:17 |
|
YOU MENTIONED THERE MAY BE ANOTHER REPORT. IS THERE ANY EVIDENCE OR INDICATION ON YOUR PART THAT ... |
| 07:33:25 |
|
LET ME MAKE IT CLEAR ONE MORE TIME. I HAVE NO INFORMATION THAT ANY OTHER MEMBER DOESN'T HAVE. I HAVE... |
| 07:33:41 |
|
ALL RIGHT. |
| 07:33:42 |
|
AND WHEN I KNOW MORE I WILL BE HAPPY TO SHARE IT. IN THE MEANTIME I HOPE I DON'T SEE YOU UNTIL JANUARY.... |
NOTE: The transcript for this program was compiled from uncorrected Closed Captioning.
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