| 00:00:13 |
Angelides, Phil - Chair
TO THE BEST OF YOUR KNOWLEDGE? THANK YOU VERY MUCH. NOW GENTLEMEN, WE DO HAVE YOUR WRITTEN TESTIMONY. BUT AS YOU KNOW WE WOULD ALSO INVITE YOU TO MAKE...
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| 00:01:05 |
Falcon, Armando - Director
GENEROUS GOVERNMENT SUBSIDIES WHICH CONVERT VERY POWERFUL MARKET ADVANTAGES AND RUN THE BUSINESS INTO THE GROUND? ULTIMATELY, THE COMPANIES WERE NOT...
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| 00:11:18 |
Angelides, Phil - Chair
YEARS, THEY WERE ABLE TO OBTAIN 100% OF THEIR BONUS COMPENSATION IN THAT YEAR AS OPPOSED TO ZERO IF THEY HAD PROPERLY ACCOUNTED FOR THE 400 MILLION
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| 00:11:29 |
Falcon, Armando - Director
PROPERLY. >> YOUR LETTER ALSO ASKED ME TO TALK ABOUT THE IMPACT OF THE AFFORD A HOUSE AND ON THEIR FINANCIAL PROBLEMS. IN MY OPINION THE GOALS WERE NOT...
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| 00:12:55 |
Lockhart, James B. III - Director
2009. THE ENTERPRISE'S MISSION IS TO PROVIDE STABILITY, LIQUIDITY AND AFFORDABILITY TO THE HOUSING MARKET. DESPITE HAVING OVER 4.3 BILLION IN DEBT AT...
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| 00:23:52 |
Angelides, Phil - Chair
TO WASHINGTON? >> IT WAS IN 19 -- >> YES OUT. >> 1989 I
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| 00:24:05 |
Thomas, William "Bill" M. - Vice Chair
BELIEVE. >> 1989. MR. LOCKHART? >> 1989 AS WELL. >> 1989. I AM REMINDED OF A MOVIE WHICH BASICALLY HAS A STORY, BUT THEN IT IS SEEN FROM VARIOUS PARTICIPANTS...
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| 00:26:24 |
Lockhart, James B. III - Director
OF '07 INTO FEBRUARY OF '08. AND THEN SOME OF IT IS INTERESTING, BUT FOR THE SAKE OF TIME, MOVE ON INTO EARLY MARCH, WHERE THINGS START TO HAPPEN FAIRLY...
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| 00:35:36 |
Murren, Heather - Member
FINANCIAL SYSTEMS TO BE TRANSPARENT. I'M INTERESTED IN THE SOME INSTANCES IN THE MECHANICS AND PRACTICAL REALITIES OF THAT. SO I'D LIKE TO ASK A COUPLE...
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| 00:36:35 |
Falcon, Armando - Director
AGENCY AND TRYING TO MAKE SURE THE PEOPLE IN THE AGENCY HAD WHAT THEY NEEDED TO DO THEIR JOBS PROPERLY. AND SO I WAS OFTEN IN POSITION OF SEEING THE...
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| 00:39:14 |
Lockhart, James B. III - Director
WHERE YOU HAD TWO FIRMS THAT COULDN'T PRODUCE FINANCIAL STATEMENTS ON A TIMELY BASIS THAT DIDN'T HAVE GOOD INTERNAL CONTROLS, YOU HAD TO HAVE A REGULATOR...
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| 00:45:49 |
Angelides, Phil - Chair
BEAR STEARNS HAS COLLAPSED, I THINK IT'S FAIR TO SAY LIQUIDITY IS DIAGNOSE UP IN THE HOUSING MARKET DRAMATICALLY. THERE WAS A BIG CHALLENGED POSED HERE...
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| 00:46:36 |
Lockhart, James B. III - Director
COUPLE MORE QUESTIONS ABOUT THIS. MR. THOMAS LAID OUT A TIMELINE. HE REFERENCED ON MARCH 17TH A PRESS RELEASE THAT WAS PROPOSED AND THEN THERE WAS ONE...
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| 00:55:59 |
Falcon, Armando - Director
IS WHERE THEY THOUGHT THEY HAD TO GO TO ACHIEVE THAT. >> FROM MY STAND POINT, IT WAS COMBINATION. PARTIALLY BECAUSE THE GOALS HAD INCREASED SO RAPIDLY...
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| 00:57:30 |
Georgiou, Byron - Member
OF 12/31/09, THESE COST THE TAXPAYERS $100 BILLION AND ANOTHER 15.1 FROM FANNIE AND I'M NOT SURE WHAT THE NUMBER IS FOR FREDDIE. IT'S AGAINST $126 BILLION,...
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| 00:58:58 |
Lockhart, James B. III - Director
TAXPAYERS? >> IT DOESN'T APPEAR THAT WE ARE PREVENTING FORECLOSURES RIGHT NOW, DOES IT? >> THE ADMINISTRATION HAS THE HAMP PROGRAM AND IT'S STARTING...
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| 00:59:46 |
Falcon, Armando - Director
THAT GIVEN THAT'S A MUCH BIGGER POOL OF ASSETS THAN THE SUBPRIME AND ALT-A POOL, THE TRENDS IN THE SUBPRIME AND PRIME ASSETS THEY HAVE ARE SHOWING DETERIORATION....
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| 01:05:14 |
Thomas, William "Bill" M. - Vice Chair
THE PAST COOKING THEIR BOOKS OR SO THEY WERE FOUND TO HAVE DONE. I UNDERSTAND FROM YOUR TESTIMONY THAT PART
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| 01:05:22 |
Georgiou, Byron - Member
OF THE REASON WHY YOU DIDN'T HAVE THE OPPORTUNITY TO EVALUATE CREDIT RISK AS WELL AS YOU MIGHT OTHERWISE HAVE DONE IS THAT YOU WERE SPENDING A LOT OF...
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| 01:06:01 |
Lockhart, James B. III - Director
A TASK FORCE TO POTENTIALLY LOOK AT THE CREDIT RISK. >> RIGHT. LET ME ASK YOU A FEW THINGS THAT HAVE BEEN BROUGHT TO OUR STAFF'S ATTENTION. FANNIE WASN'T...
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| 01:10:55 |
Falcon, Armando - Director
CAPITAL ROLE WHERE WITH DESIGNED A VERY DETAILED CASH FLOW MODEL TO COME UP WITH A RISK-BASE CAPITAL REQUIREMENT. AND WHILE IT WAS AT OMB FOR REVIEW,...
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| 01:15:38 |
Holtz-Eakin, Douglas J. - Member
ALSO THEIR ROLE IN THE LARGER CRISIS WHERE THEIR FAILURE OCCURRED DURING THAT WINDOW, SEPTEMBER 6-15 WHEN WE SAW THE TRANSMISSION OF THIS CRISIS FROM...
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| 01:17:11 |
Falcon, Armando - Director
AS YOU UNDERSTAND. SO -- BUT IT WAS THAT GROWTH OF THAT PORTFOLIO UNDER THE ABILITY TO EARN THE SPREAD. AND SO THE MORE THEY GREW THOSE PORTFOLIO, THE...
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| 01:18:09 |
Lockhart, James B. III - Director
LET SOMETHING THAT BIG FAIL. >> MR. FALCON COULD YOU AGREE THE IMPLICIT GUARANTEE WAS PART OF THE BUSINESS MODEL? >> ABSOLUTELY. THE PANEL BEFORE YOU...
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| 01:24:53 |
Angelides, Phil - Chair
IN THE POSITION OF TRYING TO BRING DOWN THE ELEPHANT OR WRESTLING WITH THE MATRES. IN '05, '06, '07, THERE WERE EXAMS DONE. YOU DID ISSUE LETTERS. BUT...
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| 01:26:29 |
Lockhart, James B. III - Director
SECURITIES ON THEIR BALANCE SHEET. PEOPLE WERE AFRAID THE CAPITAL REQUIREMENT. THERE WAS A LOT OF THINGS HAPPENING THAT REALLY CAUSED SPREADS TO WIDEN...
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| 01:27:18 |
Thomas, William "Bill" M. - Vice Chair
CASA BLACA, WHEN YOU THINK YOU HAVE TO FALL BACK WHILE OTHERS AROUND YOU ARE LOOKING AT THE WORLD AS IT FALLS APART, YOU'RE SLOW TO COME TO THE REALIZATION...
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| 01:28:43 |
Lockhart, James B. III - Director
BEFORE LEGISLATION PASSED ON JULY 30. >> WE COULD HAVE LEGALLY BUT THERE WOULD HAVE BEEN CHAOS. THERE WAS NO FCIC TO BACK FANNIE AND FREDDIE. >> I GUESS...
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| 01:29:11 |
Angelides, Phil - Chair
ALLEGE. >> THEY HAD SOPHISTICATED INVESTORS. THAT WERE BUYING IT AND THEY EXERCISED THE GREEN SHOOTS OF THE GOT THE EXTRA 15%. THEY HAD PEOPLE THAT DID...
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| 01:29:28 |
Lockhart, James B. III - Director
VERY MUCH, AND THANK YOU BOTH FOR APPEARING BEFORE US. AND I PERSONALLY WOULD LIKE TO THANK BOTH OF YOU FOR THE PUBLIC SERVICE THAT YOU GAVE THE AMERICAN...
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| 01:29:50 |
Born, Brooksley E. - Member
VERY POWERFUL INTERESTS THAT WERE ALIGNED AGAINST YOU. I NOTICED THAT MR. FALCON, YOU SAY IN YOUR TESTIMONY THAT FANNIE AND FREDDIE POLITICAL MACHINE...
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| 01:32:44 |
Falcon, Armando - Director
WITH FANNIE AND FREDDIE. AND SO THERE'S GOING TO BE ANY KIND OF GOVERNMENT SUBSIDIZATION OR ROLE IN OUR HOUSING FINANCE GOING FORWARD, I THINK IT SHOULD...
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| 01:33:50 |
Lockhart, James B. III - Director
OVER THE YEARS, AND THAT IS A PROBLEM. LEGISLATION CAN BE A MESSY PROCESS, AND WE DON'T ALWAYS GET THE BEST PART OF IT. SO I THINK WE NEED TO TAKE SOME...
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| 01:35:08 |
Born, Brooksley E. - Member
ANY BROADER RELEVANCE TO THE FINANCIAL SERVICES INDUSTRY AS A WHOLE. YOU KNOW, FOR EXAMPLE, BANKS GET THE BENEFIT OF DEPOSIT INSURANCE AND OTHER SUPPORT...
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| 01:36:19 |
Falcon, Armando - Director
POLICY JUDGMENTS. WE WERE FORCED TO DO THE BEST WE COULD WITH THE AUTHORITIES THAT WE HAD. I THINK THAT'S A VERY KEY DIFFERENCE HERE. >> WELL, YOU...
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| 01:37:12 |
Lockhart, James B. III - Director
AT LEAST THE FDIC IS PREFUNDED THAT AT LEAST THERE'S MONEY THERE AND HAVE ALREADY PAID FOR SOME OF THE INJURED. IN THIS CASE THEY'RE GETTING THE IMPLICIT...
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| 01:41:39 |
Hennessey, Keith - Member
THAT, AND WHY YOU DREW THE LINE WITH SECRETARY PAULSON BETWEEN EQUITY AND DEBT? >> OKAY. THAT'S A GOOD QUESTION THERE. WE PUT THEM IN TO CONSERVATORSHIP...
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| 01:42:08 |
Lockhart, James B. III - Director
CAPITAL. WE SAW THE DEFERRED TAX ASSET WAS NOT GOING TO BE WORTH ANYTHING. WE SAW THAT THE LOW INCOME HOUSING TAX CREDIT WOULD THEREFORE NOT BE WORTH...
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| 01:47:20 |
Falcon, Armando - Director
HAVE A PLAN TO INCREASE CAPITAL EVEN ABOVE THE 30% THAT WE IMPOSE ON THE. WE PROBABLY WOULD HAVE MOVED AGGRESSIVELY TO BEGIN TO SHRINK THAT PORTFOLIO,...
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| 01:51:33 |
Angelides, Phil - Chair
FAILURE TO RUN THE COMPANY PROPERLY. IT DEPENDS ON A PROFILE OR THE UNDERSTANDING, OR THE ASSUMED PURPOSE OF THE COMPANY. AND IF YOU'RE A PRIVATE COMPANY...
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| 01:51:47 |
Thomas, William "Bill" M. - Vice Chair
OF PROFIT, AND THE ARGUMENT ABOUT THE SHAREHOLDERS AND THE REST, I'M TRYING TO SEE IF YOU COULD FOCUS ON THE FACT THAT THEY CAME TO UNDERSTAND, FOR...
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| 01:52:49 |
Falcon, Armando - Director
TO MASK A VOLATILITY. THEY WERE TRYING TO MASK SOME OF THE RISK IN THEIR BALANCE SHEETS, AND THROUGH THE PROCESS TRYING TO MANAGE OFHEO'S ABILITY...
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| 01:53:40 |
Lockhart, James B. III - Director
WANTED TO. AND THEY DIDN'T. >> I UNDERSTAND. AND I AGREE WITH YOU. THIS MANAGEMENT IMPLIES THE -- THEY DID KNOW WHAT THEY'RE DOING. THEY KNEW WHAT THEY...
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| 01:54:25 |
Hennessey, Keith - Member
2019. IS THAT THE BUDGETARY OR THE ECONOMIC? THE BUDGETARY COST IS 191. >> THAT IS THEIR ESTIMATE OF THE BUDGETARY COSTS, WHICH IS THE SUBSIDY FOR...
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| 01:55:10 |
Georgiou, Byron - Member
ANYTHING, THAT THE TREASURY HAS PURCHASED 75.2 BILLION OF FANNIE PREFERRED STOCK. AND IN ADDITION, THE FEDERAL RESERVE HAS BEEN PURCHASING MORTGAGE-BACKED...
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| 01:56:05 |
Lockhart, James B. III - Director
NEXT-DOOR NOTATION. YIELD THE GENTLEMAN AN ADDITIONAL FIVE MINUTES. >> I DON'T THINK I WILL TAKE THAT LONG. AS YOU WELL KNOW, GENTLEMEN, OUR MISSION...
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| 01:56:29 |
Thompson, John - Member
INSTITUTIONS. AND YOU, MR. FALCON, SAID FANNIE AND FREDDIE ARE FAILED ENTERPRISES. AND YOU ALSO DON'T THAT YOU'RE OUTMANEUVERED POLITICALLY, YOUR BUDGET...
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| 01:57:26 |
Falcon, Armando - Director
OF AUTHORITIES AND RESOURCES ON PAR WITH EVERY OTHER SAFETY AND SOUNDNESS REGULAR. >> COULD ANOTHER SAFETY AND SOUNDNESS REGULAR DONE THIS WORK? >> YOU...
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| 01:58:21 |
Lockhart, James B. III - Director
ME AGAIN THE PROBLEM HERE. ACTUALLY MAKES A LOT OF SENSE. I THINK THE NEW LEGISLATION THAT GAVE US A RESPONSIBLE AND NOT ONLY FOR FANNIE AND FREDDIE,...
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| 01:59:48 |
Thomas, William "Bill" M. - Vice Chair
HAD ASKED FOR ALL IN ONE YEAR. IT WAS A 30 BILLION-DOLLAR PROPOSAL. I WAS TAKEN ASIDE AND EXPLAINED, YOU DON'T DO THINGS THAT WAY. WE WILL MAKE IT IN...
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| 02:00:40 |
Thompson, John - Member
IN A REPACKAGED INDUSTRY WE REALLY NEED? >> DEPENDING HOW THE REPACKAGING GOES, NO. IT COULD BE DEPENDING, IF WE RE-CREATE NEW GSE'S, YES. IF WE GO...
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| 02:01:10 |
Lockhart, James B. III - Director
BANK REGULATORREGULATORS PUT OUT, WE WEREN'T EVEN INVOLVED IN AND GET WE WERE THE BIGGEST PLAYER IN THE MORTGAGE MARKET. SO THE KEY THING IN REGULATORY...
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| 02:02:25 |
Angelides, Phil - Chair
CAME IN, I BELIEVE IN WHAT, JULY, AUGUST? >> YES. >> DID THEY FIND THINGS THAT YOU HAVE NOT FOUND, OR WHERE THEY OFFER ME WHAT YOU HAD ALREADY FOUND?...
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| 02:03:05 |
Lockhart, James B. III - Director
NOT HAVE? >> GUESSTIMATE OKAY. MR. MUDD EARLIER TODAY NOTED THE DELINQUENCY RATE OF FANNIE AND FREDDIE LOANS VERSUS THE WALL STREET OR PRIVATE MARKET...
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| 02:04:23 |
Falcon, Armando - Director
1.5, 61, 70 TO ONE RATIO. BUT THE ONLY REASON I MENTIONED IT IT REINFORCES YOUR OBSERVATION THAT IS PART OF THIS MARKET THAT CAN LEGITIMATELY BE SERVED...
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| 02:05:49 |
Holtz-Eakin, Douglas J. - Member
ONE CAN GET FROM THE WEBSITES THAT I WANT TO TALK JUST A MINUTE AS WE WRAP UP YOUR ABOUT THE AFFORDABLE HOUSING GOALS, BECAUSE I WANT TO UNDERSTAND A...
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| 02:06:09 |
Angelides, Phil - Chair
CAN MEET OR DO THEY REALLY FLOW OUT OF HUD? WHAT YOU LOOK AT THEM FOR SAFETY AND SOUNDNESS? >> I WAS NOT -- THE OFHEO DIRECTOR IS NOT DIRECTLY INVOLVED...
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| 02:06:37 |
Falcon, Armando - Director
FANNIE AND FREDDIE. AND EVENTUALLY THEY CAME OUT WITH A NUMBER WHERE HUD THOUGHT IT SHOWED INVESTMENT AND HIGHER GOALS AND FANNIE AND FREDDIE WITH THE...
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| 02:08:31 |
Lockhart, James B. III - Director
NOT MARKET RELATED, WHICH WAS REALLY THE FATAL FLAW. >> SO IN 2004 AND THEY SET THEM ON AN ESCALADE. DID YOU HAVE THE ABILITY, STATUTORILY, TOO, LIKE...
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| 02:10:56 |
Angelides, Phil - Chair
WITH A NONPARTISAN MISSION REALLY TRIED TO DO THE BEST JOB OF EXAMINING WHAT HAPPENED HERE, THIS EVENT OF TREMENDOUS CONSEQUENCE OR SERIES OF EVENTS...
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| 02:12:21 |
Thomas, William "Bill" M. - Vice Chair
THERMOSTAT, BUT UNDERSTANDING WHAT OUR OPTIONS WERE, WE DO APPRECIATE AND THANK THEM. FOR THOSE WHO HAVE NEVER TRIED TO RUN THESE KIND OF HEARINGS...
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NOTE: The transcript for this program was compiled from uncorrected Closed Captioning.