time is needed to be done. >> take a look at 86. >> he was the head of the -- >> she was asking for help. "she was asking for resources. >> you told her, they would be

coming later on. >> i was identifying a potential avenue where we could get additional resources. >> she was asking for additional resources, would she not? >> yes. >> you write, "you should be getting four or five new associates and continuing to get them going forward. that might help. " her response was, "they will be a great help, but they will not start until august. " she needs help now, she's telling me. you are telling her that she will get a few in august.

then she says, 'let's talk about anything we might be able to doç in the interim. the ratings are not going to hold through 2007. " you are supposed to make sure those ratings stay. he asked me to begin discussing taking rating actions earlier on the poor performing deals. i have been thinking about this for much of the night. we do not have the resources to support what we're doing now. you thought the resources were adequate? she is telling you that you do not have resources to support what you're doing. a new process without the right support would be overwhelming. what was your response? >> my response was to request resources.

>> did you get them? >> i got some. >> did you get what you needed? >> it depends on the job. on this particular job, i feel we were adequately covered. >> were there some jobs were you were not adequately cover? in your judgment? >> i would tree offers according to volatility. >> that means something -- tree iage according to volatility. it >> it means that you were not providing adequate resources where they were needed. >> ernestine warner is in charge of the residential mortgage group. her job is to inform me when she needs resources and what those resources are. this e-mail is for doing her job.

what i am doing is now trying to address that request. to that is what she says in the interim. i am looking to move the entire associates class over. i understand we're talking february to august. in the interim, she is asking for help with the head of the group. i am also shifting people from other areas. this is an addition to the data area and the deal side, if there was the luxury of people on -- available. to go out and higher, you're looking at at least a six month learning curve, such that she needs the help now. i had to address this situation at that time by shifting people

over and by making sure that we can help now. it i think you get the resources -- did she get the resources that cheated when she needed them? >> sadly enough, your chart shows the amount of downgrades that we had to do to make that rating be appropriate. at that particular time, i would say that i was never satisfied with anything. that typically it was the budget process. i would request and document the need for those requests and then we would get them. for this particular -- at this particular time, and knowing

what i did in shifting over personnel, this was resolved. >> were the resources adequate? she was warning you that a storm was coming. we need resources. now. you are telling me that she got the resources that she needed? that is what your testimony is under oath? >> yes. which increased our staff, as i said i had over one and 15 people -- 115 people at any given time. >> take a look at exhibit 84, if

you would. second page. in light of the current state -- this is ernestine again. "i think it would be very beneficial for the surveillance team to have the work done by the thames to continue. -- temps. there are currently 1000 deals. " is that satisfactory to have that kind of a backlog? >> no.

for data loading and did a correction, i would use our affiliate' company and have them do a lot of the data loading and data collection. the people she is talking to our people in the group. she is seeking additional help in loading data. >> you had to borrow staff for new ratings, i understand. is that correct? >> yes. at different times, we shifted. >> how about at that time? >> in december of 2006? in february, we were working jointly. >> retaking staff -- you were short of staff the same time they were short of staff. you're both short of staff. >> yes, mr. chairman. everybody was working very hard. >> were you both short staffed?

>> you are always asking for more resources. >> this was all routine? >> no, not at all. >> you needed more staff. you saw something coming. >> yes. >> did you also need more staff? did you make request for more staff? did you have to pull staff from other parts of the operation? >> yes, we did. in february of stock -- in february 2007, we need to talk about getting more staff in general. i really need to add staff to keep up with what is going on with the subprime mortgage performance in general. the company was doing it well.

-- was doing pretty well. >> i cannot speak to that. >> can you speak to that? >> no. we had our hands full with wondering if these delinquencies and monitoring these delinquencies to see if they would be realized losses. >> in 2006, billy quincey rates for loans supporting subprime securities are hitting record levels. is that true? >> in 2006, yes. >> they outpaced the previous year for a subprime rmbs? >> yes. >> they were approaching 10%? >> the specific numbers sound correct. >> there were a lot of reasons for the 2006 lows that were

going bad so quickly. fraud in mortgage applications was up substantially. çstated in, lungs, in which it and does not verify the borrowers in, -- stated in, loacome loans. subprime was rapidly deteriorating. was that correct? >> which month? >> is it correct that by late 2006, your of the opinion that subprime was rapidly deteriorating? >> it was deteriorating at a pace that was higher. >> yes, i agree. >> i think our group was publishing that it was higher, but it was still tracking with some of the previous downturns. >> in late 2006, i believe that

standard & poor's advise the head of structured finance. subprime was rapidly deteriorating and that you felt the standard -- that you felt that standard & poor's should start downgrading. you felt that they should downgrade subprime? >> yes. at this time period. >> did you continue to bring that up in 2007? >> your charts show. when she resistance at all? >> i would not say resistant. she would want us to work in conjunction with the deal side and others, including frank and research and dark criteria in

order to ascertain whether or not we are seeing an anomaly where the delinquencies are front end loaded. the reality over the life transaction, we would not be seeing these large losses and downgrades. when it became apparent that those losses are being realized, yes, we made those ratings appropriate. >> you had a bone of contention between you and joanna rose? >is that a fair statement? it was a disagreement between new on this issue. was there a disagreement on this issue? >> about this issue? yes. >> it became such a bone of contention that she gave you a bad performance evaluation, didn't she?

you have strong convictions on this subject, about the rapid deterioration of subprime mortgages and the need to downgrade. is that not true? >> yes, but it was not clear to me that the evaluation was personal issues or related to this issue. >> it may have been related to this issue? >> it was not clear to me why she wrote that. >> it followed, however, some continued disagreements about the issue of the rapid deterioration of subprime mortgages and the need to downgrade. is that fair? was that bad performance evaluation came -- did it, that time? >> -- did it, at that time? >> at no time, i am not clear on

what the exact question is. >> you made a comment about her evaluation. >> my evaluation. yes. >> to evaluated you? >> go evaluated meat? >> lushy evaluating you? >> she evaluated -- she wrote that evaluation. >> you had a previous disagreement about downgraded subprime mortgages.

you had a disagreement about that. you have the knowledge that you did have a disagreement. did you not write in your comments about her evaluation that you had a disagreement over subprime death deterioration? do not write that in your reaction? -- did do not write that in your reaction? >> yes, mr. chairman. >> bottom line is that the credit rating agencies continued to issue aaa ratings on new subprime rmbs in 2007 despite warnings, despite a large percentage of the 2007 problems. it is a pretty sad story. a sad chapter in the history of credit rating agencies.

people put a lot of reliance on what you do. that is a fact and it is no longer as much of a fact as it was a couple of years ago. there was a real failure here. how we deal with it, we will know in the next few weeks. there are some structural problems here in terms of conflict of interest. there are some other issues as well. we'd see some of it -- we see some of it in history in these exhibits. these problems are coming to light. thank you. >> thank you, mr. chairman. >> we're going to recess for 10 minutes.

is the final panel with witnesses of today's panel has women mcdaniel jr., the executive vice president of moody's, mrs. kathleen corbet, i don't know if you were with us before but under rules of our subcommittee, all our witnesses are required to be sworn in. i would ask you to stand and raise your hands.

enter the following question as to whether you swear that all the testimony you're about to give will be the truth, the whole truth, and nothing but the truth, so help you god. >> yes. >> thank you. under our timing system, we will give you one minute notice, the light will turned from green to yellow, it will become red and five minutes so we would ask that you try to limit your oral testimony to no more than five minutes and sometimes by goes over and it does, it does but we would ask you to make that effort. mr. mcdaniel, we think will have you go first followed by ms. corbet. thank you both for being here today. >> thank you, mr. chairman. i am raymond daniel, chairman and ceo of moody's corp., the

parent of moody's investor services. i want to thank you to contribute today. the global financial crisis sparked unnecessary debate about the role and performance of numerous participants in the financial markets. many market observers have expressed that they did not better predict the deteriorating conditions in the subprime mortgage market. let me assure you that moody's is not satisfied and i am not satisfied with the performance of our ratings during the unprecedented market downturn of the past two years. we did not anticipate the extra barry confluence of forces that drove the poor performance of the subprime mortgages. we were not alone in this regard but i believe we should be at the leading edge of predictive opinions about credit risk. some key issues in closing the unanticipated performance include the steep and sudden nationwide decline in home prices and a sharp contraction that followed in credit available from banks or mortgage refinancing.

moody's did observe a trend loosening mortgage underwriting and escalating home prices. we highlighted the trend in our reports and incorporated into our analysis. as conditions in the u.s. housing market began to deteriorate beyond our expectations, we took the reactions we believe were appropriate based on the information we had. let me summarize our actions during the 2003-2007 timeframe. first, starting in 2003, we identified and began commenting on the loosening of underwriting standards and escalating housing prices through air sector publication. second, we tightened our ratings criteria in response to these loosening standards. in fact, between 2003 2006, we lowered our expectations. in practical terms, this meant that by 2006, have the mortgages in a pool would have to default to provide a recovery of to tap the appraised value of the home

before the subprime rmbs would suffer its first dollar of lost. this is a level of the anticipated loss that far exceeded the losses that actually occurred in the last recession spread even these assumptions proved insufficient. third, we took steps to watch and analyze the unprecedented market collections and behavior of market participants. as the crisis continued to unfold. one question before the market was," help borrowers, services, and banks would respond to interest rates and how that would affect the default rate. " with some market participants -- we saw some market participants performing in extraordinary ways. moody's monitress the actual performance of mortgages and securities we rate throughout the life of the security. the early performance of the 2006 loans was comparable to the

performance of similar subprime loans during the 2000-2001 recession not until performance data from the second quarter of 2007 was available, did it become clear that many of the 2006 vintage bonds might perform worse than those from the prior recession. in short, moody's saw the loosening of some standards and we reported our observation to the market and we incorporated our unfavorable views and about ratings. however, let me emphasize that we, like most other participants, did not anticipate the severity or the speed of deterioration that occurred in the u.s. housing market. nor did we anticipate the behavior of market participants in response including the speed of credit-tightening by financial institutions that followed. the unprecedented events of the last few years provides critical lessons to all market participants including us. over the past two years, we have undertaken a wide range of

initiatives to strengthen the quality and independence of our ratings. some of these measures include establishing common macroeconomics and areas for writing committees, publishing volatilities course and sensitivity analysis on structured financial institutions, observing and further bolstering the independence of our resources for our credit policy function. moody's is firmly committed to meeting the highest standards of integrity in our reading practices. we support constructive reforms and we are eager to work with congress, regulators, and other market participants to that end. i am happy to respond to your questions. >> thank you very much. >> thank you, mr. chairman. >> turn your microphone on. >> the light is on. my name is kathleen corbet. my career spans over 25 years of experience within the financial services industry.

for a three-year period, during my career, i served as president of standard and poor's, a division of the mcgraw-hill companies from april, 2004 until my voluntary departure in september, 2007. before turning to the substantive issues raised by the subcommittee's investigation, i would like to acknowledge the important work of the subcommittee and congress more broadly in its examination of the causes and consequences of the financial crisis. it is not difficult to feel personally touched by the pain experienced by many as a result of the turmoil and the subprime market and a financial crisis that followed. many people feel anger and in my view, that anger is understandable. accordingly, i believe strongly that we should reluctantly used the lessons from this crisis to focus on effective reform, stronger investor protection, better industry practices, and accountability. as background, i was recruited

to join the mcgraw-hill companies as an executive vice president of its financial services division in april, 2004 and served as president of the standard imports took over that position in september, 2007. during my three-year tenure, i lead an organization of out days in -- a thousand planes based in 23 countries which provided financial information and market analysis to its customers and that it broader market as a whole. the company was organized across four primary business units including rating services, equity research services, index services, and data and information services. each business unit was led by a seasoned executive having direct operating responsibility in their respective area and reporting directly to me. one of those units was waiting for services which issued credit ratings of hundreds of thousands of securities across the globe

including corporate security, government securities, and structure and financial securities. ratings services was led by an executive vice president, an executive with over 30 years of experience in the ratings business. he had day-to-day operational responsibility for that business. among her direct reports with the executive managing director of structured finance redding's is responsible for the day to day operations of the structured finance ratings group, the group that issued the ratings that are the subject of this subcommittee's focus. consistent with the s&p longstanding and publicly disclosed practice, ratings decisions were and are problems solely of committees comprised of experienced analysts and the relevant area. this practice is based on the principle that the highest quality analysis comes through the exercise of independent analytical judgment free from both on to an external or internal pressure. accordingly, during my tenure, i

did not participate in any rating or analytical criteria committee meetings regarding ratings on any type of security including mortgage-backed securities. all that said, i do hope to be able to provide a business perspective that is helpful to the subcommittee. in my view, is clear that many of the ratings that we issued on securities backed by subprime mortgages have performed extremely poorly. the snb has publicly stated its profound disappointment with that performance and i deeply share that sentiment. for my personal perspective, i believe the primary reason for these downgrades is that despite efforts to get the ratings right routing its analysis and historical data, s&p's assumption did not capture the unprecedented and unexpected outcomes that later occurred with respect to the housing market, with respect to

bar or behavior, and credit correlations. standard and poors, along with others, has been criticized for its failure to predict what happened to the subprime market and in many ways, that criticism is justifiable. moreover, the substantive outcome of the severe economic downturn and downgrade of securities backed by subprime mortgages highlight the challenges inherent and eight -- and the nature of ratings. ratings are opinions at their core about what may happen in the future. specifically, the likelihood that a particular security may default. i think that most people agree that predicting the future is always challenging and outcomes can often turn out very differently than even the most carefully derived predictions anticipate. the key from my perspective is to learn from these experiences and to take specific actions to improve. the credit rating industry has begun to respond in a constructive fashion.

there is much more to be done. to the course of history and for many market cycles, the credit rating industry has put an important role in the financial system for nearly a century. i do believe that has the opportunity to continue to do so to continual improvements and from a program of regulatory reform. again, i appreciate the goals of the subcommittee's work and would be glad to answer any questions that you have. >> thank you both. before we start with questions, let me put into the record a statement of the attorney general of the state of connecticut, richard blumenthal. he is the attorney general and has made a very powerful statement about the topic of the hearing today which is wall street's financial crisis, the role of credit rating agencies and that will be made part of the record inappropriate place.

-- in an appropriate place. were you here earlier? >> yes, i was. >> i was here for the second panel. >> in that case we may have to repeat a little bit. some of the questions. the first exhibit we used it is exhibit 94b or standard and poor's analyst wrote and maybe ms. corbet you can look at that. vertical is politically closely tied to bankamerica and is mostly a marketing job helping to take risk of books. bankamerica does not seem we have to do this. this deal was rated by standard

and poor's. the analyst said the deal was not likely to perform. then, the next transaction we looked at -- that want to look at with you is fremont. that is exit 93bg. \ -- exhibit 93b. standard and poor's was asked to rate and rmbs. this is a subprime or under known for poor quality loans, fremont. and e-mail was sent by the s&p ratings analyst and a supervisor saying i have a goldman deal with some pine from a

collateral. fremont collateral has broad performing not so good. is there anything i should be aware of. one supervisor said no, we don't treat their collateral any differently. another one says the current fico scores are there, the answer is good to go. there was a whole lot of evidence, a whole lot of evidence beside evidence right inside of standard and poor's that fremont collateral was problematic to put it$n mildly. fremont had stopped using 8000 brokers and that is exhibit 93d due to the loans that those brokers were for wedding. they had some of the highest delicacy rates in the country. as a matter of fact, there was an exhibit -- 93a, a moody's

analyst in december of 2006 before the fremont deal was raided said," holy cow, fremont is an allied air," talking about the delinquency rate being the worst in the country. that is exhibit 93a at the bottom. this analyst almost couldn't believe it. it was well known publicly, inside of the rating agencies that fremont collateral was problematical. there was also a california court of appeals filing where there was sufficient evidence in a lawsuit by the california insurance commissioner talking about fremont. there was a cease and desist order.

they had the fdic involved in fremont. all we did internally here is the they are good to go. the fact that we know there problematical does not affect us. as we start, will you, ms. corbet, note that fremont -- know that fremont issued bad loans and they have old fremont loans the way they handled and other loans? should that kind of a history be taken into account by s&p? >> first of all, mr. chairman, i am not familiar with this particular transaction or the people that wrote this e-mail. i would say, however, the analysis of any transaction in terms of both the model with quantitative and qualitative analysis, all factors are

considered. in the consider is not a rating. all factors should be considered, yes. >> so standard and poor's assigned lower ratings to lenders known for poor quality loans with high delinquency rates? >> i beg your pardon? >> did standard and poor's assigned lower rates to lenders known for poor quality loans with high delinquency rates? >> i would suggest that in this particular case in terms of assessing the collateral, this may be one piece of a larger discussion around a transaction. should anything be considered about the fico score and that has nothing necessarily to do, in this particular case, with the provider of this transaction.

i believe that whoever this person was a was responding said this should not make a difference that is another element of data. it does not mean that everything was considered. it just means it should not be changed in terms of treating it any differently. that wou;e be my observation. i don't know anything specific about this transaction. >> i am asking you generically -- in this transaction, you have an analyst that says i have a gold and steel would subprime fremont collateral. since fremont collateral has been performing not so good, is there anything special i should be aware of? the answer is, we don't treat their collateral any different. my question is when you've got fremont which is not only publicly but internally, an analyst says three month collateral has not been performing good, was that the right answer, don't treat their collateral any different? >> i am not sure what they were referring to.

whether they were considering it in another context? >> was that the right answer? >> in a small context, it is not clear whether he is suggesting it should be different in another kind of model. >> should the collateral be treated differently where the collateral is coming from a company that is not performing so good? >> again, in the context of a different variables that need to be considered, i could not comment as to whether or not the particular query -- >> i am asking a generic question period should collateral was coming from a company whose collateral in general is not performing so good, should that collateral will be treated differently? >> about would be taken into consideration -- that would be taken into consideration. >> it wasn't here.

all i can tell you is that your company and i don't know if anyone cares to do anything about it when you get the kind of an answer but i would think the message should go to the leadership of an agency this is something which should be looked at, not it doesn't make any difference for the answer here is from the supervisor is it does not make any difference if their collateral is not performing well. you just said after the fourth time i asked, it should be looked at differently. >> it does not mean that it wasn't pretty >> you don't know that it wasn't. i don't know that it wasn't for we only know what the response was. use a was a wrong response. it should be a factor in how it is treated. right? >> it very well might have been. >> i am not asking you whether it might of been or was. it got a aaa rating. my question is -- should it be treated differently? >> i would expect it would.

>> and should? >> i expect it would be considered, yes sir. >> do you believe it should be considered differently. >> i would expect all of the provisions of these transactions should be considered, yes, senator. >> thank you. let me ask you, mr. mcdaniel, does moody's decide lower ready to lenders that are known for poor quality loans with high to link its rates? >> do you mean to the lenders themselves? >> know, to the loans. >> clearly, pools of lower quality loans versus higher quality loans as a credit factor, absolutely that i am not asking you that. i'm asking whether or not you assign a lower rating if you

know that the lender involved is known for poor quality loans with high delinquency rates? is that something you look at when you rate their loan? >> it absolutely is something we look at, yes. >> senator kaufman. >> thank you very much. to kind of concentrate on what it is we know. thousands of rmbs' were rated aaa and 2006, 2007 are now rated as junk. what would you give precisely as what you think would be the main reason why that would happen? >> i think there were a number of reasons. among the most principal

reasons were that we went from may period where there was a home price appreciation. there was low interest rates and low credit spreads so that there was a lot of credit availability. we had the introduction -- when we had the introduction of a softening in the housing market, the loose credit that had been available tightened very rapidly. that curtailed refinancing opportunities for many borrowers who were anticipating bay would be able to refinance their mortgages. >> paquette, ms. corbet? >> i would concur with all of that statement. indeed, it was predicting what

the likely outcome would be not only in terms of the housing market but also unemployment, bar or behavior, -- bar or behavior, credit correlation, all those in terms of the forecast. we are certainly not as great as the outcomes but actually transpired. >> essentially it was the housing market. >> that is a factor. >> mr. mcdaniel, as you said in your testimony, as early as 2003, you were talking about the housing market. you were saying that the housing market was in trouble so you knew as early as that this would be a problem. this did not come in 2006 as it is characterized by certain people as a natural the --

disaster. this housing and happened -- this housing thing happened. this is a constant theme we hear in these hearings. as early as 2003, you knew the housing market was a problem and you laid out what your concerns were. in 2006, 2007 you tighten your standards. an incredible number of these thousands, like 10,000 rmbs' are rated as a job. how does that happen? >> -- r -- as junk. bobble in 2003. >> you predicted the oncoming. >> we saw loosening underwriting standards and were where the

home price appreciation was occurring through this period, yes. >> ms. corbet, there is the chart. i am not saying -- in 2005, i send my children a printout from merrill lynch, essentially that charge. people say this is because there are so many people buying houses. if that was true, they showed another chart that rentals should have gone up but they were rock solid. we had a housing bubble. the fact that we were coming

onto a bubble -- you did not say it into peasantry but you were talking about a generally -- do you see my point? these products are still rolling off assembly lines with triple-a on them. >> that is exactly why we were raising the credit protection levels not associate with the hybrid securities. -- the highly rated securities. >> they were properly rated credit protections. those adjustments were overwhelmed by the act will performance of the mortgages that were created in the 2006, 2007. . >> do you feel the same way ms. corbet? >> standard and poor's was reporting on what they saw was the increasing risks of the housing bubble. throughout the course of 2004- 2005, through 2007, those

analyses and research with publications and teleconferences were provided to the market as well as what they expected the impact might be on subprime mortgages. >> what most people think is triple-a and what you do is not what you do but it is fair to say that if you are sending out all kinds of advisories and putting all kinds of things out, the triple-a's is still rolling off the assembly line and that is what affects investors right? we have a problem but another group of triple-a's is sent down the pike. historically, we did well because this never happened before. you have to have some kind of sense that there was a dark cloud on the horizon.

you get up every day and think about how we make this work and protect your brand and how you make this money. i know you don't take a part in doing the ratings but did either of you feel a little bit uncomfortable? did you get up in the morning and say you are reading these things aaa and it does not look good? when did you that maybe we should really take a hard look at what we are raiding triple-a? -- rating to play. -- rating tripple-a? >> we endeavor to take a hard look at everything we rate. >> regardless of the rating level.

somewhere in here is that there is a point at which you did something differently. was there any modification of behavior? did you go to the people on your board and say this is a bad situation. did you think you should do something different than you did yesterday? >> we certainly were aggressively monitoring the market and looking at the performance of mortgages and associating that performance with the credit protection levels in these deals. if you are asking what was probably the most important point in time at least for me, it was when we saw that the delinquency and the fault strands for the mortgages originated in 2006 departed from

the delinquency and doubled trend we had seen in prior recessions, most recently the 2000-2001. >> when did you think that was? >> that was in the second quarter of 2007. until then, they had been tracking almost identically to the default the link was the trends we saw in the previous recession and we knew that the transactions had more than sufficient credit protection to withstand the kind of a downturn. >> if i went back and look at the number of triple-a's going out the door as a percentage ever the first quarter of 2007, that would have begun to change? >> the credit protection levels were raised and the market shut down very quickly after that. >> ms. corbet, when did you first pulled your management team together and say that to did not think this is what

happened in the past. we are producing products and me to -- way too many of our triple-a's are defaulting and we should change our ways? >> standard and poor's is concurrent with its own research in publications of some of the stress as they were beginning to see in the marketplace back in 2005. they began to make changes in their criteria and a credit enhancement in 2005, 2006, as well in 2006, the number of downgrades exited the number of upgrades for residential mortgage-backed securities and a great deal of those were subprime mortgages. the actions were following the research and findings that were being reported to the marketplace. in 2007, falling the two

previous credit enhancements, the data was suggesting, the performance data was suggesting that it was even more serious than was previously contemplated. therefore, in february of 2007, ttájt downgrades on credit watch for subprime mortgages. in march, we reported also in a teleconference about what our outlook was in terms of expectations for the housing market and with the impact may be in terms of adapting them of this reporting is great but the key -- >> how many triple-a's are we sending out the door and retrospect when you look back on it, they were not triple-a but jump. that is really the key.

ms. corbet, were you here for the first panel? >> i was in and out. >> that is now with a set in the first panel. they said a number of things. they said it was incentives. mr. mckenna, they said there were incentives in the organization to get more business out the door and not worry about what the ratings would be, just move it out there, quantity over quality is the term one of the gentleman used. that was not raised as one of the problems. >> ratings quality is paramount at moody's. it has been throughout our history and continues to be. we rate according to published methodology is. ies.

our thinking is as transparent as a can be to provide the market market >> you think there was no incentive problem inside moody's that essentially everything went exactly as you just said3. . to the extent there were incentives for people to do things other than what you say, take a cold eye view of everything, you did not see it? maybe people were incentivize to move the product? >> we have many business objectives at the firm. none of those objectives are permitted to compromise ratings quality. people actively talk about whether our protocols and procedures are sufficient and should they be changed and that they can the and we can improve ourselves. when we can do that, we do.

>> in terms of what these four gentlemen were saying uniformly is something that you did not hear about at the time and don't see it being a problem and essentially, everything was working smoothly from your view as ceo? >> i was not aware of any incentives being misaligned. >> did anyone ever say they should be careful and not create incentives for market share and profits? maybe someone might get the wrong message and kind of, especially when you have the explosion of business you had during this period. ? ? this was literally an explosion of business. what they said was it is that

they are 8 yes, we can market. in business organizations i have been involved with, people come to me and say to let it get out the door. what the profit line and and be competitive. there are stories about market share or managers were in trouble if their market share dropped and when checked on why it dropped, the person said they are bad loans. the manager came back and said other people are doing it. you dropped three points and we cannot have that. did that go on ad movies? >> i am not aware. i have been with moody's 23 years. i am aware of any employee of moody's after being removed or terminated for a market share. >> how about getting with the program? >> i am --

>> what wouldou attribute the incredible growth during this period to? great management practices? >> the growth in the debt market. >> ms. korman, at best and paid -- >> certainly the growth in the credit markets but also in the three other businesses that s&p is involved in, the index services business is a very large and growing business. we have indexes and etf's as well as equity research. all four contributed to the growth at s&p. >> mr. mcdaniel, i am not asking about this specific email. it was a long time ago, october, 2007. this is from the moody's cheapest officer. analysts and managing

directors have reasonable arguments. judgment sometimes improves and the grades. this constitutes a risk to ratings quality. you still say that you did not have a deal in the organization that -- that the field in the organization for short-term profits had any impact on ratings? >> i am aware of the passage you just read. author of the passage was talking about gathering information from many different sources and the marketplace. issuers, investors, bankers, all with points of view.

that runs the risk of having our thinking matched the consensus thinking in the marketplace. the strength of the work we do is to have independent point of view. >> i got that. ms. corbet, when you were ceo of standard and poor's, did you ever run into someone coming to you and saying they felt under pressure to do some things in order to build business and increase profitability? never once? >> right. >> no. >> okay. one of the men on the first panel who had been with a number of years, said, whole time, he's worried aren't they going to see they are destroying our brand? by doing this short-term things, we are destroying our brand? mr. mcdaniel you never felt the