that summit these internal concerns are being made public and i take great pride in my job as chairman. part of that job is ensuring that my colleagues fully trust and are willing to work with me.

clearly, i have some work to do in that area and i am committed to improving that situation. a lot has been made of this particular paper and i think to put it in there -- >> can i go back to the apology again? >> the letter says you apologize if being a distraction. that strikes me as a classic non-apology apology. what are you apologizing for? i think it's important to be clear. >> i'm sorry if this is distracting for nuclear safety. that is our fundamental job. >> do you plan on apologizing for anyone, anytime soon about anything else? >> i absolutely intend to talk to my colleagues either individually understand their concerns and based on that discussion, i intend to do whatever is appropriate to remedy the situation.

>> okay, a while ago when senator in office asking questions, he asked, do you agree with the bottom line of the marquis report? i believe his answer was yes, based on e-mails you have seen from fellow commission. that's a pretty bold answer. >> i'm sorry. i was not my answer, senator. he met to agree with the bottom line is the marquis report, which i would characterize as follows, that all of this hubbub from commissioners is really a coup attempt and is all about slow walking safety. >> senator, i am not going to, on any congressman's improvement recommendations. >> my question is about what she think. to recruit the characterization? >> i was surprised to see the content of e-mails. those are clearly conversations going on without diathesis knowledge. i don't think that's in the

spirit of the openness in which we pride ourselves as a commission. and i think it's clearly indicative of a need for better communication among commissioners. so it's very disappointed when i saw a lot of those e-mails you >> well, so to clarify i'll take that as a yes. i find that pretty staggering. do you think any or all of your further commissioners hold nuclear safety and a low priority and you did? >> no, i think we all have -- i believe we have also different interpretations of what safety means. that is why we have a commission. >> senator sanders. >> this has been a very interesting hearing. i think there are two issues. number one, obviously the issue that is concerned to the people of the united states of america is that we make sure that our

nuclear plants are as safe as they possibly can be. there is a lot of concern, especially since fukushima about the safety of power in this country. and i suspect that what we have here, among five intelligent people, all of whom i am absolutely convinced and concerned about nuclear safety is perhaps a difference of opinion as to how aggressively and rapidly one moves forward. and i suspect there is a difference of opinion and now some cases are being caused a personality attacks across the chairman. so i say firstar, madam chair, my suspicion is looking at some of the those that have been cast. there's a difference of opinion amongst people. but the second issue that does concern me if some of the personal attacks that then made a cast mr. jaczko. he has been asked to respond to

charges of which he is not aware of. as i understand, mr. jaczko, there is a charge you have intimidated. some of your employees you have indicated to this media. >> that's correct. i learned within several days or week. >> so let me just ask my fellow commissioners. again, jaczko is forced to respond if something is not aware. have you ever lost your temper before other people you've worked with? >> no. >> well. that's interesting. ms. svinicki. >> i don't tend to -- i tend to get quieter if i have upside. >> okay. mr. train to come any chance to upset someone?

>> yes. >> mr. ostendorff? >> i immediately apologize in front of the entire people to witness it. >> and maybe i could ask my co-members of the senate with long careers i am sure never under any and insight inc. of her son anything that they were feeling badly about to any of their staff members. you know, the answer is i have no idea what kind of workplace mr. jaczko has a ruckus on at the undersea come up with someone who is aggressive in trying to do his job may have been some ways hurt the feelings of other people. i suspect that in all of our life, unlike mr. magwood i've lost my temper and inadvertently hurt peoples feelings. so i would say that i think the issue we have to focus on is everybody on your and our city has to do everything we can to

make certain that the people of the united states of america understand the nuclear power in this country is as safe as it possibly can be. and with that, madam chair, that is all i have to say. >> thank you very much, senator. senator sessions. >> thank you. well, i just don't believe that our problem here is policy difference. our chairman said she thought this was about moving expeditiously on about safe key and that the four commissioners didn't agree with that as a matter of policy and that this explains your criticism on the chairman in your letter to the president. and let me ask each of you, mr. magwood, is that the reason for you writing the letter

comment that you disagreed about moving expeditiously to ensure safety? >> no, not at all. as a matter of fact, the commission has taken initial action on task force recommendations except the first one at this point and actually has added to the agenda begun with the task force has contemplated. i feel we move forward comprehensively. >> ms. svinicki coming to believe there's complaints you've made only about moving faster for safety? >> no, i don't agree with that characterization. >> it has nothing to do is fukushima. >> i quit my colleagues. this is nothing to do with moving forward. >> i think i didn't get to complete my question about the report about staffing it was

reported that it is used authority to berate and compel staff to withdraw if owning paper that including asic -- and that was contrary to his preferred course of action. he taught about that in general, mr. ostendorff. are you aware that concern? >> the senate has dealt and this is referenced in the white house at the withdraw of the original staff recommendation of 511-0093, which had a detailed recommendation presented quite frankly bannister borchard and his deputy as to how to move forward its fukushima recommendations. the paper was strong and replaced. >> and nights in a june the commission members important information as he were speaking to make a decision? >> i would say that -- a >> it could have had that effect if you had and otherwise -- it

could have had that effect. >> yes, it could have. >> one of the allegations is the chairman used -- introduced political considerations as part of his discussions with a democratic appointee. are you aware, mr. magwood, of any instance in which you are urged for political loyalty for other reasons to vote one way or another on an issue? >> i think i would like to not answer that question right now, senator. the dates get back to you for the record. >> fair enough. mr. apostolakis. >> a long time ago once there was a hint that i should act in a certain way.

>> well, madam chairman, i'll ask about the incident of abuse of one of them. mr. magwood, your chief of staff stated quote, sometimes attacked dixie chairman used are threatening and intimidating. i understand that the rank award and distinguished career service a word. you have any reason to question her comments about her dealings with the chairman? >> no i don't, but i also don't think she's had personal experience in that direction. >> madam chairman, thank you for allowing this full hearing. we've had some disagreements. i think i'd urge the majority, madam chairman to understand

that i believe this does -- is divorced from policy differences. i think it really is a matter of awful operation of a commission who has to depend on reports and advice they get and be able to be sure the judgment of the chairman and declaring an cnn which the sole authority on the commission is very real and i thank the chair. >> well, i want to say before my good friend leaves -- and he has my good friend, but the chairman checked with the general counsel immediately before it taking on any of his powers. and within six, seven days -- i will put in the record without objection, he got a letter back explaining exactly what he was permitted to do. so i really think a lot of days -- that is why you think this is really about culture

agency, safety issues. here is another and this is interesting. at the same time these commissioners were exchanging e-mails and doing all that they did and plotting their letter whatever they did descend to white house against the chairman comment there is a confidential survey about the employees that every federal agents to you. this is what happened. this is supposed to be a man without leadership? this is a man cruel to his staff? listen to what happened. on the issue of effective leadership, the nrc was rated one out of 30 agencies. on the issue of fairness, one out of the 30 agencies. the issue is fair to supervisors. one out of 30. on the issue of family-friendly culture and benefits, one out of 30 while colleagues on the other side make it sound like you

don't really care about peoples feelings, your agency came out on top. one out of 30. so why is it that i think this is really -- a diversion is a nice way to put it. it's the way the chairman put it. the sub to be wished for something else. and mr. magwood, i have to tell you it's very disturbing to me. you did have opposition from 100 groups of invirase. i wound up voting for you because you came before us and said, i firmly believe that maintaining uncompromisingly high levels of safety is the most important job of any organization. that's what she said. and you had every single big player and industry support you. so don't say you didn't because i have the lesson i will put them in the record because let me just say this. why i am so troubled -- i sent

the nrc a letter emphasizing on a quote from the letter, the importance of transparency and urging the nrc to act promptly to implement the task force recommendations. that was the letter he sent to all of you. either way, you haven't done it and it's a nightmare for me to think that this is going to take 10 years, just like the other commission to. and that is a disaster and we'll talk more about that. one day after he sent his letter, your chief of staff wrote to you, sync will come at cache a letter from talks there in the task force report. i don't know if in fact will send a counter letter and then he replied it would be nice if someone did. why do you need a counter letter to a straightforward letter that says, will you be transparent? single ui properly? why did you find a need to on a counter letter to my very open

letter? >> to be honest, i don't remember that exchange. but let me say it was never any possibility for any question that we were going to release the task force report very quickly. as mentioned earlier, is a conversation about whether to reset a meet at late or get a chance to read the report. >> wait a minute. i'm going to send this to your e-mail. which you send us over to mr. mac with? that is not right. if you come before us to to get our votes and i have to stand up to 100 environmental groups that frankly i respect them so you know what time he convinced me. and then you have to get a counter letter from my good friend and adversary insert issues, senator inhofe, when all i am asking for is transparent to you quick action. it is extremely disturbing. so that is why i say this isn't

a court of law. i think we proved, i believe -- though of course they bring to bear certain prejudice about my own arguments and that is senator sanders and the other. but i think we proved today that this can't possibly be about what you say because your own staff waits this agency hired leadership in family friendliness. so it is not about that. it is not about grabbing power because your general counsel told you exactly what to do. and the iag, although there was less than a report that was disturbing, it was mostly the charges come its findings never found that she did anything improper. and you yourself have said it's a matter of my style and i want to change it. so let's move on from here. i'm happy to: senator barrasso. >> thank you, mr. chairman. mr. chairman, do you think these other commissioners have a lower

that you do? >> all commissioners, different ideas of what safety is that it gets to a question of can affect how safe is safe enough. my voting record shows that i tend to be -- at about the right word is here, perhaps conservative when it comes to safety decisions on the fence than i am willing to perhaps require more of licensees and that very issue to issue. it's hard to say that generically there is a way to categorize it. some situations i take more restrictive on licensees is probably the best way to put it. >> i'm looking at the letter he sent eight days ago to bill daley, white house chief of staff. unfortunately you say all too often when faced with tough

policy calls, a majority of this current commission, these four people have taken an approach that is not aspirate to have as i believe is necessary. so that says to me that she truly don't believe they have the same commitment to public safety as you do, at least as i read your words right here. >> senator, that is a reflection of our voting records. we have disagreements on policy and i don't have a problem with those differences on policy, but i think if you look at her for records, there are some differences in our take on the approach to safety at what is appropriate. to the other four commissioners, given everything that's happened, given your repeated attempts to solve the problem internally, i guess i would ask him into the company is the chairman's behavior is going to change and i have a couple of minutes left. is there anything else that for a few signed this letter would like to add?

i would just start with mr. magwood and work our way down. >> i don't think i anything further to add. i am skeptical that the change will occur. one can always hope, biscuit system is quite high. >> ms. svinicki. >> i don't have anything additional to add. i would say it's not my nature to completely give up on people. i don't approach relationships that way. >> chairman apostolakis. >> and hoping he will. >> this is an extraordinarily difficult issue. i know that the four of us have done what we think is right, that we've had great concerns an obligation because the damage solving be done to the agency. i take the chairman at his word of what he said today that if he is committed to changing the way of doing business and behavior,

then i will listen to his proposed changes, but i will tell you we had great confidence things will change, we would not have sent a letter to the white house and we did. >> when i read this article -- this letter that the chairman does not believe he can insert any of your names because he said all of you, the majority of the current commission has taken a purchase them as protective of public health and safety that i believe is necessary. to believe you take the position that are necessary and are protective of public health and safety? >> as combined to. >> absolutely. >> yes, senator. >> absolutely. >> thank you, mr. chairman. >> thank you. senator sanders. >> i think it is just important to reiterate to make sure we have it in the record that after all of the attacks about the

quote unquote hostile work environment that in the major surveys that are done on various government agencies in terms of being the best places to work time after time on issue after issue, the nrc comes out to be number one and number two out of 30 or 31 agencies. that's pretty good. i would congratulate leadership for the nrc and others for making that happen. there is an issue that has concerned me for a while. other members of the senate have to vote, we got onto the table. we say yes, we say no and two seconds the whole world knows how we vote. but you guys have a much more obscure and complicated process. and it concerns me very much. so i am going to ask you a very, very simple question.

to increase accountability for the american people know how you are addressing in 39. important issues. but each of you commit to conduct both in public, where people can see for themselves how you fulfill your responsibilities to protect public health and safety. we'll start with mr. magwood and move on down the line. >> i have to be honest. i'm not sure you understand the question. because the public to affirm our decisions, >> when we though, we go say yes or no. sometimes you go and people don't know about it for a week. sometimes those aren't reports that you make. that's an unusual way to do democracy. so what i am simply asking is, will you commit to us to conduct

votes and public were people can see for themselves how you vote. >> that may just commit to follow up with you later senator. i'd be happy to visit >> i just don't think it's not a complicated question. people would think we were so if we vote this afternoon but nobody knows how it goes than two weeks later senator sessions are bernie sanders issues about describing how he voted. did you go? yes. did you go? no. >> chairman jaczko can release his foes within two or so they podcasting as those. that's certainly something i'd be willing to consider. >> commissioner svinicki. >> my understanding is the voting process is something semi-moved in many boards and commissions and when a decision is the right data, those are posted to the nrc website and

made public. he fundamentally different voting system of yes or no would be a real departure from the way we vote now, which is to vote on complicated 100 page reports. we offer both a lot of commentary arrive at a majority. >> i would tell you sometimes we vote on a thousand page reports, but with two and three seconds later we get telephone calls telling us from angry constituents why we voted the way we put it. i am asking you, would you support changing the way? >> i support the process that we use now allows us to consider complexity of these issues that have been used since the beginning. >> i understand. in all due respect, commissioner, some of the issues we deal with are fairly complex as well. chairman jaczko. >> i believe we should return to this is overtaken by the

commission to pass. the commission conducted its deliberations on voting in public meetings and actually conducted the actual process of voting and public meetings so that the notation voting process was introduced in the 80s by a particular chairman and it's been refined over the years. i think it would turn back a voting session where we can in the room and say yes or no. we deliberate, discuss the money to edit or modify positions on public simultaneously rather than the process we use simultaneously. >> thank you. mr. apostolakis. >> there is great value in the notation vote, voting process we have now that are very intense deliberations with my staff and all of that. and i don't lose that. i am all for public information, public vote and so on as long as i don't lose that.

i am not sure it deliberating the public is as easy as the chairman presents it, but i am willing to listen. the votes in our public. they are delayed sometimes, but they are public accepting adjudicatory mashers. >> senator sanders, i am looking to make if you push them to the task force reports a five page single spaced vote is made public a couple weeks after his cast and so i would say the notation voting process we currently undergo provides useful information by physicians and transparent. >> i'm not quite clear. what does that mean? he voted yes or no in any given explanation as to why you voted. >> sir, i worked as a counsel for the house armed service i see many votes in the senate and house and understand most are yes or no votes. we have different process alluded to here that the

notation was to explain our positions. these are complicated matters. >> believe me, i appreciate that virtually everything that the united states congress does is enormously complicated. at the end the day cometh the creek we can for transparency. mr. apostolakis, everybody agrees with you. there should be wholesome debate. and take as much time as you can to argue with each other at work out compromises. to what you do. but i think to the degree that that can be done under the public scrutiny in your boots are made public on the data you make them, i cannot see why that is not a positive thing. not a chairwoman. >> yes, any of my colleagues want to allow us to have questions then we've had a healthy disagree a lot and motivations and how this thing

happened and i would just express my appreciation for those members who thought, if necessary, to race at the white house on the problems that she was solved. i believe you did that with integrity can't interest for the government and i believe that is a factual basis has been well established that adjusted values by concerns. thank you, not a chairman. >> thank you, senator. >> not a chairwoman come i would. we have four members here to republican, to democrat. all unanimously confirmed by the united states senate, three appointed by president obama, it is historic to sign a letter like this and it is courageous and i want to thank you for your commitment to public safety and i am grateful for this commission. thank you for being with us here.

>> thank you. i want to thank all of the commissioners for being here. i want to say to the chairman, you are one strong, good man. you're a good man. and as i look at the history of nuclear power in this country, the people who are calling for safety get pounded. and i get back to that because there's just no proof that what my colleagues are saying about your leadership, were just at the time they are writing the letters in cleaning and all this amount, you are being raided by your own staff and your own employees as one out of 30 on effect to leadership in terms of the way you run the place. i am disturbed of what is going on. then i had at this the last time we met. and i urge do at that time,

please all of you, sit down and do what is right for the country. a lot of us took our chances i would vote for you on both sides of the i/o. both sides of the aisle. because this agency is not about partisanship. it is about safety at the highest degree. because like it would happen that fukushima. god forbid something like that ever happened. they put the country on a sudden whether it ever requires, history will know. but it will never be the same. so we are not dealing with some harmless waste material here. you know that. you are all smart on this. so i am going to ask you each one question. you must answer yes or no. it is not a hard question. i am going to send you a letter to senator sanders and others, hopefully a both sides. i don't know.

i'll have to circulated. go ask you each individually of the 12 recommendations made by the staff, which do you feel can be accomplished within a timetable of 90 days, six months, a year. we will give you some chance to explain. and i'm going to ask you today, if you would answer that letter to the best of your ability. if you don't know, that is unfortunate. you should not disappoint. my fear is we are going to wait 10 years to get this done. and my people at home they shut down the nuclear plants within initiative. they need to know that you, we are doing a job. so that letter is very important. he said yesterday on other occasions and have been exactly the data. so before you rant it, if you feel you can't answer that letter, say no.

so will you please respond to me and i will share with all members of the committee, the sides of the aisle on which of the 12 recommendations you think could be done within 90 days, six months in a timeframe your best analytical answer for each of those. i'll start with you, mr. magwood. we visit that letter? >> yes. >> yes, ms. chairman. >> implemented why don't you guys go out and celebrate the holidays together. i will buy, honestly. and i just feel you are all so smart. let's get on the same page,

stewart is right is right for the country. thank you very much. we stand adjourned. [inaudible conversations] >> former ceo, jon corzine testified that had been transferred to a european affiliate before the

>> an estimated $1.2 billion in funds are missing from the financials were, mf global which got for bankruptcy in october. the former ceo of the company, jon corzine with the company's chief operating officer testified before the house financial services oversight

subcommittee. we'll also hear from auditors and make your leaders involved in the investigation. [inaudible conversations] [inaudible conversations] >> the members previously agreed there would be 10 minutes of opening statements on each side, i ask unanimous consent of members of the financial services committee joined us today would be entitled to participate as mr. royce, mr. answer link, mr. hensing, mr. graham will attend. so with that objections to work. i also would come up for a bit of a housekeeping issue, we are going to try to do the opening statements, but we may have an

opportunity for witnesses to give their opening statements. we were told that somewhere around 1:30 that we may have a series of votes. we think there are three or four votes in that series. we're going to continue the hearing during that period, but it looks like i'd be difficult to do since there's three or four votes and so i think the best thing for a committee to do is ask the ranking member to have different ideas for us to adjourned and briefly make those votes. and come back. and i else go ask unanimous consent that if any other members were from the financial services committee, he allowed to be a part of the hearing as well. at this time, i will now recognize myself for an opening statement. this is a very important hearing. we are here to find out exactly

what happened at mf global in their bankruptcy. i think we want to accomplish three things in this hearing. number one, we are very alarmed and a lot of people are learned we still have customer funds that are missing. and that number jumps around anywhere from over a billion dollars to a number less than that. it's very disturbing. this is very historic desegregated fund -- i think it is the first time since the law was put in place that segregated fund of caused customers to suffer a loss. the other thing we want to look at is, with their regulatory failure during this process? this is an entity that has a number of regulators and we know that some regulators showed ehrlich thinks about what was going on in this organization.

others were caught by surprise. that is a very disturbing fact. the third thing we want to look into is the corporate behavior within this organization during this time. what we now it's during this period of time these transactions and positions are put on the books. people within the organization were saying these were risky and that in fact give the market when a different way, it could actually take this firm down and in fact, that is exactly what happened. this is all important because as we look at trying to put this puzzle together, what we need to ascertain is where the failures were because they will be those who called to say we need are regulations. i would remind you we have sarbanes-oxley and dodd-frank and this event actually happened anyway. so when we look at the regulatory side of monique to see you know if we had a regulator who weren't doing

their jobs, exactly what was the reason that some of the regulators were surprised. the other thing is internally when we look in the corporate structure, what we saw was one person had an amount of authority, mr. corzine. he was the chairman of the board, the ceo of the company and according to some people we've interviewed, the traders of this company. and so therefore are there's no really hairier or higher offer than protecting investors and customers at this time to me. so i hope that we will have a very robust hearing today. and we look forward to hopefully finding some of the answers of these unanswered questions. with that kind out yield to the ranking member, mr. capuano. >> thank you, mr. chairman. that mr. chairman, the obvious

question is where is the money? their people a better position for more intelligence than to chase that down. but there's an awful lot of questions for me. first i'd like to talk about conflicting statements over the past couple of days with different hearings. different people said different things. i want to know what the truth is. i particularly interested to know what he does anyone else out there who have similar exposure to inhibit the same things are different things. does anyone know about it and does anybody care? i say that because the more i look into this, the more incoming to not a conclusion, but a suspicion they may have been little here that was technically illegal. i read through the testimony, the word misuse has been used a lot. but that is a legal statement, not a statement to a want to go and be. there's still a lot of questions of what was allowed, should have been allowed? is now closed up for future people going forward?

there's all kinds of things we need to talk about. we need to ask what the regency is doing, the auditors. the last i heard mf global was subject to try different regulators. that's ridiculous. i am not afraid of regulation, but that can't possibly work. it is nothing but a form shopping for someone to point fingers at someone else. i was in my job. it is their job. we have significant of self-regulation. it's a fair question of whether safe regulations applicable in today's world. it's another thing today. the money would be the headline and that's what everybody wants to know when i don't think we'll find out. but i hope this is the first of a series of hearings over the next several months because i just can't imagine we'll go to get good answers to the real questions i had today, but hopefully we will do so in the future. >> i think the timing.

>> thank you, mr. chairman. that we are here to examine not simply have been in a financial newspaper, collapse of mf global was the largest bankruptcy -- one of the largest bankruptcies in our nations history. this failure has change lives, impacted businesses and will cost american jobs. i look forward to hearing today's testimony i look forward to reviewing actions of their ballot to agencies. if they provide proper oversight and what could they do to prevent risk-taking that apparently occurred at mf global and reportedly conceded they said the chief risk officer. once again the confidence in our financial markets has been shaken, but the biggest frustration of israel people of austria money. this is something more than a loss on a balance sheet. farmers can a regular everyday people. the trustee continues to work with regulators on identifying various transfers and trying to locate missing funds.

this is a hope that it's true. victims need to be made whole and anyone who acted improperly certainly needs to be punished. my hope is today's hearing helps to ensure this doesn't happen to another family in the heartland or anywhere in the united states. people are tired of opening newspapers and read stories about failures on wall street and failures of regulators to identify catch problems. i share their frustration that many americans feel reading stories about a major financial institution behind and i sympathize with hard-working americans whose lives definitively impact did that flies in the federal government's regulatory regime. there was a breakdown of corporate leadership which has been a knowledge in some of the previous hearings. clearly there's also failure and a regulatory structure. ultimately agencies have jurisdiction to lack of communication and correlation that might identify the problem sooner. i expect the hearing will continue to bare facts of what happened at mf global and

implement the reforms. finally, mr. chairman as we identify problems that helps us to map out a way forward that restores confidence, especially as regulatory system undergoes his largest restructuring in over 80 years i look forward to the testimony. thank you for calling the hearing, mr. chairman. >> i thank the gentleman in the ranking member of the full committee, mr. franks. [inaudible conversations] >> thank you, mr. chairman. this is an interesting switch. for some time now i have been hearing my republican colleagues complain about over regulation and interference with the area. today we are in complaints under regulation and efficient private sector. the facts are clear whatever was done in competently, incorrectly , perhaps dishonestly although no one has established this yet, was done in the dirt. the complaint is that the public or didn't do enough regulation.

now it is true the financial reform bill is now in place. but he would sign into law in july of 2010. we have not yet seen a full implementation. in fact, one very important vote relevant to trying to deal with the problems here was just adopted earlier this month. in the way in which he was held at the spell of them. the chairman of the commission, mr. gensler, who does a good job couldn't get their info he needed. this is not the first time at the same same problem with regard to the anti-speculation role. and i say that because this commission structure, which can lead to delay and the adoption of report rules is exactly what my republican colleagues want to draft anticonsumer bureau, hoping for similar results, much less effective action. let's go back to the whole question of regulation. members of said regulators into

a a good enough job. probably because the extent to which we can expect regulators to reply volunteer help is limited. the regulators are not the salvation army. what we have are my republican colleagues consistently resisting the funding that the commodity futures trading and primary regulator, there is clearly a primary sponsor of the cftc. i don't think regulatory diversity was a problem. but we have is a significant lack of funding for the cftc. it's a complicated matters that require intelligent people to do this. the president asked for $308 million. 117 million to be funded through the user fee. that is the president wanted additional money to come from those in the business. my republican colleagues decided to defend the interest of those in the business and rejected that what outcomes from the

taxpayer. first they make sure we don't get money from the industry and it all comes from the taxpayer. in the use of that because of them it's all coming from the taxpayer is a reason not to fund it adequately. this is a taxpayer can't afford another 100 million for people to support wars in afghanistan and everything else comes somewhat hard for me to accept too seriously. let me ask you, how much time of a god, mr. chairman? >> the ranking member has yielded to additional time. >> thank you. they are inadequately funded. the republican appropriations committee this year voted them 172 million, less than a cut and occur here. that's for the next fiscal year. the democratic appropriators did help to get it after 205 million, but 55 million discount for personnel and only put into i.t. over the objection

of the cftc. so the cftc has been hampered. i believe it's been in effect a little, with some of these event started. @adequate test it out. to fully fund the cftc to adopt regulations to do the job. i think my republican colleagues have this dilemma. they are opposed to regulation in general but now the regulation should be better and we are told these regulators are interfering with our private enterprise. you cannot logically insensibly be for regulation in particular when you have opposed regulation in general and have in fact disabled the regulators from doing it. there's one other question i want to raise and that the self regulatory model. much of this regulatory model was followed in the then skeptical of her post closely tied to increased fat. i to talk reticular layabouts a

day. have a great deal of regard for the people at the day. when we drafted the regulation, i was interested in their input. i want to raise a question on why to conflict of interest. the national association of securities dealers, which finger is a self securities part spun off from the people running the exchange. no such change has taken place. i doubt been in the slightest there is any conscious happening by cme. i've too much regard for the people there. one of the things they have to look at is if you're going to haven't asked her out, should it be spun off in the way the national association cannot exchange. should we create a similar degree spin off if the cme and people in the area velocipede there. thank you, mr. chairman. >> i thank the gentleman. mr. royce for one night.

>> yes, it is not that republicans are opposed regulation in general. we are imposed to incompetent regulation. we're opposed to the type of regulation that would not allow, for example, the systemic risk regulation of gics. so what republicans want to see is competent regulation, including a bid cftc. now the customer segregation rows have been around in this country for 75 years. these rules are not convoluted. they are rather easy to understand and to an force. yet, the cftc failed. and why this had as one of the many questions we hope to get answered today. another concern we have is what happened in terms of mf global and in terms of the $1.2 billion missing funds. on top of that, concerned that we have in terms of wide the

federal reserve would grant to disorganization this database that was given in terms of primary dealer, given the weak credit rating, the bleeding of cash, the $137 million last the year prior by the firm. the 80 regulatory actions taken since 1987 is a democrat answer for regulation leading us to a situation where political paul and interfering intercedes and prevents the rule of law and prevents the right kinds of decisions to be made by the new york fed because of connections of people politically. those are the questions we want answered. >> i think the gentlemen. mr. buckeyes recognize. >> what the gentleman that for 10 seconds? >> i would just like to say it

questions me why in the 11 months of congress hasn't done it. maybe for the same reason to do for the 12 years before that. the republican colleagues are all for reform in the minority, but in the majority somehow they can't seem to do it. >> reclaimed the nighttime, you and i have debated this issue. >> excuse me, it's my time. >> i think we need to separate the time. >> thank you, mr. chairman. and ranking member for calling this hearing. i also want to thank the witness. governor, senator, mr. corzine for being here. i have to say what she was under better circumstances than you wish it was under better circumstances. but with 1.2 million customer funds completely missing, it is clear to everyone why we are here today. where is the money? where did it go and why? we want answers. for the past five years, the

american people have had their share of disappointment with the financial system. there has not been enough oversight and accountability and that is why the dodd-frank legislation came into existence to make sure we have a lot more oversight and accountability and it seems that we want to do away with the accountability and oversight, yet we want to get back to these answers. that's why i believe we should continue to have oversight and funding that is fair. from the new economic collapse to the massive frauds like the one orchestrated by bernie madoff, now to the failure of mf global, it is clear that needs for improvement and oversight accountability still remains. and at the heart of it, that is what is so troubling to members of congress and the american public. not the regulators are executives at top upon the responsibilities. not the regulators are expected to drop the ball and responsibilities, but that the

american public and investors have left with the check. i do think it is curious at a time when we see a need to increase oversight and enforcement is displayed in this case, some of my colleagues are intent on defining some other regulators charged with the same goals. it's very curious in terms of ideas at that time you need to have more. today i am hopeful we'll get the answers. this is a third congressional hearing on this matter. i don't think anyone has been overly impressed with what is happening at the previous two. i am hoping that can change today. again, i want to thank the chair in the ranking member for calling this hearing. i think the witness for being here to yield back the balance of my time. >> that element from texas will be recognized for one and a half minutes. >> thank you, mr. chaiman for calling this meeting.

companies go bankrupt everyday and while i do not believe it is the role of congress to examine every banks see that occurs in the private sector, the case of mf globalism exception. given that global bankruptcy is the eighth largest in the united states history, it is hard for congress to not ask what happened. it is extremely important for this committee to examine the consequences for the financial sector of mf globalize both impacts on end-users such as farmers and ranchers who access future he markets to hedge the risk. there are so several questions that mf global races that need to be answered. first, mf global received a number of regulatory sanctions throughout the years, yet was still allowed to dramatically increase risks, notably in its exposure to european sovereign debt. the most important question that needs to be answered, however,

is what happened to $1.2 billion of client money that has gone missing and nobody seems to know what happened to it. the first time customers have suffered losses from the improper handling of customer funding by a clearing number. the case of mf global shows not just a failure of company management, which rsa demonstrates as much concern for its risk as to the captain of the titanic, but also a profound failure in our regulatory structure that needs to be addressed. nine years ago we were told that sarbanes-oxley would put a patent to gimmickry than last year we were told that dodd-frank would lead to regulatory coordination that would make our financial systems safer and founder. despite massive increase in the government authority, neither of these promises held in the case of mf global. and at the private sector continues to pay the enormous

regulatory cap with these two bills and i look forward to hearing from witnesses today just how this break down happened and what can be done to fix it. thank you. >> now the gentleman from new york, mr. graham is recognized for two minutes. >> thank you, chairman new cavour. i appreciate you calling this meeting. as unfortunate as it is to have a need for this hearing, and eager to hear exactly and explicitly how the events that led to the collapse of mf global actually transpired. been anxious to know exactly who was involved in co-mingling funds if that occurred, who gave the order for such approved transfers. who else was involved in that approval? who executed this apparent illegal transfer? moreover, details about an insight into what happens in what appears to be an institution that did not have a strong internal compliance controls, but rather passably had a ceo who controlled most

aspects of the firm, ranging from trading strategy, essentially betting the farm on european sovereign debt to possibly ignoring chief officers warnings and all sorts of having a controlling influence over the board of directors. therefore look forward to hearing with some specificity the answers to the questions that other committees in the media have not been able to extract. also many reports and investigations have gone before the investigations i've had the opportunity to read, i would rather not assume any facts. none of this case, but rather i would like to learn it first hand, to be educated today. as much as we can about the entire truth and one person i believe can shed as much light on this as their witness today mr. jon corzine. with that, he'll back the balance of my time.

>> i thank the gentleman. now the lady from new york, ms. hayworth is recognized for 30 seconds. thank you, mr. chairman. i save the hudson valley of new york and i know goldman sachs for our partners to know you and respect you greatly. i can't imagine anything we ask at this hearing will be new to you. ..

>> this hearing addresses both management and the extent to which we have control, we have jurisdiction. the fact that $1.2 billion is missing and noting thed for, -- not accounted for, and at a time where every taxpayer is trying to account for every penny, we've someone such as yourself made your reputation in this field. this is your world, not mine, and yet you can'ting the -- account for the money, but i think it's important to keep our eye also on the innocent people out there being hurt. i have a constituent of mine, a managing member of a commodity trading advisory company in my district. right now, he is on verge of losing his business because of the actions taken by mf global, and, mr. chairman, if i would, just submit this statement for the record for my constituent.

he's a manager in new york to put a human face on the suffering this has caused and find out what happened, why it happened, and how to prevent it from happening ever again. with that, i yield back. >> without objection, so ordered. remind all members that your opening statements will be made a part of the permanent record. without objection, i'd like to into into the record the materials sent over from the exchange. without objection, so ordered. i wanted to introduce the panel, former chief executive officer, and bradley abelow, and you can summarize your testimony in five minute, and with that,

mr. corzine, you are recognized. actually, before i do that, please stand. do you swear or affirm that the testimony that you're about to give will be the truth, the whole truth, and nothing but the truth? please, be seated. without objection, your written statements will be part of the record. you're recognized for five minutes, mr. corzine, you are recognized. >> thank you, mr. chairman, ranking member, and distinguished members of the subcommittee. let me begin as i said at each of the congressional hearings. every day i think about the fact -- >> mr. corzine, i have to interrupt you. you may -- is your button on? >> it is, sir. >> you may need to talk a little bit louder. >> i recognize my concerns about their anguish -- hearing now, mr. chairman? okay. i recognize that my concerns about the anguish of those

provide no solace for their losses and hardship. whether those hurt are customers, employees, or investors. as the chief executive officer of mf global, i truely apologize to all those affected. i provided a written statement to the subcommittee, and i have previously testified before the house and senate committees on agriculture. i'm hear to answer your questions as well. before i do, i wish to make a few additional points 234 light of my -- in light of my earlier testimony. first, i've been repeatedly asked over the last week whether i directed or authorized the improper use of customer funds. i tried to answer the questions to the best of my ability, but, again, let me be clear, i never gave any instruction to misuse customer funds, never intended anyone at mf global to misuse customer funds, and i don't believe anything i said could have been interpreted as an instruction to misuse customer

funds. as i repeatedly stated, i was stunned sunday night to learn there was a problem with many hundreds of millions of dollars of customer funds. second, after i testified on tuesday, the cme suggested he recently learned that someone heard someone else say that they understood that i knew the customer funds may have been improperly loaned to the mf global affiliate in europe during the last days of the firm's operation. i don't know the source of the suggestion. let me be clear. while the last few days of mf global were chaotic, i did not instruct anyone to lend customer funds to mf global or any of its affiliates nor told anyone had done so. third, mr. duffy's comments may relate to jp morgan that i previously testified. i became aware of the situation on morning of friday, october

28th. i was trying to sell billions of securities to jp morgan in order to reduce the liquidity. they said they would not engage into the transactions until overdprafts in london were clean ed up. i contacted those in chicago to resolve the issue, which i understand they did. later friday, they contacted me friday saying they needed assurances the transfer of funds did not violate the rules. i had no knowledge of the issue, i asked seen your -- senior and legal department to become involved in the request. the back office in chicago explicitly said the funds were properly transferred and i understand jp morgan was satisfied since they executed billions of dollars of trades with mf global.

fourth, while i obviously share many of the same questions that you have about what went wrong at mf global regarding our controls on segregated accounts, i did not have such concerns prior to sunday night. during my tenure, we hired many people, employed dozens and dozens of highly regarded and trained professionals in the area of risk, finance, come -- compliance, and operations. we had outside awe -- auditors and consultants, and attorneys. to the best of my recollection, none came to me with any major issues or concerns about the quality of our people, system, or procedures. timely, before i respond to your questions, i want to offer two apologies. first to the subcommittee in advance because i have not been

able to review many relevant records. i cannot be as helpful to the subcommittee as i'd like to be. second, and frankly more important, i want to, again, apologize to our customers, employees, and our investors. my pain and embarrassment do not blind me to the fact they bear the brunt of the impact of the firm's bankruptcy. i look forward to the questions. >> thank you, and now mr. abelow, you are recognized for five minutes. >> thank you, mr. chairman, ranking member, members of the subcommittee. the bankruptcy of mf global was a tragedy for our customers, our employee, and our shareholders. if many of our customers, your constituents, still unable to retrieve funds that are theirs, it's imposed financial hardship. employees lotion or will -- lost or will soon lose their jobs through no fault of their own.

they saw value of investments reduced to almost nothing overnight. as the president and chief operating officer, i am deeply sorry for the hardships they all endured. while i know nothing i say can ease the pain, i hope through my testimony today, i can help the committee understand what happened at mf global, and how we're attempting to unwind the company in a manner to provide maximum value for all parties. i joined mf global in september of 2010 as the chief operating officer. i was given the additional title of president in march of 2011 and served in that capacity through through the bankruptcy filing in october. after the filing, the firm's board asked me to remain in the position to work with various entrustees and add min separators -- administrators to close the firm. based on what i observed at the time, there were a number of factors leading to the demise. first, it appeared that my

mid-october of this year, the market was increasingly concerned with the firm's exposure to european sovereign debt. second, beginning in late october, the ratings agencies rapidly and repeatedly downgraded the firm's credit ratings. third, the company reported disappointing earnings on october 25. the combination of those three events, increased concern about exposure to european debt, a series of downgrades and disappointing earnings created a negative perception in the market resulting in a large number of firm's trading and counterparts pulling away from mf, dramatically reducing the firm's liquidity. that reduction in liquidity, a classic run on the bank, led mf global to attempt to sell all or part of the firm in order to provide liquidity protect or our employees, shareholders, creditors, and customers. when the efforts failed, mf filed for bankruptcy on october

31st. i know this committee is interested in finding out what amount of segregated client funds went missing in the final day, how it happened, and where those funds are, and what might eventually be returned to the firm's clients. i am deeply troubled by the fact that the customer funds are missing, and i assure you i share your interest and the public's interest in finding out exactly what happened. at this time, however, i do not know the answers to those questions. they are being investigated by the trustees who took over management of mf global and have control over its records and accounts, and a host of regulatory and investigative agencies while i do not know what they've found, i know all the parties are working hard to find answers, and i hope they are able to get to the bottom of the issue as soon as possible. since the company filed for bankruptcy, i focused every day on minimizing effect on customers and employees. there's no way to turn back time and undo all the damage caused

by the collapse, but in the last six weeks, i worked day and night to reduce costs and maximize remaining value in the business. because mf global was a global firm with operations on exchanges in more than 70 countries, there's separate entities with separate systems and books around the world and worked to foster cooperation among those entities. there's a number of parties now responsible for unwinding the firm's operations, and there's been a big effort to coordinate with them to generate the maximum number of assets. it's a small measure given those who lost their jobs, i do whatever i can to help former employees find new employment. i believe it's important to examine the issues that led to mf global's demise, and the firm attempted to be as open and transparent as possible. i hope to provide some assistance to the committee today in its investigation. as i said, there's no way to undo the damage that's been done by mf global's bankruptcy, but

it's my hope that efforts such as this one to gather facts about what occurred assists policymakers, regulators, and participants in the financial service industry to avoid such tragic events in the future. i look forward to answering your questions. >> i thank the gentlemen, and we'll now go to the question and answer period. mr. corzine, you made efforts 20 clarify your priest testimony, and testified and this will be your third time to testify, and we collected a lot of information, and talking to a lot of different people, and i want to maybe see if some of the facts help you with your recollection. mf global's treasurer and the cfo of the global north american operations informed the cme that

deficiency of customer accounts roughly $700 million in customer segregated funds were moved to the broker dealer side of the business to meet the liquidity needs of the firm. were you aware of that transfer? >> i'm aware of the phone conversation with regulators that ink you're speaking to at roughly 2:30 on the morning of the 31st. i'm not aware that we used the terms that you used. i'm aware that we made very clear that there was unreconciled imbalance in segregated funds, and frankly, i thought the number was higher than the 700 also 37 -- 700 also. >> well, it was in the meeting that a $500 million loan advance was made to the global -- mf

global u.k.. were you aware of that loan? >> chairman, i am not aware of that conversation is a part of that meeting, and it's possible for two things. first of all, we were operating very late in the day, and after many, many days. i'd also say that i stepped in and out of that meeting on a regular basis both to consult with counsel and also speak to the board, so that may have been said. i don't have a recollection of that. >> yeah. two hours later in a separate conference call, the -- it was represented that you knew about the loans from customer segregated accounts. this was the cfo of mf global's north american operation stated in a conference call that mr. corzine knows about the loan.

>> mr. chairman, as i said very clearly in my opening remarks, i did not, in any way, know about the use of customer funds on any loan or transfer. it just -- >> but, mr. chairman corzine, you knew there was liquidity problems; correct? >> we knew it was a difficult position. >> did you say we have to fix this, find the money? >> i think i'm responding -- you're quoting back to me something that i said at the time when the cfo of the global entity informed, i think a group of us in which we were both a party to, that there was an unreck sited -- unreconcile z difference with our --

unreconciled difference with the accounts. >> i think one of the things that's perplexing is, mr. corzine, you've been with goldman sachs, a governor, a senator, your recollection of these events or lack of recollection is puzzling to a lot of us because you had to know that things were not going well, and that these positions were unraveling, and that all of the sudden, you just find out that there's money missing from customers' accounts? you're the ceo of the company, chairman of the board, and how is it all the sudden these people acted out of your instruction to make these transfers? >> mr. chairman, we had policies, procedures, and i believe qualified personnel that had the responsibility to make sure that customer funds were

protected. >> were these confident people? >> from every element of the information that i had gained up to this point, and i think i put that in my oral statement, there was no reason that i could think of that they were not confident. i relied upon them. >> the only thing i'm troubled by that, mr. corzine, is when you look over to how this company got to this point, basically, you had a chief risk officer telling you that these trades could or cause a liquidity process for the firm, you were told repeatedly that, and yet, you disregarded that, and, in fact, that gentleman was then replaceed, and the positions doubled from there. when you say you had procedures in place to protect the interest the company, and, yet, in many

ways, there's no fire wall for the transactions you were the primary trader on, and i'm having a hard time believing you were relying on a fire wall when you were operating without a fire wall. >> mr. chairman, the issue with regard to trading positions was fully vetted president board of directors, with risk officers, both the one you spoke about and his successor. with regard to the nature of the risks that were a part of those positions, and they were authorized by the board. that is difference than the clearance and settlements and money aspects which there are controls that, i think, in my written testimony i said i had little experience nor little involvement in at my time at mf global. >> yeah, what you're saying, and

that may be different functions, but i think it's indicative of the corporate culture that people were, you know, taking money and sending it around without your authorization. i mean, there's the chief financial officer, the treasurer of the company, they don't know about money being transferred around? that's a little perplexing to me. >> mr. chairman, i know that we had policies, procedures, and people -- >> obviously, they were not followed, or, i mean, that's what we're all trying to figure out. if you had confident people in place, you had the top people here saying that, you know, we took money out of the customer accounts, and we have people saying that you knew they had taken money out of -- >> first of all, as i said in my opening statement, i don't know how to respond to something that somebody said to somebody else to somebody else that is unidentified, and i can't speak to.

i do know that i never authorized anyone to use customer funds to make a loan or a transfer of funds. i never intenned to, nor do i think i said anything to be con trued -- construed to do that. >> i yield now to the ranking member, and after the ranking member's question, we'll recess for the votes. >> thank you, mr. chairman. mr. corzine, i'll take your word you never gave instructions to misuse customer money because, again, that's somebody else making that decision whether that's accurate or not, but i'll take you at your word. my concern is exactly how did you get to 40-to-1 leverage in the first lace? whose money was it? >> as i think i conveyed in my written testimony, that we were bringing down the leverage -- >> how did you get to 40-to-1? >> first of all, that was the number we were at before i

joined mf global, and i think as you will see if you look at the reporting on the quarterly filings, we were closer to 31 or sometimes even in the 20s. >> i understand that. i know where you were and you were coming down, but you were still in the 30-to-1 ratio when you left the firm as well. whose money was it? somebody had to loan the money to you or to your preed predecessors. >> there's many different ways a firm goes about financing itself. probably the most important element with regard to how those kinds of leveraged numbers can be produced is through repurchase agreement. >> there we go. in-house repost for the most part, is that accurate? >> more of it was a likely done with repurchase agreements from the broker dealer side of the firm with clients where proprior tear positions that the firm had --

>> repost maturity? >> repose of inventory positions -- >> but even for that, i understand -- this really is not just mf global. as i understand it under the rules of the cftc two weeks ago or whatever it was, everybody talks about segregated funds, and somehow the customers money is lockedded away never to be touched, and yet for eight and a half years, that's not true. for all intensive purposes, as long as you went through a few steps and put a piece of paper on the books saying i promise to pay you back and here's a piece of collateral i claim to be right, you actually could legally under current -- not current, but recently passed rules, basically invade those funds of customers and not break any rules doing so. is that an unfair statement? >> it's not an unfair statement. >> that's what i wanted to

know. you weren't doing anything else that anybody else was doing -- >> rule 125 set out by the cftc designates or identifies specific -- >> and that's your suggestion, you did exactly what 125 said you could do. i'm not blaming you for that. the rule said you could do it, but by doing that, i guess the next question is, okay, you do a repo, you move money out, perfectly legal under then current rules, and then as i understand it, you move that money to the u.k., and the u.k. then puts on the street for additional repurchase. again, i'm jumping around here because i'm trying to follow this as everybody else. i'm not suggesting up until this point there's anything wrong or illegal or against was rules was done. is that a fair way to put this? >> i would be speculating if i tried to say that money produced

by ropo, legitimate 125 collateral was moved to lone ton. it could very well have just been the financing vehicle for the securities themselves. >> well, it's my understanding the reason it's moved to london, and, again, i want to be clear. i'm not suggesting you did anything different than anyone else which i'll get to in a minute that it goes to london because the rules in england are significantly different than here. you can take larger risk and do different things with the repos. is that -- >> to the best of my recollection, that's not what we were doing. >> that's not what you were doing, but i guess i'll ask another way then. to the best of your knowledge, were you doing anything dimpleghtly than most people in your -- differently than most people in your business were doing? >> that's a -- congressman, that's a very broad question. we've clearly had ropos to maturity in our broker dealer on

european sovereignings that seem to be different than some of the other firms, but the kind of repo financing, general repo financing, matched books are relatively common. >> relatively common, bingo, did they just shut down the relatively common approach towards borrowing customers' money? >> i believe they narrowed assets. >> you can't use foreign debt. >> you were not able to use foreign debt before unless there were deposits of foreign currencies. >> one of the reasons why the money would be moved offshore because rules are different there. that's, i guess what i want to get at, and as i said earlier, if you did anything wrong, the criminal investigators find that, i won't. i'm trying to find out and my

concern is the things you were doing by more own statement is no one intended to misuse anything. taking you at your word, and the things you did were relatively common in the industry, and the 30-to-1 ratio is common in the industry. the regulators didn't have a real serious problem with it, a little bit of 5 problem, more than $17 billion of exposures there, and so you were doing, at that time as i read it, pretty much what everybody else was doing. my question, which i know you can't answer, who else is doing this? how much is at stake because if it happened to you, and you did nothing wrong, then it could happen to anyone tomorrow, and maybe up until this point, they are not doing anything wrong, and that is the problem to me. i'm less interest the in one -- interested in one company although you had customers seriously hurt, than i am in the

system and whether it's a risk, and if one company does it, that may not be a risk, but if everyone's doing it and the regulator allow it and those enforcing it think it's normal, and the credit agencies think it's normal, and the accountants have rules to be able to have a loan basically book as a sale, that opens up this whole thing to a massive mess, and by the way, the company that you're looking at to buy your company at the end, aren't they deeply involved in the same types of activities? >> sir, i could nonet respond -- not respond to that. i don't know their balance sheet. >> you sell the company to somebody you didn't know anything about? >> there would be a period of due diligence with an agreement if it were a standard merger agreement. >> i think my time's expired. thank you, mr. corzine. >> i thank, you, and the committee will recess until votes are over and reconvene

probably in 30 minutes. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> the committee will come back to order. some people thought this might be somewhat of a heated session, and it has turned out to be very hot in here. we apologize for that, but we've got some folks hopefully working on the air-conditioning or the temperature as well. i now resume the question and answer period, and we go to the vice chairman of the committee, mr. fitzpatrick, recognized for five minutes. >> thank you, mr. chairman.

mr. corzine, we asked the federal reserve back of new york whether you had ever called them to talk about mf global, and they reported that there were a number of calls made during the week of october 24th, 2011. for instance, on october 26th, two calls to the new york federal reserve bank and spoke with a mr. dudley. on october 27th, five calls to the new york fed to discuss the situation of mf global, and on the 28th, more calls to the new york fed. what was the substance or what was the -- what came up in those conversations? what was the purpose of making the calls? >> congressman, first of all, i was called by mr. dudley. i think proceeding that first series of calls that you identified to keep the federal reserve posted on how we saw our liquidity position, how the

clients were reagenting to us and -- reacting to us and given the steps and stress that was being exhibited in the marketplace. >> so you identified the marketplace and safe to assume in that point in time you discussed mf global was in trouble? >> we were not discussing that we were in trouble, but discussing how we managed our liquidity position and what steps we were taking in that context. >> was mf global in trouble at that point? >> in my view, we were having stressful conditions in the market, but i thought bewere able -- we were able to be able to manage those. >> on october 24th, jr. assistant controller called the exchange telling the cme you were in trouble and would be downgraded and would report losses. there's a press release, i think it's dated october 25th, and it may be on the screens in front of the members, about your

second quarter earnings, and in that press report, you said, and this is a quote, "over the course of the past year, we've seen opportunities in short data european sovereign credit markets and built a fully financed ladder ma tourty port -- maturity portfolio we manage. we are confident we have the resources to continue to successfully manage these expotures to what we believe will be a positive conclusion in december 2012. my question is why do you make a public statement about your confidence that mf global has "the resources and expertise to continue to successfully manage its situation" when you company told the cme you would be downgraded and the next day you were in frequent communication with the fed with mf global's position as a growing concern? >> congressman, the conversations with the new york fed were stimulated by a call to

keep them posted. that would not have been in contemplation of the statement, and while a downgrade is not comforting news for an organization, it is not indicative that we were approaching bankruptcy or that we were in the kind of stress that i think one would have described the situation by friday. >> were you, in fact, filed a chapter 11 bankruptcy on october 21st, six days later; correct? >> that's true, sir. >> your own securities filings are clear that downgradings are a huge risk factor leading to problems to the organization, yet knowing you would be downgraded, you made a public statement to the effect that all is well.

why did you do this, and how can you reconcile private remarks about trouble at mf global with the public statements on october 25 #th? >> sir, i think the statement that you're giving to me to review deals specifically with the repo maturity portfolio and we would be able to manage that, and we thought we had the capacity including the morning of the 25th. we were actually liquidating those positions. >> you thought you could manage to a successful conclusion on december 2012 and six days later you file for chapter 11 bankruptcy? >> we thought we would have to take adjustments to deal with the realities of the downgrade and the potential reactions of the marketplace, but that's what we were eluding to. we had the capacity to manage that. we felt we did.

>> when was the first time the potential of a chapter 11 bankruptcy was discussed with the board at mf global? before october 25 #th? >> i -- to my recollection, there was no discussion of bankruptcy before october 25th. >> okay. nothing further. thank you. >> thank you very much. mr. corzine, we all want to make sure that someone didn't have an early christmas, and we want to find out where this money went to, especially the $1.2 billion where it's gone. mr. corzine, you said that you had controls in place to ensure the customer funds, and can you e rab rate on the function of the controls? >> there are arrangements,

congressman in the treasury operations area which have, to the best of any knowledge, thresholds of how money can move size, amounts of money that can move, there's cross checks with treasury functions that are responsible for making sure liquidity's in place, so all of those, starting with the cfo, global level, moving to a global treasurer, to regional organizational structures where money could move, all of those had checks and balances in them to the extent that any of the respective, internal audits and external audits, reviews of those procedures were in place, i had reason to believe the

policies and procedures would work. >> okay. thank you. were any of the policies approved on or signed on by your regulators? >> i would have to -- i'd have to actually have that question answered by the regulators. we know that we are subject to their periodic review and all of the various venues and our self-regulatory associations and others periodically check the policies and procedures and the actions. to my knowledge, at least up until that evening of october 30th, i'm not aware of where we had major challenges to that by the regulators. >> maybe we need to find out, but to your knowledge, is there a common control that other firms have in place?

>> congressman, i'm not familiar with other firms, and actually some of the day-to-day specifics is not my experience, and detailed knowledge even of our own organization other than the kind of description that i tried to give to you. >> okay. to your knowledge, were your counterpart nears engaging in the same purchase agreements with other entities similar to an mf global? >> as i responded to the ranking member's question, i think we purchase agreements broadly spoken are fairly common. repurchase agreements to maturity are relatively common for u.s. treasury securities,

agencies, and corporates, although i don't have specific knowledge about whatever companies have. i think the repo to maturity concept applied to euro sovereigns is somewhat different. >> okay. in your opinion, had mf global had not run into problems it did, would this level of finance parps have continued or -- participation have continued or changes in regulations and procedures to ensure we didn't have this. we didn't have a crystal ball, but if we had, that would have changed everything; is that correct? >> not unlike what i responded to congressman fitzgerald. we were adjusting positions given the changing perspectives credit agencies were bringing and the availability of credit. we would have -- we were adjusting our balance sheet and

our off balance sheet items to produce greater liquidity and less exposure to liquidity calls, if you would, post the downgrade. >> thank you. my time is running out, so i appreciate your response. thanks. i yield back. >> i thank the gentleman, and now the gentleman from new york is recognized for five minutes. >> thank you, mr. chairman. mr. corzine, this is your world, not ours. if you could go through this with me. when you came to mf global you intended to dramatically change its business model to make it more like goldman sachs which would inherently involve more risk, nothing wrong with that per se, but because of the increased risk what new client procedures did now put in place when you came to mf global, and tell meme how many personnel that involved, and how close you

followed the implementation of the new procedures. >> congressman, i would say that i was not trying to recreate goldman sachs, although we wanted to be a broker dealer -- >> but more than mf global traditionally had been. >> it was clear, and i tried to outline that in quite some detail in my written statement that we wanted to be in principle broker-dealer activities to serve clients and some proprietary element that had not been done before. that's true, and it is actually in that area that the biggest issue, i think, developed over a course of time with the initial chief risk officer because the experience of that individual had been more on the commodity side of the business or the fcm

customer credit area, a concern not only of myself, but of the board, and we wanted to look for someone and did a search, a personnel search, to try to find someone who could bring the kind of experience -- >> if you change a business model to any extent, doesn't it require more than just a risk officer? i mean, do you put procedures in place yourself? did you have any frame, reverence to yourself as what you wanted to be done? >> we had to have different compliance supervision, expanded the positions, and we actually had some serious concerns -- >> tell me how many. >> well, clearly had concerns in asia. >> not concerns, but you said you brought new personnel on i think you said. >> brought new personnel to bear on our compliance functions.

>> is that hiring new people? >> new people. >> do you have the idea of how many? >> i will have trouble giving you the exact statistics because it was numbers and, as i said in my oral remark, there were dozens and dozens of people dedicated to this. we made changes, upgraded. we also installed a new -- >> new technologies -- but you can't say whether they were new personnel or just reprogramming of old personnel? >> no, no, there were new people at it. >> okay, okay. do you have any idea what that cost was? >> congressman, without being able to look at my records, i'd be speculating. >> okay. you testified you first became aware of the missing customer funds, october 30th, the day before mf global declared bankruptcy. had mf global not been in the middle of selling itself to another commodities broker, when do you think you would have

become aware of the missing funds as ceo? >> congressman, on premises basically 24/7 for the previous few days, so i probably as soon as as min had known that -- as soon as anyone had known that -- >> this crisis would not have -- if the crisis was not as critical as it was, would you have knowledge at all -- >> in the normal course of events, i probably would have been informed early on the morning of the 31st. >> okay. you repeatedly said that you don't know where the missing funds are. if i were a lawyer with a civil case, and i was trying to recover those funds for a client, and i hired you as an expert witness, what would your expert testimony be as to where you think the funds would be? based on your years of experience in the business.

>> congressman, i have tried to lay out in my written testimony some places where i would look, where movementings of money -- movements of money in large positions had moved. i think i cited $1.3 billion -- >> between october 30th and now you have not been able to narrow it down at all. ? >> congressman, i've had access to no records. i made testimony to what i think i would have at least considered, but i don't have any specific knowledge. >> my time's expired. if you could have used your years of expertise and experience at mf global to tell us where the funds may be, but with that, my time's expired. >> i thank the gentleman, and now mr. miller is recognized for five minutes. >> thank you, mr. chairman. the transaction that seemed to

cause all the trouble was the $6.3 billion purchase of sovereign european debt purchased or financed but the repo market. that's correct, isn't it? >> the european sovereign position? >> right, yes. >> financed to maturity. >> but it was purchased through the repo market. >> the original sovereigns position, the underlying debt of those particular sovereigns was purchased in the market, and there was a repurchase agreement arrived at at roughly the same time that the purchase of the underlying securities, and they were put together. so they repoed to maturity. >> the securities were their own collateral; is that correct? >> they were collateral for the repurchase agreement. >> okay. any client assets used to as collateral for that purchase? >> to my knowledge, none.

>> okay. the amount of the transaction was five times your book value, but you -- all of the security was actually from the sovereign debt that you purchased through the repo market? >> there are initial margin requirements -- >> right. >> reporter: for financing and then variation margin periodically that you have to put up -- >> okay. contracts allow use to use client assets as collateral to purchase securities for your own account, that's right, isn't it? >> very specific kinds of securities. that's what rule 125, congressman, specifies. >> okay. >> european sovereigns, except in those cases where there are deposits of european currency. >> okay. >> are prohibited. >> in the last two weeks, the last month, before mf global's

bankruptcy, did you pledge any client assets as security for any lending to mf global? >> could i ask you to repeat the question? i apologize. >> in the last days of mf global's existence, before bankruptcy, did you use any clients' assets as collateral for any purchases of securities or any loans to mf global? >> congressman, on an ongoing basis, you would use client funds for 125 eligible securities. >> okay. were any of those -- let me ask the other side, then. i think the question got at this. did you borrow money from client funds using the repo

transactions? where client funds had cash, did you use repo transactions to put -- >> a normal course of business, securities that qualified as 125 eligible could be financed with those client funds, but very strict rules on that, and we observed those. >> okay. any assets as precious collateral liquidated? >> take in the last days, this is one of the reasons i responded to congressman king's question, we sold $1.3 billion worth of commercial paper, which was 125 eligible, and i certainly -- not trying to answer his question while answering yours, but as those

were liquidated, that money showed back up into segregated accounts, and that would be one of those places where i would look very carefully. >> was any -- were any of the assets that you used to repo transaction with your own clients allowed by the cftc rule, assets as collateral for other transactions from another party? >> to my recollection, i can't think of that. >> mr. abelow, do you? >> congressman, the daily activity of funding the firm was not something that fell under my control, so i'm not intimately familiar with those structures. >> were any -- i'm sorry -- any of the assets that were in client accounts as part of a

repo transactions liquidated? taken by collateral by anybody? >> to the best of my recollection, any of those kinds of transactions were done according to the rules as we would have known them and there was a whole set of people, policies, and procedures as to how that should have been executed. >> okay. >> i thank the gentleman, and now the gentleman from new mexico, mr. piers, is recognized for five minutes. >> thank you, mr. chairman. fascinated about the continuing response of day-to-day of not my speedometer, not my -- responsibility, not my experience, and in 2003, you offered an amendment to hold a bush administration accountable with the comment that the

credibility gets weakened each day and facts about who knew what, the certain information. when did they know it? why was it expunged from one administration and not the other, and we hear today, oh, i didn't know about the $117 million loan. i didn't know about the window dressing seven quarters consecutively, five in my time. you have a question, window dressing as a "wall street journal" article says you just lower debt right before the reporting period and then you bounce it back up after so it looks better. it's not technically illegal, looks better, misleading, but it looks better, and it's not your day-to-day experience. what did you spend -- what hotel are you at here in the city? >> [inaudible]

>> the ritz carlton? did i hear that correctly? how many of the clients defrauded have you called personally? one? >> none i called. >> mr. abelow? >> [inaudible] >> i see you have anxiety and sorrow, sadness i think is the word for the people who are hurt. we have a guy coming in here, $600 million net worth. have you created a scholarship for the families disadvantaged? people just to help them out with the college funds? yes? no? >> congressman, the answer is no. >> i'm sorry? >> the answer is no. >> no. mr. abelow? >> no, sir. >> but we're so sorry? we're desperately sorry, want to apologize at the end of the transaction.

mr. corzine, you said that there were no warning signs, and yet i got three warning signs here from mr. roseman saying he was concerned taking his concerns to the board of directors. i know it was not your day-to-day responsibility, but did you ever communicate with the board of directers? did they tell you the risk manager came and said, oh, we're doing some things that frighten me? in fact, the testimony that other people have brought was that he may have left the company under duress. yeah, he left voluntarily, and he was replaced by a guy that also as risk manager was raising questions about what was going on, and yet i think i heard you say that you had never heard anything about any questions about anything going on at the company from the internal sources. >> congressman, i don't think i said that with respect to --

>> so you were aware he was deeply concerned with risk management things, and you didn't have to go through standard risk management practices. you could go straight to the board and buy and sell in your client, in your portfolio without going through risk management, one of the basic things of internal controls. >> congressman, risk limits were set at the board. the risk manager observed those and where we stood relative to those and would have reported to the board if we broke those limits. >> the risk manager was right on his concerns and somebody else was wrong. who made the decision that we're not going to be concerning ourselves with the risk manager's concerns about where we stand? >> no one was uninterested or

wasn't willing to listen to the risk manager present their -- his case to the board. >> no, i didn't say no one's disinterested, but just ignored his advice. we've got rainmaker. i hear the term "rainmaker" used a lot around your presence. we got rainmakers out in the dusty barren sand hills of new mexico driving around in pickup trucks with 55-gallon barrels of oil in them, light them up, and make it rain. that's not much different than what they do on wall street. thank you. >> i thank the gentleman, and now the gentleman from florida is recognized for five minutes. >> thank you, mr. chairman. mr. corzine, who advised you that the transfers were legal?

>> the -- the overdrafts that i addressed on friday as i put in my oral statement directed my inquiry to whether they were proper, to senior people in our chicago back office. >> would that be laurie ferber? >> ultimately laurie was aware that we had questions about this, and i referred that also to her. she's our general council, but the assurance that i received was from our back office people in chicago. >> can you give me a couple names? >> the woman that i spoke to was a miss edith o'brian. >> but ms. ferber agreed it was

legal too? >> she was looking at the letter requested by jp morgan to ensure we were compliant. >> and she said you were? >> once i submitted the letter that i was supposed to sign, i did not hear back from ms. ferber. as i suggested in my opening remarks, i had explicit statements that we were using proper funds both orally and in writing to the best of my knowledge, and i since i don't have all my records, i don't have that, but i think i believe i have it in writing, and i conveyed that to jp morgan, and jp morgan asked at a later period of time for confirmation that we were using cftc compliant funds, and that's when i spoke with ms. ferber. >> and what was her response?

>> she took the issue and was reviewing the letter, and i never heard anything back about it. >> so you asked if it was legal to do this, and she never answered you, so -- >> i had confirmation from the people that we -- >> back office people? >> people in the treasury function that berelied -- that we relied upon. >> okay. have any of your assets in the past been frozen? >> no, sir. >> do you agree with the assertion of the "wall street journal" that jp morgan chase benefited from the fall of mf global? >> i have only read the article, and i have no idea. ..

i mean, it's a bad either someone basically so i've so i've been asked for a cat you cannot fault the regulation unless the regulators catch you. make it a bus, it's not going make any difference. the only way this bad behavior -- ended up the subject, ill be changed by putting people in prison. mr. abelow connery still employed by sub 10 global? >> idea by the holding company, the regulated entity. >> were you ever regulate it? >> i was employed at global

insight which the regulated entity with a subsidiary. >> so is that a yes? >> i believe i was employed by mf global holding another technical matter that so i got my paycheck from, sir. >> what do you think should be done differently if we could roll back the clock what you think would be done differently that would prohibit this from happening? >> congressmen, and waiting to to see the result of the investigation and i assume when we do and when you do, but you together with regulators will be better informed and able to take a view as to what can be done at the moment absent the information as to attack and i am not sure how to answer the question. >> wrister corzine come the same question. >> i think this with the fact dependent. >> thank you. my time is expired. mr. chairman, i don't die.

my time is expired. >> mr. corzine committee to sign the letter for jpmorgan before his or her fight those funds you tell them to go check it out? >> chairman, i did not sign the letter. >> i now recognize the gentleman from i/o. >> thank you, mr. chairman. mr. corzine, mf global had a history of compliance failures and internal control problems, and complete disclosures. when you check over, did you have any effort? did you take any effort to look at enhancing internal controls and the come any? >> as i responded, i think to mr. king or congressman king, we have broadened out our compliance that dvds. we brought in consultants. >> you're trying to enhance internal controls?

so you do understand internal controls? >> u.s.a. ceo will have to sign -- i understand sarbanes-oxley verification that your policies and procedures and people in place. >> you have to understand. >> you have to have the assurance that you can rely on those things that happen and be able to have this tested by auditors and others. >> i agree. otherwise you wouldn't notice i'm not, correct? >> you do, but she can't eat detailed, as experienced in the execution of that as someone who might have, especially in some of those areas. >> as part of your internal control procedures, who made the decision to allow you complete authority over tradesmen which only the tears could lop? that's a pretty significant

internal control issue. >> any of the trades they think you are speaking to pass have a sovereign traits for maturity were in the context of limits established after debate and discussion at the board. >> the board of which you are chairman was the only one -- the only group that could block your traits? >> they certainly could have blocked them to the limits unless the god authority to go on beyond the summits, which we did. >> there is nobody else in the come and pick a block those traits. >> the board could block them, yes comest air. someone matter what anybody said lothar and i go back to mr. roseman raise serious concerns.

mr. stockman raised serious concerns. when mr. stock and took over, someone took away the tour d. to take where the liquidator risks of trade your making. who did that? is that you were the border is that the board based on your recommendation. >> i am not aware of anyone taking away authority for mr. stock in. in fact, i would think that we broadened his authorities. he might clearly has no authority to stop you from making trades because everything was back up to the board. when he went to the board, is set to the board to stop you from making some of these traits. >> mr. stock and mike mr. roseman had access to the board, reported to the board, could have and it has individual meetings with the board members with full ability to stay his position, his concerns --

>> you are chairman of the board, so i think i read somewhere one point in time he told the board you are considering leaving because they were just coming down. >> congressmen, to my recollection that is not the fact. >> okay. >> you indicated earlier these types of situations were consistent with other companies similar peered what you say that internal control is similar? at other companies similar would only have the board of directors beaver to overrule them? >> congressmen, i don't really want to speculate and i don't really know. >> we talked about the significance of internal controls over financial reporting given through the sarbanes-oxley certifications. did you send this on march 31, june 30th and september 30th >> i sign on -- i think actually

the timeframe is later than not. when auditors come back. >> deeply mf global had sufficient internal controls given the breach i've subsequent offense. did you believe that you sign out? >> when i signed this agreement for those certifications, i believe that the policy and procedures and people in place. and as i said, there are no sleep if you can notice is either from regulators or others i notice with regard to those controls. >> so you believe you were truthful of your auditors when you sign the sarbanes-oxley certifications and assured investors and regulators at the advocacy of internal control. you believe that when you find it? >> yes, sir. >> thank you. my time is up. >> i thank the gentleman. the gentleman from texas, ms. canseco. >> thank you, mr. chairman.

thank you, mr. corzine for being here. back in july 2002 while you were serving the senate, he made a statement regarding financial regulation and said, we need real reform. we need it now. we do not need the rhetoric. we need to be able to restore the confidence of the american people want to see. move away from the era of enron and worldcom and get to an era where we have markets that are balanced and fair, where they have the checks and balances and non-to give people the confidence that when they made an investment, that investment is what they thought. it is when they entered into it. unfortunately, the bills of which you were then speaking in strong support with the sarbanes-oxley bill, which has cost the dirt billions of dollars to comply with and as a direct cause of the lack of public offerings in recent years, yet even with all the

provision for sarbanes-oxley, $1.2 billion of customer money could supposedly just vanish into thin air outside and global. a lot of this money belongs to hard-working farmers and ranchers across the country. just at mf global and segregation mods have been in place for years. the farmers and ranchers whose assets are frozen or last are not different than the rank-and-file workers that enron who lost some or all of their retirement savings. they are all innocent but comes the field corporate management and field regulation and certainly the investments that customers need at mf global are what they thought they were. so the question to you. you have specific responsibilities in your role as mandated by sarbanes-oxley law. according to your testimony you seem to have made little or no effort to acquaint yourselves. were you feeling as ceo to perform the due diligence is required by law?

>> congressmen, we have a whole staff of individuals and checks that are performed to make sure that senior management has knowledge of deficiencies and elements of our control system that would have been reported not only to me, that to the audit committee before we would sign the sarbanes-oxley. >> let me ask you this because i have limited time here. you as ceo have the ability to monitor internal controls at mf global. who is responsible for ensuring the customer accounts were segregated? >> there was a team of people in our chicago office by the north

american cfo and people on that staff that have the oversight of the functions that the segregated accounts. >> and you know what they are? >> i do. >> let me move on a little bit. mf global's website states and that's global is a well capitalized and diversified intermediary with a strong conservatively managed balance sheet. we take pleasure principled risk for decrying the dvd and financing to facilitate client transactions because our financial strength and comprehensive risk management. clients can have confidence that they are treating with a strong counterparty. so please tell in your own words what the following terms mean. well capitalized. >> well-capitalized means we

were meeting a regulatory requirements, we had capital that would require us to believe that our positions were sustainable for the timeframe we were hoping. >> diversified intermediary. >> diversified mean that weaver and more in one business that we have different ways we could approach producing revenues. >> strong conservatively managed balance sheet. >> as you know or as i suggested in a written statement we were actively reducing the leverage and we're in the midst of looking for strategic sale or partnership with regard to her sem so what would come down even more dramatically. the mac measured principal risk? >> measured principal risk has to do with how -- how generally people are required to report their risk -- evaluation of risk

in those numbers were really quite small by comparison end of our competitors and didn't grow under my watch. >> i see my time is just about to expire. let me ask you this. where was sarbanes-oxley and dodd-frank and the collapse of mf global? could have prevented it? >> i don't know that i can answer that question, congressman. >> do you have an opinion? the >> i believe that when you have internal controls and they work the way they were supposed to come out the right people, policies and procedures in place, which we believe they did, they should have prevented the kind of problem. >> so obviously dodd-frank and sarbanes-oxley can help you and couldn't have helped mf global survive. thank you very much. >> now the gentleman from colorado for five minutes.

>> thanks, mr. chairman. that gets to where i want to start. there is an old adage. desperate people do desperate things. desperate companies do desperate things. so when these final days, just basic questions and maybe you have answered these. we are taught three secured creditors say we can advance of the bankruptcy? and i'm asking both gentlemen. >> secured creditors probably more than who ran a secured credit facility for us. there are a number of banks and most of the major financial. >> did they cash their corrado roll him out last week? >> i have no knowledge on whether they did or they didn't. they continue to allow us to fund against the secured facility. >> i guess my question is over the course of the last week, how

did the company get so upside down? >> well, as sightseeing -- i would say in my written testimony, the downgrade, the reported loss in the concern that was expressed by the rating agencies in particular with regard to the sovereign position created a fairly negative environment for investors in people who are making judgments about a company. >> luck, they are going to be plenty of courts to look at this from the bankruptcy court to who knows what else. i am with mr. capuano. i'm trying to figure out and

times are there really is a run on a bank, where there really is desperation, ordinary protocols sometimes go out the door. now, whether there needs to be a third-party who holds the money and trust, kind of slows down the whole process and good times, but definitely slows down in at times, is that something that would've helped here? to protect folks that seem to have lost their investment? >> if segregated accounts were held outside, it might have. i don't want to speculate on that. the depositories now hold some of the customer fund.

and they are already held outside the firms. some are, some aren't. >> mr. canseco's questions were focusing on sarbanes-oxley, focusing on godfrey. we've got the 33 act, the 34 act. all sorts of things, but the thing we don't have some specific requirement that there be a segregated account. that may be too harsh on the system and won't operate very efficiently. but in this instance, it would've potentially blocked or been a firewall to slow down the movement of the money. so i am just trying to figure out as mr. y no less, how could we have prevented this? because in the last days, your work was chaotic. >> congressmen, until the facts

are peeled that i literally thousands of transactions, i am moving into a speculative for him and i could be misleading. ! mr. avila, giovanni response to that? be her year as legislators. i'm not here to judge what happened. a lot of people lost a lot of money and i'm trying to figure out if there is a way that could be -- we could do with it in terms of the law to stop this from happening. >> congressmen, at the risk of repeating myself, i think that we will and the fullness of time, when we understand it ackley would happen to me you will be under braking leaders will be better positioned to identify what additional safeguards if any would prevent whatever happened from happening again. >> thank you. i yield. >> i thank the gentleman another

gentlewoman from new york is recognized for five minutes. >> governor corzine, and page 18 of your written testimony, you state that she were not an expert on the complicated rules and regulations governing the various different operating business as that comprise mf global that you have little experience or expertise and those operational aspects of the business. now on page four when you are describing your initial tenure at mf global, you do say that you initiated obviously a strategic review, very well said and he looked into obviously a range of businesses and determined that he would take mf global from being a g 203 all broke her term in three to five-year plan, that she would ultimately convert it into an

investment bank, which obviously carries more risk, the more potential profitability one presents. that's why he would've done it, although i don't need to impute motives. but if it had remained simply a broker obviously presumably we would all be here. but you can understand the discrepancy and you can understand again, i spoke of a former colleagues of yours who at the highest respect for your gift. you know, it is hard to imagine. we found ourselves in this sort of situation unfortunately all too frequently in the recent past, that there is a highly talented man or woman who experiences are they to leads an organization that comes to you one way or another and there is a contention of ignorance. i am wondering how we resolve

this thing and how cannot -- how could any awareness in that way or perception and not where hope to prevent this kind of that from happening in the future? >> it's the challenging question, congresswoman. i believe that the vigorous application of the checks and balances that come from things like sarbanes-oxley's review of internal controls are a positive ingredient to breeding some sense of security to does that look outworking ossetians externally, certainly gives one

a greater sense that financial numbers are what they are supposed to be. it is absolutely essential that leaders within an organization set a culture that people tend to does terms and conditions of operating within the spirit and letter of the law. until that evening, as it relates to customer funds, i believed we were doing that. >> do you think there might have been excessive deference towards your position, given that you had a rather stellar career to say the least? >> sometimes the kind of career that i had might not bring

deference. >> i assume you talking about the political side. >> leave it to your conclusion. it is a risk when someone comes in here to an organization. >> i wonder as i listen because we try to come up with -- well, this congress has passed, not the 112, but the 111th has passed a massive love that is meant to try to prevent tragedy. and yet we find ourselves that risk is suffocating the very mechanisms that create growth and what you need is better tools that will allow the effective application of the laws that existed prior to dodd-frank. would you say better tools might help us better analytics?

>> ettore analytics always hope. more information, more transparency in my view are positive and certainly better analytics are important. >> i yield that, mr. chairman. thank you. >> gentleman from tennessee is recognized for five minutes. >> thank you, mr. chairman and thank you, senator -- governor for coming today. i represent a very, very heavy act district back in tennessee. a lot of constituents had money tied up in mf global and they are calling me and asking me, you know, what has happened? what is going on? if you're a customer of mf global, have a couple statements

come a couple questions that elect to comment. if you're a customer, would you accept the story you're telling? but you simply don't wear the funds are? the $1.2 billion is unaccounted in the ceo, co the oldest firms simply don't know where the money is if they don't have access to the records. should hard-working farmers and ranchers who have their money tied up except this? >> if i were one of those customers, i'd be very frustrated, and very. i would expect that we'll get the the answers to those as the multiple investigations that are looking at all of the facts laid this out. and people according to what i

have heard have almost a 24/7 approach to those investigations. and i am sure it is frustrating, but it needs to be resolved with facts, not speculation. >> why didn't she resigned? the >> i was asked to resign. >> you repeatedly state you are able to answer specific questions because you do not have access to the books. why not help the investigators find this money? and can you point to any instances where you have assisted in the ongoing search for these funds aptiva? >> i have not, other than my testimony, which i'm sure has been we used >> who had the right to approve

transfer between for an account? >> as they head in my testimony, it was in our treasury function and their checks and balances i'm not that our treasury operations where people made securities and people that do the financing prior. operate in interface with banks in the repurchase markets and other things. >> would it be safe to say that maybe the reason in layman's terms that the well is if you are just mf global was just short in the market and couldn't cover the margins and that is where the money's gone? >> congressmen, to my recollection, the evening

october 27, there were substantial hundreds of millions of dollars in cash and free collateral that should've allowed us to meet articles. >> t. think any laws had been broken here? >> congressmen, i would be speculating because i don't know the facts and they think this fact dependent. >> i do not now, sir. i don't have access to the ongoing investigations and with discovery today. >> it is really too common sense business people, farmers to take risk -- i am a farmer -- take risk every day trying to deal with all sorts of variables to have some stability and presence, knowing that their cap will it save.

and to have these hearings and i have watched the senate and the house back in today no answers. it is just eating around the bush so to speak as we say back in tennessee. no clarity. no one knows anything. everybody has done some thing. and it's really a shame. i'm sure we'll get to the bottom of it. someone will. but i hope no laws have been broken here because this is really a disservice to a lot of american farmers. thank you, guys. >> i thank the gentleman. another gentleman in california, mr. royce is recognized for five minutes. >> thank you, mr. corzine. he took the helm of mf global in march of 2010. a couple months prior to that, you lobbied before the new york

fed on behalf of mf global, seeking to become a primary dealer. it has been noted that she believed the status was a critical part in shifting mf global towards a golden like institution. can you explain why that was the case? >> congressmen, i take joy in mf global in the last few days of march of 2010 and i did not previously to that time meet with the federal reserve on mf global on any matter or anyone else with regard to in mf global matter. >> so the reports about joining a select club is a primary dealer, you did not play a role

and not? you did not envision that and suggest that and try to -- go ahead sir. >> after he joined mf global, i continue to pursue, which had actually begun a think as much of the year and a quarter before i had, believe it was important for us in a developed and to write business, we were active market makers in u.s. treasury agent t. securities before i came to mf global. it is part of my own history and the place i actually had expertise. we certainly did not step back from seeking that recognition. >> at the time of your approval is a primary dealer, the

institution had a weak credit rating. mf global was leading cash. the loss in the prior year i believe for $137 million. there was a history of compliance failure come at least 80 regulatory actions taken against it since 1997. looking at that. in the spring of 2010, does it make sense to you that mf global was approved to be a primary dealer by the new york fed? >> congressmen, we were approved, if i'm not mistaken, in 2011, either january or february. i can't remember the specific date, but it was 2011 approval. >> which are approved an institution with those problems? >> i would have, as we did come

and make the case that we were a meaningful provider of liquidity to the underwriting of the u.s. treasury debt, that we were providing liquidity to our clients through the repurchase agreement market that we had insights because we were active in futures markets around the globe that could be important to the capital markets to ask about what was happening in markets. >> at the same time, if you were in the shoes of a new york fed and you have been through bear stearns leverage of 30 to one, if you'd been through layman and arguably the leverage here if your firm 40 to one, i guess i am asking, do you think you have special treatment because of your connection in terms of this decision, to get this visit

nation to mf global given some of the concerns out in the financial press about the dictation? >> congressmen, i don't believe we got special treatment. we never asked for special treatment. >> let me ask you about cftc. as you know mr. gives there has recused himself because of your past relationship. do you believe mf global specifically in the segregation of customer funds, to think those properly overseen by the cftc and you believe your firm might have been given special treatment because of your connection to mr. kinsler who is now recused himself. >> i do not believe we were given special treatment. i need to understand as i've communicated to the committee that when we know what the issues that cause this element,

then i think you can make better judgments about whether to sub cftc or anyone else. we perform our responsibilities. >> a time is expired, mr. chairman. >> thank you. i thinki thank the gentleman ant the gentleman from new jersey is recognized for five minutes. >> i thank the chairman and the governor for being here. >> governor kenny go to great lengths in your testimony to explain your opinion none of the firms ever lost money. i understand that. but obviously you would also have to have no it could lead to margin calls, which is what occurred and also liquidity risk as well. i think you allude to this in your testimony. so the question becomes, isn't it your job as ceo in chief risk

officer and i believe your testimony or one of your statements was one of my most important jobs to be chief risk officer isn't one of your jobs and to take it seriously. this talks all the time. maybe that that's where appropriate bets and it's the liquidity and potential for downgrades that had to be considered and in this case we are not. >> congressmen, it is not that they were considered, but they probably were measured, certainly after the fact to the degree as they should have been sent in. >> so i see. we have learned from michael roseman that he expressed significant concerns associated with the current repo market that way for a top about.

>> liquidity risk associated that we just talked about, first of all, do you think he was right to not send? >> first, congressman, i believe that by my recollection that mr. rosen's chief concern was the fault risk or restructuring risk as opposed to liquidity risk. mr. stopped when was much more focused on liquidity risk that mr. roseman was. >> the facts speak for themselves. >> mr. roseman was uncomfortable with position limits and you talk about the process as far as going to the board for that. he was concerned apparently when they were set at $2 billion. i understand you have to go to the board twice to improve limits about that level and as the position we went to

$4 billion in light of last year, october and i guess at that point in time, according to mr. roseman drew a proverbial line in the sand against any other increases and made a presentation to the board in november 2010. is that a correct assessment of what he was trying to do quite >> i'm not certain of the timeline. but i accept that mr. roseman did not want to increase this. i did add within the context that we did in those countries with private investors and unfair credit arrangements. >> the board after those concerns ultimately create a hard cap at the $4.5 billion and revisit the position paper in march of this year. mr. roseman was placed in early january of this year. the question is, when you keep the game it was you from your search to replace him? was at this time of his

departure or proprietor? >> visits to the best of my recollection. we started a search sometime around the first of february. >> sometime after his departure? >> mr. roseman and i had a conversation about whether there were other things he might want to do and would we want to have additional folks and would he help us in a transition? the mackey mentioned he was concerned about liquidity risk aspect of it. it was under him in the board decided to go pass before $.5 billion cap that just had previously been set. on the previous review day. how did that happen at the whim of again above the limit takes it upon themselves or for the company i should say. >> i would, to my recollection

would ask for a specific sovereign authority or individual country. into my recollection, the board was more comfortable with some sovereign than they were others. once ones that had how you're reading and were more comfortable having larger size. not collectively they decided they could go on not quite >> my request was actually for smaller size, but to take into consideration with the european community have put in place to back up ireland and portugal. >> if the chairman just a lot of fun last question. in the interview. in the interview. in the interview, work folio. first of all, work folio. first of all, is that correct? if that's correct come away with that position me to take out of

his portfolio on stability? >> congressmen, i don't know how to risk onto that. the liquidity risk was certainly some thing that we constantly depended upon her wrist department. >> is for is your understanding, whether he had limited -- limit the authority i can speak to. >> i yield back to the chair. >> i think that sentiment. the gentleman from new york is recognized for five minutes. >> thank you, mr. chairman. mr. corzine come you just testified a moment ago. my colleague mr. rice asked you a question in your aunt in part to some place i actually had expertise. i assume you're talking about your time at goldman.

>> congressmen, i grew up in the governor's security business and i was homage to the fact that mr. royce raised this issue about the primary dealership and this had been something i'd probably spend 15 years, had been very, very a good enough marketplace. >> which he would say as ceo at mf global you had expertise. is that correct? >> certainly would require to the government security markets. >> you were asked about your deference. you think you could've got minis national treatment because of deference in the positions he's held? i just want to know that you were granted a three-year extension of your employment agreement in 2011 and two of the reasons they cited the success and primary dealer status and improving the posture with regulators. do you think that would definitely have something to do

with maybe some deference to the wire in your status click >> i mean, possibly. congressman, if possible. >> thank you very much. let's ask this. you mentioned before in your state is that you actually came in and the leverage was 40 to one and rotted down to say 30 to one. is that correct? >> yes, sir. mr. pearce started in on it, but didn't much answer the question. when you analyzed the records, seven quarters in a row, you run out your leverage right after the quarter ends. so you do ever rate before before the filings. for seven quarters in a row i'm sure you know it's window dressing. these are the repos 105.

>> to my knowledge, congressmen, there were no repo one of eyes executed at mf global. >> if this is not true after each families in orders in a row, the leverage was dramatically up? >> congressmen, because our systems are not as strong as we would like them to be, we only netted positions at the close of the quarter. that is if you are long and security in one account. >> thank you for the nation, but ultimately if they ligatures seven quarter fairings in a row, at the end of each filing, your leverage is one place and after the filing your leverage is much higher. regardless of why, is that a factual statement are not quite >> i can't actually answer that question. >> okay maybe the cf can answer that question.

but is someone who knows nothing like me that is not involved in mf global, if i look at your quarterly filing, is that statistically affect regardless of why? >> congressmen come and see if i was here. i apologize. >> i wasn't the president and i don't have those records with you, so i can't verify or i don't know what happened the day before today. >> mr. said three come you don't recall seven quarters in a row? there was an article so i assume it was brought your attention. i'm sure you read the article. >> congressmen, and not familiar with the article. >> i'm not familiar with that article. >> okay, outstanding. there's millions of people familiar with the article. i'm just going to say i don't believe any of your, mr. corzine. if i am the ceo of a major

national newspaper writes an article alleging i'd something unethical, windowdressing, maybe not illegal, but unethical. i cannot believe no one calls you think you to see that article they read about you? you don't know about that article. he testified under oath you do not know about this article. i don't know the date cruet newspaper. >> e4 you say "the wall street journal" -- you testified about unreconciled different isn't segregated account. i am not a ceo. what is unreconciled differences? does that mean there's money missing in the account? >> it means they're not the assets that were supposed to be held against the segregated dollars that were responsible. >> a response. at the end of the day?

>> i will admit to the cftc -- >> unreconciled differences mean something is missing. in this case. not in the abstract. were talking not mf global, what did that mean unreconciled different? >> we're not an imbalance in in their segregated account. >> what does that mean? >> it could mean he didn't have control of collateral and we had money that moved it shouldn't have moved. the nike with money that moves that shouldn't have moved. who other than you? is at the treasury department that has the authority to move that money? >> yes, sir. >> by 106 ire. >> at the gentleman is recognized for five minutes. >> thank you, mr. chairman. i'm interested in where my friend from new york was going. i'll give you 30 seconds so you

can finish that up. >> at the end of the day you testify they reconcile. prior to the time to talk about, the demise, were you ever -- did you ever have unreconciled differences? >> never. that's good to hear. what is the first thing that would have been a nice find out or something out of balance? something is unreconciled? would you could've caused the ceo? >> it was a serious imbalance, yes. >> you got a call? >> there was work trying to reconcile this. i notice after-the-fact, not before the fact. >> this is a pretty serious difference, correct? >> only what i've been able to discover afterwards from reading some of the press reports. >> as soon as they found out, treasury found in the stomach is coming to did call you are not? >> i was notified in monday

evening. >> they did not call you. when they close the books at the end of the day, it was not reconcile, but they did not call you? >> it was some operating teacher to let the calculation done the following business day, which was friday to monday. and so, folks were working on this reconciliation through the weekend. i think airways -- >> who openly notified you there is unreconciled cfo? >> i'd like to reclaim my time at this point and quickly turn into sentiment. kind of the long that line, do you recall making a statement? are positioned to judgment about risk mediation respects on a personal responsibility. but according to bloomberg,

regarding on october 25 conference call and quarterly losses and debt downgrade come you than 567% loss of value there. you recall making that statement? >> i recall something of that nature. >> okay, that was the quote in the article. and i am just curious. we all get here. you sat on the side of the microphone. i'm sure you're wishing you were setting him that side of the microphone. but are you a hint on kind of guy, detailed kind of guy? >> in markets and clients that dvds. >> in general and life? i mean, i know i am here and i like asking questions. i like knowing what's going on. are you a control freak type were hey, we'll let things play out and see what happens. >> to think i understand and have expertise, i'm very hint

on. >> well, it seems to me the things they should have done in life, you've had to strike a balance. i know i do. i have to know details on legislation. do i know every detail about every piece of legislation? probably not. i have to go get it when a constituent masks. i don't think we are expecting you to know everything that every single employees possibly doing during the day. but my friend from new york is a mac, when you got major issues like this, it would seem that responsibility lies in your office. i mean, that is what she said on october 25. i can tell having personal experience with attorneys and real estate brokers, i am a former realtor myself. when you start coding the fun and start pulling an don't want you to go do things, no matter how valiant, beneficial to you

personally would affirm or whatever else, people lose their law license is. people lose brokerage licenses. i think that is why you were singing such frustration, anger, annuity. my phone started going up november 1 and late october 31, people with no idea in my district who i couldn't even fathom has some sort of connection into mf global, but they did. enter predominately the agricultural community. and it just seems to me that when you are claiming that not to know details about the nature, nature issues that have been prodded peter, it just doesn't ring true. it just doesn't ring like it's heartfelt. mr. abel, i know both of you were employed by the global holdings. i am assuming this isn't the only affect the global holdings had. i know you have operations in canada and hong kong and england and in other places around the

world, correct? >> yes, sir. >> are they are much like the structure operating in these other countries? >> each country has its own regulatory structure. each country has its own finance structure. there is cooperation across the global. >> you communicate on a regular is? >> that seems to maybe get that -- i know my time is almost up here, but it seems that if some of the concern is we see this money get passed around. the fiduciary element feels wicked thoughts. matt made either legally, technically, but i can tell you as someone who has fiduciaries not ability as a realtor and developer and having a dollars command, this certainly doesn't feel or look like you were caring for this other peoples money the way you should have and certainly were expected to.

one last question -- did you have personal dollars yourself in a segregated fund accounts? >> i did not. so this is not their own money? you are just out everyone else's money? of his other clients? >> i didn't have the futures account. didn't trade for my own account, but it would be a conflict to be in that traitor for my own purposes while i was leaving the company. a mac you certainly were active in trading personally, correct? >> i buy shares in mf global, which i think i've reported. >> yes, that you were involved in the day today choosing where things are going to be going. >> there were things that i treated through -- we set up a very complex compliant structure

, extra supervision to make sure that when i executed a trade, first of all i didn't write a ticket, but somebody else did the day were both observed and those procedures were followed. >> i know my time is that, the governor said three companies that thousands of hard-working people around this country that feel cheated and frankly it's hard not to disagree with them. >> i thank the gentleman. now mr. dole's is recognized for five minutes. >> i thank the chairman of what you think the governor. i appreciate your appearance and testimony here today and another senate committees as well. i'm particularly interested in this issue for the first time in 150 chicago mercantile exchange have customer funds missing and i represent the northern district of illinois and i probably have more treaters in my district than perhaps any other district in the country. so my first question to you, we

look at the $1.2 billion missing did you have many communications whether in person, by telephone, by e-mail or text message or any other means that specifically contemplated, addressed reproved segregated customer funds to service funds to collateral for a liquidity for broker dealers, whether or not they're mf global affiliates are not affiliate? >> i believe the answer to that is no. >> so today here before this committee. >> i believe that the new theme of customer fun i never authorized. i never intended to authorize, nor do i think anyone could misconstrue anything i said i

would authorize the moving of customer funds in an improper way. >> i may try to be more specific and not put so many of his caveats on there because it was really trying to get to the point is certainly in today's technology, dg received any e-mails, were you may have been cced that talked about moving customer funds? >> to my knowledge and i haven't been able to review all my records. >> this is a pretty big deal. >> as someone said a memorandum or an e-mail or apd off off of an e-mail that suggested he is customer funds, i wouldn't have authorized it. >> and at this point in time you do not remember receiving any of those quick >> at this moment, i do not recollect. >> is segregated customer finsbury is our global purposes, would you expect u.s. treasuries

were similar securities to be placed as a substitute for customer funds? >> that would be how reuland 25 requirements would work on that basis. >> now i do have a couple questions. he talked about being notified there was an imbalance, correct, just a month ago? united any statements that there was imbalance in their account? >> congressmen, i can answer that question. i do know the answer to that. >> my understanding is no customer received a statement. they never received a statement there a was an imbalance. >> i don't know about that again that i learned as the governor has stated. i learned on the evening of the 30th that there was an alan and customer funds. i don't know if any