will redeem the ratings of the largest competitors in the >> and what were the best of my published report announcing the recollection? downgrade we stated that the new >> you reported, but she did not ceo john corzine announced a verify whether the liquidity was strategy to begin transitioning the firm from the traditional commodities broker to the available. >> was that part? investment bank. in the report we noted that the strategy would likely result in the company taking on more >> the actual liquidity function proprietary trading positions. is part of the cfo and treasury area with respect to source of which in our view would be riskier than the company's traditional broker business. liquidity and does it relate to before the stated the company's risk-management controls continue to be work in progress. the various discussions and six months later in may 2011, mf information that was disseminating in july. global discussed the head off balance sheet exposure to approximately 6.3 billion of the .. sovereign debt to the so-called repurchase maturity transaction that we heard this morning as has been referred to as the transaction. this disclosure is perhaps because the portfolio is made of the sovereign bonds funded through scheduled maturity in 2012 meaning the mf global will

only lose money of more than one of the sovereign's defaulted in this relatively short time period. following the may 2011 disclosure s&p continued to believe that the underlying credit fundamentals supported the trading of the triple d . in october, 2011, concerns in the markets over the escalation of the credit crisis combined with a disappointing earnings positions are new relatively report from mf global and other -- have relatively little factors were causing the firm's underlying principal risk in the investors and counterparties and destruction of the transactions others to be completely increasingly concerned about the firm and this back drop in as essentially eliminates the market and financing risk. do you agree with that they sought to obtain additional informational portfolio and were statement? >> my apologies. could you just from that told by mf executives the firm statement by me again? believed it was, "in its strongest position ever as a >> mr. courts line on public entity. october 24th said in a statement notwithstanding the management with an investor says that ms opposition, they reported in that gap the quarterly loss of global positions of relatively 109 million the next day. little underlining principal the loss is opposing and risks and that the structure of frightened the market even the transactions essentially further. although mr. corzine stated that eliminates the market and financing risks. mf global remain on strong footing and at its portfolio

abysmal risk the stock price >> i had no reason to doubt fell by nearly 50% the day of the earnings announcement. mr. quote's comments at that point. one day leader october 26th, >> you wouldn't doubt it is that what you said in your testimony? they placed the mf global retail seven days later the company negative implications under goes bankrupt? review for the potential downgrade. >> how do you justify that? this reflected the view that continued volatility in the capitol markets and lower interest rates could further >> well, sir, the downside in harm their ability to generate capital. those final weeks was a very as part of the action we also noted that the firm's exposure complex issue and contained the we also noted the firm's exposure and increased the risk confluence of at least three profile. the october 26 report concluded challenging events. by saying that s&p idle with the ratings testiculate for non-investment-grade depending on the execution of strategic one, the negative earnings plans which included a potential related to the attack write off short-term operation. october 31st, 2011, mf global filed for bankruptcy protection deferred asset write-offs. and as a result downgraded the credit rating. second, the downgrades that were happening at that point in time, in their view mf global collapse fairer, the perception in the wasn't caused directly by the exposure to the portfolio.

marketplace regarding the rather we believe mf goebel riskiness of the sovereign demise was driven primarily by strategy all seem to come the rapid downward spiral of confidence among the participants and counterparties together in a very short period to question the transparency and of time so that the outcome its ability to attract and maintain investors and generate revenue. thank you for the opportunity to unfortunately was unpredictable participate. i would be happy to answer any we walked through the questions that you have. challenging period of time. >> you are recognized for five >> i see my time is expired. minutes. >> mr. chairman, members of the subcommittee, good morning. my name is richard, i'm the now you're recognized for five chief credit officer of moody's minutes. >> chairman, thank you and my investors service. in that capacity i lead the colleagues for allowing me to credit policy derbent share the run in and out i apologize but i have another markup on the policy committee which are whole, transportation and a very jointly responsible for the review and approval of loadings important bill so i will be in that all day. to the committee's rating >> i want to ask you some methodology. thank you for the opportunity to questions based on your written address you today. testimony. long before the collapse of mf i'm going to ask them in the order that they appear on page global, moody's regarded the company as a franchise that was three to make a statement particularly reliant on customer overtimes to culberson putting and counterparty confidence. the rating agencies etc. gaining our rating reflected the view the confidence in the that mf global profile of the improvements. stick of characteristics to the

i've got a record of both s&p other credits. in fact for several years, dave and moody's the five ratings of mnf global in the only time that there was i guess you could consider it an upgrade was viewed mf global some of the risky credits among all of the banks and securities firms. today i will describe the rating friday, july 18, 2008 when all they did is took away the actions that they took before negative outlook. the bankruptcy which was brought they kept the trouble reading but all they did is took away on by the revelation that the the outlook and that was customer assets were missing. actually before you took office but first, it would be helpful at mnf global. am i missing something or do i to briefly explain the meaning have something -- and - and of the credit ratings and the additional indicators we used to communicate to the market's information that i should have? apostle direction of the >> during the discussions with the agency's myself and the ratings. moody's credit ratings are others in the executive forward-looking opinions that management they did continue to speak to relative credit risk of express their interest. multiple step scale. >> but they didn't take action this means issuers assigned a on ratings. they said good things but didn't higher rating levels are less likely to default than the issue take into account when they said was assigned a lower reading good rating. >> i may be misstated in my level. some are expected to default at testimony. every level but no one can >> okay. predict which specific credit at i guess from your testimony it any particular level will certainly seems as though default. if that were possible, moody's presume that in a june or july, would simply is a two-step scale to fault or not the fault.

i'm sorry, may 22 and you agree on the billion dollar nominal moody's expresses opinions to limit across the board and get the market not only through its by mid september only a few ratings but also through the months later, obviously the people that ran the business had publication of directional reading indicator scald the completely ignored the board outlooks and reading reviews and through the written research. approval and had blown through it almost to the amount of when we announced a credit rating had been a negative $2 billion then leader on one month after that they doubled it again. there is no indication the board outlook we're indicated slightly took any action in between that to be over time placing the time so that there was an rating on the review indicates agreement at a billion the in the rating is likely to change the about 4 billion by october over the near-term. of 2010. by 2008, moody's and viewed the am i reading this right? >> know you're not. creditworthiness was not particularly strong as reflected in the rating and its outlook. when the billion dollar limit was approved, that was taken under the management delegation subsequently downgraded the credit rating to. of authority risks from the by the end of 2010, the rating board said that approval didn't have to go to the board of had a negative outlook. directors. again, communicating downward subsequently, any other limiting increases before the $2 billion pressure on the rating. they've reassessed the global was also taken internally and profile last of the worry in approved by myself and light of the company's continued

mr. courts line. profitability and high leverage they didn't pose what i consider relative to the similarly related peers. a material issue relative to the we affirm the outlook and issued a press release identifying the appetite per say. >> you are saying that you are areas of concern at the company authorized and did in fact agree performance earnings, leverage to the $2 billion. and risk which would determine the action over the following >> up to 2 billion. four to six quarters. >> september, 2010. what about the 4 billion by two quarters later in august of october of 2010? last year movies once again >> when it got to the 2 billion communicated a would likely i don't remember the exact number, then i indicated we downgrade mf globalist the performance didn't improve in would have to approach the board these areas. of directors for approval for october 21st, moody's analysts met with mr. corzine and members the increases. of the team in advance of the >> he went to 4 billion without company's announcement of its your agreement or board quarterly financial results. during that meeting, mr. corzine approval? >> at that time i recall going made clear that it's repurchased to the board and discussing the of the maturities transactions strategy and the limits to get were purely proprietary trading positions. prior to that meeting, movies further increases and there were a few periods in between my have understood they signed written statements where there discussions with management that the company was increasing its were meetings with the board's principal trading activities executive committee to approve primarily for the purpose of facilitating customer transactions. the limits. mf global also revealed the

meeting would report a you're telling me now that at no significant quarterly loss. as a result, moody's, mf global time did the investment limits exceed what was agreed to buy performance had deteriorated in you and/or the ward? the three areas of concern that >> that is my recollection, yes. moody's had identified last february. earnings, leverage and risk. >> the statement in my opinion on the very next business day, is that clear because if they and moody's once again had come in yes, during that downgraded the rating, this time time did anybody know you were doing that? placed on review for a further the board did know obviously. possible downgrade. were you telling the general the following day, mf will announce the record quarterly public or investors or the credit rating agencies? loss and accelerating flight of >> prior to that time, within customers and come to produce rapidly to cold. as the crisis of confidence and the 2 billion number in my liquidity gathered over the 48 opinion because the buckets in hours moody's downgraded its rating and cut the credit on review for the further possible three months, six months, 12 downgrade. month periods i didn't -- when mf global file for bankruptcy on october 31st, moody's downgraded its rating to >> i asked were you telling the credit rating agencies were you the caa1 to read a withdrew in forming your investments that you had indeed were hit that altogether on november 15th. number? thank you to really look forward >> i'm not aware of myself to answering your questions. >> a thank the gentleman.

specifically the credit rating >> on behalf of the rapid agencies coming in by not aware as possible that others had ratings, shareholders and subscribers i would like to notified them of those thank chairman of the power, positions. but again we have to keep an frank kimber capuano and members of the committee for asking me account of the materiality of to testify. the positions in the the i'm the german tashi fix it if of the rapid ratings. shortness of the positions. as is clear by now, mf global >> basically you think there was nothing wrong up until the was a tragic story from wall street, main street and the $4 billion on the board approved up to 4.75? futures industry. its bankruptcy follows trends with the other notable financial >> i would say my comfortable failures in the last 12 years in and the board risk appetite one way. agencies the were paid to provide professional opinions on credit risk failed to give the started around the approved risk warning of the risk. appetite at that time i should mf global carried the ratings clarify that exceeded around from standard and poor's from $2 billion. that required to go back to be 2007 until october 31st, 2001, the estimate of around 2 billion and for moody's in october 27 you and the board were both getting uncomfortable? and october 4th 2011. >> is relative to the state could risk appetite that have in contrast, the credit ratings provided the two years of improved given the prior warnings that they were the high strategy of the company. risk investment grade entity. add that time because the we are a user paid nonissue were strategy was evolving it was escalated in the board before firm. we use only financial statements, no market and puts the additional approval of the camano quality that analysts and

we have no contact in the specific limits to control risk. ratings process with management, bankers, investors or their >> i'm missing something. i'm asking a simple question. advisers. we utilize the proprietary software system to rate the you are telling me the board financial health of the thousands of the private approved up to $4 million you are saying that you and the company's quarterly. the ratings have been impressed board were getting uncomfortable with far outperforming the in the 2 billion-dollar range? >> i specifically started victory agency. the financial health ratings system evaluates 62 from the company's income statement and becoming more uncomfortable at balance sheets. 2 billion i felt that there was the product of the highly in excess of the approved board complex modeling process the measures variations and risk appetite at that point in financial health of any company found of lee benchmarking how it time. >> did you tell anybody that? is able to withstand an internal >> i presented the board. or external shock or consistent or accurate. over the past 20 years >> at that point in time that was i don't think any issue to approximately 90% of defaults occurred of 40 and below on the bring to the credit rating scale. at the bankruptcy we rated at agencies until after the 23. prior to the best quarterly discussions potentially with the release the were rated at 29. board. >> they were reading you this both ratings are in the entire time they had you on a high-risk category and below the investment-grade where we've had good watch and get either them for over two years. affirming or downgrading you these are the equivalent of the pretty much repeatedly from

2008. i've never seen this many credit ratings of the firm by two major c- or c on just below where they set for the big three agencies. credit-rating agencies so the system is an agnostic to frequently. it seems like every couple of months somebody was reading you. quality -- qualitative judgment like management. >> you have to remember to keep unless the actions affect the company's financial health. in context to the ms global to our system, mf global is the history. as you know in february of 2008 story of the firms' declining performance since 2007 in shortly after, the company various measures including revenue performance, suffered the rogue trading profitability, debt service management and others. incident. >> i and a stand that but that's from two clauson seven through a separate item. i will give you the benefit of 2011, mf global revenue declined the doubt that you address that by 63% to 2.1 billion. issue. okay. the was a problem with the was a minor problem you took care of. net profit by 142% from i'm wondering going forward as you get the credit rating agencies every couple of months 190 million to - 79. were you telling them that you the last 16 quarters to ten were uncomfortable at the level quarters of losses and the last that you were at? four days of losses grow by 68% >> first i didn't meet with the of the last 12 months to read rating agencies right away. i wasn't in the -- the most recent report showed a record loss of 191.6 million >> so the credit rating agencies were reading without talking to them manager? with of factoring the risky >> periodically i would, not every three months or every trading or other things, mf month but i would say on a

regular basis maybe once or global is declinable yet de twice a year. >> did you tell them that you were uncomfortable? meurlin moved over this pogo. >> having said that, they had up why? the business model is inherently until that point in time of the conflict of making it object to be difficult to administer strong transparency on the risk consistently. management of the companies will of the organization. try hard to get and keep the >> you never told them and starting to get along nervous? best possible ratings. if they are convincing the >> i did not see that. ratings are better than not. >> that's what i was trying to if ratings analysts don't get at. properly question what they are sold, the rating can be compromised. mr. grossman, i'm sorry, the strife of the stable ratings and to move through the cycle and ignoring the short to medium mr. stockman. when you took office in january that can capture and affirms the of 2011 were you aware of your underlying fundamentals and determine long-term success or predecessor's concerns of the 2 billion-dollar limit? failure. the barriers to the competition are still great, despite reform >> we did not spend a lot of efforts and the ratings are time together in the overlap, still firmly embedded all over and as a general matter these the financial system. were a large position but i finally, the big free holds wasn't specifically aware of little trio accountability when things go wrong to read the story never inevitably turns to concerns at that point upon the question of timing of the joining. changes traditional agencies say they need to be careful when >> so neither did he tell you or done gritting a company because

was their documentation that you it can affect our two dever il's can crossing your period of time asserts many investors want that indicated the 2 billion my reading stability. predecessor got little nervous these are real concerns that a maybe i should think about this? pill in comparison to the damage done when the ratings are >> i explored on arrival a downgraded to leave or not at all. we do not advocate the ratings couple of board meeting minutes volatility. we support a better industry. that covered that period to the congressman since patrick's recent bell responds to these best of my recollection are a clear which require the november, december before i roads to stand by on a quarterly basis and market has no way of joined, and to try to find and knowing one there proactive, explore a little bit of what behind schedule or simply in a ticket to the maintenance of an might -- what had been undertaken just before i joined, exhaustive rating. while we perform the basic freebie do not believe the system is better than others for and in those minutes there was the traditional readings are no specific indication of the always a lot. concern that is certainly did we believe in the competition highlight. >> you didn't find anything that the business is the basically said the bell went off institutional investors and and when you can add the four regulators choose among options that suit their needs best. and a half give or take the lead in that didn't get nervous, you the hours that the early thought that was acceptable? warnings were far better served them those who. >> i'm saying this a little differently. in those board memos minutes it's time for more competition.

we cannot simply lie rely on there was an indication that the them to promise much only to deliver and to defend much less. risks were discussed and highlighted by mr. roseman and i thank you. >> thank to the gentleman and we will now go to questions. gave me the understanding -- i apologize and over my time and i appreciate the generosity. one last question and then i the chair recognizes himself for will jump to it. five minutes. you say you have no personal in the january 17th newsletter knowledge of where the money is responding to the subcommittee, or what happened. if you think that maybe this excessive risk and the pressure that might have caused the with reference to the trades, losses that were seen in these risks might have media encouraged some of the employees they said the analyst did not have an understanding that mf to either ban or restrict or global was exposing its own even possibly break the rules? capital in an ounce representing the multiple of its outstanding >> server, i don't think so, and common equity until october 21st would be hard at this point in time. i hope at some point in time we really do understand the details of the situation, and in 2010 lead in the 10k goebel particular, as it relates to these sovereign risks in the period ending march 31st was published on 520-2011 they

analysis that when the last chapter does come through i disclosed those positions in the think we will be able to see with a bit more clarity but in fact -- 10k. .. >> thank you for your indulgence. >> thank you so much. i have one quick follow-up. i want to go back to this report on october 13th. is is this report was prepared by the treasury financing and risk team. there would be your team is the right? >> that's what i mentioned before, senior member from my team provided assistance on some of the scenarios. >> and so this is a plan where these people think they are about to go under. i mean this is a break the glass deal. you are the chief risk officer and you are not a part of this plan? >> as i said i had a senior officer doing some of the risk analysis and as it relates to the production of that which we have interpreted based particular document, i wasn't on our discussions with management in the past as being

transactions that had been part of the specific risk team undertaken with the intention to that contributed to that and the facilitate customer base treasury and finance so yes, i transactions, which would imply either they were being liquidated over a short period of time in this customer transactions have taken place or had of seem the final -- they were being hatched or being >> but you are aware the document has been prepared and used in somether o purpose rather then taking a strictly proprietary trading position. you agree with mr. close on's statement on october 24th that everything is fine, having >> i think we understood that mr. response, but we talked to some other people who let the 10 knowledge that the senior management is working on a plan? k. and based on bringing mr. corzine men and mr. corzine >> to the best of my knowledge, stated goals for this company, the brick and glass scenario is a contingency plan that would that they were moving, you know, for adding to proprietary have been an intelligence thing to do and like a number of becoming a full-service different cases in particular investment tanking company. for a company it was just above investment grade. so, i think that those, as i and so, a lot of folks think that what it had either if you

said the break the glass didn't understand that come he should have followed it up. scenario is something that was but then as i'm sure you are an intelligence contingency plan aware in august than they failed to be looking at. >> what prompted them to do put a 10-q. and basically did you together the bleak the the debris the glass strategy that caused them to think that wouldn't you think that they needed to develop a plan like that? >> to the best of my recollection was a board review the file? request, and again i think to >> i am not aware. find out some of detail as to >> they did a 10-kilo in what the request and how it is september, which detailed prepared would have to be really $100 million capital charge, which was related to the directed towards a or finance and treasury group who drove european rtm trades. that. astana i appreciate committees indulgence and now yield to >> that was a one-page document. mr. fitzpatrick. that is not as far as i ran out of review analyst at the time. >> mr. stockman you indicated that the plan was a board cannot that and a flag as an request. was their anybody within the organization that had concerns analyst in your firm to say you know what, what is up with this? and keating was a board concern? we should go back and take a look at this. >> i'm sorry. i didn't hear the question.

>> you indicated a generation of >> i don't believe so. but that document indicated was the document breaking glass around october is a board that cash b. required by mf request. didn't that come within the global's with speed increased organization? >> to the best of my understanding it came from the because that's a different board. interpretation being given to the exposure. >> you indicated you didn't spend as much time in the transition with mr. roseman. it was a new information about the exposure, the rather capital did you spend any time as he treatment and changing capital passed on the obligations of the requirement of significant chief chris officer? how much time did you spend? amount from a credit >> michael and i spent an hour perspective. >> teacher analysts read newspapers. together, too, three, four weeks into my initial when i first >> "wall street journal" cited arrived and michael was helpful article and 2011 that detailed in the transition as well with the series of including the the e-mails that i remember outline they had been asked to receiving but i couldn't speak put up capital that there is to exactly -- concern about the company. >> did he indicate his concern about the rest in excess of $2 billion of sovereign debt? does your analysts follow up on that? >> yes, we had a meeting party >> as a general matter during that brief discussion that we have for an hour to the best of scheduled with and that global

in that topic would be my recollection, it was certainly an indicator as an discussed. >> what was the date of that item of the interests as it relates to the company. meeting? >> the date of the meeting was but i don't recall any specific the 21st. i think there was prior discussion two days before that. discussions. >> i want to go back to the october 13th break the glass >> four days after "the wall scenario that you indicated in street journal." so you all didn't pick it up in response to the german's the initial 10-q that came out question that you were not directly involved in this plan. is that correct? in march, the subsequent 10 k. they came out. >> correct. you are the chief risk officer responsible for how many he became aware that they had employees in the organization? been asked to put up additional capital. so then he read "the wall street >> in my team approximately 60. journal" and decide debut we should go over to mf global and >> your office is in the same he was going on? building? liquidity was a key concern, >> this was in the context of correct? the regularly quarterly weekend that we had to mf global and the other major issuers in the >> the first time i had an market. we would be reviewing and not opportunity to really look at it carefully was just a day ago needing all the financial when was provided to me. releases that occurred in the release since the previous meeting of the week discussing that issue as well as others.

>> sir, the committee obtained internal notes from s&p to recall, there was not a lack october 28 management meeting on ms global and this is a big of knowledge of the european exposure, but rather a european exposure the analyst to difference of view about what drafted the notes also writes it's scrambling for funding and that exposure entailed and how to interpret that exposure which wasn't discussed i believe in has lost its liquidity and either of the documents you mention. october 24th a day when the break the glass was being >> obviously since he was able to figure that out a little drafted and that global earlier than moody state and as we hear from dennis, they'd be scrambling for funding. on the 24th, the root an e-mail concerned about the company's capital inability for some time. to the s&p analyst standing i was going to ask you, the among other things that and of reading list 23 in your firm? the global capital and liquidity has never been stronger and >> it was 29 going into ctober then, quote, ms cool is in its and that the quarterly financial strongest position as a public release, we downgraded again to entity. 23. can you reconcile those for the >> that is on a scale from -- committee? >> zero to 100. >> i don't know what context our

>> said 23 is a not a very good cfo said that no doubt, so i grade. >> as a matter of fact, 26 is on couldn't and to the best of my a curve where the highest incidence of individual defaults recollection is part of the have occurred. so anything in the 23, 26, 29 dialogue so i really couldn't range is definitely a cause for speak to that. significant concern. >> i yield to mr. capuano for >> you speak with mr. is it five minutes. >> thank you, mr. chairman. stingcamp are around that time? >> not on this subject, no. >> given what you know about the mr. parmelee, which you agree or tripled the reading is not a really good reading. liquidity to alleges that in a global was facing on >> r. rating was triple b- and november 24, and which break the it darlow is -- glass plan had foreseen how do you think that he could make the >> i know what it is. which. but it's not very good? representation to the credit rating agency? >> it's in our middle of the >> again i would be speculating scale. >> would you invest in some underinvestment be keen to the as to what context he was triple b. with your personal referring to, and it would be money? >> sir, it is considered an hard for me to give you a investment grade rating, but it's the lowest investment grade comment as to why and what the rating. that's the only point was making. context was for that particular >> mr. cantor, pretty low?

know. >> were there internal meetings between the treasury people, the >> there is no rating that is a good reading archive reading. risk people and finance people in the creation of the document? we have a lot of issuance. >> there was. >> having received ratings in >> were you involved in any of the past i was just not those meetings? >> very early on. as the treasury and finance team respect -- i respectively disagree when you get that was pulling the document rating, you well want a good one. we know the difference between a together. and as i mentioned before, taa and in na. subsequent -- excuse me, after you shall? >> i meet with issuers regularly. that point in time, the member some are extremely pleased to of my staff assisted in the get one rating and send ncaa's two. creation of the document as it investors are thieves. relates to some of the various >> you're basically telling me ratings don't mean a thing. scenarios. >> is a trillion dollars jump on >> $1.2 billion of customer the market every day on speculative on a shoot. money is missing. i have constituents who've lost a significant amount of money. >> doesn't matter what issue breakdown, why bother? your risk team is putting together what is essentially an you can avoid the questions up until a point. armageddon plan for the i'll get you in a minute because organization and you on the committee to believe that you had no direct involvement in the i want to follow-up on the the

chairman's question. creation of the plan and never he stated in your written saw the plan until very documents that you didn't know? recently? >> again, sir, i mentioned that that there is proprietary trading until october 21, 2011? to the contingency plan such as note that tells me very simply that was certainly sensible, and can't go from to 10 k. that is unjust giving you the if at a fair conclusion? he did not read 185 document in stated truth of my involvement. may of 2011? >> that document was read. >> twitchiness the fact they >> thank you, chairman. >> i now recognize mr. miller for five minutes. were dealing harikari? >> thank you, mr. chairman. in response to mr. capuano's >> we did not understand. >> so it was unclear. questions, you said you only spend an hour with mr. rosen and >> -- the size of the position is proprietary. in the subject concerns about >> that's not your statement. the sovereign debt positions did come up. your statement was you didn't but you also know that you were know it. being hired from the outside to honestly, i want to get on the road of these 10 k. is. replace the sea are zero who was being asked to leave. did you have any conversations mr. parmelee, you stated that in your interviews about why he the 10 k. was the first time he learned at the off hours she'd

was leaving and if it had to do with his risk appetite. ibms. is that a correct statement. >> yes, sir. we didn't have advance notice. >> in those conversations, we were -- it was continual >> did you know? >> i learned about the off-balance-sheet rpm's later meeting. it was a continuing meeting. on. we talked about the concept of the team was aware. i didn't learn about those until probably the october time frame. my getting hired was really >> mr. cantor, did your company know about the off-balance-sheet related to the company's stated rtm's? goal of the transition from may >> yes. >> i said yes before. future commissions broker trade >> kind of interesting because broker-dealer, and in my skill if you get money to read set, was more -- had more something you think you'd actually read it. >> i guess the reason i'm asking this is because honestly, the history and more in line with what the firm was trying to do. off-balance-sheet and bothers me to no end in the fact that so it was really more about that neither of you could have as it relates to their hiring. possibly known. i guess i'm asking quick question. did you know about the rpm's >> that's the reason that they give you that he was being asked to leave. did they discuss the risk before the off-balance-sheet? appetite? did they have a discussion with >> no. you about the firm and what they >> so there's no way you could have known, which i understand. wanted to have for the firm? that's why they're called off

balance sheet. >> as a general matter, yes, we i get that. and the problem i have is i talked about if you are understand it, allowing referring to the point of when i off-balance-sheet rtm's is got into the firm, we certainly perfectly okay according to accounting rules. decided my understanding talked about the stated goal going forward and the types of correct? >> yes, sir. >> mr. cantor, deeply for my analysis and the assessment understanding is correct? would have to be performed in >> i believe so. order to accommodate that. >> according to published >> the resent of the off-balance sheet is for some reason these are allowed to be counted as reports mr. roseman had direct nails, which for all intents and access to the ceo and the board and when you came in, your purpose is an asset. i don't understand. access was no wonder to the ceo or the board, but to the co they are basically a wash. why they are not recorded, maybe zero. did you have a discussion about that change in the organization? vanessa liability in this case maybe they were a liability, but at least a wash. if he accounting rules require >> did you have any questions them to be put on earlier about whether concerns that he statements, you think it would might have about the risk what have the effect of your ratings we get to the board? earlier, mr. parmelee? >> i reported directly to the >> now, sir. after it was made public in may,

we were players of the coo and had responsibilities to report from time to time on the risk matters to the best of my portfolio. our analysts rate the financial statements as part of our procedures. understanding. >> did you ask why you were no they told me they did. longer talking to the board? we believe that all the >> let me make sure that i information around that correct you on this. portfolio is factored into a while i reported directly to the coo, i also have obligations to reading. the portfolio itself. >> when you first learn of the multibillion dollar's the board to report on risks and off-balance-sheet risky investment wouldn't change her highlight risks similar to my opinion at all? predecessor, so i had access to >> what is most relevant is not whether soft on, but with an the board. >> publish reports or that the investment self and how much risk as opposed? will basically consisted of our evaluation of the risk of helping prepare part of planned the candidate was made up of presentations for jon corzine to make to the board; is that five european sovereign bonds. this tended to be very highly incorrect? rated europeans daughters. >> that's incorrect 80% of the exposure. >> mr. neugebauer read a >> it did not bother you at all that someone who is supposed to be telling you everything hadn't bothered to tell you about the statement that mr. where resigned made to investors before the collapse that the cover didn't strike you as a little not good? repo to the majority to the >> sir, will believe transparency is a very good and capitol of any consequence a

week before the collapse told we push for more transparency, absolutely. >> when you got the transparency didn't change your opinion. standard and poor's s and p m. >> once we learned about it, we ethical was in its strongest factored in and as well as other position ever and actually while information and belief that rating continue to be they had downgraded to the junk appropriate. i can comment a little bit on status four days earlier at time of the collapse and still have why we were so concerned relative to a reading if you'd like. >> mr. cantor, if year firm had the investment grade. were you consulted in any way on known about these off-balance-sheet earlier, would it have effect to your ratings? the restitution is made by mr. courts line or by >> well, i'm not sure they were mr. stingcamp? did you know the representations present much earlier than the were being made? disclosure. >> mr. quote's comments i >> according to testimony we believe for a public fight understood the quote that you have come and they were present for months before that and were referring to come and the representation as i mentioned growing. as matter of fact, the previous peel pretty much said that. before i was not involved or >> a few months, yet. as i said, there's a number of things to consider as the other couldn't represent to him on

with the context was. panelists said, the inherent >> did you pass along to anybody credit risk of those that you disagree on those your presentations that you felt transactions was fairly modest there was risk? is highly rated. who did you tell? if we were talking about an italian reading agency, we wouldn't even think twice. >> as i mentioned, as far as the but the positions were not risk pilots and risk reporting inordinately risky. goes, for example at the august however, the trading strategy david resented that the firm was board meeting there was quite a taking on a very large detailed presentation of both proprietary bad outside of its verbal and a powerpoint present. traditional business with the break from the strategy that we is that the example that you are referring to? understood they were taking. you had an arbiter. >> let me just break. again, i'm a politician and i understand fully well that did they raise any concerns transparency and actually agree with you. about the previous reported but i could tell you if you relationship between mr. roseman walked in my office and you don't tell me some thing, that's and the ceo and the board and the change that you reported, not transparency in the next did they raise any concerns with the process that and that global time you walk into my office, you will not be received quite as well as you were previously.

have in process for the trading and the accounts, was the price >> i agree with you. did they know about all this, if we had known -- in fact, we did they make the changes were made, did they know about the felt that we learn something new on october 21 that we did not ending of the direct reporting know before and the firm had to the board by the cro? gauge in a large proprietary >> i wasn't involved in any bad. >> have you learned earlier come you might've changed your opinion earlier. contract relationships were >> if we knew something earlier discussions with him. might change your opinion. >> are you aware of any? >> i guess i'm asking if they required more transparency in did anyone tell you they talked the situation, would it work could have change your opinions? to cooper's or that they had raised any kind of concern or >> i don't think accounting said it's okay with us? rules would've been able to reveal to us the strategy that lay behind that particular >> not to my understanding. >> you know of no discussion of position. all of the conversation had any i think that would've required conversations with management. communication with coopers about >> c. management used now say didn't tell you they were dealing proprietary. the changes in the organization so what would meetings with of the imf global changes and those people have held? they wouldn't have told you reporting relationships between something else. the cro and above board or any i guess what i'm getting at is

honestly, i think transparent is changes or anything regarded the the critical thing of the entire marketplace. that's what it's all about. process for the trading and account segregation? letting investors know. your ratings in this case let spec to the best of my the world know this is a recollection, i was not involved significantly risky investment. in those discussions. and i don't want to say that for whatever reason, but that's what >> did you have a conversation it tells everyone in america and you know it. at the water cooler, was there a the factor now telling me if you knew more you would change your rumor and? >> again i wasn't responsible opinion now raises questions about your opinion in the first place to me. for the price waterhouse coopers it's like saying wait a minute, relationship or -- i was about to give the guys >> i know that. did you hear about it? credit for actually being on top any organization is a rumor of this are in front of it and now i'm not so sure. mill. were there no discussions within one of you apparently didn't the organization? read the 10 k. and now you say did you not hear from anybody no matter how much information you told me if i was perfectly about whether it was okay with fine. all of this? and you know something? is really not a good answer and >> again. coming back to my original i guess we'll pursue this later because i'm whatever my time comment, to the best of my again. recollection i wasn't aware of thank you, mr. chairman. the specific conversations with >> i think gentlemen. now mr. fitzpatrick. the items you just mentioned. >> thank you, mr. chairman.

followed by mr. i. miss questions and that the moody's and s&p's questions, can you >> mr. posey i believe that he's recognized the risk in a speech visit how often do, would he read you very much mr. chairman. look for, what you rely unconscious talk about how you it appears just trying to put do it. the pieces of the puzzle >> sure. i'm happy to take that. together as simply as possible also in this case for us we that mr. roseman was the chief downgraded mf global six months financial officer until he before this disclosure. stopped telling mr. koret time what he wanted to hear and so then mr. stockman was hired to at the time he pointed out the tell mr. courts sign what he fact we pointed out that he be wanted to hear. taking a proprietary risk. so is factored in. just saying that is clearly how it appears so far. in terms of our surveillance i read an article sold out, and policies, weser bell companies on an ongoing basis. that global investor protections trampled in the private meetings anytime you information is in between the governor regulators. the marketplace, analysts responsible to know if the i'd like to begin by asking information has followed mr. stockman just a few questions warranted and act on questions about that meeting. do you know about the meeting it. it's really irregularly to with jpmorgan, goldman sachs and

surveillance based on the others? >> no sir i wasn't involved in those meetings a by understand market. which ones they were. >> mr. cantor. >> do you know about the >> look at a lot of things on an ongoing basis including the meeting? macroeconomic basis, such drove >> i was aware as a general matter but not involved in those meetings. iran is slow. of course we review the >> do you know the names of financial filings. those who were there? we often meet with the firm. in the case of mf global map at the firm 15 times in two years >> i do not. >> how did you find out about the meeting? and review financial results and ask questions. >> if it is the sec meetings >> you indicated with enough of a 15 times in a couple years? that you are referring to, some of this is in the public and as gazettes review the ratings? a general matter, you know, -- i >> yes. there is a number of higher frequent the meeting towards the end, but we certainly need it don't recall exactly where, but the least on a quarterly basis. as i said i wasn't involved. >> do you know the names of >> something goes middies and anyone who was there under oath? s&p stand by your ratings and

the methodologies? >> yes, sir. >> under oath to the best of my >> mr. cantor. >> to feel confident enough to knowledge making sure that you personally stand by them? understand what meetings you are referring to, i wasn't aware of >> yes. >> so is the chief credit officer and managing director, which would have been game-tying or at those meetings. to any reading is as precise as it could be on the best and most >> cui lady october 31st up-to-date information available to your company? meeting, which you mentioned was >> in some ideal world, everything can be improved of with the sec. always seeking to improve processes so one of the things i do you know the names of anyone hope to do is improve quality of ratings over time. who was at that meeting rumored firsthand, and had them third >> given the european sovereign hand, fifth hand if you know debt holdings at mf global were disclosed as early as may of about anyone that was at that meeting. >> i do not. 2011 in realizing the market did not respond at the time, but in retrospect knowing that they would lead to a downgrade >> did you find out after that indicated six months later. meeting what transactions were would you say this was perhaps a made by ns global holdings? surveillance failure? >> i don't believe so. >> no, sir. >> you don't know what decisions i think we laid out very clearly came out of that meeting or what

they decided to do with assets or how they decided to oppose three areas of concern for the the investors? firm. we laid out a timeline over you haven't heard any of that which we be evaluating the performance against those three anywhere? >> if you are referring to the final days of the company wind benchmarks. when we learned that the firm down, is that what you are was not meeting those criteria we have played out, we took referring to? immediate action. >> you are the risk manager. it's also important to recognize that while the firms credit i'm just a congressman trying to put pieces together. you know more about this thing profile had deteriorated and was and everybody appear on the reflected and rating downgrades, border has and we are trying to get you to tell us about a little bit of it so that we the bankruptcy of mf global appears to be caused by might better protect the public something very different or what and media for the first time in four years have some were talking about right now. accountability for the things >> we heard from the previous that are pondering the public and it's important for you to be panel that found october 21 honest with us and tell us everything that you know about meeting with medusa at the chief the situation in order to do risk officer was there. that. kind of like a pro forma meeting your testimony, will you knew about it, you didn't say this is really. all i know about it you said he wasn't asked any questions. this is all i care to say about didn't say anything. it read this meeting is very critical what went on at this it's a typical further review going on at that point? meeting. and i want to know everything that you know about that meeting >> i don't know what was

discussed particularly at the meeting. i have a copy of the and i'm not going to stop asking questions about it on record presentation. under oath until the chairman all the issues that were makes me unless you start critical for the rating action answering some of them. taken immediately after her quite amply discussed. >> i wouldn't be able to answer >> mr. parmelee committee fill confidently enough that should the question in any differently because i wasn't there or personally stand by them? >> yes, sir. involve at that meeting. we factored relevant information >> the last question i asked you in the ratings and they were was the result of what came out of the meeting. certainly you know what transpired after the meeting don't you? there was a decision about approved. selling assets who was going to opinion of the firm. get priority of the assets. >> that's an ongoing basis? tell me what you know about that >> yes, sir. subsequent to the meeting place. >> you integrate links in your testimony to chart the ratings >> subsequent to the meeting i your company assigned to have wasn't involved in the wind down of the company or its decision global and also included description of methodologies. do any of these ratings reflect to file for bankruptcy. to some information not available to the nrs for movies so i was not in the areas of to speak of actual specific decisions being made regarding and s&p and since? >> doak would generate all which assets to sell in the wind ratings based off of disclosed financials so we're not privy to any additional information and we have no contact with management so we are not

down. >> so you're saying you don't bouncing questions or ideas off of them. even know what decisions were if all publicly available made? information. >> thank you. >> i wasn't involved in the wind down of the company during that period of time when assets and >> i decide to follow up on just one thing. you said the recent mf global decisions were being made to but encrypt was because the missing money. reduce exposure to respect who do you think is the best person to know what went on in that >> was my understanding that meeting? like many financial services companies then we can financial position and having liquidity strains, they were seeking an >> again -- acquisition partner and they were close to reaching agreement >> under oath, i know. >> not having been neither a along those lines, which fell participant or inflated to what apart when the customer money was missing. you are referring to a think it wouldn't be hard to figure not who the attendees were but as you asked before, -- >> you recognize, mr. posey from >> 400 million people it could have been any of them. florida. >> thank you, mr. chairman. a few general accounting questions. if a company where rating has a is that what you are telling me? commodity account like exxon or mobil, exxonmobil or tyson foods, is the value of the cash

>> not having been invited to our treasury fields in the that meeting or participant of account us into a full value? that meeting -- you have no clue as to who would have been there. yes or no of each of you please. >> yes. >> yes. >> only one of you have the opinion? >> it would make sense that some >> i don't know the answer to senior management would have that. >> i don't know for been there. >> and some names may be? mr. parmelee. i don't know for mr. cantor. >> i mean, our senior management, again it's hard for he met our system takes care of me to be very specific because that and i don't need to have. tonight i don't know, yes and this particular meeting -- then i believe it's yes. >> assets on the balance sheet can appreciate or fall in value by reseller transferred. >> listen, you were not a lonely we all agree? clerk in an organization. you know darn good and well what is going on the organization and >> attention as it could also be stolen. we all agree? you know darn good and well you >> yes, sir. can tell me who you think should have been at that meeting. and i'm just asking you to be >> is and if you ever heard of honest with us. them being quote vaporized, close quote? >> yes, sir. >> no.

>> again i just have to keep >> no. >> with the record show they all coming back. said no. i could only imagine. >> how you treat assets on a balance sheet if the assets have been stolen? >> mr. roseman, can you give us or just to save time, is it any ideas? obviously you needed to be correct to assume they wouldn't be counted because they would replaced by this guy but maybe eventually need to be returned to their rightful owners, and you have a little bit better you agree with that statement? knowledge of how the organization works. >> fair, i'm not sure i've ever faced attics. >> i wasn't there but in his defense it sounds like he was in >> so anastas would be put on the balance sheet is here, but there may be a contingent that meeting but after the fact potential of recovery. i'm sure there was some direction and was given to the individuals. >> with other never faced why wasn't there so i can't anything like that, but we would respond to whether or not he probably handle it very similarly. >> said mr. cantor, knows what actions were given out or otherwise. mr. parmelee, you don't know? islamic who you think would have been in attendance at the >> yes, sir. meeting if you what? >> don't know or you don't like they would? >> certainly if it were >> i don't know, sir. concerning me as suggesting >> okay. mr. karzai to be there and maybe he met in your dealings at mf global, was laurie ferber involved in your work? yes or no? a few other members of the exit >> no, sir. >> i'm not aware.

of management but at least those individuals. emacs so all said no. >> just speculation though of course. >> she's considered an expert on >> ms. bader swa? legal issues related commodity >> thank you very much, and derivatives trading. mr. chairman. would you agree mr. parmelee? >> i don't know about laurie ferber's background. it's clear to me what was taking i don't know specifically about her background and expertise. i can't speak to that. >> okay, so someone in her place at ns capital, and i think position you feel could have no expertise in a serious? that this information has come >> i feel they would you out in a previous hearing or >> i really don't know anything about her. previous hearings. >> you know who she is? >> no, i don't. mr. koret -- mr. corzine was the >> with no contact with them. chairman and ceo and threatened >> okay. let the record show nobody knows to the board when they got in nothing. the way of the sovereign i guess in ridding mf global, trading. he was glad when mr. roseman you assume they would conduct

business in accordance with fellow laws and regulations i'm left. he hired his own people. he did his thing. not that they would leave their and so, i think there is no customers segregated accounts for their own benefit. is that a correct assumption? question that mr. corzine >> that's correct. >> okay. did you miss them that the cftc violated the rules of the day in terms of being the chief that and the software works with emerges out of all of this either response to ability to information. audit those assets? mauney concern is what happened that's correct. to the customer asset. >> which often the same? >> yes, sir. >> did you confirm with ms at a loss of the 1.2 billion in the customer funds mr. stockman, auditors trace waterhouse coopers that they had verified that controls were in place to prevent unauthorized transfers? >> no, sir, we did not speak to what do you know about the auditors but typically we wouldn't expect an auditor would be up to share information decision that was made to across as a third party. they have a confidential utilize these customer funds relationship with their client.

>> we didn't speak directly. we did recognize they had signed despite the fact they were their opinion that we did supposed to be segregated and review. >> fair enough. again, no contact with auditors protected? are bankrupt or his grifters. >> i assume you reside on sec >> in my opening statement, i noted that i have no specific filings to complete your work. knowledge of the client on or we were there about dated and segregated fund, and as far as my job duties, they were not otherwise adulterated? involved in the treasury or -- >> we did rely on sec filings. many say backdated and >> what non-specific knowledge unadulterated, i'm not aware. do you have? >> i have no specific or more on >> i said may have been. >> at the same answer. >> i have no awareness. specific knowledge. >> so you knew nothing about any >> okay. >> just following up on decisions that were made to use mr. capuano's,, and moody's letter to congress, it stated they did not learn about and these customer funds, you know nothing about that, is that correct? that's large rtm trade until >> that's correct. >> all right. october 21 and i'm just wondering, you know, like given everything that has everyone else just how the path. happened, what would you do >> again, we were aware of differently?

>> that's a terrific question. disclosures in the 10 k. emily read through the 10th case we we think that when the final chapter is written by believe were aware of their position as the moment it's a little reported. where we became aware of on the preliminary to meet specific 21st was the motivation for positions in how they were decisions and recommendations. managed. at that point in time, and the description of that type of that spec you were the risk officer. dvd changed our view on the you had the responsibility for appetite, which along with the two other measures were tracking at least alerting the board of earnings and leverage led us to directors about was taken place. take the action we intended to take if we thought the weakening performance for all censure. what would you do differently today? i don't want to talk about any >> so, could anybody come close recommendations. i don't want to talk about -- i to properly assuming that perhaps it was an oversight? just specifically one of the >> i don't understand what you're saying. position that you are in hadn't we had talked about it in all been the risk officer everybody our publications of taking a looking at you and wondering where were you, you were absent multi-quarter approach to evaluating all of these or not have said what would you do differently? dimensions and upon executing a

lot of that plan we took the action we had intended to. i want to challenge you a little on that want to say myself and >> thank you, mr. chairman. my risk-management team we did i recognize someone from new our job during these mayer brown mexico. mr. pearce. this period. >> thank you, mr. chairman. we highlighted it analyzed, i guess mr. parmelee is the assess the risks made transparent and clear to both the senior management and the rating system not monaco or is board. the object gave, subjective the risks that we were running cannot you come up with the at the firm. >> who did you give this rating? information to? speak marne to the microphone. >> yes, sorry. >> senior management and the the ratings incorporate both qualitative and quantitative board. aspects. the informed and sophisticated >> which weighs heavier? business judgments were made >> so we take a look at the based on my department's underlying business and make an assessments. assessment of the business and >> you may have said this how risky the businesses and how we assess the financials. already. in need your report to the board and they somehow risky the business is, that drives are of the management, did you say

that this company was being look on the financial. >> so i look at your readings placed in a highly risky for the firm from about 2008 to situation with a sovereign debt trade that mr. corzine was 2011 when i started having trouble and everybody got it involved in? right then. >> in the august board report it was clearly highlighted in both were your readings higher or lower than your friends next written and verbal presentation year there? >> when we vote our ratings in to the board and senior management as an example the november 2010, that ticket to a increased risk in the marketplace over all from the summer of the volatility. level lower than our two largest competitors. >> was set up to 2010 the bbb number two, lightning the credit spreads. number three come increasing the rating in two dozen eight to probability of default. 2010? is that higher or lower? number four, wearing of the illiquidity in the marketplace >> over copiers that went down and importantly, number five in to triple b- which was lower. particular. increasing the stress. >> who is richard moore? >> so in essence you felt you did your job; is that right? >> i don't know richard moore >> that's right. >> and there is nothing you would have done differently? personally. >> i didn't ask if you know them >> obviously let me say that personally. i said you would see. with the benefit of 2020 >> i know same from the media hindsight, there are things that root for.

we would have done differently >> so you might know he was knowing what we know now. working for mr. corzine and whistles on your heirs. >> my time is over. i yield back. >> i did know that before the media report came out. >> thank the gentle woman. you are recognized for five minutes. >> thank you, mr. chairman. you didn't know that? mr. stockman, over here on this side. and again, looking at all the ok'd. questions that you are hearing is it ethical, this and getting, you are probably starting to get to understand off-balance-sheet trading. you heard my questions i think that mr. roseman at least saw if you're sitting here. some issues, brought them to the board, and at the time the board is that ethical? >> it's an accounting issue and wasn't happy with the decisions he was making so he went on to most important is that whether hire someone else and that was or not the trade is you. off-balance-sheet. so my question is who recruited what is important is understanding the risk you? how did you come to this bathymetry. position? i think as i said earlier -- >> i came to the position >> eisai didn't matter enron was through a search firm and then trading 27 of the 60 billion? went to an extensive interview >> trance parents is important. process. >> who ended up hiring new >> i think ms could have been more clear to the market place. ultimately? i'm asking with the guests are

now about the off elegy. mr. corzine? >> effectively to is the >> could've been more decision maker? transparent than they were. why your and directly erie port >> with a transparent enough to know was going on? to mr. attwell. >> wednesday filed their 10 k. >> so mr. corzine had no influence in a decision? report in may, we knew about the off balance sheet exposure. >> i'm sure as a matter of senior management we recruit for >> they would have affected if the senior positions by they've not been sneaky about it interviewed with mr. corzine but before. there was an extensive interview if they been more transparent. process with both mr. corzine mr. geller, when you begin to and the board. >> were you asked in the process the wanted sound out you put your opinion that any time of the ns global appetite and them down to 29, which is equivalent to the ccc. taking a greater position in the european or p.m.? >> that's correct. poets are concerned that 10? >> the european backed >> is a combination of drops and three primarily three of our six specifically to the best of my performing categories. recollection didn't come up sales performance was dropping specifically during the dramatically. their profitability performance interview process which as a general matter wouldn't be that is dropping dramatically and there is leverage. unusual as it relates to the proprietary positions for so we saw significant warning someone that hadn't been hired jett. >> do you believe in any way signs across the board and we look at some of the numbers i that ms global's increase quoted in my opening statement

appetite may be during this as a dramatic change in that discussion, this interview process would have been a business over the past few prerequisite of you being hired or do you think that was totally years. >> mr. cantor, i'd like your viewpoints on this non-ethical not a position of their? question. about off-balance-sheet. >> i don't believe it's >> it wasn't a pre-requisite and as i mentioned i will discuss a unethical. >> any speak when the was about the interview and microphone? hiring process is about my skill >> i don't believe it's unethical it's about off-balance-sheet reporting. set and where the firm had the >> so if i file -- if i file a stated goals and where it was going. >> use it in your testimony you claim of the federal election noticed after you were hired commission that declares my net that there was some concern worth is different because it noted in the board that got off balance sheet, you would think it's unethical? mr. roseman had addressed with the board related to the >> toothing the federal election increased positions being taken commission to take issue with me in the european back. what did you do after that? finally got off balance sheet? did you just ignore that? you are the risk officer. >> i won't comment on mac, but what did you do with that only believe this exposure was information? >> i began soon after i arrived at the firm to do my own disclosed in the footnotes. so it's pretty transparent.

analysis and was assisted by my department and that analysis >> pretty transparent except included a number of features in that you all didn't have a clue. the sophisticated every month of the plant by during my tenure as i don't agree with that. in the analysis included a >> you don't agree with that? number of elements in particular >> you tommy they were doing anything off balance sheet before they got the word? liquidity risks. >> he also said in your >> beaming between quarters? testimony that you felt their >> again, they were moving stuff positions were acceptable; is and announce that they could drive leverage up-and-down to that correct? mr. corzine could ring the >> correct. in the context of the first leverage down. three or four months while the actually what he's doing is selling whatever the day before the signing period closes. conditions for what they were all of that stuff is just to feel normal everyday activity. much for benign and in favorable, i found that the risk >> moody's position on mf global and the award were acceptable they had weakening earnings, and as was discussed in july i rising leverage and had a risk had a change of view. appetite that had potential to so as all of this was going on grow given the change in and you look back to the business strategy and all three of those things perfect teen minutes, you had no concern about the potential outcome. risk. the taking on of european

depositions at that point in you are comfortable that everything was going okay right time itself was not a highly down to the last minute. risky credit judgment. >> i highlighted the risks as i but the decision to maintain such positions on a proprietary mentioned in very specific for men and fashioned, and in those basis had essentially taken a large side that, even at the risk themselves were modest, was early few months as i mentioned not consistent with the stated of them acceptable market business strategy, which was conditions change and so did my more minimalist in its risk view. intentions that had been described to us. >> mauney background is >> my time is gone, but if i financial also and i had to deal could comment that i have seen with a lot of companies. there comes a time. where the downgrading goes way south in about a seven day period and you are wanting us to believe that the performance of the company was transparent and >> in july that was as market there's nothing obvious to anybody except mr. gellert who conditions change that's when i came up with some team and you began to recommend the company want us to believe that. thinks carefully not really only it stretches the belief understanding the increased risk capability. thank you, mr. chairman. profile, but didn't consider >> i thank the gentleman. the ranking members recognized. hedging the reduction strategies. >> thank you, mr. chairman. >> mr. roseman, regarding the

braking class plan, the margin calls on the liquidity risk that mr. cantor, just as information achieves the rest officer at mnf i suggest you go back to the 10 global might concern himself k. on page 76. with. and on page 17 proprietary activities fairly clearly >> certainly it is a material reported one of them in bold. collateralized finance and with concern. if you look at all of the companies that have failed ultimately it's generated wide activities expose their company to issue a default and liquidity liquidity risks or more often risk title of subsection on page than not. 17. they go on to say later on that they may have additional margin certainly you need to have a good understanding of the cause. we may not readily have. liquidity risk that the organization is facing including so if people read it i don't the margin. >> you through the red flag a couple of times. know if they need to be can you briefly tell me what retrained or something. this opinion of the red flag was? >> will the initially there was a disagreement on the potential >> mr. parmelee in your testimony on page nine, you say price risk associated with of we believe ms globo speenine the positions in regard to the capitol risk. span confidence among market at that point in time has put in my written statement there wasn't necessarily the concern participants who question the firm's transparency. what transparency are you about the liquidity risk because referring to?

they had more than enough >> we think the loss of liquidity to handle the initial confidence occurred because of the number of issues. one, concerning transparency around the rtm portfolio at a positions. as the position started to grow in the fall that's when i time when european sovereigns were under pressure. express' my growing concern certainly there is a less about the liquidity risk and the reported that was significant. department presented to me and i they're a credit downgrade. >> just a transparent departs. >> transparency related to the presented with a considered details. >> so you are concerned about it potential scenarios are around when he learned he may or may the margin. never told you about it before, but now the sydney get concerned. >> thank you mr. chairman. >> they should've been more transparency about it. that wasn't the driver of our >> thank the gentleman. creditwatch action. >> thank you, mr. schramm the replace reading some creditwatch on october 26. >> eisai the demise was the lack of transparency and at the lack co-chairman. of transparency which admitted i want to try to better earlier was revealed to you in understand some of the basics may. so it took you from may until -- here so i would like to start actually the day they filed for bankruptcy to put them below where you left off with investment grade. it took you almost six months for that lack of transparency to mr. roseman and if you could all of a sudden be of concern. explain for me what you think >> sera, a series of events occurred beginning early

caused the problem here. september that we believe undermined confidence. you started your outline it in >> i understand. i get all that. answer that you just finished. i know it happens, the you said it was mostly the lack of transparency. if you could walk me through i happen to agree with you, but that in a simple way as you can and tell me how you fall to the i guess my concern is the same risk management process here lack of transparency which eventually fell apart when you finally at dead, the same lack fell apart or didn't look right and how it may be should have of transparency existed in may. and i guess when somebody writes happened. >> the first thing i think the committee needs to realize is to you, does not tell you some them about that person or that company, that maybe they might have lied about something else or maybe they might continue and the sovereign risk some of the sovereign positions and the associated risk in the positions yet it took you six months to react to it. were well communicated, very >> we published about are concerned, about the transition be an investment banking model transparent within the and the expectation for higher organization and to mr. corzine risk. >> but she didn't change the grading our calendar and the and to the board. public. >> we did in november. >> so the risk associated with >> i don't know who we should be everything was going on was more upset with. one is to take six months to be clearly laid out to go forward up sad or didn't catch in the

notwithstanding some of those first place. this miss i figure figure out but understanding what the risks who out get upset with ivana for and as in the other events couple days. that hadn't occurred before out of those answers think. sometimes there is a difference both of those answers stand. of opinion on the view of what might happen, the challenge is mr. gellert, which you agree the if you get it wrong then you 10 k. was pretty clear about proprietary action? have an even such as what happened with enough global. >> i haven't personally read the 10 k. for that language, but our system holds in these numbers >> the risk manager what is your role in that conversation? and processes them properly. if there's transparency -- if there's a question of am i envoy role is to articulate transparency, to me is relative my view on what the risks are in to the shift in the business the organization. model. the business model have been if and i also believe to ensure it are subject to it, i think that there is enough cushion the it's incumbent on anyone who has a relationship with management means to support the risk and to ask the questions to be on make sure the risks the company the benefit of the doubt.

is taking is in line with the >> here's my problem. strategy of the company and that i was here when enron came along we heard about offshore off is an ongoing concern. balance sheets, a major accounting firm went out of >> so, you obviously were moved business because of that review out of the position. of books. we have a crisis in 2008. is that because management was our major banks talk to us about off balance sheet investments. unhappy with the advice that you they call them special investment vehicles. were providing for -- they all have been. they all did then and no one >> you're asking why i was knew about them except them. replaced? i'm really not in a position to and now i'm being told, or am i answer that. i would say that my views on the being told that it's okay to risks certainly played a factor off-balance-sheet significant investments, significantly risky in the decision. investments of the balance sheet. are you telling me that okay for >> so, regardless of that your reading, mr. parmelee, that happening, what happened after it's perfectly acceptable to you you left, and where do you think quick >> if you're off-balance-sheet to transparency can i agree fully that needs to be more the company went wrong from that transparency not be more point on? transparency. >> mr. cantor college believe >> in my opinion, there is a it's okay to have off-balance-sheet or any other investment were not told about? sovereign strategy in a self but >> it would be helpful to have these types of transactions on in a broader context the firm

balance sheet, but i think is my was pursuing an investment panel aside, there is already banking strategy that was transparency, information is in clearly articulated by mr. quote the foot note as i identified. to the public and others in the such whether that's on the balance sheet or not, the information is transparent. capitol liquidity to fully support. >> so you think everything is it was important to manage the perfectly fine? you think you just blew it? strategy within the means, and i do think that's strategy >> again, you cannot assets under balance sheet. you need to interpret what are those assets? exceeded the ability of the what are the risk in those resources. >> are there lessons here with assets? respect to how the systemic risk >> your interpretation was is implicated with this utterly wrong. utility now you have enough information to make a judgment? fine, okay. particular case that should so your judgment was wrong. concern us as members of the >> it wasn't the only important financial services committee? to the rating. one thing that was important to for their systemic issues that we ought to be concerned about the reading was whether the as members of the committee with respect to what happened at ns

positions, the principal positions the firm is taking on represented a significant global? increase in risk appetite or >> as it in my statement, i whether it was -- think that one of the main take away is again the firms need to >> so obsessively as average is be very mindful of the concentration they are running into the implications of the $6 billion debt off the books? stress scenario related to that concentration risk and clearly in the mortgage crisis it was @value. >> it's not so much is off the some of the firms that feel they have concentrations in the books. the mac here's my problem. securities and we know the i can do this here prepared to outcome that occurred. give the guys credit not for the i certainly think again that investment rate, but pretty needs to be revisited. close. your ratings are not decade. but we are telling at the islamic the issue of hearing is you just turn me concentration of the around back to where he started, which is then not show sure i >> concentration risks that a can trust you guys anymore. company may hold. you think it's okay to have >> thank you very much. i see my time is up and i yield off-balance-sheet things that no one can report. back. >> thank the gentleman. to out more information? now the gentleman from new >> you can use more transparency mexico mr. pearce is recognized and end up doing pro forma for five minutes. sensitivity when they went to -- before mr. chairman. but from the prayer breakfast. rent scenario stress testing and talking about the man doesn't want to live without brolan

the things i've balance sheet to $1.2 billion disappearing off understand them better and the table out there. implications that i ratings. mr. stockman, how much did you >> i guess i'm lucky night inc. get hired for, what was your salary when you got hired? in the major credit agencies think it's okay to have massive risky investments of the books >> my salary began at 300,000. and that they don't know about. it's okay for you to tell the >> and what about you when you public, user ratings. that's an incredible statement to say and i've got to tell you departed? walk away -- i thought today was >> 350,000. that they would kiss and make up >> 350. some past differences of opinion, but i guess it's not. i yield back. so, you got the chief operating officers, you got the ceo, the >> i thank the gentleman. chief executive officer, the so i went to go back to some of chief riss officer they all began with a "c." the basics of the rating model that you use for mf global. does that mean anything mr. stockman? in other words it doesn't sound like you were in the real would you put this company in the same category as goldman management meetings. you were just left out of those. sachs? am i hearing you correctly? in other words, are you looking >> mauney responsibility is -- at very pieces in aspects. >> i didn't ask the responsibly. you are left out of the key

meetings. you didn't know you were answering questions from the and edwards, during the the same other side, and you didn't know who might be at the meetings. business category? so, it appears the you were not >> rewrite them using a general there you were something with other firms. did you get to sit in on the methodology securities industries methodology so they senior management as a risk officer whatever level you were? are probably embraced by the fact her in the france is very >> at the meetings that were appropriate. different telescope. >> did you get to sit down on the things in the future of the company? >> so basically the same it is yes or no. parameters electric goldman >> i'm sorry? >> did you sit in on the key meetings for the future of the sachs who would look at -- country? >> as the chief risk officer i did not sit in at the highest >> starting point for the level. >> you were not. is that right? analysis. okay. >> friday october 21st you had >> when you think about this, we the management team meet with

note you sent comparison types moody's. did they come back and report to you as the chief risk officer of risk they take. things might not be going so goldman sachs is a bank holding good over there? they are now worried a little company. we apply our bank methodology to bit about what they are seeing. goldman sachs. the release new methodology in did they come back and really that to you the chief officer? november 2011. >> i think wary of going with you are the head by an officer and you were right up there with this is, you know, they were the fancy pin-striped suit. moving and trying to emulate did they come back and tell you anything about what they said using the goldman sachs model. might be happening to them? >> the key contact is it was our and so i was wondering if their old business model of a broker cfo. dealer in commodities? >> i said to did they come back and tell you anything to raise if we look at this in the sense the flag and share anything with that it is a company broadening activities were proprietary you? trading? we need to look at them did you ever think that maybe differently because it doesn't they brought you into the kind appear you're doing that. of a guy that doesn't tell >> so one important difference is the bank holding company though? did that ever occur to you? goldman sachs has access to the >> no sir. discount window and other sources of liquidity that ms >> what about off balance wouldn't have had. sheets? i'm looking here at your break

there are comparisons. the glass and it says we are going to prevent the off-balance under bank methodology we break out components of the rating and sheet drain. when i read about that i'm just a stand-alone credit rating and a suspicious character but it brings to mind enron doing all goldman sachs' triple b+, two notches above for mf global wes. this fancy stuff around the there is some similarity they edges and the fast-moving treaters moving up and down and are. >> so the risk manager said he did it occur to you that may be is concerned that this expansion off the balance sheet stuff was something you shouldn't be of business probably really signing off on the chief riss stretched their cup go. and so, both of your firms had officer? did it occur to you that you should say something about that? this company raided basically >> the off-balance sheet treatment -- >> can you pull the microphone just inside the rope. closer? >> the treatment that you are referring to was fully did not concern me when he looked at that 10 k. and says okay this is a comp any this may established prior to my -- >> i'm not going to ask if it is fully established. did you hear them say you ought to think something about that be marginally capitalized because is it normal for you because it's got to be one of giving off balance sheet trading the fact as his capital. at ubs? >> to the best of my and now they are expanding the recollection there was balance

risk of their company. sheet trading but again if you are referring to mf off balance given that kind of ring a bell sheet -- >> is off balance sheet legal? somewhere quiet >> there's an accounting >> senator, importantly we did think about that and talk about treatment. >> is it legal? that in a public document. >> again i'm not an accounting expert, but under -- when we downgraded the company, >> you're the one that has to and in many parts because of the certify the risk. reasons you point out. i don't care if you are an expert or not on accounting. a month after jon corzine joined the firm he was engaging towards i'm asking from you as a "c," cro, coo come you are one, is it being an investment bank, we are legal? concerned about the incremental risk they be taken on. >> to the best of my understanding, it was performed we noted in the november release under the accounting principles. >> is it ethical? and we downgraded them to the triple b- level. it was months before the rtm .. level portfolio is made public in the 10 k. filing. >> my final question is when you read the 10 k., did you ask mf global for detail on their

off-balance-sheet at charity? >> i didn't personally, sir. i am not aware if they asked that question directly. >> you said you not testified y'all did read it. did you ask them for detail on that off-balance-sheet activity? >> no, we did not. >> type inc. i've run out of questioners. i'm sure that's okay with witnesses. we appreciate your coming. you know, one of the things you probably hear from my colleague is that we are concerned about every aspect to this, the search only if there is a responsibility we believe in the reading community to make sure that if people are going to continue to have confidence in deeply, deep these sorry. the system, that we feel like in did you call when it sees? the public more importantly feels like the appropriate amount of due diligence is being done on your part in making i got one guy who asked by a thousand at christmas time. today we have some concerns did you call anyone? about that. 1.2 billion divided by 5000 is a lot of people. so we thank you and the

did you call one of them? witnesses for being here. we remind all members issue of >> i have not commissary. i'm deeply sorry. >> yeah, i see. 30 days -- i have to get my i guess maybe you ought to give script to make sure you read this correctly year. your payback and put it into a all members have additional scholarship fund for these kids aren't going to to go to college from the sitting out there, some hawks armor trying to make questions that the pinup of the amends the. most too. without objection the hearing record remained open for 30 days trying to pay for the next to submit to the witnesses in accuracy. pay at $1.2 billion had not the place responses in the record. definition of whether it's legal with that, this hearing is and ethical or unethical. adjourned. [inaudible conversations] i don't think shaved reaches >> can you create anything you want in the world you created, wall street, but if it did if and feel comfortable in that you should of the catholic church paid and what you're creation? paying for. >> i think that china may now mr. canseco from texas. or, can you decide that i can't >> thank you, mr. chairman. offend anyone so i can't write mr. stock men's, one brief this thing? >> from lectures in history, professor william foster on question as a follow-up to the questions that have been asked. >> i apologize for dean.

american literature and culture i want to make sure it is saturday night at 8:00 eastern. also in american history tv understood that the mideast change the reading habits of meeting i did attend if there is any confusion on not. i'm not sure there was, but i americans. just wanted to confirm. a look at the influence of time >> let me ask a question now. inc. henry viii, publisher of time, fortune in life magazine >> wednesday at mf global first saturday morning at 9:30 eastern and sunday 5:00 p.m. approach? i know you went through an january 1901 the oil boom has agency, but when did you first sent lukas gusher quickly makes texas a leading oil producing meet? went at mf global first approach you? by letter, phone call or state. visit the homes and streets of otherwise? beaumont texas. >> best of my recollection, in september, october possibly. >> for economic conditions. possibly october of 2010. hot dark i need a new america to >> by what means was it? letter, phone call coming in now? >> phone call. >> and did you go and visit with them shortly thereafter? everlasting each and ideas that >> shortly thereafter at a series of intermediaries. solve their differences by

>> and was that your headhunter killing each other. or agents that cause you? i was at mf global ecology of? [applause] >> as candidates campaign for president this year, we look >> this is the research firm. back a 14 man who ran for the >> so your search from college office a must. about this at mf global wants it go to c-span.org/the contenders and i was in october. to see video of the contenders who had a lasting impact on >> to the best of my recollection. american politics. >> earlier over her late october? >> i apologize. >> the radical liberal must offer only went to lucian to the to the best of my problems which confront us. they tell us again and again and recollection -- [inaudible] again, we should spend our way out of trouble and spend our way into a better tomorrow. >> mr. grossman, you're told you're no number of the data as chief risk officer of mf global and january 2011. is that correct? >> s. commissary. so the crl is an important job than i imagine in order to >> national intelligence replace you it would require at director james warned of an increasing risk of cyberattacks least a few months of a search process. at this house intelligence do you know when mf global began committee hearing. to search for your replacement? he was joined by the heads of the cia, fbi and defense

>> i do not commissary. intelligence agency. >> and what month was your this panel also testified before biggest disagreement with jon the senate intelligence committee on tuesday. corzine over liquidity risk of european soccer rpms? this is two hours 20 minutes. >> i would say that discussion started become a much more material in september. >> called the committee to order >> what month was it that she made your presentation to board, and the committee will come to saying that support should not follow mr. corzine's advice to order. i like to thank our guests and witnesses today. increase mf global0:00 p.m. sovereign rpms? first let me thank you for your service and i hope you'll pass on the committee to the men and >> i did a full presentation in november. women who do the real work as a >> do you have an opinion say in the intelligence whether or not your presentation had anything to do with your business. please pass on our admiration, removal? >> 's as i said before, i'm really not in a position to respond to that. respect, support and great i do think my views on the risk things for what it's been a very, very good year in the would have played a part. intelligence business for the

>> thank you for your candor and united states of america. i thank you for your answers. and testifying before the house agriculture committee, mr. john i also want to thank all of you corzine said he replaced u.s. for since we started this dairy chief risk officer because mf global quote needed someone in hearing bustier come at the very fact that we have established a very professional working the chief risk officer position that was more fully attend to relationship with the community the broker-dealer cited by and that has netted valuable business than what mr. rosen's background was about and there results. we have two authorization bills, are other issues about how lots of great oversight. people work with each other, we have been professional, even close quote. when we have disagreed and at the end of the day, that so mr. roseman come you have an daylight has been important for the community to move forward in impressive resume and a wide variety of experience. the classified realm. do you believe your background was not fully attend to the i think americans get to see publicly you'll hear today. broker-dealer side of mf global it's the classified work that really makes a difference for business? the national security posture and we can both say from a >> i would fully disagree with that statement. ranking member and myself do we i have the experience in appreciate all of your cooperation in the work we've been able to do. investment banking prior to mf i do think the ranking member global. >> so it's true you have a and fellow democrats for making strong financial background and this committee a bipartisan experience in a good strong effort on national security and that certainly refreshing that

resume? you would agree with me there? we hope it's duplicated around >> i appreciate you saying it this town. that way, they would say certainly heavy strong i'm going to get a little bit background. >> thank you. >> oyster sauce and, in a letter offstage. i thought the hearing was to the set committee, movies instructive. it certainly highlighted issues that deserve our attention. indicated that they did not understand until it over 21, i just want to cover three issues quickly and turn it to a ranking member. 2011 at the european sovereign on cyberand i heard some comments made in the senate on debt portfolio as part of mf global streaming book. cyberand there seemed to be a did this surprise you since mf little bit of finger pointing. global had disclosed this exposure several months before? we are fighting a two front war on cyberand it is happening today. one more countries like china have embraced economic espionage >> guests. i was not fully attend to exactly the dialect, that yes i is a part of a national security framework and reaching an unprecedented economic assault would find that surprising. on the united states companies >> you found it surprising? and intellectual property. even at mf global had disclosed the exposure several months in the second and growing threat before? should not in a surprise price, of a large cyberdistraction is

right? >> again, i couldn't tell you on its way because the exponential capabilities growing exactly the context midis is making a statement, but i with countries like china, russia was good before and thought that our disclosures getting better. other countries like iran and others are investing heavily in were both adequate and robust. cybercapabilities, relatively cheap investment and a big big >> what was mf global financial response for inquiries from for the buck. midis about the exposure? i argue getting classified >> i was not -- when you say an briefings, discussions with all of you and your counterparts in the working part of the siege of initial inquiries, can you help those agencies that a me? >> don't parser. what was the company, mf cyberattack is on its way. global's response to inquiries from midis? i mean, you are the chief risk we will suffer a catastrophic officer. cyberattack. the clock is ticking and winding also mentioned by my predecessor, i was not the key down. contact and had very little time to have direct contact in terms i have to say we've admired this of discussions. problem for very long time. we've made it is about this >> let me ask you this. you are the risk officer. problem for a while now.

i don't care who you told, but we have think tanks this problem to death. we've created working groups when you heard about this, but across the executive branch should try to study the problem more and work on it. i saw some of the blame is on response -- what response is the community and i'll take your getting into that their exception to that. i think you ought given the teeth about this? resources you have in that they didn't realize can authorities yesterday at done a suffer and that was part of his treating book of mf global? phenomenal job on what is the hardest problem i think i've >> again, i want to understand more specifically what they ever seen. reference to the treating book it is so complicated and so difficult and the target site is large and growing still. and otherwise would because dimension before i can't about i hate to say the united states congress. there is some 30 saver goes out disclosures with adequate for there. again, we have looked, studied and understood the problem. adequate. >> and that's witchery sponsored lots of approaches, but at the end of the day we must act. me. your disclosures for adequate? congress must act. i will say this is the only >> on october 15 of 2011, committee has produced a executives at mf global put bipartisan product, very narrowly focused. together a break the class huge coalition support that we believe takes a small step to at presentation outlined what mf gopal would do in the event of a least allow the issue to be

credit rating down downgrade covered. currently covering top middle provided by the chief risk officer. that would be you. and dark and i hope we can -- the cso and mf global treasury they hope we find in ourselves department. whited mf global find it to understand the risk we take necessary to draft a break the class presentation? by not taking action and get something done the next year we >> as mentioned before, this can brag about the work you've done to keep american networks initiative to the best of my understanding was at the work safe. a reconciliation, i want to talk about that in my questions. request camassia phone treasurer really drove that strategy or i want to commend the administration for keeping congress fully informed. that analysis. one of my senior officers hope they didn't do so well on the advice and counsel part of this particular event. in a bipartisan way, some very to on creating some of the strong conversation about scenarios then mayor. opposition to the path forward they are taking on reconciliation with the taliban. so that was the genesis of that i think generally the comments were that we were going to legitimize nonstate areas that contingency plan. we've been trained to do >> i see that my time has delegitimize that the afghan people for the last 10 years and

expired, but i don't think you've been very candid with us. it sends a horrible message to the people that it then that the >> gentleman from tennessee. >> thank you, mr. chairman. united states and afghanistan. thank you, gentlemen. women entrepreneurs, people who did you have previous believe democracy with rain a relationships of any of the board members? mr. stockman? >> i did not have previous better day and afghanistan. relationships with any of the board members. normal afghans don't want to do >> governor corzine, how long did you know him personally? any longer fear and be >> i had -- i didn't. intimidated in their daily lives across as a pretty dangerous i'm sorry, if you're asking how i did i know mr. corzine line in a policy change. personally? >> i did know mr. corzine personally, but i have worked at it's a message for the world at goldman sachs a number of years just the soldiers, prisoners, prior. citizens treated like >> he said a few minutes ago that she did your job, that she commodities. reported information to the that is a horrible precedent and one that i hope this

board to mr. corzine and they administration strongly made the decisions. reconsiders. and iran nuclear bomb triggers mr. roseman also said that you an arms race across the middle did your job. east. there is no doubt. he reported the information. i ran for national leadership clearly and simply does not have it looks on his face, my peaceful intentions. it is clearly a state sponsor of terrorism. it is doing so in the colleague, mr. pearce, either call it that many, many people breathtaking pace. lost thousands of dollars, iran has systematically been farmers, ranchers. it almost looks like that they involved according to a state took mr. roseman out and department report based on replaced mr. roseman with a yes department of defense statistics killed as many or as at least man. does that that we do you guys? just in iraq alone is many as 600 u.s. soldiers through mr. roseman, which you comment about educate she gave them information they didn't like, so proxies, through introducing weapons systems that are very, they replaced you and put very lethal. they sponsored two of the most someone in there to give them information that they liked? most dangerous terrorist >> you know, i've answered that organizations. question actually liked. hezbollah and hamas. they bankrolling the al assad and in the fairness i'd say i'm not in a position to answer that. others made the decision for me. regime, even with its violent

i would say again, some of my upswing of late. following north korea's fleet, views would have played a part i did actively sought to subvert believe. iaea inspections and obligations. iran continues to threaten to >> mr. stockman. choke up the world's energy >> fair, and my test to me knows that when i joined the firm supply by closing the street of doing deep analysis on sovereign positions in particular, i found hormuz and their navies the risk acceptable and in particular so did the board and senior management in terms of finding those risks except the ball. and if market conditions changed, in particular in july, i expressed my views as it relates to wanting to recommend hedging strategies to bring in the rest down. i'd have to make a difference and take exception to your characterization. >> so in your opinion that the money was there to cover the margins on whatever the recommendation was?

>> correct. although to be specific, our treasury and finance area would have represented because that is their first line of business. >> you would know in your position? you wouldn't know? >> i understood, but ultimately our treasury and finance is responsible for the liquidity. >> and the nose to produce, that underwrites about its assessment of mf global's risk management. he writes at mf global is betting the house and their current approach to risk management. do you agree with this assessment? and was mr. corzine betting the house with the european debt? >> as i mentioned before, to the

genesys says the idea of betting the house was inaccurate the profile is changed in the marketplace that the same transparency and assessment of analysis and informed business judgments are made at the senior management level and let's not forget about the sophisticated board be in the balance between sean and these decisions. >> i certainly said just that the ability of the company to handle positions was pushed to the maximum. and as i outlined at first liquidity conditions in some

areas, good potential but the company in harms way. >> okay. i yelled at. >> i think agenda meant another chime in from california, mr. rice is recognized for five minutes. >> thank you. mr. roseman, let me ask you to leverage ratios if i could. the 30 to one ratio has been cited in the financial press. and mr. corzine testified that he worked to do you firm as he testified. can you expand upon the effect to leverage the, the ratio that existed there while you were thayer and whether you believe the leverage of the firm material or changed under mr. corzine? >> i think the important point is not only the leverage, but what composes the leverage.

but the year before that all the leverage was extremely liquid security. they were very short dated in nature. that's the important point. >> when you return august 2008 in spring of 2010 as you say, that started to change. did this windowdressing as she began to arise as well? at that time? >> i would say when we speak in terms of window dressing, it is pretty common part is across the street to bring leverage down at the reporting periods. >> this is 34%.

>> ansari? >> aged them down. i'm aware of that. if you can bring the leverage down, it reflects the quiddity of the positions. so nfp and that means they don't pose a threat. it's the latter shoot down system is at risk, be such a crisis as well as some of these other positions held by mf global. >> their investments overseas and sovereign debt a ticket? >> when asked about the concerns you raise, mr. corzine testified we allow people to speak their minds. that was his response. your testimony here today suggests something slightly different. you raise concerns about the positions as he lay them out to the board and you walk them

through the risk scenarios and they were challenged as being impossible as you say. shortly thereafter, your lasso. but they were challenged as being impossible. can you reconcile those two representations of what was going on in the mayor? >> i'm sorry. can you repeat the first parayo? >> i'm sorry. can you repeat the first part? >> well, mr. corzine testified that way about people to speak their mind. that was his argument about what went on. but you say when your product these risk scenarios, you were challenged before the board, but that was impossible. what you were arguing was impossible and a few months later -- >> i don't know if those statements are contradictory per se. you certainly allowed me to ask price at board meetings.

>> was there constructive dialogue that really raised your concerns there? with the board members -- it is one thing to raise an issue. it's another to be told by the chairman of the poor that's an impossible scenario. >> within the room there was certainly differences of opinions with the other board members on the positions themselves. so they were certainly discussed. >> one last question. you noted the strategy pursued by mr. corzine didn't match the resources of msg. can you expand a little bit on what you mean by that? what specifically caused the failure of mf global in your

opinion? >> since i wasn't there, i'm not really familiar with the specific decisions that they added to the company subsegment to my departure. so i'm probably not been the best position to respond to that. >> and hot but this? units the strategy pursued by mr. corzine did not match the resources of msg. what did she mean by that? >> you certainly need sufficient capital globally. we're operate a number of different companies around the globe, which causes some challenges to moving around on capital to other entities. when you employ a strategy, you have to make sure you do the analysis. they were certainly losing additional capital and what have you. so they might have had plans to raise more funds, were capital. i'm not aware of it because i

wasn't there. it certainly presents that needs to assess the strategy against the resources. >> teaming agreements, mr. roseman. >> thank you, chairman. the very testified that she were not privy to the meeting on october 31st with the sec and cftc allegedly discussed the unwinding with other large entities of mf global. let me ask you this. i'm a global, would you say 98% to 99% of the business as commodities? commodities and futures i mean? in terms of revenue break down, i am not 100% sure, but that sounds a little bit high.

>> over 90%? vast majority of businesses, 3ecent futures. vast majority of businesses, decent futures. >> if we had to use spot it, in terms of its current strategy, commodities and futures could have been closer to a half. i'm only speculating at this point. >> i think you're speculating quite a bit. my curiosity is this. your chief risk officer. you obviously know the history pretty well been paid handsomely to know the industry. is there any reason you can think of why this would be for bankruptcy under securities investment protection that verses under the commodities rules? any reason why you would see why that would be?

>> sir, i understand the question and i don't really offer much expertise as it relates to bankruptcy and specific laws. so i'm not going to be a will to really comment on that. >> mr. grossman, any ideas why the decision would be made to do this? do you know of any precedent to this? >> but none of the expertise myself why the decision was made. >> from your knowledge of the industry, doesn't strange to you? >> it actually does seem strange. >> does it raise the flag? talented even in the industry? >> 16 years. how about yourself? >> 25 years. >> i'm not saying you're an expert on bankruptcy. i am just saying, does it raise a red flag that accompany mostly in commodities and futures is

not going on the bankruptcy normally under the commodities bankruptcy, but it's understood that. does that seem to raise a red flag for you? does that cause you any reason to question? >> i think it is a reasonable question in deciding the basis on which to answer the question fully is unfortunately where we -- >> you don't want to answer the question. that's fine. if you don't have an opinion, don't have an opinion. i'm trying to figure this out. with two companies, one of mf global inc. in the other is the holding come in. is that correct? the two really honing in on today, with the problems lie. i know there's a whole bunch of other things but those are the two main entities focused on? correct? through the risk main entities focused on? but those are the two main entities focused on? but those

are the two main entities focused on? >> what your responsibilities? what looks like happened, maybe i'm crazy, i i think the inmates are running the asylum. that is well this has been the first place because we have massive leverage happening in the holding company, leverage that his chief risk officer said he had problems with the 2 billion it went way beyond there. mr. corzine didn't like the answers he was getting for mr. roseman, so we hired you. leverage keeps going up. very whiskey, market conditions continue to change and margin calls happened. when the margin calls have been, the liquidity mr. rosen was worried about wasn't there and in the final hours, in the

mayhem, someone which we have yet to find out, but everyone has a good idea who, transfers money from segregated accounts over to the holding company and that is probably where the money and are probably work a lot somehow someway. that is just a hypothetical. but i'm wondering now if you are the chief risk officer for both with the holding company, what safeguards were in place to stop that from happening? before you answer, i just want to read to you, here's the latest from mf global that when out to customers. and it says, your assets at mf global are it stability, protection. as the chief risk officer for these entities. is this true? is their stability separation

and protection to the best of your knowledge? >> i have no reason to doubt that. >> actually have a great region. $1.2 billion is missing. thank you very much. >> thank the gentleman. what we are going to do now in the chair is going to force this good will go to a two minute lightning round for some members that won't follow up questions and then we will dismiss this panel and go to mr. miller and recognize them for two minutes. >> mr. roselyn had questions about risk appetite. he also had questions about liquidity, about whether there was some money to pay a margin call, to cover margin call if you got one. you talked about them at a conversation you had with mr. roseman. he talked earlier about interviews he had a discussion of risk appetite in those interviews. how about liquidity? digit talk to mr. bush and about

liquidity? whether you have the money or liquid assets to meet the margin call if you got one? >> sir, as i pointed out, we analyzed the risk and stress -- >> start with a yes or no. did you have a conversation with mr. roselyn about liquidity concerns? >> we did not. >> du jour that conversation? >> during that period of time, liquidity was fully available. >> that's joe. but what point did you ever raise liquidity concerns and the 11 months, 10 months, however long the repair with anyone to whom you report it, the ceo of? when? >> along the way and in particular in the july time period, where liquidity, stress needs an actual liquidity -- >> did you make sure those

concerns were passed along to the board? been absolutely. >> it was during a presentation, both verbal and written. >> repo transactions are usually with highly liquid assets as collateral. they're usually very short-term. these were repo to maturity transactions, which bought the sovereign debt with 100% financing by using the data itself as the collateral. it was european dead. the whole world was holding her stomach about whether they would be a default on european dead. and it appears the reason that these transactions held up the possibility of a substantial profit was it was a bad against the market. ..

did you say to your accountant, to your auditors, who did you see it to? >> we continue to highlight the risks internally and talked about them in great detail. >> internally just as a ceo? >> to all those who were involved with the functioning in terms of the reporting risks and

he knew with 100% financing with a possibility likelihood of a marginal call and no way to make a margin call and you knew that the top executives were making statements as to investors and agencies that they were in a rock solid position and you talked about it internally? >> prior to the final week, the firm was meeting its margin calls and financing the positions and the case speaks for itself. what happened in that in suing week. >> i thank the gentleman. the chair recognizes himself. mr. roseman, going back from your analysis and kind of watching how this played out, what mf will be in bankruptcy

today if they hadn't put on those traits the sovereign debt trades? >> in my opinion -- bernanke believe that contributed to the downfall of the economy? >> i believe so. >> mr. stockman? >> as i mentioned before i would like to wait for the final chapter to be written. there may be other circumstances but sometimes that's a domino. on the books would they be here today? >> i think that confluence even i was talking about -- >> i just asked you a yes or no you believe it would or would not be here? >> i think it is a possibility that even with the positions we will have to wait for further details the the company could

have survived. estimate it's funny when everybody is covered then that's when the company went down. i now yield to mr. posey for two minutes. >> thank you mr. chairman. trey transformation in which they went from the liquid state to the gaseous state in other words just of the brightest. in your experience, is that possible? >> sir, else i mentioned before, i have no specific knowledge of customer funds. >> they pay three ander $50,000 a year because you got 25 years of experience in this business and you can't answer a simple

question as to whether or not you think assets can just vaporized like there's nobody to blame it isn't god's fault, they just the brightest, it's the corporate measure. t you think that's possible? >> i think that there is a team of experts going through the details, and in my experience -- >> as a $350,000 a year expert you have no idea what's possible for money to vaporize? that's good. >> you are fully aware of the rules requiring the council has to be segregated and protected at all times was mr. corzine aware of those requirements? >> i would be speculating, but i imagine that he is aware of those. >> how about larry fervor? >> i would imagine he is, too. >> what involvement did she have with your risk management and

compliance functions? >> she didn't have a significant involvement in the risk management function. >> was she aware of the risk positions and the use of segregated funds? >> i couldn't speak specifically to what laurie they have known. >> did she maintain or have risk in the counterparties? >> i'm sorry, could you say that again? did she maintain or have access to the control for the risk positions including their repo proprietary positions and counterparties? >> i don't know. >> was jay-z flowers counterparties involved in mf? >> i don't know. islamic floor was was a board member and john corzine was still employed by untold wouldn't that be in your opinion as an expert trained $50,000 a year experience and then hearing

conflict of interest? >> again i couldn't speak to specific conflicts of the interest. >> the gentleman's time. >> i would let members know if you have additional questions for these witnesses we are going to hold the record open. you may submit them in writing and we will expect the people to respond to those questions as well. i now go to the vice chairman of the committee mr. fitzpatrick. >> i want to go back to the e-mail that the cfo route to i think it was smd the 24th of october he said the company was never in a stronger position great public entity and you indicated the response to my question you didn't have a reason to disagree with the assessment. after i asked you that question coming you consulted with somebody and came back and

indicated you were at a meeting with moody's on the 21st of october; is that correct? >> i want to take half a step back. i think the answer to the question regarding the e-mail i don't know what context he sent that e-mail nor was i part of that as far as i know. >> in the context where you on the meeting with the different rating agency three days earlier? >> yes i was in that meeting. >> was mr. stingcamp? and was the firm downgraded as that meeting three days later? >> the firm was downgraded three days later. i couldn't be specific as it was a result of that particular specific. >> was the result of anything you said at that meeting? did you say anything at the meeting? >> me personally? >> i spoke very little frankly. >> did you let them know that

mr. roseman had a concern of credit risk beyond $2 billion you are brought into the trade through the 2 billion-dollar number? >> that characterization certainly wouldn't have come up at that meeting, no psp mick do you have an opinion as to the position of mf global support from mr. stingcamp? you have an opinion of the viability? this is now ten days before the complete in implosion of the bankruptcy. did you agree the firm was viable and was in a strong position? >> not my area of expertise, and i relied on our cfo people to help us understand in specificity the liquidity in the financial position of the company.

estimates by thank the gentleman and the final question from new york you're recognized for two minutes. >> mr. stockman, do you think you should be held liable in any way, shape or form a yes or no? >> how about mr. corzine the think he should be reliable for anything? >> that would be beyond my chance to -- you don't have an opinion? just say you don't have an opinion to read the think it is possibly negligent maybe even gross negligence for a new risk officer to come in and install these things going on and only spend one hour with mr. roseman, the former -- the prior risk officer and did not want hour you didn't even speak about the risky positions. you're taking over as the risk officer and you tell me all you spend is one l. were and you didn't really speak about

concern for the rest. >> we spoke about the sovereign risk. estimate you testified earlier that you didn't speak about that. >> we spoke as i mentioned briefly and not contained on that list of discussion was the touch on some risk. >> the touch on sarva and risk. >> more importantly when i arrived at the firm i did my own analysis, i performed my own along with my team assessment of those risks. and as you see in my written testimony, the discussion and description of those risks were fully vented and transparent. >> you also testified ten days prior to this, you had no reason to believe the company wasn't liable so you've done all this risk analysis, but on ten days prior to the collapse you didn't have any reason to believe that there wasn't liable. >> ten days prior i wasn't

coming into work that day. >> last thing, do you think this could jeopardize the entire community commodity futures trading markets here in the u.s. that people think if they are in segregated accounts it could be moved over and then put into bankruptcy and everyone basically gets the shaft don't you think that could jeopardize the entire system and the integrity of the u.s. markets with regard to the commodities is that a true statement? >> it is my sincere hope that this all works out. >> do you think it could jeopardize the integrity of the market's? people could lose faith in our system? >> i would hope not. hopefully this will get reconciled and they don't lose faith. >> the point is people in segregated accounts, promises were made. they were told it was safe to think it's safe to say people

lose faith. thank you very much. >> i thank the witnesses for your time. with that, the panel is excused and we will call the panel for 32. amol conversations in all conversations [inaudible conversations]

call one of the second panel of witnesses mr. parmelee managing director for corporate and government division standard and poor's rating agencies. mr. richard cantor, chief credit officer of moody's investor services. mr. james geller president and officer of the rapid ratings internal international bank. i'm going to ask the three of you to please stand and raise your right hand. do you solemnly swear or affirm the testimony you're about to give will be the truth, the whole truth and nothing but the truth? >> thank you. >> we are going to ask each of

you to give your opening statement and let you know that you're written statement will be made a part of the record. mr. parmelee, you are recognized for five minutes. >> thank you. mr. sherman, a restaurant a number of members of the subcommittee, good morning. my name is craig parmelee i serve as managing director and analytical manager for the north american financial institution team at standard and poor's. i am pleased to appear before you this morning and discuss the rates. over the course of its history s&p -- >> i'm going to ask you to do me a favor to read those microphones don't pick up a very good unless you nearly half your lips on them that you don't have to put your lives on them if you move them closer. over the course of its history we sought to improve transparency and capital markets by providing independent assessments of credit worthiness. at the core the credit ratings reflect the forward-looking views about the ability and willingness of issuers to meet the financial obligations in

full and on time. the ratings or expressions of opinion. they are not recommendations to buy or hold securities and they are not statements of fact. a frustrated in 2007. the rating at the time was the bbb-plus and remained at that level until 53, 2008. we then downgraded the ratings to the trouble be following its announcement regarding the loss from the offer is trading and based on our view that the company's high financial leverage among other things. in 2010, we downgraded the company yet again this time a triple d . just one notch above the duraid or non-investment-grade status.