and mf global offered me a position and i joined the company in that capacity reporting directly to the chief operating officer. my responsibilities included market and credit risk for the company. >> there has been a question

about mf global's transactions. in january of 2011. at that time $4.75 million. after rigel and mf global's department that analyze the company's sovereign position for the first several months of my tenure based on analysis by the department i believe the risk profile associated with the sovereign debt position was acceptable in light of prevailing market conditions. among many metrics reporting this assessment for credit ratings, credit spreads, probability of the faults of another things. the risk department analyzed potential liquidity needs associated with the trade and the distressed market conditions and received information from

other departments that the company possessed adequate liquidity to address such potential. as the credit market deteriorated in summer of 2011 i came to the view that it would be prudent for the company's to mitigate increased risks associated with european sovereign debt and consider entering into hedging transactions to reduce the company's exposure. in july of 2011 i initiated several discussions with senior management to express the view to explore such risk mitigation strategies. i also highlighted the increased liquidity risk associated with sovran r t ms in written and oral presentation to the board in the august of 2011 board meeting. in my view the board and senior management were sophisticated. this strategy was in place.

a new land understand how it worked and were well aware of the increased risk caused by a weakening market conditions in the summer highlighted in my report. to the best of my recollection following my presentation in 2011 board meeting the board and senior management made informed business judgment adding to the company's position in european sovereign debt to allow existing positions to roll off as underlying securities reached maturity thereby reducing the company's exposure. it is mine understanding none of the sovereign debt has defaulted in all of the security portfolio that reach maturity. i am aware and set about the numerous press reports of the

billion dollars in customer funds. i have no personal knowledge of any missing funds or unreconciled customer accounts. while at mf global i was not responsible for fund transfers or segregating customer funds. like everyone else i am truly hopeful that all the missing customer funds will be located and returned to their rightful owners. that concludes my statement. >> thank you. let's go to questions. >> mr. stockman, in a march of 2011 memo to the board you highlighted some market risks associated with terms under the heading of late market risks you identify liquidity risks associated with potential hair cuts from mf global's

counterparties. one scenario in that report requires if that scenario were to play out the company would have to come up with seven sixty-one million additional dollars. are you a ring familiar with this memo? >> yes, sir. >> do you agree with the conclusions that you reached in that memo about the market risk and liquidity risks associated with european arty and trades? >> that is a fair representation of distressed market conditions that we should analyze. >> and in october you produced a document which we call break the glass scenarios and in this particular document you said forget scenario one hand 2 and we are now in a different environment so you outlined additional scenario and

additional liquidity requirements that are needed based on additional scenarios. >> was that august you are talking about? >> this is october. >> downgrade the impact of mf global. >> referred to in the march memo, specific to the sovereign risk and break the glass scenario although there might be similar technology. i am not sure we're talking apples to oranges. >> did you prepare this document? >> yes. i did not prepare that document. financing treasury group, a

senior member of my staff preparation of the document when i was at the company. i actually did not see a final outcome that you're referring to. >> doing the stress scenario and you're the risk-management officer and you didn't see the document? >> i did not see the out -- the final outcome of the document. >> so the stress scenarios that you were familiar with were one that ridge and in mid august. is that correct? >> correct. >> you have different scenario in your august memo than you had your march memo. >> yes. >> what was the difference? >> the difference moving from the march scenario to the august

scenarios were market conditions had changed over time. my risk department and myself always tried to keep haste, updating market conditions and stress scenarios as market conditions change. >> mr. chairman, can you have him pull the michael little closer? >> i am sorry. the scenarios you're referring to were effectively updated to incorporate more recent market conditions and apologies for the different numerology but the basic point once updated scenarios were to capture some of the more recent market volatility. >> did you have greater concern about the liquidity of market risk in august than you had in march? >> that is correct. >> did you express that to jon

corzine and the board? >> yes. a series of meetings i became more concerned particularly in july. >> and that's an area that you did in august did you feel the company had the ability to meet liquidity needs should those scenarios play out? >> apologize. can you ask that question again? >> scenario three and four that you did in august requires use the law additional liquidity requirements should those scenarios play out. could you validate if the scenarios played out there was sufficient liquidity confirmed to sustain those scenarios? >> or. eventually these discussions about risk mitigation and

particularly increased liquidity scenarios were discussed and debated at the board. i would suggest that there was full information to senior management and board members with the understanding that the scenarios could play out and liquidity, potential liquidity would be available. >> would be available? what were the best recollections? u just reported -- you did not verify whether the liquidity was available? is that part of your responsibility? >> the actual liquidity function is part of the treasury area with respect to the sources of liquidity and as it relates to various discussions and information i was disseminating in july, those people, those

individuals responsible for ensuring liquidity was available saw this information and made an informed judgment. >> i want to go back -- in march you said to the board you were concerned and previously mr. roseman said he was concerned about these positions and in august you are more concerned about these positions and in october the company puts together a break the glass, more aggressive scenario and on oct. 24 during another call jon corzine visits seven days before bankruptcy stating mf global's are key am positions have relatively little underlying principal risk and the structure of these transactions simply essentially eliminate market and financing. the you agree with that statement? >> i apologize. can you when that statement by me again?

>> jon corzine on october 24th said in a statement with investors said mf global's rtm positions had relatively little underlying principal risks and structure of these transactions essentially eliminates market and financing risks. >> i had no reason to doubt jon corzine on that point. >> you wouldn't doubt it? is that what you said? >> seven days later the company goes bankrupt. how do you justify that? >> the downfall of mf global in the final weeks is a very complex issue and contained the confluence of at least three challenging events.

one, the negative earnings related to a tax write-off asset write off. second, the downgrades that were happening at that point in time, third perception in the marketplace regarding the riskiness of the sovereign strategy. all these things come together in a very short period of time and so that the outcome unfortunately was unpredictable. as we walk through that through a challenging period of time. >> my time is expired and now mr. capuano is recognized for five minute. >> thank you and i thank my colleagues for allowing me to run in and out. i have another markup down the hall.

transportation and very important bill that i will be after all day. mr roseman leaders want to ask questions based on your written testimony. i will ask them in the order that they appear. on page 3-year-old statement that over time stakeholders and rating agencies gained confidence in mf global's improvement. i have the right of s&p's ratings and the only time there was i guess you could consider an upgrade was friday, july 18th, 2008, when all they did was take away the negative outlook. they kept the triple d rating but took with the negative outlook. that was before you took office at mf global. am i missing something? am i missing information i should have? >> during discussions with rating agencies, with myself and others and executive management they did continue to express their interest -- >> they didn't take action on

rates. they said good things but didn't take into account the rating. >> i may be misstated. >> okay. i guess from your testimony it certainly seems as though presuming in june or july -- may of 2010 you agreed on a $1 billion limit across the board and yet by mid september only a few months later, obviously the people who ran the business had completely ignored the board approval, your agreement and. threw $2 billion and later on, one month after that they doubled again. there is no indication here the board took action in between that time so that there was an agreement -- they end up at four billion by october of 2010. am i reading this right? >> no, you are not. when the billion dollar limit

was approved, sappiest taken under management delegation of 40 or risk from the board so that approval did not have to go to the board of directors. subsequently any other limit increases before the $2 billion was also taken internally and approved by myself and jon corzine. they did not pose what i consider a material issue relative to the risk appetite. >> you are saying you and jon corzine were authorized and did not agree to $2 billion. >> up to $2 billion. >> in mid september of 2010. what about the -- >> when it got to $2 billion i don't remember the exact number. i indicated to mf global -- jon corzine would have to approach the board of directors for approval of further increases. >> he went to $4 billion without your agreement or board approval. >> at that time i recall going

to the board and discussing the strategy and the limits to get further increases and there were a few periods in between my written statements where there were meetings with the board's executive committee to approved the limits. >> written testimony is not that clear. you are telling me at no time did the investment limit exceed what was agreed to by you and/or the board. >> that is my recollection. >> the statement of my opinion is not that clear. because if they had, during that time did anybody know you were doing that? the board did know obviously. were you telling the general public, were you telling investors or credit rating agencies? >> part of that time, within the $2 billion number in my opinion because the risks were controlled and positions were

controlled and maturity buckets in three months or six months or 12 months period it did not come close to material risk. >> i asked were you telling credit rating agencies? were you in forming your investors that you hit that number? >> i am not aware of myself notifying answering questions to rating agencies and i am not aware as possible that others had notified them. but again, we have to count the materiality of the position. >> basically you think there was nothing wrong going on until $4 billion were approved to 4.755 reading this correctly. >> my comfort level and the board's risk appetites started getting exceeded around the approved risk advertising at that time i should clarify. that was around $2 billion and fat required to go back

>> around $2 billion you and the board were getting uncomfortable. >> it is relative to the stated risk appetite that i had to approve an entire strategy for the company. at that point because the strategy was evolve think it was escalated to the board for additional approval of those specific limits to control the rest. >> i am missing something. i am asking a simple question. your telling me the board -- un the board got uncomfortable in the $2 billion range? >> i got more uncomfortable at $2 billion in excess of the approved board's approved risk appetite statement that that point. >> did you tell anybody that? >> yes. >> did you tell the credit rating agency? >> at that point in time, that

was i don't think an issue to bring to the credit agencies until after discussions potentially with the board. >> they were rating you the entire time. they had you in a pretty good watch. they kept either affirming or downgrading you pretty much repeatedly in 2008. i have never seen this many credit ratings of a firm by two major credit rating agencies so frequently. every couple of months somebody was rating. >> keep it in context to mf global's history. as you know in february of 2008 shortly after it the ipo of the company suffered -- week trading -- >> i understand that. that is a separate item. i will give you the benefit of the doubt that he will address that issue. that was a minor problem you took care of. as you get the credit rating

agencies, every couple of months, were you telling them that you were uncomfortable at the level you were at? >> i didn't see what the rating agencies regulate. >> credit rating agencies were reading you without talking to risk-management? >> periodically i would. every three months -- i would say on a regular basis maybe once or twice a year. >> did you tell them you were uncomfortable. >> having said that up until that point in time, they had a strong transparency on risk of the organization. >> you never told them -- i'm starting to get a little nervous? >> i did not say that. >> that is what i am trying to get at. mr. roseman. i am sorry. mr. stockman. when you took office in january of 2011 were you aware of the concerns of the $2 billion limit?

>> mr. roseman and i did not spend a lot of time together in overlap. as a general matter we were in large positions but i was not specifically aware of concerns at that point on joining. >> as he was leaving did he tell you there was any documentation you came across in that period of time that indicated my predecessor got nervous and i should think about this? >> high explore upon arrival lake couple of board meeting minutes that covered that period to the best of my recollection november and december before i joined to try and find -- explore a little bit what had been undertaken just before i joined.

in those minutes was no specific indication of concern but highlighted -- >> you didn't find anything that said a bell went off -- you thought that was acceptable? >> it was a little different. in the board memo minutes there was an indication that the risks were discussed and highlighted by mr. roseman and with the board that gave me confidence there was a full understanding. >> i am over my time. i appreciate the generosity of the gentleman. one last question i will jump to. you have no personal knowledge where the money is or what happened. you think this excessive risk and the pressure that might have caused losses and might have maybe encourage some of the employees to either bent or

stretch or break rules? >> i don't think so. it would be very hard at this point in time. i hope at some point in time we do understand the details of that situation. in particular as it relates to sovereign risks and the analysis that when the last chapter does come through, i think we will get more clarity. >> thank you for your indulgence. >> one quick follow-up. i want to go back to this last report on october 13th. it says this was prepared by treasury, finance and risk teams. >> that is what i mentioned before. senior member from my team provided assistance on those scenarios. >> this is a plan where these people think they are about to go under. 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, as senior officer doing some of the risk analysis and as it relates to the reduction of that particular document, i was not part of the specific risk team that contributed to that and treasury and finance area really drove the assessment. serious. i have not seen the file. >> you are aware that a document has been prepared and you agree with jon corzine at statement that everything is fine? having knowledge that senior management was working on a plan to build a foxhole? >> to the best of my knowledge

the break the glass and area was a contingency plan that would have been an intelligent thing to do in a number of different cases in particular for a company that is just above investment-grade. as i said the break the glass and area was something that was an intelligent contingency plan to be looking that. >> what prompted them to do that? why don't we put together a break a glass strategy? there had to be something that caused him to think that. wouldn't you think? if they needed to develop a plan like that. >> i think it was a board request. to find out in detail on the request and how it was prepared would have to be directed towards our finance and who really drove that.

>> i appreciate. mr. fitzpatrick. >> mr. stockman indicated the board request. anybody within the organization had any concerns communicating with the board concerns? >> i didn't hear the question. >> you indicated the generous document, break the glass in october, board request. did that come from within the organization? >> to the best of my understanding it came from the board. >> you indicated you didn't spend as much time in transition with mr. roseman. did you spend any time off of the obligations of the officer? how much time did you spend? >> michael and i spend an hour together three or four weeks into my initial -- when i first arrived. michael was helpful in the transition as well.

a series including this series of e-mails that i remember receiving. >> mr. roseman indicated concern of $2 billion of sovereign debt. >> as a general matter during that brief discussion that we had for and our the best of my recollection, certainly indicated an item of interest as it relates to the company. i don't recall any specific discussions. >> back to the october 13th break the glass and area in response to the chairman's question that you were not directly involved in this plan. is that correct? >> correct. >> you are the chief risk officer responsible for how many employees in the organization? >> on my team? approximately 60. >> 60? your office is in the same

building? liquidity was a key concern, correct? >> the first time i had an opportunity to look at it carefully was a day ago when it was provided to me. >> the committee -- our committee obtained internal notes from s&p october 28th management meeting of mf global and the notes contain the discussion that mf global's, quote, big european exposure. the analyst who drafted these notes right that mf global was scrambling for funding and had lost its liquidity. to october 24th. in the middle of this break the glass plant was being drafted and implemented and fouro cf1 o glass plant was being drafted and implemented and four days before the s&p said mf global was scrambling for funding. on the 24 mf global at ceo wrote

to s&p analysts stating among other things that he believed mf global's capital liquidity, quote, has never been stronger. mf global is in its strongest position ever as a public entity. can you reconcile those statements? >> i don't know what context the cfo had that so i couldn't -- to the best of my recollection was not part of that's dialogue so i couldnblic -- >> you speak with mr. steamcamp? >> not on this sstrject. >> given what you know about the liquidity challenges mf global was facing, a break glass plan, how could he make this representation to a credit

rating agency? >> i would be speculating. it would be hard for me to a comment as to what the context was for that particular note. >> were there internal meetings between you treasury people at risk pobal ple and finance poba in this document's creation? >> there was. >> were you involved in any of those meetings? >> very early on as the treasury and finance team was pulling the document together. as i mentioned before, after that point in timsury a senior member of my staff assisted in the creation of that document as

it relates to the various stress scenarios. >> $1.2 billion customer money was missing. i have constituents who lost a significant aus unt of us ney. your risk team was putting together what was essentially an armageddon plan for the organization and the with the committee to believe you had no direct involvement in the creation of a plan. never saw the plan until recently? >> again, and mention that the contingency plans such as that was sensible. that -- i am giving yo1 o the stated truth of my involvement in it. >> thank you, chairman. >> i recognize mr. miller. >> thank you. mr. stockman you only spend an

hour with mr. roseman in the subject of his concerns about the sovereign debt positiosu that came up. you also knew you were being retired from the outy,ide to replace cro the with the nafta leave. any conversatiosu in your interviews y mr roseman was leaving and it had to do with his risk appetite. >> in those conversations we continue the meeting and talked about this.

it was more in line with what i am trying to do. it was really more about that as it relates. >> that was the reason they gave you this. mr. roseman was asked to leave. did they have a discussion with you about risk appetite? what they wanted to have enough term? >> as a general manner yes. we talked about if you are referring to the point about when i got to the firm, we certainly talked-about stated goals going forward and the types of analysis and assessment that would have to be performed in order to accommodate that. >> according to published reports mr. roseman had direct access to the c e o and to the board and when you came in your access was no longer to the ceo or the board but the ceo 0.

did you have a discussion of that change in organization? >> it made -- >> did you have any questions about what concerns you might have about risk would make it to the board? >> i reported directly to the sea 00 and had respond to the batista report from time to time on earth matters to the best of my -- >> did you ask why you are no longer talking to the board? >> let me correct you on this. and reported directly to the coo but i also have obligations to report on risks and highlight risks similar to my predecessor. i had access to the board. >> published reports are your role basically consisted of helping repair power point presentations for jon corzine to

take to the board. is that incorrect? >> that is incorrect. >> mr. neugebauer read a statement that jon corzine made to investors shortly before the collapse, that the repo to maturity presented no threat to capital of any consequence a week before the collapse. the c f o, mr. steencamp told standard and poor's, the s&p, that mf global is in its strongest position ever. while moody's downgraded mf global to junk status four days earlier at the time of the collapse, the s&p had mf global at investment grade. were you consulted in any way on a recitation by jon corzine or mr. steamcamp? >> i was not. >> did you know these representations were being made?

>> jon corzine's comments were public if i understood the quote you are referring to. the representation as i mentioned before, i was not involved and could represent him. >> did you pass along to anybody that you disagree with those representations? that you thought there was a factor? who did you tell? >> as i mentioned, as far as the risk highlights and risk reporting goes, at the august board meeting.

the power point presented. you have an auditor, did they raise any concerns about the previous relationship between mr. roseman and the board and change your reported? did they raise any concerns with the processes that mf global had for proprietary trading, was price waterhouse coopers -- did they know about and changes that were made? did they know about the end of the direct report to the board? >> i was not involved in any direct relationships or discussions with price waterhouse. >> are you aware of any? did anyone tell you they talked to price waterhouse coopers or did price cotter -- price waterhouse coopers raise any concern and it is okay with us?

>> not to my understanding. >> you no discussion of any conversation, any communication with price waterhouse coopers about the changes in the organization at mf global in reporting relationship between the sea are 0 and the board or any changes or anything regarding the process of propri? >> to the best of my recollection, i was not involved in the discussion. >> did you have a conversation at the water cooler? did you hear anything? was very rumor? >> i wasn't responsible for the price waterhouse coopers relationship. >> i know that. did you hear about it? every organization has a rumor

mill. were there no discussions within the organization? did you not hear from anybody whether price waterhouse coopers was ok with all of this? >> i come back to my original, and. to the best of my recollection i was not aware of a specific conversation regarding the items you just mentioned. >> thank you. >> now go to mr. posey, recognized for five minute. >> thank you very much, mr. chairman. appears just trying to put the pieces of the puzzle together it is simply impossible that mr. roseman was the chief financial officer until he stopped telling jon corzine what he wanted to hear and so then mr. stockman was hired to tell jon corzine what he wanted to hear. just saying that is how it appears so far.

i read an article, sold out, mf global investor protection trampled in a private meeting between government regulators. i would like to ask mr. stockman a few questions about that meeting. do you know about the meeting with the sec, j. p. morgan, goldman sachs and others? >> i was involved with those leading the fight understand which one they were. >> do you know about the meeting? >> i was aware as a general matter but not involved with those meetings. >> do you know the names of those that were there? >> i do not. >> how did you find out about the meetings? >> if it is the sec meetings that you are referring to some of that is in public and as a

general matter -- >> the rumor mill? >> i don't recall exactly. but as i said i was not involved. >> do you know the names of anyone who was there? >> under oath to the best of my knowledge, making sure i understand which meeting you are referring to, i wasn't aware or at those meetings. >> clearly the october 31st meeting that you mentioned was with the sec. do you know the names of anyone who was at the meeting? firsthand or second-hand or third hand or fifth hand, do you know about anyone who was at

that meeting? >> i do not. >> did you find out after that what transactions were made by mf global holdings? >> no, sir. >> you don't know what decisions came out of that meeting and what they decided to with assets and how to host investors? you have not heard that anywhere? >> if you are referring to of final data, is that what you're referring to? >> you are the risk manager. i am a congressman tried to put the pieces together. you know more about this than anyone on the board had. we're trying to get you to tell us about a little bit of that. might better protect the public and maybe for the first time in four years have some accountability for what is plundering of the public and it

is important for you to be honest with us and tell us everything you know about the situation to do that. testimony, you didn't say this is all i know about it. this meeting is very critical about what went on at this meeting and i want to know everything that you know about that meeting and i am not going to stop asking questions about upon record under oath until the chairman makes me unless you start answering some of them. >> i wouldn't be able to answer the question in a different way because i was not there were involved in that meeting. >> the last question i asked was the result of what came out of the meeting. certainly you know what transpired after the meeting, don't you? the residents about selling some assets and who was going to get priority. tell me what you know about that subsequent to the meeting. >> subsequent to the meeting i was not involved in the wind

down of the company or its decision to file for bankruptcy. so i was not in the area so to speak when specific decisions were being made regarding which assets to sell in the wind down. >> so you are saying you don't even know what decisions were made? >> i am saying i was not involved in the wind down of the company during that period of time when assets and decisions were being made to reduce exposure. >> judy you think is the best person to know what went on in that meeting? >> again -- >> under oath, i know. >> i am saying i was neither a a participant or an invitee to the meeting you are referring to. i think it wouldn't be hard to

figure out who the attendees were but as you asked before -- >> four hundred million people in the united states of america. could have been any of them. is that what you are telling me? >> no, sir. i am simply saying not having been invited to that meeting or participated in that meeting, i wouldn't know. >> you have no clue who would have been there? >> it would make sense that some senior management would have been there. >> and names may be? >> our senior management -- hard for me to be very specific because this particular meeting neither was i invited or participant. >> listen. you were not a lowly clerk in

that organization. you know well what is going on within the organization. and you know well you can tell me who you think should have been at that meeting and i'm just asking you to be honest with us and do it. >> fa have to keep coming back to i could only imagine. >> mr. roseman, can you give me any ideas? obviously you needed to be replaced by this guy. maybe you have better knowledge how the organization works. >> i wasn't there but in mr. stockman 11's defense it sounds like he wasn't at the meeting but after the fact i am sure there was some direction that was given to individuals. i wasn't there so i can't respond to whether or not he knows what actions were working out or otherwise.

>> to do you think would have been in the meeting? just flag if if you would. >> if it were a concerning meeting like you are suggesting i would expect jon corzine to be there. i would expect mr. avilo to be there and other members of executive management. at least those individuals. >> we're going to have to -- >> just speculation. >> let's move on. >> thank you, mr. chairman. it is clear to me what was taking place at mf global capital. i think this information has come out in previous hearings.

jon corzine basically was a 1-man show. he was the chairman and ceo and he threatened the board when they got in the way of his sovereign trading. he was glad when mr. roseman left. he hired his own people. he did his thing. i think there is no question that jon corzine violated many of the rules of the game in terms of being the chief and prolific trader that emerges out of this information. my real concern is what happened

to the customer assets? the loss of $1.2 billion in customer funds. mr. stockman, what do you know about the decision that was made to utilize these customer funds despite the fact they were supposed to be segregated and protected? >> in my opening statement i noted that i have no specific knowledge of client funds or segregated funds and as far as my job duties they were not involved with the treasury -- >> what nonspecific knowledge do you have? >> i have no specific or nonspecific knowledge. >> you knew nothing about any decisions that were made to use

these customer funds? you knew nothing about that? >> that is correct. >> given everything that happened what would you do differently? >> that is a terrific question. we think that when the final chapter is written, at the moment it is preliminary, specific recommendations. >> i didn't ask for recommendations. you are the risk officer. you had the responsibility for at least alerting the board of directors or somebody about what was taking place. obviously you didn't do it. what would you do differently today? i don't want to talk about any

recommendation. i don't want to talk about -- i simply want to know the position you are in now having been the risk officer, everyone looking at you and wondering where were you when you were absent or not absent? what would you do differently? >> the absent comment, i want to challenge you on that which is to say that myself, and my risk-management team, we did our job during this period. we highlighted and analyzed and assessed risks and made transparent and clear to senior management and the board. the risks that we were running at the firm. >> who did you give this information to? >> c management and board.

the sophisticated business judgments were made based on my department. >> did you say this company was being placed. the sovereign debt trading that jon corzine was involved in. >> in the august board report it was clearly highlighted in both written and verbal and senior management. the increased risk in the marketplace over all from the summer volatility, and number 2, why the credit spreads increasing probability, and his

lowering liquidity in the marketplace and number 5 people in particular increasing stress. >> in essence you did your job. is that right? >> correct. >> there's nothing you would have done differently? >> let me say with the benefit of 20/20 hindsight there are things we would have done differently knowing what we know now. >> my time is over. i yield back. >> i think the gentlewoman. mr. renacci is recognized. >> mr. stockman, i am over here on this side. looking at all the questions you are hearing you are probably getting to understand that mr. roseman at least saw some issues, brought them to the board and at the time, happy with decisions he was making so he hired somebody else and that would you. who recruited you?

how did you come to this decision? >> i came to feed decisions through a third term and went through extensive interviewing process. >> to ended up hiring you ultimately? >> you mean who were the decisionmakers? >> i was tired and directly reported to mr. avilo. >> jon corzine had no influence? >> i am sure in a senior position, i interviewed with jon corzine but there was extensive interview process with jon corzine and the board. >> we left during the interview process your opinion that any time of mf global's appetite in taking greater position in the european backdoor scam? >> the european rtm specifically

to the best of my recollection did not come up specifically, as the general manager would be that unusual as it relates to proprietary positions for somebody who hired. >> do you believe in any way that mf global increased appetite during this discussion, this interview process would have been a prerequisite of you being hired or do you think that was totally not a position our third decision? >> yes. i believe it was not a prerequisite and not specifically discussed and it was really about the interview and hiring process and about my skills set and where the firm's stated goals were and where it was going. >> you said in your testimony you noticed after you were hired that there was some concern

noted that mr. roseman addressed with the board related to increased decisions being taken in european backdoor rtms. did you just ignore that look into it? you are the risk officer. what did you do with that information? >> i began soon after i arrived at the firm to do my own analysis. i was assisted by my department and that analysis included a number of features and grew more sophisticated every month that went by during my tenure. the analysis included a number of elements. ed in particular liquidity risks. >> you also said in your testimony that you felt their positions were acceptable. is that correct? >> correct. in the context of the first three or four months, market conditions were what they were.

much more benign and favorable. the risk and reward were acceptable and as we discussed in july, i had a change of view. >> as of this was going on at you look back through the minutes you have no concern about the potential outcome? you were comfortable that everything was going okay down to the last minute? >> i highlighted the risks as i mentioned in a very specific form and fashion, and in those early few months as i mentioned found them acceptable. market conditions change and so did my view. >> my background is financial also and i had to deal with a lot of companies. their comes a time when you realize things are going the wrong direction and you throw up some flags. did you ever do that?

>> in july, as market conditions change, i began to recommend to the company to think through carefully not only understanding the increased risk profile but that we consider hedging a reduction strategy. >> mr. roseman, regarding the breakthrough glass plan, are these the kind of risks that achieve risk officer at mf global my concern himself with? >> certainly liquidity risk is always a material concern. if you look at all companies that have failed ultimately it is generated by liquidity risk or more often than not. you need to have a very good understanding of liquidity risks including margin calls. >> you did throw up a red flag to jon corzine a couple times. can you briefly tell me what his opinion of your red flag being

thrown up was? >> initially there was disagreement on the potential price risk or default risk associated with the positions. in regard to capital risk. at that point in time there was not necessarily concern about liquidity risk that the firm had enough liquidity to handle initial positions. that is the position started to grow in the fall, that is what i expressed my growing concerns about the liquidity risk and the risk that was presented to me and i presented it to jon corzine. what i considered potential scenarios around initial margin and variation margin. ..

>> you start to outline it in the answer that you just finished with mr. renacci. if you could just walk me through that in a simple as way as you can, and tell me how you thought the risk management process here fell apart, didn't work right, and how it maybe should have happened. >> well, the first thing that i think the committee needs to realize is as mrs. -- mr. stockman says well, the sovereign risk, sovereign positions, any associated risk with those positions were very well communicated, very

transparent within the organization. and mr. corzine, and to the board. >> so the risk associated with everything was going a lot, clearly laid out to mr. corzine, the board, and they decided to go forward notwithstanding some of those, understand what the risks were? >> in fairness to them, as in other events, or events that haven't occurred before, sometimes there's a difference of opinion on you of what might happen. the challenge there though is, if you get it wrong, then you have an event such as what happened with mf global. >> so in your position as global risk manager, what is your role in that conversation? >> my role is to articulate my

view on what the risks are to the organization. and i also believe that, ensure there's enough cushion within the company's means to support the risks, and make sure that the risk that the company is taking is aligned with the strategy of the company, and as an ongoing concern. >> so, you obviously were moved out of the position. mr. stockman was put in the position. is that because management was unhappy with the advice that you were providing, or -- >> i'm sorry, you're asking why i was replaced? >> yes. >> i'm really not in a position to answer that. i would say that my views on risks certainly played a factor in the decision. >> so regardless of that happening, how did it go? what happened after you left?

and where do you think the company went wrong from that point on? >> in my opinion, there's a sovereign strategy in itself, but in a broader context. the firm was pursuing an investment banking strategy that was clearly articulated by mr. corzine to the public, the shareholders and others. that strategy certainly required resources, capital, liquidity, to fully support. it was important to manage the strategy within its means, and i do think that strategy may be exceeded the ability of the resources. >> were their lessons here with respect to how systemic risks were implicated with this

particular case that should concern us as members of the financial services committee? >> could you repeat that? >> are their systemic issues that we ought to be concerned about as members of this committee with respect to what happened at mf global? >> in my written statement, i think one of the main takeaways is, again, to be very mindful of the concentration risk that they are running. any implications of the stress scenarios related to that concentration risk. i mean, clearly during the mortgage crisis it was the same, some of the firms have failed. they had concentrations in more securities, and we know the outcome that occurred there. i certainly think again that needs to be revisited. pick the issue of concentration? >> concentration risk, large positions that a company may

hold. >> right. thank you very much. i see my time is out. yield back. >> i thank the gentleman. the gentleman from new mexico, mr. pearce, recognizer five minutes. >> thank you, mr. chairman. got back my prayer breakfast this point. we talked about me and does not live by bread alone. $1.2 billion with the bread disappear off the table out there. mr. stockman, how much did you get hired for? what was your salary when you got hired? >> my salary begin at 300,000. >> how much? >> 300,000, u.s. >> what about you when you departed from either ceremonies are unceremoniously? >> 350,000. >> 350. so you've got chief operating officers, you've got ceos, you've got chief executive officer, you've got chief risk officer. they all begin with a see.

does that mean anything, mr. stockman? in other words, it doesn't sound like you're in many of the real manager needs. you're just kind left out of those. am i hearing you correctly? >> server, my responsibilities speeches i didn't ask a responsibility i said you are left out of the key music you didn't know. year and took some the questions from the other side. you did know who might be at those meetings. you didn't answer mr. posey. so it appears that you were not there, so when you were something with other firms, did you get to sit in on senior management meetings at those other firms as a risk officer? whatever level you were. >> at meetings that were appropriate -- >> ubs, did you get to sit in the things we are talking at the risk of the copy, the future of the company? >> the -- >> just yes or no will work. >> i'm sorry? >> yes or no work. did you sit in on key meetings

when the future of the company was at stake? >> at ubs, i did not sit in at the highest level. >> you were not, is that right quick you are not? okay. so friday october 21, you had that management team, need with moody's. did they come back and report you kind of as a chief risk officer that things might not be going so good over there, they were now worried a little bit about what they were seeing. did they come back and relay that to you, the chief risk officer? you're the head guy in charge. you're not wearing a hard hat in the risk management. you are right up there with the fancy pinstriped suit guys. to become back and tell you anything at all about what moody's said might be happening to? >> the key contact at moody's was our cfo. >> i didn't ask that. did they come back and tell you anything? kind of raise the flag.

[inaudible] >> didden share anything with you? >> correct. >> did you ever think that maybe there ran off mr. roseman, and brought you in to be the guy that doesn't need to know, to? did it ever occur to you? >> no, sir. >> it didn't? >> no. >> what about off-balance sheets. i'm looking after breaking lasting in its we're going to present the off-balance-sheet drains. when i read that, i'm just a suspicious character but brings to mind enron. enron doing all this fancy stuff around the edges and cut fast-moving traders and moving all up and down and jumping and jotting and moving all around. did it occur to that the off-balance-sheet stuff was maybe something that you should be signing off on as chief, chief risk officer, the c and the risk deal? did it ever occur to that you might should say something about that? >> the off-balance-sheet treatment -- >> could you move the mic a little closer? >> the treatment you're referring to if you refer to the

sovereigns was fully established prior to my -- >> i didn't ask it is fully established isa did you ever think your to say something about that? is it normal where you do off-balance-sheet trading at ubs? >> to the best of my recollection there was some off-balance-sheet trading, but if you're referring to i can come if you're referring to mf, off-balance-sheet, the -- >> is that balance sheet legal? >> that is an accounting trick that. >> is off-balance-sheet legal? >> under, gene, i'm not an accounting expert but under -- >> you're the one who has to certify the risk, and so i don't care if you're an expert or not on the county. i'm asking from you as a c, c. r. o., ceo, you're one of the c. isn't legal? >> to the best of my understanding it was performed under accounting principles.

>> is it ethical? >> that's a hard question to answer. i mean you are the c guy. we hired you. we hired you to be the head c guy. cro. you've got to say that nobody else in the organization responsible for telling risk of off-balance-sheet stuff. is it ethical? >> again, ethical is, as it relates to accounting and accounting treatment and how the off-balance-sheet statements are prepared, are guided by accounting principles. and i don't have a strong view as to -- >> i get the drift to kill have to keep going. i get the drift. $1.2 billion with the people got the drift. we are hiding around the corners. we're doing stuff that we don't know of his legal. we certainly will not say it's ethical or unethical. and we are deeply sorry, i read

your testimony. the same as mr. corzine. deeply sorry park deeply, deeply sorry. did you call one of these, i've dedicated my district who lost 5000 bucks. at christmas time. did you call anyone? 1.2 billion divided by 5000, that's a lot of people. did you call one of the? >> i have not. again, i -- >> deeply sorry though, deeply sorry. i see. have you suggested that maybe ought to give your pay back and put it into a scholarship fund for these kids that are going to go to college sitting after some hog farmer? just trying to make ends meet. my dad raised pics. i know what it's like. trying to pay for the next sack of feed, and you guys have $1.2 billion you're hiding around on the definition whether it's legal. and whether it's ethical. or unethical. i don't think shane reaches wall street. but if it did maybe you should

be looking at how much your paid and what you paid for. thank you. i thank the gentleman. now the gentleman, mr. canseco, from texas. >> thank you, mr. chairman. mr. stockman, one very brief questionnaire to fall up to some of the questions that have been asked already. >> i apologize for interrupting. i wanted to make sure that it was understood that moody's meeting identity and, if there was any confusion on that. i'm not sure that was by just wanted to confirm. >> thank you. let me ask a question now. mr. stockman, when did mf global first approach you? i know that you went through an agency. when did you first meet? when did mf global first approach you? if you by letter or by phone call or otherwise. >> best of my recollection, in september, october possibly,

possibly october of 20 can. >> all right. and by what means was it? letter, phone call, e-mail? >> a phone call. >> phone call. and did you go and visit with him shortly thereafter? >> shortly thereafter i had a series of interviews, yes. >> and was it your headhunter or agent that called you, or was mf global that called you? >> this was through a search firm. >> so your search firm called you up and said, in the global wants to visit with you, is that correct? >> correct. >> and it was in october to? >> to the best of my recollection in early october or late october to? >> i apologize if it, to the best of my recollection, it was around that period. >> mr. roseman, you were told that you are no longer needed as chief risk officer of mf global in january of 2011.

is that correct? >> yes, sir. >> okay. so the cro is an important job, and i imagine that in order to replace you it would require at least a few months of research process. do you know when mf global began to search for your replacement? >> i do not, sir. >> in what month was your biggest disagreement with john corzine over liquidity risk of european sovereign are gm's? >> i would say the discussion started becoming much more material in september. what month was it that you make your presentation to the board saying that the board should not follow mr. corzine's advice to increase mf global's european sovereign rtm's? >> i did a full presentation in november. do you have an opinion whether

or not your presentation had anything to do with your removal? >> as i said before i'm really not in position to respond to that. but again, i do think my views on risk would have played a part. >> thank you for your candor. and i thank you for your answers. in testifying before the house agricultural committee, mr. jon corzine said that he replace you as chief risk officer because mf global quote needed someone in the chief risk officer position that was more fully attuned to the broker-dealer side of our business and what mr. roseman's background was about, and there were other issues about how people work with each other, closed quote. so, mr. roseman, you have a very impressive resume and a wide variety of experiences in the financial industry. do you believe that your background was not fully attuned to the broker-dealer side of mf

global business? >> i would fully disagree with that statement. i certainly had the experience, investment banking truck -- prior to mf global. >> so it is it true you have a very strong financial background and experience and they could strong resume. you would agree with me there, right? >> i appreciate you saying it that way, but i would say i had a strong background. >> thank you. so, mr. stockman, in a letter to the subcommittee, moody's indicated that they did not understand until october 21, 2011, that the european sovereign debt portfolio was part of mf global's trading book. did this surprise you, since mf global have disclosed this exposure several months before? >> yes, i was not fully attuned to exactly the dialogue, but

yes, i would find that surprising. >> you found it surprising? even to mf global have disclosed the exposure several months before? so it should have been of no surprise, right? >> again, i couldn't tell you exactly the context that moody's was making a statement, but i thought that our disclosures were both adequate and robust. >> what was mf global's initial response to inquiries from moody's about the exposure of? >> i was not -- when you say initial inquiries, can you help me with -- >> don't parse it. i mean, what was the company, mf global's, response to inquiries

from moody's? you're the chief risk officer. >> right. as also mentioned by my predecessor, i was not the key contact add very little contact, direct contact in terms of discussions with the rating agencies been a let me ask you this. you're the risk officer. i don't care who you told, but when you heard about this, what response, what response would you have given to moody's about this, that they didn't realize that european sovereign debt was part of the trading book of mf global? >> again, i would probably want to talk, understand what specifically was their reference to the trading book and otherwise was, because as i mentioned before i thought that our disclosures were both, were adequate and, and were adequate.

>> and that's what your response would be? your disclosures were adequate? on october 13 of 2011, executives at mf global put together a break the glass presentation that outlined what mf global would do in the event of a credit rating downgrade that was prepared by the chief risk officer, and that would be you, the cfo and mf global's treasury department. why did mf global find it necessary to draft a break the glass presentation? >> as mentioned before, this initiative, to the best of my understanding, was at the board request. the cfo and treasurer really drove that strategy, or that analysis. and one of my senior officers helped out on creating some of the scenarios in there.

so, that's the, that was the genesis of that, of that contingency plan. >> well, i see that my time has expired but i don't think you've been very candid with us. thank you, mr. stockman. >> the gentleman from tennessee, mr. fincher. >> thank you. thank you, mr. chairman. thank you, gentlemen. did you have previous relationships from any of the board members, mr. stockman? >> i did not have previous relationships with any of the board members. >> you didn't know them at all? >> no. >> governor corzine, how long did you know him personally? >> i had, i didn't, sorry.

if you're asking how long did i know mr. corzine? >> personally. >> personally? i did know mr. corzine personally but i had worked at goldman sachs a number of years prior. >> you said a few moments ago that you did your job, that you reported information to the board, to mr. corzine, and they made the decisions. mr. roseman also said, you did your job. you report the information. it looks on its face, my colleague, mr. pierce, i have a district that many, many people lost thousands of dollars, farmers, ranchers. it almost looks like that they took mr. rose and off, replaced mr. roseman with a yes-man. doesn't look that way to you guys? mr. roseman, would you comment

at all? you gave them information they didn't like so they replaced you with someone, give them information that they like? >> i've answered that question actually twice. in fairness, i have to say i'm really not in position to answer that. others made decisions for me. i would say it again. some of my views would have played a part, i would believe. >> mr. stockman? >> i think in my testimony, notes that when i joined the firm, doing deep analysis on saga positions in particular, i found the risks acceptable. and in particular so did the board, and senior management in terms of finding those risks acceptable. and as market conditions change, in particular in july, i expressed my views as it relates to wanting to recommend hedging

strategy, bringing the risk down. so i would have to sort of take, maybe take a difference, excuse me, take exception to the characterization of a yes been. >> so in your opinion did the margins, the money was there to cover the margins? on whatever the recommendation was? >> correct, although to be specific, our treasury and finance, treasury and finance area would have represented that because that is their first line of business. >> but you would know in your position? you wouldn't know? >> i was -- i understood, but ultimately our treasury and finance area is responsible for the liquidity. >> in the notes that were produced, the member writes about his negative assessment of mf global risk management. he writes to mf global is

betting the house, so to speak him in the current approach to risk management. both of you, do you agree with this assessment? and was mr. corzine betting the house with european debt, rtm portfolio of? >> as i mentioned him as i mentioned before, through the genesis of the nine months i was there, the first three or four months i would have to say the idea of betting the house was inaccurate or not, not the depiction i would are present. and that as the risk profiles changed in the marketplace, that the same transparency and assessment and analysis and informed business judgments were made at that senior management level. and let's not forget about the sophisticated board meetings, the balance between john and

these decisions. >> i would surely suggest that the ability of the company to handle the positions was pushed to the maximum, and at the -- as i outlined before, under adverse liquidity scenarios it would potentially put the company in harm's way. >> okay. i yield back. no further questions. i thank the gentleman. now the judgment from california, mr. royce, is recognized for five minutes. >> thank you. mr. roseman, let me ask you about leverage ratios, if i could. 31 leveraged ratio has often been cited in the financial press. and mr. corzine testified that he worked to be leverage the firm, as he testified to us. can you expand upon the effective leverage, the ratio

that actually existed there at msg while you were there, and whether you believe the leverage of the firm material change under mr. corzine? >> i think the important point is not only the leverage, but what composes the leverage. so, a year before that almost all the leverage that existed was extremely liquid securities. and it was well presented. for example, the rating agencies that we were holding treasuries, we were holding treasuries, agency notes and what have you. they were very short date in nature or after mr. corzine joined, the composition of the leverage changed. that's the important point in if you were there in august 2008. he came the spring of 2010. as you say, that started to change. did this window dressing issue begin to arise as well? >> i would say when we speak in

terms of window dressing, it is pretty common practice across the street to bring the leverage down at the reporting periods. i would also -- >> this is 34% higher. >> i'm sorry? it did come down. i'm aware of that. the point you need to beware of that as welcome if you can bring the leverage down, it reflects the liquidity of the position. so if you can quickly bring them down that means they're not going to pose a threat to the balance sheet, percy. it's the leverage you can't bring them which is the more concerning risk, which be consistent begin with what happened with subprime crisis, as well as again with some of these other positions that were held by mf global. >> their investments overseas and sovereign debt, i take it. when asked about the concerns you raised, as you corzine

testified that we allow people to speak their mind. that was his response. and your testimony here today suggests something slightly different. you raised concerns about the positions, as you lay them out to the board, and he walked them through the risk scenarios, and they were challenged as being implausible, as you said. and shortly thereafter you are let go. but they were challenged as being implausible. can you reconcile those two representations of what was going on in the boardroom speak with i'm sorry, can you repeat the first part? >> well, the first part, mr. corzine testified, we allowed people to speak their mind. that was his argument about what went on. but you say when you brought up these risk scenarios, you were challenged before the board,

that that was impossible when you are arguing was implausible, and, of course, a few months later -- >> i don't know if it's contradictory per se. i mean, he certainly allowed me to express my opinion at board meetings. >> was there a constructive dialogue that really raised your concerns there? were the board members, i mean, it's one thing to raise an issue. it's another to be told by the chairman of the board well, that's an impossible -- implausible scenario. >> within the room there was certainly differences of opinions with board members on positions themselves. so they were certainly discussed. >> one last question. you noted the strategy pursued

by mr. corzine didn't match the resources of mfg. can you expand a little bit on what you mean by that? what specifically caused the failure of, of mf global, in your opinion? >> since i wasn't there, i'm not really familiar with all of the specific positions that they added to the company, subsequent to my departure. so i'm probably not in the best position to respond to that. >> been held up to this, you noted that the strategy pursued by mr. corzine did not match the resources of mfg. what did you mean by that? >> you certainly need sufficient capital globally. we were operating in a number of different companies around the globe. which causes some challenges that will be around funds or

capital, other entities. and when you employ a strategy, you have to make sure you do the analysis on the forward needs. they were certainly raising additional capital and what have you, so there might have been other plans to raise more funds, more capital. i'm not aware of it. because i wasn't there. it certainly presents the need to assess the strategy against the resources. >> thank you very much, esther roseman. >> i thank the gentleman. now the gentleman from new york, mr. graham is recommended for five minutes. >> thank you, chairman. mr. stockman, you testified you are not privy to the meeting on october 31 wher 31st whether sed capc allegedly discussed the unwinding with other large entities of mf global. let me ask you this. mf global, would you say 98-99% of its business was commodities?

commodities and futures army unit in terms of the revenue breakdown, i'm not 100% sure but i think that sounds a little bit hi. >> over 90%? vast majority of their business commodities and futures? >> if we had to spot it, maybe it was, in terms of this growing strategy, commodities and futures, maybe, it could have been closer to half. i'm respectively at this point in i think you are speculating a bit. my curiosity is this. you're a chief risk officer. you obvious we know the industry pretty well. you get paid handsomely to know the industry. is there any reason that you can think of for why this would be a

bankruptcy under the securities investor protection act, set the, bankruptcy versus under the commodities rules? any reason why you would see why that would be? >> sir, i understand the question, and i don't offer much expertise as it relates to bankruptcy specific, specific laws. and so i'm not going to be able to really comment on that with any -- >> mr. roseman, do you have any reasons why a decision would be made to do this -- you know of any precedent for this? >> i don't have the expertise myself why the decision was made, or why -- >> but from the knowledge of the industry, does it seem strange to you? >> it actually does seem strange. >> does it raise a red flag that something is wrong? how long have you been in the

industry? >> sixteen years. >> how about yourself, mr. stockman, you said even in the industry? >> twenty-five and i'm not saying you're an expert on bankruptcy. i'm just saying does it raise a red flag that a copy that is mostly commodities and futures is not going under bankruptcy normally under the commodities bankruptcy, but it's under sipa? does that raise a red flag to you? does that seem odd or strange? doesn't cause you any reason to question? >> i think it's a reasonable question, and in deciding the basis on which to answer the question fully, unfortunately -- >> okay. you don't want to answer the question, that's fine. if you don't have an opinion, you don't have an opinion. explained to me, i'm trying to figure this out, we have two companies, one is mf global inc. and the other is the holding company, is that correct?

>> among -- >> but the two we're honing in on today's weather problems like. i noted a whole bunch of other things but those are the two main entities that we are focusing on, correct? are you the risk officer for both? >> correct pick your the risk officer for both. >> we didn't really organize ourselves on an entity basis but rather a global basis. >> so, what were your responsibilities in the holding company been? because what looks like happened, maybe i'm crazy, i think the inmates running the asylum. that's what all this happened in the first place, because we had massive leverage happening in the holding company. leverage that a chief risk officer said he had problems with a 2 billion, and it went way beyond there. mr. corzine didn't like the answer he was getting from mr. roseman so he hired you.

leverage keeps going up, very risky, market conditions continue to change, and margin call happen. when that when those margins -- margin call seven, the liquidity that mr. roseman was worried about was addicted in the final hours in the mayhem, someone, which we have yet to find out, but i think everyone has a good idea to, transfers money from the segregated accounts, from the, over to the holding companies. and that's probably where the money is so that's probably where it got lost, that's just a hypothetical. that's my hypothetical. but i'm wondering now when you look back, if you're the chief risk officer for both, but the holding company, what, what, what safeguards were in place from keeping that from happening? and before you answer, i just want to read to you, here's the latest from mf global that went out to customers. and it says your assets at mf

global are protected by the multilevel safeguards, stability, separation, and protection. as the chief risk officer for both of 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 reason. $1.2 billion is missing. thank you very much. >> i thank the gentleman. what we are going to do now is, the chair is going to enforce this, going to go to a two-minute lightning rods -- lightning round for some emerson want to ask follow-up questions, and then we will dismiss this panel. mr. miller, recognize him for two minutes. >> mr. roseman had questions about risk appetite. you also had questions about liquidity. about whether there was money to pay a margin call, to cover a margin call. if you got one.

mr. stockman, you talk about whatever conversation we had about mr. roseman. to talk about the interviews that you had and the discussion of risk appetite in those interviews. how about liquidity? did you talk to whoever was interviewing you, did you talk to mr. roseman about liquidity concerns? whether you have the money or the liquid assets to meet a margin call if you got one. >> sir, as i pointed out, we analyzed the risks and stressed the -- >> that's -- and you start with a yes or no? >> i'm sorry, could you repeat the? >> did you have a conversation with mr. roseman about liquidity concerns? >> we did not. >> did you have a conversation in your interviews for the position about liquidity concerns? >> during that breed of time, liquidity was fully available. >> that's no, okay. what point did you ever raised the liquidity concerns in the 11 months, 10 months, however long you were there, with anyone to

whom you reported, the coo? >> yes. >> when? >> along the way, and in particular in the july time period where liquidity stress needs, actual liquidity posted for -- >> did you make sure those concerns were passed along to the poor? >> absolutely. >> where they passed along to the more? >> absolutely. it was during a presentation. >> okay. repo transactions are usually with highly adequate assets as collateral. they're usually very short term but they're usually in fact overnight. these were rebound to maturity transactions. which basically bought sovereign debt with 100% financing by using the debt itself, as the clatter. it was european debt, the whole world was holding their stomach about whether they'll be in in default on european debt. it appears that the reason that

these transactions held out the possibility of a substantial profit was that it was a bet against the market. the sovereign debt was be down because the world was worried. the markets were worried about whether they would be default. it was 100% financing. it wasn't the money to make a margin call. he knew that margin call was a possibility. what red flags, and at the same time, corzine and others were saying there is no problem here. there is no problem here. you said earlier that you did read corzine's statement to investment was a public statement if you knew about it. to whom did you say no, we've got a lot to worry about. did you say it to the board? did you say it publicly? did you say to regulate a? did you say to your accounts, your auditors? who do you say to? >> sir, we continued to

highlight the risks internally and talked about them in great detail. >> to whom? internally, just to the coo? >> two, two, all those who were involved and continued you are functioning in reporting our risks in and you knew with 100% financing, with a possibility of, likelihood of margin call, and no way to make a margin call, and you knew that the top executives were making statements out to investors and two rating agencies that they were in rocksolid position, and you just talked about it internally? >> sir, the, prior to the final week, the firm was meeting its margin calls and financing these positions. and ultimately obviously the case speaks for itself, what happened in that incident week. i thank the gentleman.

the chair recognizes himself. mr. roseman, going back from your analysis in your time there, then kind of watching how this all played out, would mf global be in bankruptcy today if they had not put on those trades, sovereign debt trade? >> in my opinion, they would still be here. >> so you believe that that contribute to the downfall of the company? >> i believe so. >> mr. stockman? >> as i mentioned before, i think i would like to wait for the final chapter to be written. >> i think this question, there may be other circumstances, but sometimes that the domino. but if you took that particular piece of it out, if they had not had these are tms on the books,

would that company still be here today? >> i think those events that i talked about -- >> i just ask you, yes or no, do you believe it would or would not be your? >> and i think the possibility even with the rtm positions will have to wait for further details, that the company could have survived. >> it's kind of funny when edwin discovered that are tms, that's when the company went down. i now yield to mr. posey for two minutes. >> thank you, mr. chairman. it's been reported, mr. stockman, customer assets may have gone through a transformation to which they went from a liquid state to a cached state. in other words, they just vaporized. in your experience is that possible?

>> sir, as i mentioned before, i have no specific knowledge of customer funds and where they may have gone. >> listen, they pay you $350,000 a year because you have 25 years of experience in this business. and you can't answer a simple question as to whether or not you think people's assets can just vaporized, like there's nobody to blame? you know, it's not god's fault, your fault, corzine's fault, they just vaporized. it's a quirk of nature. the belief that is possible? >> i think there's a team of experts are really going through all the details, and in my experience i had never -- >> as a $350,000 a year expert you don't know if it's possible for money just to vaporize? okay, that's good. you're fully aware there are rules requiring customers to create accounts to be segregated, protected at all times. was mr. corzine aware of those

requirements? >> i would be speculating but i would imagine he would be unaware of those requirements. >> how about laurie ferber? >> and i would imagine she is, too. >> what involvement did ms. ferber have with risk management and compliance functions in the glory didn't have significant involved in the risk management function. >> was she aware of him as risk positions, and the use of segregated funds to? >> i couldn't speak specifically to what laurie may have known. did she mention i have access to control sheets for risk positions including repos for provider positioned and counterparties? >> i'm sorry, could you say that in? >> did she maintain or have access to control sheets for risk positions, including repos, proprietor positioned and counterparties? >> i don't know. >> was j.c. flowers a trading counter party with mf?

>> i don't know dick since j.c. flowers was aboard number an investor and jon corzine was deployed by j.c. flowers, until, wouldn't that be, in your opinion, as an extra $350,000 a year, 25 year experience in inherent conflict of interest to? >> i couldn't come again i couldn't speak to specific conflict of interest to. >> were you aware of any -- >> the gentleman's time has expired. but i would ask, let members know if you have additional questions for these witnesses, we're going to hold the record open. you may submit those to them and writing. we would expect the people to respond to those questions as well. i now go to the vice-chairman of the committee, mr. fitzpatrick, for two minutes. >> mr. stockman, want to go back to the e-mail that the cfo, row two i think s&p, 24th of

october. he said the company was never in a stronger position, great public entity. and you indicated, your response to my question, you'd had any reason to disagree with the cfo's assessment. after i asked you that question, you consulted with somebody and you came back and indicated that you're at a meeting with moody's on the 21st of october, is that correct to? >> i want to take a half a step back. i think the answer to the question regarding mr. steen can't e-mail was that i don't know what context that gets sent that e-mail, nor was i part of that e-mail jake. >> in terms of contacts, were you in a meeting with moody's, different rating agency three days are the? >> i was in, yes, i was in that meeting. was mr. steen can't in that meeting? >> he was. >> and was the firm downgraded as result of that meeting?

>> the firm was downgraded three days later. i couldn't be specific as it was a result of that particular specific -- >> was it a result of anything you said at that meeting? did you say anything at the meeting? >> me, personal? >> yes. >> i spoke very little, frankly. >> did you let moody's no that mr. buswell concerned about are at risk young $2 billion you are brought in to trade, mr. corzine trade through the 2 billion-dollar number? >> that characterization certainly wouldn't have come up at that meeting, no. >> did you have an opinion as to the position of mf global at that time separate from mr. steenkamp? do you have an opinion of the firms viability? this is now 10 days before the complete implosion of the firm and the filing of bankruptcy. did you agree that the firm was viable and it was in a strong position to?

>> not my area of expertise, and i relied on our cfo and finance people to help us understand in specificity the liquidity and financial position of our company. >> i thank the gentleman. final questions. >> thank you. mr. stockman, do you think you should be held liable, civilly, criminal, any shape or form? yes or no? >> no, sir and how about mr. corzine, do you think you should be held liable for every? >> that would be beyond my chance to speak you don't have anything in? >> i don't have anything at. >> you say you don't have an opinion. did you think it's possibly negligence, maybe even gross negligence for a new risk officer to come in a midst all these things going on and only spend one hour with mr. roseman,

the former, the privates officer, and in that one hour you didn't even speak about the risky positions? you don't think that is a little negligent question are taking over the shop as risk officer and you don't all you spent was one hour, and you didn't really speak about his concerns for the risks. >> we spoke briefly about the sovereign risk, and the i think you testified earlier you didn't speak about that in no come we spoke him as i mentioned we spoke on we spoke briefly in contained on that list of discussion was the a touch on sovereign risk in a touched? >> on sovereign risk him he is. but 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 vetted, and transparent in

it but you just also testified that 10 days prior to this you have no reason to believe that the company was a viable? so you can all this risk analysis but 10 days prior to the collapse you didn't have any reason to believe it was a viable? >> ten days prior, i wa't coming into work that day in innocent. he didn't come into work that day. last thing, do you think this could jeopardize the entire communities, commodities and future markets here in the u.s. that people think that if you 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 our entire system, the integrity of the u.s. markets with regard to commodities and futures? is that a true statement? >> it's my sincere hope that this all works out for the client's. >> mr. gutierrez think it could jeopardize the integrity of the markets? >> people could lose faith in our system?

>> i would hope not. hopefully this will get reconciled and they don't lose faith and even it gets reconciled, the point is people were in segregated accounts, promises were made, they were told it was safe and that my is but even if if it gets returned later, i think, i think it's safe to say people lose faith. thank you very much. i yield back i yield back. i thank the gentleman and i think i witnesses for your time. and with that this panel is excuse, and we will call up panel number two. [inaudible conversations]

>> [inaudible conversations] >> calling of our second panel of witnesses. mr. gregg parmalee, managing director of corporate and government ratings division, standard & poor's rating system. mr. richard cantor, chief credit officer, moody's investor services. mr. james gellert, president and chief executive officer of rapid ratings internal international inc. i want to ask the three beauty please stand and raise your right hand. [witnesses were sworn in]

>> thank you. i'm going to ask now that each of you to give your opening statement, and just to let you know that your full statement, your written statement will be made a part of the record. and mr. parmelee, you're recognized for five minutes. >> thank you. mr. chairman, mr. ricci miller, good morning. my name is craig parmelee but i served as managing director and lead analytical manager for north american financial institution team at standard & poor's. i'm pleased to appear before you this morning and to discuss s&p ratings at mf global. over the course of its long history speed i'm going to ask you to do me a favor. unfortunately those microphones to pick a very good unless you nearly have your lives on that but you don't have to put her lips on them. move it closer. >> over the course of its long history as if you saw to improve transparency and capital market

by providing independent assessment to credit worthiness. at their core, s&p credit ratings reflect our forward-looking views about the ability and willingness officials to meet their financial obligations in full and on time. snp's ratings are thus expressions of opinion. they're not recommendations to buy, sell or hold securities and they're not statements of fact. s&p first great mf global in may 12007. operating at the time was bbb+ and remained at that level until february 2008. we can downgraded the company's race to bbb followed its announcement regarding a lawsuit unauthorized trading based on a view that the compass-national average among other things. in 2010, we downgraded the company yet again, this time to bbb. just one notch above speculative grade or not assessment great status. lower than the rates of s&p's two largest competitors air canada published report announcing this downgrade we stayed mf global of new ceo jon corzine had announced a strategy

to begin transitioning the firm from a traditional commodities broker to a full-service investment bank. in our report we noted the strategy would likely result in the company taking on more proprietary trading positions. which in our view would be riskier than the company's traditional broker business. we further stated the company's risk management controls continue to be a work in progress. six months late in may 2011, mf global disclosed for the first time and off balance sheet exposure to private 6.3 billion of european sovereign debt, so-called repurchase to maturity transaction that we've all heard this morning as refer to as rtm transaction. this disclosure cause no discernible destruction in the capital markets, perhaps because the portfolio was made up of highly rated sovereign fund scheduled to schedule 30 in 2012. meaning that mf global would only lose money if one or more of the sovereign state folded during his relatively short time period. following the may 2011 disclosure, s&p continue to

believe that mf global's underlying credit fundamentals supported its trading of bbb. in october 2011, concerns in the market over escalation of the eurozone credit crisis, combined with the disappointing earnings report from mf global and other factors are causing the firm's investors, counterparties and others to move quickly in increase in the concerned about the firm. against this drawback, without to obtain additional information about the rtm portfolio, we're told that mf global executives that the for and believed it was quote in its stronger position ever as a public entity, end quote. notwithstanding measures optimism, mf global reported a net gap quarterly loss of $191 million the next day. this loss was surprising and frightened the market even further. although mr. corzine stated that mf global remained on strong footing, and it's rtm portfolio post minimum risk the company's stock price their -- fell by nearly 50%. one day lead on october 26, s&p placed mf global's ratings on

credit watch with negative implications under review for a potential downgrade. this action reflected s&p's view that continued volatility in the capital markets and low interest rates could further harm mf global's ability to generate capital. as part of this action we also noted that the firm's rtm exposure that we also know the rtm's exposure had increased risk profile. the october 26 report concluded by saying that s&p whistleblower mf global's ratings to expect it or not assessment great taking on the execution of strategic plans which include potential short-term sale of certain operations. on october 31, 2011, mf global filed for bankruptcy protection. ..