violate violated many of the rules of the game in term of being the chief and prolific trader that emerges out of all of this information. my real concern is what happened to the customer assets and the loss of $1.2 billion in the customer funds? will 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? >> ma'am, 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 or -- >> what nonspecific knowledge do you have? >> i have no specific or nonspecific knowledge. >> so you knew nothing about any decisions that were made to use these customer funds? you know nothing about that? is that correct? >> that's correct. >> all right. given everything that has happened, what would you do differently? >> that's a terrific question. we think that when the final chapter is written, i believe at the moment it's a little preliminary to make specific decisions and recommendations. >> i didn't ask for

recommendations. you were the risk officer. you had the responsibility of 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 recommendations. i don't want to talk about any -- i simply want to know if the position that you're in now, having been the risk officer, everybody looking at you and wondering where were you? i mean you were absent or not absent. what would you do differently? >> ma'am, i think the absent comment i want to challenge you on that a little bit which is to say that myself and my risk management team, we did our job during this period.

we highlighted, analyzed, assessed risks made transparent and clear to both senior management and the board. the risks that we were running at the firm. >> who did you report this information to? >> senior management and the board. and the informed and sophisticated business judgments were made based on my department's assessments. >> you may have said this already. you may have said this already. in your report to the board or the management, did you say that this company was being placed at a highly risky situation with the sovereign debt trading that mr. corzine is involved in? >> ma'am, for example, in the august 4 report, it was clearly highlighted, excuse me, in both written and verbal presentation

to the board and senior management as an example the increased risk in the marketplace overall from the summer of volatility. number two, widening credit spreads. number three, increasing probabilities of default. number four, lowering liquidity in the marketplace. and importantly, number five, in particular, the increasing stress -- >> so in essence, you felt you did your job? is that right? >> that's correct. >> and there's nothing that you would have done differently? >> ma'am, obviously, 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. >> we thank the agengentlewoman. >> mr. stockman, i'm over here on this side.

>> okay. >> and, again, looking at all the questions you're hearing and getting, you're probably starting to get to understand that mr. roseman at least saw some issues, brought them to the board and at the time the board wasn't happy with the decisions he was making so they went out and hired somebody else. and that was you. so my question was, who recruited you? how did you come to this position? >> came to the position through a search firm and then went through an extensive interviewing process. >> okay. who ended up hiring you ultimately? mr. corzine? >> you mean effectively who was the decision makers? >> yes? >> i was hired in directly reported to mr. avalo. >> so mr. corzine had no influence in that decision? >> oh, i'm sure, you know, as a matter of senior management when you recruit for a senior

position, i certainly interviewed with mr. core zoin. but there was an extensive interview process mr. w. mr. corzine and the board. >> were you asked during the interview process your opinion any time of mf global's appetite in taking a greater position in the european backed rtms? >> the european backed rtms specifically, to the best of my recollection, didn't come up specifically during the interview process. which, as a general matter wouldn't be that unusual as it relates to propriety airy positions for somebody who isn't hired yet. >> do you believe in any way that mf global's increased appetite maybe 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 or their decision? >> yeah. i believe it was not a

prerequisite and as i mentioned, not specifically discussed. it was really about the interview and hiring process was really about my skills set and where the firm had stated goals were and where it was going. >> okay. you said in your testimony you noticed after you were hired that there was some concern noted, i think in the board minutes, that mr. roseman had addressed with the board related to increased positions being taken in european backed rtms. what did you do after that? did you ignore it? did you look into it? you're the risk officer. what did you do with that information? >> i began soon after i arrived at the firm to do my own analysis. and i was assisted by my department and that analysis included a number of features and grew more sophisticated with every month that went by during my tenure. so the analysis included a

number of elements, in particular, liquidity risk. >> so you also cite in your testimony that you felt their positions were acceptable? is that correct? >> correct. and the context of the first three or four months while market conditions were what they were, much more benign than favorable, i found that the risk in the board were acceptable. and then as we discussed in july, i had a change of view. >> so as all this was going on, as you look back through the minutes, you had no concern about the potential outcome? you were comfortable that everything was going okay right down to the last minute? >> sir, i highlighted the risks and i mentioned that in very specific form and fashion. and in those early few months,

as i mentioned, found them acceptable. market conditions changed. and so did my view. >> you know, my background is financial also. i've had to deal with a lot of companies. there comes a time when you railize things are going the wrong direction. you really start to throw up some flags. did you ever do that? >> in july, that was as market conditions changed, that's when i began to recommend that the company think carefully, not really only understanding the increased risk profile but that we consider hedging or reduction strategies. >> mr. roseman, regarding the break the glass plan, are margin calls the kind of risk that's a chief risk officer at mf global might concern himself with? >> it certainly liquidity risk is always a material concern. if you look at all companies

that have failed, it is generated by liquidity risk event. more often than not. certainly the -- you need to have a very good understanding of liquidity risk that the organization is facing, including margin calls. >> you did throw up the red flag to mr. corzine a couple times. can you just briefly tell me his opinion of what your red flag being thrown up was? >> the price risk or default risk associated with the positions, in regards to capital risk, at that point in time as i put in my written statement there wasn't necessarily a concern about liquidity risk as the firm had more than enough liquidity to handle the initial positions. then as the positions started to grow in the fall, that's when i expressed my growing concerns about the lick wud ti risks and the risk department presented to me, and i presented to mr. corzine plausible, what i

considered, you know, potential scenarios around initial margin and variation margin. >> thank you, mr. chairman. >> i thank the gentleman. thank you, mr. chairman. i just want to try to better -- this is fairly complicated for me. i just want to try to better understand some of the basics here. and so i'd like to start a little bit where he left off with you, mr. roseman, about whether you raised the flag. and if you could explain for me what you think caused the problem here. you started to outline it in the answer that you just finished with him. if can you walk me through that in a simple way as you can and tell me how you thought the risk management process here fell apart or 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 mr. stockman stated as well, i mean, the sovereign risks -- the sovereign positions and the associated risks with those positions were very well communicated, very transparent within the organizati organization and mr. corzine and to the board. >> so the risk associated with everything that was going on were clearly laid out to mr. corzine, the board, and they decided to go forward notwithstanding some of those -- understanding 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 the view 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 there is enough cushion within the company's means to support the risks. make sure that risks are in align with the company and that's an on going concern. >> so you obviously were moved out of the position and mr. stockman is put in the position and is that because manage am

was unhappy with the advice you were providing? >> 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 -- 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 a -- an investment banking strategy that was 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 the means. and i do think that -- that strategy maybe exceeded the ability of the resources. >> were there lessons here with respect to how systemic risk is implicated with this particular case that should concern us as members of the financial services committee? >> can you repeat that? >> are there systemic issues that we ought to be concerned about as members of this committee with respect to this -- what happened at mf global? >> as i put in my written statement, i think one of the main take aways is, again, firms need to be very mindful of the concentration risks that they're running. and the implications of the

stress scenarios related to that concentration risk. clearly during a mortgage crisis, it was the same, you know, some of the firms failed. they had concentrations in more securities and we know the outcome that occurred there. i certainly think, again, that needs to be revisited. >> the issue of concentration? >> concentration risk, large positions within the company that a company may hold. >> right. thank you very much. i see many i time is out. i yield back. >> i thank the gentleman. now the gentleman from new mexico, mr. pierce, recognized for five minutes. >> thank you, mr. chairman. got back from the prayer breakfast. we talked that man doesn't live by bread alone. $1.2 billion of bread has been disappearing off the table out there. mr. stockman, how much did you get hired for? what was your salary when you got hired? >> my salary began at $300,000. >> how much?

>> $300,000. >> how you about mr. roseman? >> $350,000. >> 350. so you got chief operating officers. you have ceos. you have chief executive officers. you have chief risk officer. they all begin with a c. does that mean anything mr. stockman? in other words, it doesn't sound like you're in any of the real management meetings or just left out of those. am i hearing you correctly? >> sir, my responsibilities -- >> i didn't ask your responsibilities. i said you were left out of the key meetings. you didn't know you were answering some of the questions from the other side and you didn't know who might be at those meetings. you didn't answer mr. posey. so it appears that you weren't there. so c. when you were -- you were something with other firms. did you get to sit in on senior management meetings with those

other firms as a risk officer? whatever level you were? >> at the -- at meetings that were appropriate to -- >> so did you get to sit in on things where you talk about the risk of the company and the future of the company? >> yes or no will work. >> i'm sorry? >> yes or no will work. did you sit in on the key meetings where the risk of the company is at stake? >> at ubs, i did not sit at the highest level meetings. >> you were not? is that right? you are not. okay. so friday, october 21st, you had that management team meeting with moodies. did they come back and report you to kind of as a chief risk officer that things moo it not be going so good over there. they're now worried a little bit about what they're seeing. did they come back and relay

that you to, the chief risk officer. you're the head guy in charge. you're right up there with the fancy pinstripe suit guys. did they come back and tell you anything at all about what moodies said might be happening to you? >> the key contact at moody's was our cfo. >> i didn't ask that. i said did they come back and tell you anything? kind of raise the flags. >> they didn't report to me. >> didn't share anything with you? >> correct. >> did you ever think that maybe they ran off mr. roseman and brought you in to be kind of the guy that doesn't see, tell, know? did that ever occur to you? >> no, sir. >> didn't? >> no. >> what about off balance sheet stuff? i'm looking here at your break the glass thing. we're going to prevent the off balance sheet drains. when i read that, i know i'm a suspicious character, but i brings to mind enron. enron doing all this fancy stuff around the edges and fast moving traders. they're moving up and down and

shucking and jiving. did it rur to you that the off balance sheet stuff is maybe you shouldn't be signing off on as the chief risk officer? did it ever occur to you that maybe you should say something about that? >> the off-balance sheet statement -- >> would you move the mike closer? >> the off-balance sheet that you're return to was fully established prior to my -- >> i didn't ask you if it was fully established. i asked you if you ever thought that you should say something about that. >> there was off-balance sheet trading. but if you're referring to mf, off balance sheet -- >> is off balance sheet legal? >> that's an accounting treatment. >> is off balance sheet treatment legal? >> again, i'm not an accounting expert. but under --

>> you're the one that has to certify the risk and so i don't care if you're an expert or not on accounting. i'm asking from you, as the c, the cro, ceo, coo, you're one of the c's. is it legal? >> to the best of my understanding, it was performed under accounting principles and -- >> is it ethical? >> that's a hard question to answer. >> you're the c guy. we hired you. we hired you to be the head c guy. cro. you got to say it. nobody else in the organization is responsible for talking about off balance sheet stuff. is it ethical? >> again, ethical is -- as it relates to accounting and -- accounting treatment and how the off balance sheet is prepared are guided by principles and i

don't have a strong view as to -- >> you don't have to keep going -- i get the drift. $1.2 billion worth of people got the drift. we're hiding around the corners, we're doing stuff that we don't know is legal. we certainly will not say it's ethical or unethical. and we're deeply sorry. i read your testimony. it's the same as mr. corzine's. i've got a guy that lost 5,000 bucks at christmastime. did you call anyone? $1.2 billion divided by 5,000, that's a lot of people. did you call one of them? >> i have not, sir. >> deeply sorry, though, deeply sorry? >> and found by -- >> have you suggested that maybe you ought to give your pay back and put it in a scholarship fund

that is not going to go to college, a hog farmer trying to raise pigs. my dad raised pigs. you guys $1.2 billion and you're hiding around on the definition of whether it's legal, whether it's ethical or unethical? i don't think shame reaches wall street but if it did, maybe you should be looking at how much you're paid and what you're paid for. thank you. >> thank you, gentleman. and now mr. conseco from texas. >> okay. mr. stockman, one very brief question. >> sir, can i -- i apologize for interrupting. i wanted to just make sure that it was understood that moody's meeting i did attend. if there was any confusion on that. i'm not sure there was, but i just wanted to confirm. >> thank you. >> that's all right. let me ask a question now, mr.

stockman. when did mf global first approach you? i know that you went through an agency. but when did you first meet? when did mf global first approach you, either by letter or by phone call or otherwise? >> to the best of my recollection, in september/october possibly. possibly october of 2010. >> all right. and by what means was it? letter, phone call, e-mail? >> phone call. >> phone call. and did you go and visit with them shortly thereafter? >> short thereafter i had a series of interviews, yes. >> was it your head hunter or agent that called you or was it mf global that called you? >> this was through a search firm. >> so your search firm called you up and said, mf global wants to visit with you.

is that correct? >> correct. >> and it was in october? >> to the best of my recollection. >> early october or late october? >> i apologize. to the best of my recollection, it was in and around that period. >> mr. roseman, you were told that you were no longer needed as chief risk officer in january of 2011. is that correct? >> yes, sir. >> 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 a search 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 jon corzine over liquid dee risk of sovereign rtms? >> i would say the discussion became much more material in

september. >> in what month was it that you made your presentation to the board saying that the board should not follow mr. corzine's advice of rtms? >> 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 a 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 agriculture committee, mr. jon corzine said that he replaced you as chief risk officer because mf global, quote, needed someone in the chief risk

officer position that was tuned to the broker dealer side of our business than what mr. roseman's background was about and people worked with each other. so, mr. roseman, you have a very impressive resume and a wide variety of experience in the financial industry. do you believe that your background was not fully attuned to the broker dealer side of mf global's side of business? >> i would fully disagree with that statement. i had experience in investment banking prior to mf global. >> so it is true that you have a very strong financial background and experience and a good, 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. >> so mr. stockman , in a lette to a subcommittee, moody's

indicated that they did not understand until august 2011 that was part of the mf global trading book? did that surprise you since mf global had exposed this 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 though mf global had exposed 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 their statement but i thought that our disclosures were both accurate and robust.

>> what about moodys and the exposure? >> i was not -- when you say initial inquiries, can you -- >> don't parse it. 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 spread says for, i was not the key contact and had little contact in terms of discussions with the rating agency. >> let me ask you this. you're the risk officer. i don't care what -- 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