book of mf global? >> the -- again, i probably would want to talk more -- understand more specifically what their reference to the trading book and otherwise was because, as i mentioned before, i thought that our disclosures were both -- were adequate and -- were adequate. >> and that's what your response would be, that your disclosures were adequate? okay. on october 13th 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. it was prepared by the chief risk officer. that would be you, the cfo and mf global treasury's 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 a board request. the cfo and treasurer really drove that strategy or analysis and one of my senior officers helped out on creating some of the scenarios in there. so the -- that's the -- that was the genesis of that contingency plan. >> well, i see that my time is expired but i don't think you've been very candid with us. thank you, mr. stockman. >> thank you, gentlemen. did you have previous

relationships with the board members? >> i did not have previous relationships with the board members, no. >> no in. >> no. >> what about governor corzine? did you know him personally? >> i didn't -- know mr. cornize personally but had worked at goldman sachs a number of years prior. >> you said a few minutes ago that you did your job, that you reported information to the board to mr. cornize. mr. roseman also said that you did your job, you reported the information.

it looks on its face, my colleague, mr. pierce, i have a disstra d district that many, many people lost thousands of dollars. farmers and ranchers. it almost looks like they took mr. roseman out and replaced mr. roseman with the "yes" man. does it look that way to you? mr. roseman, would you comment at all? you gave them information that they didn't like so they replaced you with someone that would give them information that they liked? >> can i -- i've answered that question actually twice. i mean, in fairness, i have to say i'm really not in the position to answer that. others made the decision for me. some of my views would have played a part, i would believe. >> mr. stockman? >> and, sir, i think, as in my testimony notes, that when i joined the firm doing deep

analysis on sovereign 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 changed, the -- i expressed my views as it relates to wanting to bring hedging strategies and bring the risk down. so i would have to take exception to your characterization of a "yes" man. >> 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? >> i was -- i understood but ultimately is responsible for liquidity. >> the negative assessment of mf global's risk management. it's betting the house, so to speak, in the current approach to risk management. both you -- do you agree with this assessment and was mr. cornize betting the house with european debt, rtm portfolio? >> as i mentioned before, through the genesis of the nine months that i was there, first three or four months, i would have to say the idea of betting the house was inaccurate or not a depiction that i would

represent and that as the risk profiles changed in the mark can ket place, 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 a sophisticated board being, you know, the balance between jon and these decisions. >> i mean, i would certainly suggest that the ability of the company to handle the positions was pushed to the maximum and as i outlined before, under adverse lick quit tea conditions or scenarios, it would put towards the company in harm's way. >> okay. i yield back. the gentleman, mr. rois, is

recognized for five minutes. >> mr. roseman, let me ask you about the leverage ratios if i could. the 30-1 leverage ratio has been cited in the press. and mr. roseman said that he worked to deleverage the firm. can you testify upon the ratio that actually existed there while you were there and whether you believe the leverage of the firm materially changed under mr. corzin snechlt. >> i think the important point is not only what is the leverage but what encompasses the leverage. a year before, that all of the leverages that existed was extremely liquid securities and was well presented to the rating agencies that we were holding treasuries, we were holding treasuries, abc notes and what

have you, that were very short-dated in nature. after mr. corzine joined, the composition of a leverage changed. that's the important point. >> were you there in august of 2008, he came in the spring of 2010. you say that started to change. did this window-dressing issue begin to arise as well at that time? >> 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 say -- >> but this is 34% higher. >> i'm sorry? >> it certainly was brought down. i'm aware of that. the point you need to be aware of that as well is if you can bring the leverage down, it affects the liquidity of the positions. if you can bring them down, that means they don't pose a threat

to the balance sheet per se. it's the leverage you can't bring down which is the more concerning risk which would be consistent again with what happened during the subprime crisis as well as again some of these other positions held by m f global. >> their investments in sovereign debt, i take it. when asked about the concerns you raised, mr. corzine testified that we allowed people to speak their minds and your testimony here today suggests something slightly different. you raise concerns about the positions, as you laid them out to the board, and you walked them through the risk scenarios and they were challenged as being implausible, as you said, and shortly thereafter, you were let go. but they were challenged as being implausible. can you reconcile those two

representations of what was going on in the board room there? >> i'm sorry. can can you repeat the first part? >> well, the first part, mr. corzine testified, you know, 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 implausible. what you were arguing was implausible and, of course, a few months later -- >> i don't know if those two statements are contradictory per se. i mean, he certainly allowed me to express my opinions in the board meetings. >> okay. but was there 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, that's implausible. i'm trying to reconcile those two. >> within the room there's certainly differences of opinions within the board members on the positions themselves. so they were certainly discussed. >> one last question. you noted the strategy pursued by mr. corzine didn't match the resources of mfg. can you expand a little bit about what you mean by that? what specifically caused the failure of mf global, in your opinion? >> since i wasn't there, i'm not really familiar with all the specific positions that they added to the company subsequent to my departure. >> uh-huh. >> so i'm probably not in the best position to respond to that. >> then how about 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 to moving around, funds were capital to other entities. and when you employ a strategy, tough 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. but it certainly presents the need to assess the strategy against the resources. >> thank you very much, mr. roseman. >> well, thank you, gentlemen. now the gentleman from new york, mr. graham, is recognized for five minutes.

>> thank you. mr. stockman, you've already testified that you were not privy to the meeting on the 31st where the fcc and the unwinding was discussed with other large entities of mf global. let me ask you this. mf global, would you say 98 to 99% of it is business was commodities? >> the -- >> commodities and futures, i mean. >> in terms of a revenue breakdown, i'm not 100% sure but i think that sounds a little bit high. >> over 90%? vast majority of their businesses, 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 a half. i'm really speculating at this point. >> i think you're speculating quite a bit. my curiosity is this. you're a chief risk officer. obviously you know the industry pretty well. you were paid hand somely to know the industry. is there any reason why you can think of why this would be a bankruptcy under the securities protection act, a spa, under versus the commodities rule? any reason why you would see why that would be? >> sir, i understand the question. and i don't really offer much expertise as it relates to bankruptcy -- specific laws and i'm not going to be able to

comment on that with any specific -- >> mr. roseman, do you have any idea why this -- do you know of any precedent for this? >> i don't have the expertise myself why the decision would have been made or -- >> but from your knowledge of the industry, does it seem strange to you? >> it actually does seem strange. >> does it raise a red flag that something's wrong here? i mean, just someone that's -- how long have you been in the industry? >> 16 years, 17 years. >> 16 years. how about yourself, mr. stockman. how many years have you been in the industry? >> 25 years. >> i'm not saying that you're an expert but does it raise a red flag that most of the commodities and futures are not going on the bankruptcy normally under the commodities bankruptcy but it's under the spa? does that seem odd or strange or cause you any reason to

question? >> i think it's a reasonable question in deciding the basis on which to answer the question fully is where, unfortunately, we -- >> 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. explain to me -- i'm trying to figure this out. we have two companies, right? one is the inc, the mf global, inc, and the holdings company. >> yes. >> but two where the problems lie, those are the two main entities that we're focusing on he can correct? >> yes. >> are you the risk officer for both? >> correct. >> you're the risk officer for both? >> we didn't really organize ourself on an entity basis but rather a global basis. but -- >> so what were your responsibilities in the holding

company, then? because what looks like happened, maybe i'm crazy, i think the inmates were running the assignment. that's why all of this happened in the first place. because we have massive leverage leverage that a chief risk officer said it went way beyond that and leverage keeps going and very risky and mr. roseman was worried about wasn't there and in the final hours someone which we have yet to find out, it would be a good idea to find out who, segregated from the fcm side over to the holding company and that's probably where the money is or probably how it got lost somehow, some way but i'm

wondering, now when you look back, if you look at the chief risk officer for both, the holding company, what safeguards and before you answer that, i want to read to you, here's the latest from mf global that went out to customers and says your assets are protected from multilevel safeguards, stability, separation, and protection as the chief risk officer from both of these entities, is it true? >> i have no reason to doubt that. >> actually, you have a great reason. $1.2 billion is missing. thank you very much. >> thank you, gentlemen. what we're going to do now, the chair is going to enforce this.

we're going to go to a two-minute lightning round for those that want follow-up questions and then we will dismiss this panel. i'm going to go to mr. miller and recognize him for two minutes. >> thank you. mr. roseman had questions about risk appetite. he also had questions about liquidity, whether there was money to pay a margin call, to cover a margin call if you got one. mr. stockman, you talked about the limited conversation that you had with mr. roseman and about the interviews that you had and discussion of risk appetite in those interviews. how about liquidity? whoever was interviewing you, did you talk about liquidity concerns, whether you had the money or liquid assets to meet a margin call if you got one? >> sir, as i pointed out, we analyzed the risks in -- >> you start with a yes or no? >> i'm sorry.

can you repeat the conversation? >> did have you 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 period of time, liquidity was fully available and there was -- >> that's no. okay. so at what point did you ever raise the liquidity concern in the 11 months, 10 months, however long you were there with anyone to whom you reported, e the. >> yes. >> actually liquidity posted for -- >> did you make sure those concerns were passed along to the board? >> absolutely. >> okay. were they passed along to the board? >> actually, it was during a presentation, both verbally and written. >> okay. repo transactions are usually with highly liquid assets as ka

ka lat tral and bought the sovereign debt and financing about using the debt itself as the collateral. it was european debt. the whole world was holding their stomach about whether there would be a default of european debt. it appears that the reason that these trans transactions held out the possibility of a substantial profit, it was a bet against the market. the sovereign debt was beat down because the world was worried, the markets were worried about whether there would be default. it was 100% financing. there wasn't money to make the margin call. you knew the margin call was a possibility. what red flags and at the same time corzine and others have said, there's no problem here. there is no problem here.

you said earlier that you did read -- corzine's statement was a public statement and you knew about it. to whom did you say, whoa. no. we have a lot to worry about? did you say it to the board? did you say it publicly? did you stay to a regulator? did you say it to your accountants? to your auditors? who did you say it to? >> sir, we continued to highlight the risks internally and talked about them in great detail. >> to whom? just internally to the coo? >> to all those who were involved, we continued to do our function in terms of reporting the risk and -- >> and you knew with 100% financing with the possibility of a margin call and no way to a make a margin call and top executives were making statements to investors and

rating agencies that they were in a rock solid position and you just talked about it internally? >> sir, the -- prior to the final week, the firm was meeting its margin calls and financing its positions and ultimately, obviously, the case speaks for itself, what happened in that ensuing week. >> i thank the gentleman. mr. roseman, going back from your analysis and your time there and then kind of watching how this all played out, would mf global be in bankruptcy today if they had not put on those traits, the sovereign debt traits? >> in my opinion, they would still be here. >> so you believe that that contributed 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 just a question -- this is -- there may be other circumstances but, you know. >> sometimes that's a domino. but if you took that particular piece of it out, if they had not had these rtms on the books, would that company still be here today? >> i think that's a confluence of events that i was talking about. >> i wasn't asking you about the confluence of events. yes or no, do you believe it would or would not be here? >> i think it's a possibility even with the rtm positions, we'll have to wait for further details that the company could have survived. >> it's kind of fun when everybody discovered the head rtms, that's when the company went down. i now yield to mr. pozzi for two

minutes. >> it's been reported that customer assets may have gone through a transformation from which they went from a liquid state to a gaseous state. in other words, they just vap 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've got 25 years experience in this business and you can't answer a simple question as to whether or not you think people's assets can just vaporize like there's nobody to blame? you know, it's not god's fault, your fault, corzine's fault, it just happened, just a quirk of nature. do you think that's possible?

>> well, i think there's a team of experts going through all of 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 to just vaporize? okay. that's good. you're fully aware of the rules requiring customers' accounts to be segregated at all times. was mr. corzine aware of those requirements? >> i would be speculating but i would imagine that he would be aware of those requirements. >> how about lori ferber? >> and i would imagine she is, too. >> what involvement did miss ferber have with your risk management and compliance functions? >> lori didn't have significant involvement in the risk management function. >> was she aware of mf's risk positions and the use of segregated funds? >> i couldn't speak specifically to what lori may have known

and -- >> did she maintain or have access to risk positions including reposs, counter positions and counterparties? >> i'm sorry. can you say that again? >> did she maintain or have access to control sheets for risk positions, including reap pose, proprietary positions and counterparties? >> i don't know. >> was j.c. flowers a trading partner with mf? >> i don't know. >> since j.c. flowers was a board member and member of mf and jon corzine was still employed by flowers, as an expert in your $350 thor,000 a experience, wouldn't that be a conflict of interest? >> i can't speak to specific conflicts of interest. >> i'm sorry. the gentleman's time -- we're going to have to -- i would ask -- i would 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 in writing. we would expect the people to respond to those questions as well. i know go to the vice chairman of the committee, mr. fitzpatrick. >> mr. stockman, i want to go back to the e-mail that the cfo wrote to -- i think it was a position and you indicated in response to the question you didn't have any reason to disagree with the assessment. after i asked you to question, you consulted with somebody and you came back and indicated that you were at a meeting with moody's on the 21st of october. is that correct? >> i think i want to take half a step back. i think the answer to the question regarding mr. steamcamp's e-mail was, i don't know what context that he had

sent that e-mail nor was i part of that e-mail chain. >> but in terms of context, were you at a meeting with moody's different rating agency three days later? >> yes, i was in that meeting. >> was mr. steeamcamp in that meeting? >> he was. >> and was he downgraded as a result of that meeting? >> the firm was downgraded three days later. i can't be specific as it was a result of that specific -- >> was it a result of anything that you said at that meeting? did you say anything at the meeting. >> me personally? >> yes. >> i spoke very little, frankly. >> did you let mr. moody's know that you were brought on to trade -- let mr. corzin e-trade through that $2 million number? >> that characterization