nonetheless went forward. what do you think the motivation or the impetus for going forward with these >> again, that would call on speculation for my part and i -- i don't know. >> thank you. i will yield the rest of my time. >> thank you very much. mr. thomas. >> thank you. commissioners need any additional time for any follow-ups? go ahead. >> how much time do you need, mr. wallison? >> i will give you 4 1/2. we will negotiate to five. go ahead. >> microphone, mr. wallison. >> i have some questions for

ms. lindsey. you refer to buyers of securitized subprime mortgages as unsophisticated. that is quite interesting to me. these are buyers, people who are in this business all the time. why do you regard them as unsophisticated? >> they were sophisticated in putting financial details together. the reason i used the word unsophisticated, they didn't know the risk of the underlying product. these were all very high-risk loans. underlying product. these are all very high risk loans. >> and then they didn't know that. you thought of them as putting together the pools very well and negotiating i suppose about how these tools would be eventually marketed. but you didn't think they really understood the underlying loans. why would that be too? why do you think that is what i mean. >> my personal opinion is

because what i have learned growing up in working in finance and working for hard money lenders and other subprime lenders who actually had a stake in the game, who had an interest in whether the loan performed or not. these were extremely risky loans. so if they would look back at a beneficial mortgage, for example. the highest loan-to-value and officials loan would have loved somebody with a poor credit score, and if they had spots on the credit, or on their employment history, they wouldn't loan than any more than 65% loan to buy. so they would have to come up with that other 35%. so the default -- anybody defaulted on these loans, the linda was going to take a loss immediately. there was no protective equity, no cushioned. >> you so love to fannie mae and freddie mac? >> yes. >> with a unsophisticated come in your the? >> i don't know. >> was there any -- budget on but the others either.

the point is did you think from looking at what they were buying that they might also be in sophisticated? >> i didn't see the actual product that they're buying other they were buying the subprime loans that had the higher credit risk, or the lower credit scores. i'm not sure what loan-to-value's they were using. so i'm not sure which packages. they may have been by a particular pool of loans that had a lower loan-to-value but i don't know the answer to that question. >> okay. ms. mills, in february 2007, you started reducing your subprime exposure. why? what signaled you to do that? and that paper 2007 was early. >> we had started to see a deterioration in the quality of the loans that were being originated and as the deterioration in the whole loan

prices that where loans could be sold. and so because we let money to a lot of people that we also bought from, we have access to the financial statements, part of what they require to do was to send as quarterly financial statements and they were all sorts of financial covenants related to the profitability. so on the fairest of microlevel we started to see that the types of loans that were originated these companies were not making money. and that in combination with the fact that whole loan prices continue to drop, we have started to step with a little bit from the business in the middle of 2006. we slow down our purchase activity. we stipulate our bits. we tried to buy, if there is such a term, sort of the core subprime product. so nothing goes like an outlier as far as risk. because the credit, the rating agencies were increasing their credit enhancement levels, which was reducing the amount of proceeds that you could raised by selling bonds. so we had to pay less for loans,

and because everything we bought was competitive bid, we also weren't winning pools. >> who you bidding against? >> primarily other wall street firms. >> did they do the same thing you were doing, or -- you were selling to others it seemed to me from what you are saying. they were selling directly to investors? >> in very general terms, most of the firms that were in our space i believe bob loans and securitize them. but i can't speak, you know, definitively that that's all they did a. >> but the bidding is still strong? >> number still a lot of activity, yes. >> one more question. you describe a process of working with investors and the credit rating agency. you said you would get a dollar amount and a rating for the rmbs. then you, you would market to investors and solicit feedback. his house like a very process. i think all of us would like to understand a little bit more have this really worked.

>> okay. >> please. >> once we own a pool of loans, we would send a data file to the rating agencies. we primarily dealt with movies, snp and historic each rating agency had their own data requirements so what they they want to see and what format they wanted to see again. we would send them the information, the rating agencies have models that they sort of run the cash flows of the underlying mortgage loans through this model. and their comeback is and tell us how many bonds we could issues that were rated aaa, aa, single-a, tripled it, and the with the over globalization amounts underneath the bbb needed to be. and then based on, that was sort how we size up the bonds in the offering process. and then we went out to investigate you went out with pricing. so you might try to sell the aaa at libor plus a spread. and you either had investigators

or you didn't. if you have investor interest you might be able to tighten the spread. if he did have investor interest, you would have to widen the spread to. >> tightened the spread, with disparate, did the rating agency have any role speak i'm going to yield by the way an additional, we are over, and additional. >> i appreciate that. after you got the initial structure from the rating agency? >> you don't technically get the structure from the rating agency. you just get bond sizes and other features of the deal that are related to credit enhancement. they are involved up until the actual day the deal closes. the pool could change during the marketing time. loans could drop out. love to go delinquent. so there was always this sort of final to up that goes on. on the day that the deal closes you get a letter from the rating agency that says i, rating agency, cuba, in relation to the

security will let you issue this many aaa's and so on. >> did you ever go back to the rating agency during the time you're in the middle of talking to the investors and say we need a change here in this structure or that part of the rating or the number of bonds involved and that kind of thing? so that they changed their assessment and responded to your request and. >> i don't have any specific recollection of that happen in the subprime space. i do in there and i know we're not focused on prime, but in the prime securitization market, i do number instances where investors wanted more credit enhancement levels in the rating agencies were requiring. >> mr. wallison, we will move on. thank you. ms. murren, you have a couple of minutes, if you would like, and mr. georgia, two minutes each. >> thank you but i do question all of you but it may be a simple yes or no answer. in listening to your commentary, it appears that we've talked

about declining underwriting standards and the fact that this is a business where there were fairly low barriers to entry. and that the prices of loans declined over the course of the boom. so when you think about in their own minds weighing the factors that drove the boom, was it demand driven or was it supply driven? when you think about the relative importance of these two things. and then, in consideration of that, do you think that having had better oversight and reasonable barriers to entry, that things might have been different? >> i guess i will take that first pic i think it is a combination of both. i don't think what happened without the other. and yes, i very much believe had been some barriers or, i'm sorry, not various but greater levels of oversight that we could have prevented this mess in happening, or at least minimize it to a certain degree. >> i agree as far as the load originators go, there needs to be more oversight with that.

definitely. as mr. bitner point it out there were several states that didn't even require licensing, and they were allowed to originate loans and that was part of the probl problem. >> from my perspective i think it was both supply and demand driven. i don't really -- i can't really speak that well about the impact of regulation, just because the people that we bought from we believe are regulated or well-run or well-capitalized. so i did have the same sort of negative experience in dealing with smaller i'm regulated counterparties. >> i was not involve any actual origination of the loans. these had already been originated by the time that i reviewed them. so i really can't opine on that pic. >> all right. thank you. >> mr. george of? >> thank you, mr. chairman. ms. mills, could you tell us in

the typical structure that you had when you did these bonds, how were the credit rating agencies paid? >> they were paid the fee that was driven by the transaction size. so it -- >> they got a certain number of basis points up to a maximum cap dollar amount. and then they were sort capped out at the dollar amount. >> but they got a basis points based on the sides of the issue? >> the dollar amount of the transaction, yes. >> that didn't matter how they rated it. they got a. how many times did you take to market or attempt to take to market a pool of loans that didn't receive ratings that you thought were necessary to sell them? >> i'm not sure i understand the question smack to the rating agencies ever provider rating that was too low for you to be able to market effectively a

pool of loans that you securitized? >> what the rating agencies gave us was the dollar amount of bonds in each rating categories. uis have bonded each rating category. and there was typically appetite for bonds with various ratings. >> differential returns spent risk appetite in yield requirements. >> okay. you provided warehouse lines to argent to the tune of about $3.5 billion, is that rights because it was a argent/ameriquest platform. i think we might've had once more warehouse line with mr. ar. >> later in the process you folks ended up buying argent, is that right? >> yes. >> how did that work out for you? >> could have been better. [laughter] >> that's good enough i think. thank you.

mr. thomas? >> a couple of quick follow-ups all along that line and then moving in another direction. in terms of the rating agencies that you are sending new material to them and getting them back, was there ever something that could be described as negotiations that is as you get something back from them, you argued back they re-examine or look at it? was there anything that could be fairly characterized as negotiating with the rating agencies in coming up with a final package and agreement? >> what you could do is you could change the composition of the pool. so in other words, if you got that credit enhancement levels that were not sufficient enough number of aaa bond, you could remove some of the riskier loans from the pool and resubmitted to the rating agencies spent when it was submitted to you in that regard, was there any guidance or clear understanding of what you could do to make it work of? >> what do you mean? >> were there any negotiations

with the rating agencies? if using a package and i sent back to you, i can give it to you called and you got to figure out what to do, or i can give you a couple of hands in terms of moving it in a particular direction. but, of course, it would be up to you to make that decision. >> i don't believe so. i think that we knew if you pulled out riskier loans you have less credit enhancement. >> i could probably even handle that level of understanding. so you mix it up in santa back. were the situations you had to send back two or three times to get what you were looking for? >> i'm not sure that i know how to answer -- i don't know i can answer that. >> the answer is yes or no, i don't know. so you don't don't? >> i don't know. >> and i want to say this. i appreciate your willingness, because unlike other you are in current position and we're asking you questions about your employer. and so i am very sensitive to

that. now having said that, i'm going to ask both of you a series >> were there ever instances where you might have given the same bundle of loans to two different rating agencies to essentially shop for the best rating? >> there was a requirement from investors primarily on the triple a side that bonds have two ratings and it was typically moody's and s&p. most had three. but the demands was driven by the investors so we could sell bonds. >> so the answer is yes? >> well, i don't like the word "shop" because that was not really the process. the in order to sell bonds you needed more than one rating agency. >> ok. >> did you ever choose the worst one? >> no. >> we currently have a new

emerging party called a tea party. in history there was a political party called the no nothing party and that was the response people would give when questions were answered. what i heard from both of you, one formerly employed, one currently employed, is i think one of the reasons he was very interested in looking at citibank was in terms of its structure, and basically the answer we have gotten back from you whenever we wanted to inquire about what i think most of us would think would be an aspect of the work you were in, or a partnership in some way, the answer was, "i don't know because they were somewhere else." i know it is an enormous operation and the history was more of a conglomerate then a synthesize i

synthesizing integrating structure. was this because of the way the company was built or do you think there might have been a design to the separation? and mrs. mills, if you want, you can take a pass on that question. information? and ms. mills come if you want to you can take a pass on that question. mr. bowen? >> mr. vice chairman, i cannot render an opinion as to what the organization structure was why it was. i -- it was very heavily segmented. and i was responsible for my peace, and other people were responsible for theirs. >> let's revisit your e-mail once again very briefly. was that the first e-mail you ever sent? >> to mr. rubin? >> yes. >> yes. >> did you send into others'? >> at corporate --

>> i'm just asking you, were you an e-mail in terms of communicating with folks higher up the chain about what you saw as problems? >> there are in excess of hundreds of pages of documents that i submitted. >> i'm looking at something that could be characterized as sending an e-mail to hire a in this segmented operation to try to explain something that concerns you. >> i know that the warnings went to the highest levels within my business unit, which was called the consumer lending group. >> i mean, your analysis of all is going on was a can to the fellow in the field who calls an airstrike on his location because his position is being overrun. and that was about the only way

that you could resolve the problem that you are in. so i was just wondering if you have found yourself in those predicaments more than. >> you're talking about prior to citi? i don't understand. >> no, let me ask you. it was segmented and you wanted to send an e-mail. and you have, i use them, a book with people who are in your company, and you have a choice of selecting who is you want to send it to. my question would be, why did you pick move in and not prince? >> there was speculation in the press leading up to that weekend that mr. prince would no longer be with the company. there was announced that there was going to be a special board meeting. but there is. >> but there was no water coming with folks in the coming have

this info? you had to go find out about in the press rather than the scuttlebutt in the company's? >> i don't understand your question, mr. vice chairman. i'm sorry. >> we will just leave it at that. but you decided based upon what you read in the press, there may be a structural change in your company. and that putt did you do e-mail to rubin. is that because he wasn't speculated as being removed? >> i was -- i knew that there were issues that were being considered by executive management. and the board of directors. and i felt like i needed to get these in front of them because to my knowledge, they had no -- they had no knowledge. >> and if you were giving it to the board of directors, it made sense it could've been rubin

within the board of directors. was that a motive to get it to rubin? >> it was again speculated and the press going up to that weekend, that mr. rubin would be taking over for mr. prince. >> thanks. i'm interested because i don't know anything about it, how you operated in terms of -- i was a relatively small amounts of money. mr. bitner, you talk about how you got your company up and going. and would be correct to say that there was no chance of growing that company, save for the warehouse concept where you could use these other folks money to do what you would otherwise do because you couldn't bootstrap itself, is that active? >> i think i understand your question. we did grow the company. the reality is warehouse lenders is based on amount of leverage. typically a 10 to 15 to one. so the amount of loans that i

could find was i think limited to initial 10 to $59 on a monthly basis. about my country chosen of the companies that i knew also, we took most of our money and put it back in the company, to our net worth to grow the size of her warehouse lines to try to be able to find a more business is. >> at least in terms of new century, you were involved in that as well. >> yes. >> i guess i'm kind of figure out how you find out about this stuff. we discussed earlier state regulation, and perhaps problems that were not there. you have professional organizations, don't you, where there are newsletters that were going out? . .

>> you know, we did talk about that. nobody ever talked about, -- some groups did talk about the increasely risk with the interest only loans and when they readjust. that was more of our compliance department and fair lending group who would talk about stuff like that. >> was there a discussion when you got into the whole business about the risk associated with that? >> the risk with boring the money to make the loans? if we didn't sell the loans, that was probably pose the biggest risk to us. >> but there was plenty of opportunity. >> there was plenty of

opportunity for a long time, yes. >> long time is what in your business? >> well, we were founded in -- we made our first loan in january of 1996. then we declared bankruptcy in april of 2007. >> that was a long run? >> for subprime, sadly, yes. >> you were in at the beginning and collapsed when everybody else did. >> yeah. >> thank you, mr. chairman. >> thank you, mr. thomas. terrific. let me i have questions first for mr. beau than. i'm going to start is with you. i want to try to get a good understanding of what i do look at the data in the citigroup, it appears in the various lines of business where citi was buying, selling, securitizing, or holding mortgages it shall with looks as though the writedowns

would be in the business of $20 million. this would exclude what happened in the collateralled debt business. i'm trying to get an identical of risk. how the losses occurred. how they might have been avoided. in your opening statement today you talked about how your review, i guess of the underwriting standards in the business lines you were in which is the wine of mortgages for portfolio and mortgages for sale. >> i was not involved on the selling side. just on the purchase side. >> purchase side. all right. you made the comment on what was happened made a mockery of citi's business. i want to go to your e-mail on december 3. i believe mr. prince stepped down, what on the 5th?

so hastened down a couple days later. looking at your memo and having looked at the transcripts of the interview of our staff with you, it appeared from the sale of the third parties, you indicate that's a $50 billion business. you underwrite a small sample of those who see to what extent i want to get clear -- to what extent they met your policy criteria. you were concerned that the sample size was too small. that the policy called for 5% sample, is that correct? that you believe there was undersampling? >> yes. that is correct. >> okay. secondly i want to understand if 40 to 60% of the files are either outside of the policy criteria have documentation missing from the files and then it rose to 80% tell me specifically what that means.

these were standards that citi was selling for what it would buy, or was it verification that the loans were what the sellers represented they were? in other words, is it a standard you set or you sampled these things to see if they meet the standards that the sellers say they meet. the sellers represented that they sold to citi according to our standards. and it was our standards i measured those loans against. so again i'm trying to understand your question, mr. chairman. >> well, i guess what i'm understanding is you had standards then. you were saying they were efficient but the purchases were happy notwithstanding that; correct? >> the purchasing of the mortgages was against our step. we did not underwrite all of the -- in fact, we did not underwrite any of the mortgages

there prior to, purchased. >> correct. what are you judging. when you say they were deficient, how? >> they were deficient in one of two ways. one, they were not underwritten by the expressed guidelines by citi or they were underwritten and proported to be against the underwriting guidelines by citi. but they did not have documents that were required by citi policy to support the assumptions that were put into or made in the underwriting decision by the originating lender. >> okay. what were the risk that flowed from that? that were you getting loans that weren't underwritten properly that had risk and risk layering for mortgages you would hold and

potentially resell; correct? >> the risk from my standard point as i outlined in my memo to mr. rueben, we in tern being citi represented to the investors that these mortgages were made according to our guidelines. >> and they were not? >> correct. they were not. >> all right. does that also apply to the wall street purchasing the same essential problem? >> we did do underwriting in the wall street subprime channel. >> but you were overwritten; correct? >> yes. >> you believe the risk were too great. and you were overwritten. >> there were many instances where my underwriters decision

having run a business there is always somebody -- you are running a business, there are always people who recommend for and against certain transactions but did you see a market change? >> i'm sorry, mr. chairman -- >> did you see more overrides? >> absolutely. >> so you saw accelerating overrides. let me talk to you about another matter. the argent purchase, the one that could have turned out better one of the biggest, most aggressive subprime lenders located in the state of california. as i understand it from looking at documents that our staffs put together, there -- and interviews -- there was a desire to buy a captive subprime originator to give you a flow of loans. you reviewed that transaction,

didn't you, mr. bowen? or you were involved with it with your supervisor mr. davis? > i was involved as mr. davis was in the due diligence of that acquisition. >> and you recommended against it? >> yes. >> and on the basis of? >> we sampled the loans that were originateed by argent and we found large numbers that were not underwritten according to the representations that were there. >> okay. large numbers. what kind of percentage? i do not recall, mr. chairman. >> i have no access to that document. >> okay. you don't have access. >> it was enough to cause you

some concern. because obviously you state that as the reason for your decision. >> yes. >> there was a lot. >> yes, sir. >> all right. whatever that means. terrific. let me move on now to ms. mills. you mentioned there were certain underwriters you didn't feel comfortable doing lending business. were you in the ware house business? >> yes. >> my understanding is citi extended $11 million to ware house lines. so in a sense, and i'm sure there are many other institutions that provided these, so you were providing fairly significant credit report. i guess my count there were about 26 of them across the country. let me start by picking up and saying when you said they are somebody we wouldn't be comfortable with, give me an example of entity either

purchasing or providing the warehouse line. >> sometimes when we go to visit a company that wasn't a start up but hadn't been in business for that long, we would go out and conduct an onside review and meet with senior management. having done this and having people on my teams that had done it for many, many years, there's a reaction to whether or not the companies knows what they are doing. where that's the management, whether or not they are making money, what the business plan is. so there are con treat examples that you can look at such as profitability, but there's also a sense that, you know, maybe they are not ready to do business with us. maybe they need to have a little bit more time under their belts before we would be comfortable they had worked out the kings, for instance. >> would you normally also get a

commitment to having them funnel product to you? were they linked agreements? >> no. >> of course there was the relationship. >> part of the reason was to establish relationships with the originators. but there was no direct linkage. >> there were 2600 companies. which i believe is -- excuse me, sir. >> my concern is how much you rejected. >> i can't remember. i know there are company that is we went to see that we did not lend money with. i knew we did not review because of the comfortable operations. >> did you have an average? >> our minimum capital requirements, it's not like there were hundreds of companies to choose from. you know, i really would not -- i wouldn't want to speculate.

>> you wound up with 26. so it's like 100 batting average? >> i like right now is 26 is every warehouse line that we've done. some of them have nothing to do with subprime. they are current lines that were financing fannie and freddie fha loans. >> there's agency and nonagency. correct. it's one of the documents which i'm sure the staff with classify. let me proceed on this. one thing that mr. prince, and we'll have a chance to talk to him tomorrow morning. one the things he said, he said two things. i want to see if you share his views on these matters. he said, i believe in the hindsight, the lack of adequate originate of mortgages create the situation on the demand side found a place where more raw material would be created and created safely. more and manufacture these mortgages were created as raw material for the securitization

process, not surprisingly in hindsight, more and more of it was lower quality. at the end of that process, the raw material was bad, tockic quality. that's what ended up coming out of the other side of the pipeline. the second thing he said is, i found out at the end of my tenure, about the warehouse lines, he found out they would be extended,dy not know it before. $11 million of warehouse lines. getting that close to the origination function, being that involved in the origination of some of these products was something i wasn't comfortable with. on reflection. do you share his view about the tock silty of the -- toxicity of the problem and mix the business lines between what you did as

the third party buyer of originator and sellers. >> i'm not sure what mr. prince was referring to when he talked about the types of loans that he referenced. i don't think there was a mistake for us to lend money. i think it was a way to facilitate the business. that was to create mortgage-backed security. we were not that close to the origination side of the business. we bought loans that cloned, we never set money to the originator, we set up the warehouse lines so that there were mechanisms where we couldn't be deemed to be the originator. we were in a different position than an originator of loans themselves. we had complete control over what we bought and what we were willing to finance. our warehouse lines had restrictions as to the types of loans we would finance.

we would not finance every type of loan, we will limited as far as types of loans, ltvs, season of the loan, how long the loan could stay on the line, it wasn't a blank check to an originator that we would finance anything they originated. >> all right. let me -- okay. john, do you want to ask? okay. yeah. well, it'll be hopefully surgical here. this is an origin point. after mr. thomas asks his question, i may return to ask all of this you question. i want to go to the responsibility of a market maker. everyone here at some level has their business model, they are originating, securitytizing, and you've said today and others have said, we are market makers. whatever people want to sell and buy, we will be market makers. what's the responsibility of a market makers to ensure that the

product they are moving into the marketplace is a good and sound product? in other words to undertake the responsible level of due diligence that you would feel absolutely comfortable that this was the kind of product to move akin to manufacturer who makes a technology or a -- you know, a toy manufacturer understanding whether or not that toy manufactured perhaps in another country had led in it. what's the responsibility of market makers in the financial system to warrant the products they are moving? >> what was the last part? >> the warrant to stand behind the quality of the products they are moving through the system? and just, you know, it's a large question. to the extent that everyone is saying i'm just passing this along. where's the responsibility along the chain for ensuring the quality of the products moved into the system? because i understand, can i ask you a question, duh not have

your own underwriting standards, you relied on underwriting of others. >> correct. we believe we conducted the appropriate diligence which is a document that you deliver to investors that we had high confidence that what we were telling investors about the loans were accurate. there were pages and pages of with information about the loans, there were page of risk factors where we told investors every possible scenario that could describe something that would go wrong with the securities. there were pages that described the origination and guidelines of whoever the originator was for that particular pool. there were ratings from rating agencies on these bonds. and our job as an underwriters is to comply with securities laws and, you know, this business is regulated by the scc. we used outside council to make

sure citi as a form and underwriters was protected. it's the investor decision to buy the bond. >> all right. well, you did have different standards for the loans that you were buying to hold; correct? different standards. in other words, in the business, you accepted whatever was given you to; correct? >> i believe so, yes. >> and then on the other side of the business where citi was originated to hold, they had a higher standard is my understanding. >> i'm not familiar with the standards. >> are you familiar? >> i was not involved in the origination channels, mr. chairman. >> do you agree with ms. mills

characterization of the responsibility of market makers? >> i can't express an upon on that. >> all right. last question here. >> mr. thomas, do you have? >> the phrase market maker, i guess in your analogy, which i would like to follow through on, that you have people who make products. we're talking about what motive they had to make sure the product wasn't toxic or if you sell a baby plan cell. -- blanket to make sure it doesn't burn easily. there are actions, plus you have other folks looking at it. you started off your testimonying indicating that was the responsibility of the people who were buying the product. i mean a good old fashion, we're putting it out there. but it doesn't have anything to do with us if it goes the

direction that apparently almost everything was going. i was hearing a little bit of that out of you as well. commissioner, georgiou said maybe if you had some skin in the game. do you think if you were on the line, you wound up with a lot of loss. in terms of each and every product you put out there, it would have been sobering, or there was just so much to make that, you know, $20,000 out of $2 million isn't that big of a number. keep shoving product? >> yeah, i think that if you have skin in the game, you're going to protect it more. i think it got so overwhelming at the end to try to get product to sale that the product did go downhill. but, yeah, having the skin in the game is very important. >> everyone using the skin in

the game as euphemism, if it wasn't a euphemism, it would be better. >> just very quickly. when you referred to the wall street purchases, that ms. mills shot? >> no, it was not. >> okay. you were talking about the overrides, that wasn't refer to ms. mills? >> no. >> my final question, ms. mills is for you. that is from what we've learned, you began to slow down. >> you're privileged, you're lucky to get the is you began to slow down because of the risks you saw to the market. i have two questions. i'm looking at a march 28, 2007, nonagency strategy measure and i don't know if this was yours -- it was not yours? ok. would you know whose it was because it speaks as late as

march 28, 2007, it talks about gaining additional access to mortgage origination to enable citigroup to grow the whole loan purchase business. do you know from whence this would emanated and where it undered up? >> i believe that presentation was put together by the business management unit of global securitized markets. >> which would have been above you or -- >> business management is sort of -- they manage the business. >> but it was not your document? >> no. >> so i will put that aside and we will ask them about that. but i understand you slowed down your purchases. but at the same time -- and they will be here later today -- the collateralized investment desk was ramping up, raising its limits from $30 billion to $35 billion and i think it ultimately had about $35 billion in write-downs.

was there any communication between you directly as someone who is buying, seeing things in the market and securitizing and folks on the other desk who are ramping up, buying their mortgage-backed debt obligations in a sense beginning to ramp up their risk profile the same time you are pulling down? >> no. >> all right. thank you. mr. thompson. same time you are pulling down? >> no. >> all right. thank you. mr. thompson. >> ms. mills, pardon me with tables. if they didn't matter, why buy argent? were you involved? >> i was involved in the diligence that went on for the argent platform because they were a client of ours that i had done business with over the years. at that time in the market, a lot of other wall street firms

were buying originators and their -- we didn't think that the end was there. we didn't think that it was over. we didn't think that was the end of subprime. >> so lead tables did matter? >> this is not about lead tables. >> market share did matter. >> i didn't say that. this is about having access to originations so that we could supply bonds to our fixed-income investors. and so with all of the other origin originators, independent being bought by other wall street firm for our business and our business of creates mortgage-backed security we were concerned about having access of supplies. argent was a platform that was available, we knew them, it was a very long month to month diligence process. in that time, call it the summer of 2007, the subprime market and securitization essentially dried

up is our view. i think we thought of it as akin to fall of 1998 where the capital market froze for a couple of months. then they balm unfrozen. argent had stopped originating loans because our purchase was bending. and our thought was until subprime came back, we would use the platform which was just an origination platform, if it didn't have any loans in it. and we would originate agency eligible loans and fha type loans until subprime came back and because it was out, we could control the types of loans. we with all know how that worked out. >> thank you. >> on that question, at some point, somebody decided it would be better to have them in house than the business model you were following. >> to buy the platform? >> yeah. >> in the context that there weren't that many independent

originators left. >> and it was easier not to do that because you didn't have that other side load to attach? do you know where that decision came from? where were the groups that discussed moving in that direction? >> moving in the direction of? >> i know i discuss it with my management. and i know that i was involved in some discussions with the two gentleman or one of the two who ran fixed income. after that, i was not involved in any direct discussions. >> would you say that you were rightfully so kind of one of the originators of the idea? >> no. >> no. do you know where it was originated? >> no. >> okay. consistent. thanks. >> all right. members, we are close to on time considering our lights out problem earlier in the day. i want to thank all of you for the time you've given us.

we are going to take a 10-minute break and we will be back here in 10 minutes. thank you very much. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] >> today on "washington journal" a look at what to expect when congress returns from easter. following that international atomic energy agency department

of nuclear and safety director on assisting nations and strength strengthening nuclear security. and a discussion on employing returning veterans with the hire heroes u.s.a. executive. that is live 7:00 a.m. eastern on c-span. today on news makers representative brad sherman chairman of the house foreign affairs subcommittee on terrorism and nonproliferation. on the obama administration's goal to reduce the world nuclear arsenals and signing of an arms control agreement with russia's president. >> i think they have momentum on dealing with the rather technical issue of making sure that medical nuclear materials are well handled and when they are no longer useful they are returned properly to where they can be reprocessed or disposed of. as to the bigger issue of

stopping the iranian nuclear program or dealing with the north korean program, i think we are doomed to failure as long as we maintain the policies of the bush and obama administrations. >> you can see the entire interview on "news makers" today at 10:00 a.m. and 6:00 p.m. eastern on c-span. it is also available on line at p -- c-span.org. >> today first lady's white house meeting with students on preventing childhood obesity. you will hear from filmmakers around the country including this year's first prize middle school winner that. is today at 10:30 a.m. eastern on c-span. >> let's get jobs, those opposed, no, no, no. >> what in the world is more

ridiculous than american politics? >> the past year using clips from various media outlets the gregory brothers have become viral hit makers with auto tune the news. we will talk to them tonight on q&a. >> this year the student cam competition asked middle and high school students to create a five to eight-minute video deal with one of our greatest strengths or a challenge. here someone of the third place winners. >> atlanta, the gateway to the south. the home of the braves and the place i call home. but as day turns to night in the south's largest city, atlanta, like many of america's large cities becomes the headquarters of the third largest criminal industry in the world.

human trafficking is the fastest growing criminal offense in the world affecting the lives of over 700,000 people each year. to help me understand more i contacted angel vicars the director of program strategy at well spring living a faith based rehabilitation center targeting victims of sex trafficking especially. on top of wanting to know what human trafficking was i first wanted to know who is to blame. >> here is the interesting thing. to point the blame would be very difficult. if you look back in history slavery has been around from the beginning of time. you can find accounts of some form of slavery at the peak of the slave trade there were 12 million people who were taken against their will and brought into slavery into different countries. >> human trafficking.

trafficking is a modern day slave trade. >> we are talking around 200,000 people at least that are trafficked in bondage. this is david badstone, best selling author and founder of not for sale a campaign to raise awareness of human trafficking. >> half of the kids put into trafficking situations either inside the united states or brought from overseas are in the commercial sex industry. >> of these victims, what is the average age? >> a lot of research has shown the average age of a child prostitute for child employmentation victim is the better term, is 14. >> 14, that is the average age of an eighth grader. >> a lot of what happens with

the victims of human trafficking is inhumane. when they enter into this explo exploitation situation they are not going into it thinking this is going to be something i can't get out of or this can be bad for me, or this person is really going to do some damage and have others do the same. >> i found that within the first 24 hours the trafficker will physically abuse, usuallily sexually, a child or a woman who they have trafficked. so it is to get into their mind right away that i own you, i dominate you, you try to leave this will happen again. >> there is life-long damage done to the victim. you have to imagine someone who has been brutally abused, emotionally they are torn, physically they are battered. they are really broken down to where they have no hope in anyone or anything. >> there are other people from other country brought to the united states, but what really shocked me this is not something

that just happens in tile land or -- tie thailand or revenoma. you need to look it your own back yard and realize the united states has a problem as well. >> the need to raise awareness has been seen by the u.s. government. as a matter of fact, in president barack obama's 2008 campaign he tackled the issue head on. >> what we have to do is create better, more effective tools for prosecuting those who are engaging in human trafficking. >> but that is easier said than done. identifying the exploiters is much more difficult than it seems. >> a lot of the victims are reluctant to -- resistant to come forward with their story for fear they would be arrested. it is viewed as they were doing an illegal activity of

prostitution. >> law enforcement will not solve this. they can be part of the puzzle but they are not going to solve it. it will have to come from a community engaged group. >> there needs to be greater awareness in the community of the exploitation going on and teenagers are actually the best group to tell the message of human trafficking and child exploitation because if efforts can be made to reach the adolescent population to tell them the risk, to tell them the hard core facts about human trafficking and child exploitation, that can prevent them from being lured into it. >> the real issue is not just the exploitation and trafficking of innocent people around the world but our lack of knowledge of that exploitation. >> are we really that blind that we don't see this taking place in our own back yards? or are we just turning a blind

eye? >> to see all the winning entries in this year's competition go to stude studentcam.org. .