we are now putting together the findings of our investigation, deliberating as commissioners and we hope to have a report delivered to the american people that helps explain how this calamity came to be. >> mr. chairman, good to see you. the big news on thursday was that fannie mae and freddie mac will need billions more dollars of government support out of the financial crisis. can you tell us the degree to which your committee has discovered the role fannie mae and freddie mac played causing the crisis? did they cause the crisis? >> we have looked extraordinarily hard at this issue and devoted a lot of time, energy and resources to

it. i would say just for context that often people think of the tarp program -- in the end, the taxpayers in this country would have shelled out trillions of dollars through dozens of programs to stabilize the financial system. there is no question that fannie and freddie, because of their scale, played a role in this crisis. we are in our deliberations, so i don't want to get ahead of my fellow commissioners, but i will give you a couple of observations. from the information i have seen, while fannie and freddie were clearly disasters of epic proportions, while their business model was extraordinarily flawed, this notion of a private, publicly- traded corporation of the upside compensation for executives and taxpayers bearing down side, it was a tragically flawed model. as we look at the data, it does

appear in the early to mid 2000's, it was wall street that led the charge to subprime lending and it was the wall street-packaged product that began the deep dissent in terms of the subprime lending that happened in this country. but there's no question that come 2005, 2006, 2007, fannie mae and freddie mac jumped in full force. because of their scale in the market, they have an impact, no question about it. >> if you are going to say that fannie and freddie played a role, will you also be looking at the royal congress played in putting pressure on fannie and freddie to issue these types of loans and take on more risk so more americans could buy homes? >> absolutely. we are looking at what congress did over a long time in terms of policy regulation. we will look at what regulators themselves did. but i also want to point out

that in many respects, fannie and freddie had a lot of characteristics as did the wall street firms. while they were created by the government, they were publicly traded corporations with a lot of compensation incentives that led them to take big risks. there are very concerned about their market share. so we will be looking not only at policy, but we have also been looking at what the management did and why it jumped in feet first. when you look at the compensation paid to the executives, it is a mirror of what happened on wall street. large compensation, compensation for immediate results and not long term results, and unfortunately, like wall street, we have a situation where all of the upside was to be gained by those companies. when the down side came, weather was the companies on wall street or these two companies in washington, the taxpayers were asked to foot the bill.

>> you said one of your bills was to issue a unanimous report. he also said deliberations are ongoing. as the deadline approaches, do you feel you are closer to the goal of unanimity or farther away? >> this is a kind of process where you have 10 people from different walks of life, not just to parties. we have an independent among our members. here is what i think is our number one priority -- to lay out as much of the facts of this crisis for the american people, to tell more of the story and pull the veil back on more of what happened in this travesty that is affecting millions of people. 27 million people are now out of work. >> i'm sorry to interrupt. our time is short. are you closer to unanimity or farther away? >> we are in our deliberations.

but the most important thing is to have a report that is truthful and lays out the facts. i hope if we do that people will come along. but the number one marker is not to make a political deal. that is what a political body could have done. but to lay out the facts as stark and as difficult and as politically challenging as they may be. let me be clear -- there are very powerful forces in wall street and other players who are not anxious for us to lay out every fact and hopefully we will do a good job of that. >> i would like to follow up on that aspect. you mention this is a politically charged process. you will be taking a final vote shortly after the election. do you feel the outcome of the election will affect the decisions your fellow commissioners make, given there are republicans who would like to roll back parts of the financial over all? >> i hope not. what we were asked to do is look what happened.

we have looked at millions of pages of documents and interviewed hundreds of people. the facts are the facts and i would hope that either post- election or pre-election there would not be political calculus over who got hurt. who got hurt are millions of americans and our charges to give better understanding to what led to this cataclysm. you asked about fannie mae and freddie mac -- maybe somebody see them as institutions that democrats may want to protect. my view is we lay it out as it happens and i hope my republican colleagues will be willing to do the same. when you look at what happened, there is some pretty dramatic failures of policy, regulation, and of corporate management on wall street. is stark. the story in many cases will tell itself. >> can you tell us what you found that we do not already know either from public hearings or from sec investigations or news media accounts?

what can you tell the public they did not already know by december 15th? >> let me give one example because all through the year we have laid out more information about what ended up being dark markets worked. we unveiled government decision making around lehman brothers. the official line was simply we could not save lehman brothers because we didn't have the legal authority. we found it was much more complicated. there are forces that did not want to bail them out and there were political considerations. i will give you an example of what we released in the last three or four weeks that i think is pretty significant information. we released information that showed the major investment banks, whether ubs, deutsche bank, goldman sachs or citigroup, had it deployed due diligence firms to look at the quality of mortgages they were buying from countrywide and the

new century. we have known for some time the quality of those loans have become toxic. what we unveiled was the fact that the major banks had a very specific information about the quality of those loans that some 20% of them in todo from january 2006 to 2007 being bought by goldman sachs and merrill lynch did not even meet the miserable underwriting standards of countrywide were a new century. but they never revealed that information to the people buying those mortgages. nor -- >> is that a violation of securities law? >> that is certainly something law enforcement entities will have to make a determination on. >> have you referred it -- >> we have the obligation to refer matters where we think there is a violation of laws and we have to respect the judicial

and it must give process. we take that charge seriously and will fulfill our obligations. >> it is reasonable to assume your panel has referred this issue to the sec? >> i would not make any assumptions about what we have or have not referred. we do have to respect the investigative process. what i did point out is we uncovered information that showed the big banks knew about the division quality of loans. they package them and the disclosures merely said that some of the loans may not meet underwriting standards. throughout this process, we have unveiled a number of new facets of what people knew was obviously a disaster on wall street and in washington. we unveiled new information about the federal reserve and the warnings they had about subprime lending. notwithstanding that, they did

not act to regulate subprime lending. we revealed dramatic failures in corporate management and entities like a.i.g. and citigroup. >> can you tell us if you are under some obligation not to disclose which have or have not referred to law-enforcement? on the matter of the federal reserve, the fed gained significant power in terms of financial stability and oversight over the largest companies under financial overhaul. get your criticism moment ago of the fed, do you feel is prominent -- is problematic to invest them with additional power now? >> we have an obligation to refer where we found there may be violations. we also have an obligation as a commission to respect the investigated and judicial process. we are not in the business of holding press conferences or trying to make news when we have information.

we do what's appropriate. what i would tell you with respect to the fed is as we look at the record, and we have not come to a conclusion, the fed had enormous power before the crisis. they are the one entity that could have regulated subprime lending. they did adopt some rules they thought would cover 30% of the subprime market. but the rules were so weak they only covered 1%. when chairman break -- when chairman greenspan was question about this, he said they referred the matter to law- enforcement. we look and sound from 2000-2006 that the fed under mr. greenspan only made to referrals, one small bank in palm desert, calif., and one small bank in centerville, illinois. clearly, the fed had tremendous power and it has yet to be seen whether, given their new powers, they will use the more

forcefully than they did in the run-up to this crisis. >> want to ask about some specific players, particularly goldman sachs, which has received a lot of attention in washington. did goldman sachs take actions before the financial crisis that ultimately accelerated and deepened the pain of the financial crisis either by putting pressure on a.i.g. to meet collateral calls or selling against the housing market at the same time it was leading companies clients to that in favor of the housing market? >> let me talk about the fact we have put on the record. clearly what we have an established is starting in july of 2007, goldman sachs was very aggressively demanding cash from a.i.g. under its credit defaults what contracts. one of the most stunning things about that is almost all of the executives said a.i.g. had no knowledge they had signed a billion dollars worth of

contracts with various companies, including $20 billion of goldman sachs. they did not realize there would have to post cash if the market value of those securities went down. it is clear goldman sachs was demanding a leaping catch on a.i.g.. but those demands were much lower than the rest of the market. by september, 2008, goldman was joined by many other entities demanding tens of billions of dollars of cash from a.i.g. which helped bring it down. their position is that is whether contracts called for. we have laid the facts out for people to look at. with respect to the role goldman sachs and others played in the marketplace, we hope our report and the facts laid out let people come to their own conclusions. let me point out that the real housing market topped out in 2005 across the country in many markets. certainly by 2006. but the wall street security machine just kept moving. it was goldman sachs, merrill

lynch, citigroup. they kept packaging and repackaging securities and moving them in the marketplace. they then began shorting them. looking at those activities and all the synthetic mortgage securities which were pure bets on the mortgage markets, that in a sense amplified the potential for losses in the mortgage market, those activities in 2006 and 2007 were very important in this crisis. >> mr. chairman, you have said you're going to lay out the facts in your report, but that report is about what were the causes of the financial crisis. many wall street banks in the process you just described have claims that they were victims of weak underwriting and fraud by mortgage lenders. how do you separate the culpability of those big firms on wall street feeding money and creating the machinery necessary to make the securitization

process run from the culpability of the loan officers and those who may have made bad loans? >> this notion that wall street is not culpable is ridiculous. one of the things that has struck me is the extent to which all fingers point away from personal responsibility. here is the fact -- it was those firms, goldman sachs, merrill lynch and citigroup that bought those loans, that package them up, seldom to investors around the world and the notion that they are somehow not responsible for the quality of those loans and the quality of the products were selling just does not wash. i remember our first hearing, the point was made that we are just market makers. i do not believe that's the standard to which we should hold our financial system. they were creating products that they were selling into the marketplace. they clearly turned out to be tragically deficient products. now we have uncovered information, not just by the way

in the recent of racially put out, but information we found at citigroup where people were telling citigroup within citigroup that 50% of these loans did not meet the standards but lenders said they did. those were not exactly gold standards for lending. clearly there was involvement and people either knew and did not care or did not know and did not care to know. >> of all of the people and companies you have interviewed and inspected in the past year, does anyone or to stand out for more culpable to causing the crisis than the other? >> what i say we will let the facts speak for themselves, let me be clear -- i don't want to get ahead of the deliberations are members. we will have an assessment of what are wrong, culpability on the private sector side and

among regulators and policy makers. i am not going to start ranking the companies, but we have seen dramatic failures at a.i.g., this company would offer $80 billion of insurance and not have the capital to back it. that was devastating. the fact that goldman, merrill lynch, citigroup, and a set of other companies package hundreds of billions of dollars of what turned out to be tragically flawed securities was clearly very damaging. the fact that fannie mae and freddie mac in 2005-2007 joined this party clearly was of impact. i will say that i think there is significant participation, but i also don't buy this it was a perfect storm. you have to look to leadership. corporate leadership, the folks who drove their companies over the cliff as well as public leadership. there is a line we have gotten out of washington and wall street is that no one could have

seen this coming. there were lots of yellow and red lights along the way. >> so companies are to blame, but companies are made of people. which people at these companies, the ceos, or people in government, names, are making -- are responsible for making these bad decisions or regulators dropping the ball? >> that is what the report is about. my personal view is leadership is about responsibility. at the end of the day, town atop does count. when you look at key policy makers, you have to look at who led the federal reserve during this time. you have to look at who led the regulatory agencies. at the companies, the buck stops at the ceo's office. you had many companies where the ceos are being paid tens of millions if not hundreds of millions of dollars. while there may have been a broader societal involvement in the media around the house

prices going up, at the end of the day, leaders must take responsibility. >> on that point, i had the pleasure of attending your public hearing with treasury secretary tim geithner. he was the head of the federal reserve bank of new york in the years leading up to the crisis and during the immediate response to the crisis. your questions for him were not as hard as your questions or hank paulson who was the treasury secretary when the crisis hit. he was a former goldman employee. the camp -- questions for tim geithner did not follow up about how the a.i.g. bailout for managed and how that money went to wall street firms and overseas banks. i'm wondering why you showed him that deference and where do you think the leadership of the federal reserve bank of new york was an issue? >> i would beg to differ with you. we try to be civil in our questioning but tough. the focus of our inquiry is not happen after the bailout but how did we get to the point where

the only choices for the american people were to allow the financial system to collapse or to shell out trillions of dollars. i point out mr. -- i pointed out tim geithner had made several points but not act upon them. we pointed out in that hearing with citigroup and other federal reserve banks reviewed the conduct of the federal reserve bank of new york and found it wanting in its oversight of citigroup. you can expect us to be as critical and tough on the federal reserve bank of new york as warranted. we will not play any favorites here. i will tell you that as i look at the evidence, i see lots of yellow and red warning lights. there was a lot along the way that should have warned people like tim geithner, hank paulson, alan greenspan, that troubles on the way. >> you say you don't want politics or political consequences to influence the decisions you and your fellow

commissioners make. i wonder if you given any thought to the political ramifications of what might be to assign blame to individuals like tim geithner or ben bernanke? >> we of a job to do. our job is not to get out the news and roll heads. our job is to lay out the facts of what happened and collett as we see it. i just made the observation that when you are talking about institutions, leaders have to take a measure of responsibility. one of the things most disturbing about this crisis is, because the american people waited in with trillions of dollars of assistance, there has not been the kind of self examination in the leadership of wall street their washington that may have otherwise occurred. -- wall street or washington that may have otherwise occurred. you often suffer the consequences of the behavior, but america saved wall street from that pain. the regulatory system was pared from the kind of withering criticism -- was scared from the

kind of withering criticism that perhaps it deserved there. our job is to lay out the facts so there can be a coming to account. but as of today, there has been letter -- there has been very little consequence for the mess steps leading up to that event. >> will your report recommend action against these people you plan to lay out? the leaders of these wall street companies? it seems the american public is angry over the fact many of these executives walked away without a scratch. >> our job is to write a report to the american people about what happened and then to say what we think the primary causes of the crisis were. it falls to the shareholders at companies to step up and be more responsible than have in the past. it will fall to policy makers to make the changes. it will fall to law-enforcement if they see potential violations of the law to be vigorous in the pursuit.

but there has been very little consequence. if you look at the information we have unveiled about citigroup, they dramatically misled shareholders and the only consequence was a $100,000 fine to the cfo who made $7 million in the year in which he misrepresented the position of the company. the company was fined $75 million, which means that shareholders were hit again. mr. mozilla sold $140 million for stocks. his ultimate penalty is he will pay $45 million. there has been very little consequence for tremendous damage to the american economy across the country. >> that sounds like a criticism of the sec for not taking a harder tack with both him and citigroup and the executives. it sounds like you are concerned

regulators are not going after these people strongly enough. >> i think regulators have an obligation to do their jobs in a tough way. i was observing the fact that i think a lot of americans see a lot went wrong. the train ran off the rails and there has been little real consequence. almost every settlement that occurs is almost accompanied by no ignition of responsibility. if we're going to move by this crisis, one of the rules are commission templates to lay the facts out there. to spur a d for self examination. but -- to spur a deeper self examination. there needs to be more reflection about what went wrong. my concern is if we do not make changes, we're doomed to bailout history again. >> on a point of the regulators, not just the specifics of a financial overhaul legislation, but the

decision of how to pursue it rests in their hands in the future. you have talked about their failures. what assurance can the american people have those regulators will not fall down again on the job? how can your report prevent that from happening? >> first of all, i will say our report is important because while the law has been passed, there are 250 separate rule making process these. the debate around reform is just beginning. vigilance is required and right now, i'm very concerned we are back to business as usual. the only reason the ship is not sinking is that it's tied to the dock. the minute this economy starts moving, i'm concerned wall street will turn to its risky practices and i'm very concerned about whether we have built the right kind of attention to public attention -- to public attention that we need. >> thank you for being on "newsmakers."

we're going to continue the conversation with our to reporters. did you hear? >> it sounds like the financial crisis inquiry commission is looking to merge a lot of dissenting views on the panel and to a nuanced history of what went wrong and, as a result, while it will name people, i think it's going to have to name a lot of people and a lot of companies and that may distract attention from anyone or two or three particular ones. a lot of factors caused this crisis and it may dilute the power of the ultimate report if one or two people are not singled out. >> so you do not think it will be naming names? >> i think it will be naming a lot of names and will be hard to know how we won against the other. >> when he said we're going to let people come to their own conclusions, that struck me a little bit. isn't this commission's most laying blame?

>> they are supposed to be laying blame. they have a mandate to describe to the american people the causes and examine an actual list of different issues that may have contributed. i think it will make sure to check all of those boxes that they need to evaluate. i agree that the general answer that there has been out of washington which is there's plenty of blame to go around is it is and it -- any individual parties response to the assigning of blame. i think we will have to close read that report and look at what language they were able to agree on. on the issue of fannie and freddie, a have folks who are very outspoken in their views on either side of that debate. that is politically charged. we are going to want to look at are they saying fannie and freddie caused the crisis or as i heard deep in his comments, did they merely to win the game? in response to the fannie and

freddie question, he said wall street led the charge and fannie and freddie caught up. i asked about the role of -- >> i asked about the role of congress. will they blame congress as well? >> they probably will, but they will not tell us anything about congress we did not already know. democrats had a general allegiance to fannie and freddie. republicans [inaudible] but i doubt we will see an excoriation of congress like we will of wall street. >> that is an interesting point. there are multiple oversight bodies working on tarp. so the sections of the report that may end up being the most interesting are the ones that deal with specific, nuanced issues on which certain commissioners had expertise. i would point to brooks claiborne as we know suggested

derivatives are more heavily regulated and was shot down decades ago. not everybody who ever worked as a political hack for this or that party will have an opinion. it might be the sections where they drill down on what they believe the issues were. >> i want to follow up on the questions you were asking about possible violations and reporting them to the sec. can you explain what he was saying there? >> the panel found out that banks new information about these mortgage-backed securities. they were not telling investors. that is potentially a violations of securities law. that is what the goldman sachs case was about. so i was asking him, if you found a violation of securities law, will you tell the sec about it? it sounds like a told him, but he does not want to confirm that because until an investigation is announced, it is not public. is announced, it is not public.