the government decided to rescue bear stearns. if followed quickly by the decision to let lehman brothers collapse into bankruptcy while aig receive government assistance. this inconsistent approach stoked uncertainty and panic in the markets at the heat of the crisis. it is my pleasure to turn the microphone over to have their murray -- to heather murren. she co-founded the nevada cancer institute's. >> thank you, bob. as we have witnessed, the integrity of our financial markets and the public's trust in those markets are essential to the well-being of our country. the sound as chance to say -- sustain stability of our economy rely on notions of fair dealing, responsibility, and transparency. americans expect businesses and individuals to pursue profits and at the same time to produce quality products and services and to conduct themselves well. but after careful research, we concluded that this crisis was fueled by a systemic breakdown in accountability and ethics. these failures were not universal. but the breeches stretched fr

for example, the major investment banks, bear stearns, goldman sacks, lehman brothers, merrill lynch, and morgan stanley were operating with extraordinarily thin capital. by one measure, as of 2007, their leverage ratios were as high as 40 to one, meaning that, for every $40 in assets, there was only $1 in capital to cover losses. so immodest 3% market moves against them could consume their entire capital reserve. to make matters worse, much of their borrowing was short term in the overnight market. that meant that the borrowing of tens of billions of dollars had to be renewed each and every day. the kings of leverage or fannie mae and freddie mac. they were the two behemoths government-sponsored leveraged banks. their leverage grew 75 to one. it was often hidden in derivatives positions in off- balance sheet entities and through what is called window dressing, financial reports made available to the public. our report in detail instances in which lehman brothers and bear stearns worthy true leverage was masked. the heavy debt taken on by some of these financial restitutions was exace

of the federal reserve in july, 2007, when bear stearns block.they think they are relatively unique. they actually say, they think they are relatively unique because not many other funds have these positions. so the fact is the response was a very slow flooded, and it is hard to do wahat-if's. there was inconsistent and slow response. >> let me just mention that in the time period you were talking about people like chairman bernanke and secretary paulson were assuring congress and the public that there would be little stomacystemic impact of e mortgage and housing decline. i think that if the regulators had more fully understood the markets they were dealing with and their regulated institutions exposures to them, they might have taken earlier steps, but i do not think they did understand that. >> mr. thomas? >> is really to follow-up on -- it is follow up that one would have hoped that there could have been more critical examination of the variety of financial companies that held assets related to that. for example, the banks, the investment ban

for example, the major investment banks, bear stearns, goldman sacks, lehman brothers, merrill lynch, and morgan stanley were operating with extraordinarily thin capital. by one measure, as of 2007, their leverage ratios were as high as 40 to one, meaning that, for every $40 in assets, there was only $1 in capital to cover losses. so immodest 3% market moves against them could consume their entire capital reserve. to make matters worse, much of their borrowing was short term in the overnight market. that meant that the borrowing of tens of billions of dollars had to be renewed each and every day. the kings of leverage or fannie mae and freddie mac. they were the two behemoths government-sponsored leveraged banks. their leverage grew 75 to one. it was often hidden in derivatives positions in off- balance sheet entities and through what is called window dressing, financial reports made available to the public. our report in detail instances in which lehman brothers and bear stearns worthy true leverage was masked. the heavy debt taken on by some of these financial restitutions was exace

so they do not say it should not have happened, but they say that bailing out bear stearns, freddie mac and fannie mae, and not believe out lehman brothers, treated uncertainty and panic. host: the current secretary timothy geithner was working with hank paulson. does he get the blame? guest: he gets a little bit of the blame. the new york fed was not the primary regulator for those institutions. even ben bernanke, what the time of the crisis was federal reserve chairman, and still is far, he comes under blame. as late as 2007, he was saying the sub-prime crisis could be contained. host: what about congress? guest: they come in for blame to the extent that it passed the report. among other flaws that the report finds is that 2000 law that modernized commodities trading, and specifically exempted over-the-counter derivatives from being regulated by the federal government. that was passed by congress under president clinton. host: what about fannie and freddie? guest: they come in to blame, but they are less blamed the and some republicans would like. the report says that they contributed

so they do not say it should not have happened, but they say that bailing out bear stearns, freddie macnie mae, and not believe out lehman brothers, treated uncertainty and panic. host: the current secretary timothy geithner was working with hank paulson. does he get the blame? guest: he gets a little bit of the blame. the new york fed was not the primary regulator for those institutions. even ben bernanke, what the time of the crisis was federal reserve chairman, and still is far, he comes under blame. as late as 2007, he was saying the sub-prime crisis could be contained. host: what about congress? guest: they come in for blame to the extent that it passed the report. among other flaws that the report finds is that 2000 law that modernized commodities trading, and specifically exempted over-the-counter derivatives from being regulated by the federal government. that was passed by congress under president clinton. host: what about fannie and freddie? guest: they come in to blame, but they are less blamed the and some republicans would like. the report says that they contributed to the

we don't want you to have exposure to bear stearns or the investment bank. the depositor takes those notes and market its entrance into a mortgage-backed security -- takes those notes and mortgages and turn it into a mortgage- backed security. trying to get our arms around how much of the systemic crisis is why we're holding this conference is pre -- why we are holding these conferences. countrywide was not passing these notes through. why is that important? it is important for three reasons. one is that date signed things like point of service agreement. the actual infrastructure of a contract that everyone science requires the notes to be there as part of diligce -- that everyone signs requires the nets to be there as part of due diligence. this is what investors rely on when they buy these things. the second thing -- the servicers are very thin business. they are designed to take money from one side and walked off the other side. -- walk it off the other side. they're not supposed to be doing a lot of things. they're not supposed to be actively buying not