hennessey? >> thank you, mr. chairman. mr. lockhart, can we talk all little bit about the failure of fannie and freddie, and specifically why you felt they had to be put into conservatorship, in particular could you talk about what might've happened to mortgage markets had you not done that, and why you drew the line with secretary paulson between equity and debt? >> okay. that's a good question there. we put them in to conservatorship because we felt, and as we really laid out in those various reports, which i think you all have seen copies of, that there capital was it really extremely quickly. we saw credit losses that were significantly more than their capital. we saw the deferred tax asset was not going to be worth anything. we saw that the low income housing tax credit would therefore not be worth anything because they would be losing money far into the future. and that their private-label securities were really suffering badly spirit why not just let them feel? >> why not let them fail? we felt that if we let them fail,

hennessey. ms. born? >> thank you very much, and thank you both for being willing to appear before us and help us with our work. in the written testimony of james lockhart, who was the director of ofheo from 2006-2008 and who is going to appear before us this afternoon, he said that fannie and freddie had very large derivatives positions in connection with their portfolios of mortgage interest. and i understand from our staff that danny held about $1.2 trillion in an amount of derivatives in the summer of 2008. prior to the conservatorship. and that freddie had an additional $1.6 trillion in notional amount of derivatives. if you can -- if you have knowledge of this, can you tell us what kinds of derivatives were being held by fannie mae? >> they were principally in the form of options swaps and swaps there on, plain vanilla used for the purpose of extending the match on the debt to the underlying mortgage assets. >> so they were basically being used for hedging purposes? >> yes. >> and they were trying t

i know they drinking hennessey and singing "let's stay together" by al green. ♪ let's stay together [rn, what 45 next week? >> 45, yes, next friday. >> jimmy: is there a big plan? you going to do anything? >> no, i'm just going to, you know, try to relax, enjoy wit the family and just try to grow older gracefully, you know? >> jimmy: were you a good kid? >> i like to think, but -- but i got a lot of ass whoopings. >> jimmy: you did? >> because i was a very hyper kid so i stayed in stuff. i was always getting in stuff and before you know it, the belt was, pop, pop, you have to stop, get it together. get it together. i be crying, i'm sorry, i didn't know. >> jimmy: you think that helps? do you think the beatings help? >> most definitely. >> jimmy: they do? >> most definitely. i got a lot of beatings. look at me now. [ applause ] that's -- that's the problem with some of the young kids today. they don't get enough ass whoopings, man. that's the problem. [ applause ] i mean -- they all rude. they don't speak. >> jimmy: so many people are cheering on the beating of children. [ applause ] a

hennessey? >> thank you, mr. chairman. mr. lockhart, can we talk all little bit about the failure of fannie and freddie, and specifically why you felt they had to be put into conservatorship, in particular could you talk about what might've happened to mortgage markets had you not done that, and why you drew the line with secretary paulson between equity and debt? >> okay. that's a good question there. we put them in to conservatorship because we felt, and as we really laid out in those various reports, which i think you all have seen copies of, that there capital was it really extremely quickly. we saw credit losses that were significantly more than their capital. we saw the deferred tax asset was not going to be worth anything. we saw that the low income housing tax credit would therefore not be worth anything because they would be losing money far into the future. and that their private-label securities were really suffering badly spirit why not just let them feel? >> why not let them fail? we felt that if we let them fail,

next is mike hennessey, the associate general counsel at microsoft. next is kathryn montgomery, she is the professor of school communications at american university. next is marked rotenberg, the executive director of the electronic privacy communications center. last of the children's table [laughter] i'm sorry that our table is only so long this morning. we have baron soca, the director of the center for internet freedom at the freedom foundation. thank you all for being here. mr. richards, you can lead us off. >> -- miss richards, you can lead us off. >> mr. chairman and members of the committee, i am a jessicarich, deputy director of consumer protection at the federal trade commission. i want to update you regarding our to protect children's privacy and in force coppa. we submitted a written statement today which represents the views of the ftc. this expressed -- these views reflect my own feelings. the federal trade commission is deeply committed to helping to create a safer, more secure online experience for children. our role implementing coppa