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Notes to Chapter 7 573

72. John D. Hawke Jr., written testimony for the FCIC, Public Hearing on Subprime Lending and Se-
curitization and Government-Sponsored Enterprises (GSEs), day 2, session 2: Office of the Comptroller
of the Currency, April 8, 2010, p. 6.
73. Citigroup Warehouse Lines of Credit with Mortgage Originators, in Global Securitized Markets,
2000–2010 (revised), produced by Citigroup; staff calculations.
74. Charles O. Prince, interview by FCIC, March 17, 2010.
75. Moody’s Special Report, “The ABCP Market in the Third Quarter of 1998,” February 2, 1999.
76. Moody’s 2007 Review and 2008 Outlook: US Asset-backed Commercial Paper, February 27, 2008.
77. Moody’s ABCP Reviews of Park Granada and Park Sienna.
78. Moody’s ABCP Program Review: Park Granada, July 16, 2007.
79. Letters from the American Securitization Forum (November 17, 2003) and State St. Bank
(November 14, 2003) to the Office of Thrift Supervision.
80. Darryll Hendricks, interview by FCIC, August 6, 2010.
81. Citi August 29, 2006, Loan Sale.
82. Correspondence between Citi and New Century provided to FCIC. FCIC staff estimates from
prospectus and Citigroup production dated November 4, 2010. Citi August 29, 2006, Loan Sale.
83. Fannie Mae Term Sheet.
84. For the more than 20 institutional investors around the world, see Citigroup letter to the FCIC re
Senior Investors, October 14, 2010. The $582 million figure is based on FCIC staff estimates that, in turn,
were based on analysis of Moody’s PDS database.
85. See Brad S. Karp, counsel for Citigroup, letter to FCIC, about senior investors, October 14, 2010,
p. 2. See also Eric S. Goldstein, counsel for JPMorgan Chase & Co., letter to FCIC, November 16, 2010.
86. Citigroup letter to the FCIC, November 4, 2010.
87. See, e.g., Simon Kennedy, “BNP Suspends Funds Amid Credit-Market Turmoil,” August 9, 2007.
(www.marketwatch.com/story/bnp-suspends-fund-valuations-amid-credit-market-turmoil).
88. See Brad S. Karp, letter to FCIC, about mezzanine investors, November 4, 2010, p. 1. The equity
tranches were not offered for public sale but were retained by Citigroup.
89. FCIC staff estimates from prospectus and Citigroup production dated November 4, 2010.
90. Patricia Lindsay, interview by FCIC, March 24, 2010.
91. PSI Documents, Exhibit 59a: “Long Beach Mortgage Production, Incentive Plan 2004,” and Ex-
hibit 60a (quoting page 2 of WaMu Home Loans Product Strategy PowerPoint presentation).
92. John M. Quigley, “Compensation and Incentives in the Mortgage Business,” Economists’ Voices
(The Berkeley Electronic Press, October 2008), p. 2.
93. Barclays Capital, Bear Stearns, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, HSBC,
JPMorgan, Lehman Brothers, Morgan Stanley, and UBS.
94. Figures are average top-tier pay worldwide in mortgages and MBS sales and trading. See Options
Group, “2005 Global Financial Market Overview & Compensation Report” (October 2005), pp. 42, 52;
Options Group, “2006 Global Financial Market Overview & Compensation Report” (November 2006),
pp. 59, 69; and Options Group, “2007 Global Financial Market Overview & Compensation Report” (No-
vember 2007), pp. 73, 82.
95. See Merrill Lynch, 2007 Proxy Statement, p. 46.
96. See FCIC staff analysis of Moody’s Form 10-Ks for years 2005, 2006, and 2007.
97. See FCIC staff calculations based on Moody’s Form 10-Ks for years 2003–07.
98. “Moody’s Expands Moody’s Mortgage Metrics to Include Subprime Residential Mortgages,” Sep-
tember 6, 2006; FCIC staff estimate based on analysis of Moody’s SFDRS and PDS databases.
99. The ratings from the three agencies measure slightly different credit risk characteristics. S&P and
Fitch base their ratings on the probability that a borrower will default; Moody’s bases its ratings on the
expected loss to the investor. Despite such differences, investors and regulators tend to view the ratings as
roughly equivalent. Ratings are divided into two categories: investment grade securities are rated BBB- to
AAA, while securities rated below BBB- are considered speculative and are also referred to as junk (for
S&P; similar levels for Moody’s are Baa to triple-A).
100. Richard Cantor and Frank Packer, “The Credit Rating Industry,” FRBNY Quarterly Review (Sum-
mer–Fall 1994): 6.