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574 Notes to Chapter 7

101. Andrew J. Donohue, director, Division of Investment Management, SEC, “Speech by SEC Staff:
Opening Remarks before the Commission Open Meeting,” Washington, DC, June 25, 2008. See also
Lawrence J. White, “Markets: The Credit Rating Agencies,” Journal of Economic Perspectives 24, no. 2
(Spring 2010): 214.
102. Lewis Ranieri, interview by FCIC, July 30, 2010.
103. Eric Kolchinsky, testimony before the FCIC, Hearing on the Credibility of Credit Ratings, the In-
vestment Decisions Made Based on Those Ratings, and the Financial Crisis, session 1: The Ratings
Process, June 2, 2010, transcript, pp. 19–20.
104. See 15 U.S.C. 78o-7(c)(2).
105. Jerome S. Fons, testimony before the House Committee on Oversight and Government Reform,
110th Cong., 2nd sess., October 22, 2008, p. 2.
106. Arnold Cattani, testimony before the FCIC, Hearing on the Impact of the Financial Crisis—
Greater Bakersfield, session 2: Local Banking, transcript, p. 60.
107. Gary Witt, testimony before the FCIC, Hearing on the Credibility of Credit Ratings, the Invest-
ment Decisions Made Based on Those Ratings, and the Financial Crisis, session 1: The Ratings Process,
June 2, 2010, transcript, p. 41.
108. Moody’s Investors Service, “Introducing Moody’s Mortgage Metrics: Subprime Just Became
More Transparent,” September 7, 2009.
109. David Teicher, Moody’s Investors Service, interview by FCIC, May 4, 2010; “Moody’s Mortgage
Metrics: A Model Analysis of Residential Mortgage Pools,” April 1, 2003.
110. Jay Siegel, interview by FCIC, May 26, 2010.
111. Teicher, interview.
112. Jay Siegel, testimony before the FCIC, Hearing on the Credibility of Credit Ratings, the Invest-
ment Decisions Made Based on Those Ratings, and the Financial Crisis, session 1: The Ratings Process,
June 2, 2010, transcript, p. 29.
113. Roger Stein, interview by FCIC, May 26, 2010.
114. Moody’s Investors Service, “Introducing Moody’s Mortgage Metrics.”
115. Stein, interview.
116. Jerome Fons, interview by FCIC, April 22, 2010.
117. Moody’s Rating Committee Memorandum, August 29, 2006.
118. FCIC staff estimates based on analysis of Moody’s PDS database.
119. Invoice from Moody’s Investors Service to Susan Mills, Citigroup Global Markets Inc., October
12, 2006.
120. Standard & Poor’s, Global New Issue Billing Form, Citigroup Mortgage Loan Trust 2006-NC2,
September 28, 2006.
121. FCIC staff estimates based on analysis of Moody’s SFDRS data as of April 2010.
122. Chris Cox, SEC chairman, prepared testimony before the Senate Banking Committee, 109th
Cong., 2nd sess., June 15, 2006; “Freddie Mac, Four Former Executives Settle SEC Action Relating to
Multi-Billion Dollar Accounting Fraud,” SEC press release, September 27, 2007.
123. James Lockhart, director, FHFA, speech to American Securitization Forum in Las Vegas, New
Mexico, February 9, 2009 (p. 2, slide 4 of presentation shows the chart).
124. OFHEO Special Examination Report, December 2003.
125. In 2006, OFHEO issued its final Report of the Special Examination of Fannie Mae. OFHEO said
that management engaged in numerous acts of misconduct, involving well over a dozen different forms
of accounting manipulation and violations of generally accepted accounting principles. As in the case of
Freddie, OFHEO said Fannie’s management sought to hit ambitious earnings-per-share targets that were
linked to their own compensation.
126. Donald Bisenius, interview by FCIC, September 29, 2010.
127. Mortgage Market Statistical Annual 2009.
128. See Tables 5.1/5.2 in FHFA Conservatorship report for third-quarter 2010.
129. OFHEO Special Examination Report, September 2004, pp. 9–10.
130. Ibid., pp. 2, 10.
131. OFHEO, “2005 Report to Congress,” June 15, 2005, p. 15.