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Notes to Chapter 8 575

132. Alan Greenspan, testimony before the FCIC, Hearing on Subprime Lending and Securitization
and Government-Sponsored Enterprises (GSEs), day 1, session 1: The Federal Reserve, April 7, 2010,
transcript, p. 13.
133. FHFA, “Mortgage Market Note: Goals of Fannie Mae and Freddie Mac in the Context of the
Mortgage Market: 1996–2009,” February 2010, p. 22; “FCIC calculations.”
134. FHFA, Report to Congress, 2008 (2009), pp. 116, 125.
135. BlackRock Solutions, “Fannie Mae’s Strategy and Business Model, Supplementary Exhibits,”
December 2007.
136. Robert Levin, interview by FCIC, March 17, 2010.
137. Mark Winer, interview by FCIC, March 23, 2010.
138. John Weicher, former FHA commissioner, interview by FCIC, March 11, 2010.
139. Letter from Robert Levin to FCIC, June 17, 2010, p. 2.
Chapter 8
1. Joe Donovan, Credit Suisse, quoted in Michael Gregory, “The ‘What If’s’ in ABS CDOs,” Asset Secu-
ritization Report, February 18, 2002.
2. FCIC staff calculations, using data from the U.S. Census, data in Moody’s CDO PDS database, and
data in Moody’s CDO Enhanced Monitoring Service database. The FCIC selected CDOs with at least
10% of their collateral invested in mortgage-backed securities or with other characteristics that identified
them as ABS CDOs.
3. Scott Eichel, quoted in Allison Pyburn, “CDO Machine? Managers, Mortgage Companies, Happy
to Keep Fuel Coming,” Asset Securitization Report, May 23, 2005.
4. Patrick Parkinson, interview by FCIC, March 30, 2010.
5. Jian Hu, “Assessing the Credit Risk of CDOs Backed by Structured Finance Securities: Rating Ana-
lysts’ Challenges and Solutions,” Journal of Structured Finance 13, no. 3 (2007): 46.
6. Wing Chau, interview by FCIC, November 11, 2010.
7. CDOs that bought relatively senior tranches of mortgage-backed securities were known as high-
grade; those that bought the BBB-rated and other junior tranches were known as mezzanine.
8. Joe Donovan, quoted in Gregory, “The ‘“What If’s’ in ABS CDOs.”
9. Laurie Goodman et al., Subprime Mortgage Credit Derivatives (Hoboken, NJ: John Wiley, 2008),
p. 315.
10. Hu, “Assessing the Credit Risk of CDOs Backed by Structured Finance Securities,” p. 47, Exhibit 5.
11. Issuance dropped in 2007 to $194 billion and virtually disappeared in 2008. FCIC staff estimates
based on data provided by Moody’s CDO Enhanced Monitoring System (EMS).
12. FCIC staff estimates based on analysis of Moody’s CDO EMS database.
13. Nestor Dominguez, interview by FCIC, September 28, 2010.
14. Michael Lamont, interview by FCIC, September 21, 2010.
15. Chris Ricciardi, interview by FCIC, September 15, 2010.
16. Lamont, interview.
17. FCIC staff calculations using data in FCIC CDO manager and underwriter survey.
18. Mark Adelson, interview by FCIC, October 22, 2010.
19. FCIC staff calculations. Our estimate assumes an annual management fee of 0.10% of the total
value of the deal—that is, the lowest normally earned in the industry—applied to the mortgage-focused
multisector CDOs in the FCIC database. It does not include other income, such as interest on equity
tranches retained by the managers. CDO managers responding to the FCIC survey reported manage-
ment fees ranging from as low as 0.10% to as high as 0.40%.
20. “Summary of Key Fee Provisions for Cash CDOs as of January 2000–2010,” prepared by Moody’s
for the FCIC.
21. FCIC Hedge Fund Survey. See FCIC website for details.
22. FCIC staff estimates based on Moody’s CDO Enhanced Monitoring Service.
23. Bloomberg LLC, Financial Analyst Function; Bear Stearns Companies Inc., Form 10-K, for the fis-
cal year ended November 30, 2006, filed February 13, 2007, Exhibit 13.
24. The Options Group, “2005 Global Financial Market Overview & Compensation Report,” October
2005, p. 16.