Moody’s screwed up in such a major ways. Doesn’t want to just go with the first three points – would be useful for the American people . JWT: not suggesting we settle on 3, but we should slim it down. Ferret out most relevant portions. BG wants to refine list to facts and find commonality and come back to the group. JWT – try to draw some agreement around #5 as the nucleus. PW: this is incomplete because haven’t heard back from other areas – immediately went to item 5 – if what they did in other areas was simliary then this raises questions about failure of asset backed securities. Keith: flawed models or flawed assumptions? Different AAA risk profiles? Some sort of description on who this bad information was used to create problems. and the result of it damage wise. (Staff should focus on this) DHE: came to conclusion that ratings did matter- we need to document the timeline/facts on how these ratings became so important – relied on it too much – didn’t do due diligence. (Staff should focus on this) PA: in bullet pt 2 – but needs to be beefed up. PA: Be carful to distinguish to distinguish what we know about standard products. BG: like capital arbitrage 9not regulatory arbitrage) PW: very little testimony from people saying they relied on the ratings. IF they did – they would be stupid. PA – clear and evident. 7. (The Derivatives Working Group will meet immediately after retreat sessions conclude today, from 3:45-6:00pm) 8. Break *Beverages served at the conference room (2:00-2:15) 9. Session Five: Discussion of List of Priority Institutions (2:15-3:15pm) Attached Background materials: Draft List of Priority Institutions (Lots of complaints that we need to end by 3:45 and are behind schedule) (3:29pm) Wendy presented the memo. PA: if you look at the context of our statute – this
represents that list without limiting scope. Staff also presented additional institutions . countrywide is already being examined. DHE – what si being asked? PA: direction to staff. DHE – hugh liquidity run that killed the institution – focus on the liquidity run rather than a full scrub of the institution. Keith – first list of 3 lists?PA: first list is recommended staff list to meet our statutory requirement. Second list is additional institutions to be added to first list. What is the output/product? WE: for a number of these – it will be an investigative report. Fundamentally, within the report wee discuss the causes of WaMu’s failure – they were major investigation by PSI – we won’t reinvent the wheel, but will get comfortable or additional info. KH/DHE: IndyMac, Countrywide, GMAC, National City Corp. etc. added list. Byron: treasury support column. Thanks we need to have more. Thinks we need a column on Federal Reserve. WE: GMAC doable. PA likes the primary list – undisputable it was the biggest. Countrywide fits b/c big. If we add PNC and IndyMac – there has to be a reasonable rationale. (Doug departed at 3:46pm; Byron departed at 3:38pm) How do we determine who would have failed? PA: put as part of the report. Not sure we produce a list. Just weave into the narrative of our report. Add the four additional. 10. Session Six: Other Items of Business (3:15-3:45pm) Day 2: July 29th Commissioners Present: John W. Thompson, Peter Wallison, Doug Holtz-Eakin, Keith Hennessey, Brooksley Born, Phil Angelides, Heather Murren, Bill Thomas, Byron Georgiou Commissioners Absent: Bob Graham Staff Present: Gary Cohen, Greg Feldberg, Gretchen Newsom, Scott Ganz, Courtney Mayo, Rob Bachmann, Shaista Ahmed, Ron Borzekowski 1. Session One: Draft Section 4 of the Report (9:00-10:30am) FORTHCOMING Background materials: Draft Section 4 with Commissioners’ comments