CREDIT RATING AGENCIES AND THE FINANCIAL CRISIS ...

188Ms. SPEIER. And they don’t contribute to conferences you havearound the country?Mr. MCDANIEL. I don’t believe they do, but I would have to goback and check to see if there is any——Ms. SPEIER. We’ll ask you to do that.Mr. Sharma.Mr. SHARMA. Similarly, as Mr. McDaniel said and Mr. Joynt, wehave a gift policy, which we made available to you.Ms. SPEIER. All right.Is it true that as a result of legislation you sought and supported—Ibelieve in 2007, maybe in 2006—you no longer can besued by the taxpayers?Mr. SHARMA. Say that again.Mr. MCDANIEL. I’m sorry. I don’t know the answer to that.Ms. SPEIER. Thank you. Let’s move on then to AIG. Each of you,or one of you, rated AIG as AA 2 days before it went bankrupt.How can you square that rating with the condition of the companyat the time?Mr. Sharma.Mr. SHARMA. First of all, AIG rating has continued to be changedover the last several years. Three years ago it was AAA, and thenit was downgraded to AA.Ms. SPEIER. But let’s just talk about it in that week before itwent bankrupt. And the taxpayers in this country are now on thehook for over $100 billion. You had rated them as A or AA.Mr. SHARMA. Our analysts had projected some economic lossesfor AIG which they had gotten a similar independent view from athird party as to what those economic losses were. But then whenthe Fannie and Freddie Mac issues happened, the spreads widened,and as the spreads widened, they had to report greater mark-tomarketlosses on their books. As they did that, that created morepressure on them, and as a result, they had to raise more capital.Ms. SPEIER. We understand all that. But did you raise any questionsabout the credit default swaps?Mr. SHARMA. We do. We had taken into account of that and puta capital charge against them. But as our markets unfolded soquickly, their ability to raise capital and liquidity quickly shut offfrom them; and as a result, the spreads widened on them, and theyhad to put more losses on their books.So things moved very quickly on them, and as it moved quickly—and, in fact, the Friday of that week I believe we already sort ofput them on grade Watch Negative, recognizing these issues werestarting to come up.Ms. SPEIER. Two days before they were AA.Chairman WAXMAN. Thank you, Ms. Speier.Mr. Shays.Mr. SHAYS. Thank you very much, Mr. Chairman.Gentlemen, thank you for coming. When the story is told aboutthis debacle, there will be a lot of blame to go around to the privatesector, the public sector, the HUD, Congress; but it doesn’t relieveany of us from the particulars of what each of our roles were.Tell me, first off, do you believe that your company’s brand, thatyou’ve lost because of the incredible failures that have takenVerDate 11-MAY-2000 12:35 Aug 24, 2009 Jkt 000000 PO 00000 Frm 00192 Fmt 6633 Sfmt 6633 U:\DOCS\51103.TXT KATIE PsN: KATIE