Carl Levin

All I said is trades were made daily. That is a tactical implementation of a longer-term decision.

Which is a little different from what you said, which is that they 'get the information on those positions on a regular and recurring basis.'

Did you believe that they got information on these positions on a regular basis as part of your normalized reporting?

All right. So when Ms. Drew said you were, or she thought you were, she was wrong. You were not.

The responsibility would lie first and foremost with management, to have the proper risk systems and controls, proper reporting.

Should the OCC have been informed about that?

You had no reason to believe it until April 2012?

That creates an impression which is not true.

It would not come on a routine basis.

We recommend that the OCC tell banks to use independent pricing services to remove the temptation from their own employees to tweak marks.

What happened here is factually clear, and they acknowledge what happened here.

Yes, absolutely. And it is important for us as the regulator to know what the actual market is and be informed on a timely basis.

Did the OCC know any about that, what I have just described?

[A]ll those positions are fully transparent to the regulators.

One of our recommendations in our report is that the OCC get banks to use independent pricing services

These regulatory capital requirements are one of the most important tools that we have to ensure the safety and soundness of our financial system.

Well, if its purpose is to do exactly what I said, would that trouble you?

Now, in May 2012, after the media disclosure of the whale trades, the bank determined the new VaR model was not portraying the SCP's risk accurately.

If you had known that, or if you had known that, Mr. Waterhouse, would that have affected you?

But it is supposed to be at least once a year, isn't it?

Is this because there is not enough people at the OCC to read these reports? How does it happen?

So that was just a failure at the OCC.

Everyone knows what is going on and there is little need for more limits, controls, or reports.

That kind of tone I am afraid went to the top.

We had a $157 billion high-risk derivatives portfolio here that OCC hardly knew existed, and that strikes me as being a hidden financial risk.