Carl Levin

We are contemplating selling a larger portion of our Option ARMs than we have in the recent past.

That is never right. That is never what we represent.

Should not happen. These are securities that happened on your watch.

No, when there was fraud, what you do is reward the folks that are being investigated with trips.

Wasn't there a recommendation in 2005 to take action against those officers?

Shouldn't you have checked to make sure that the fraudulent, tainted mortgages were not part of those securities before you peddled them?

Purchasers of these securities are relying on you as an underwriter to provide truthful information.

Why were so many Long Beach mortgages defaulted? Why were Long Beach securities consistently among the worst performing in the marketplace?

So Long Beach was continuing to issue poor quality loans, is that fair to say?

And the audit that you saw when you first got there, that 2006 audit, which is Exhibit 10, was the reason, as I understand it, that you were asked to take responsibility for Long Beach, is that correct?

Until then, there was a huge appetite, is that fair to say, for residential mortgages on Wall Street?

And is it true that, as shown in Exhibit 37, at times, 95 percent of WaMu's Option ARM borrowers were making minimum payments, which led to no or negative amortization?

Now, the fraud problem is not limited to Montebello and Downey.

You were aware of it at the time?

Is it fair to say that WaMu was not particularly worried about the risk associated with Long Beach subprime mortgages because it sold those loans and passed the risk on to investors?

Now, according to this memo, the push to increase loan volume made things worse.

It also went to the chairman and chief executive officer, Mr. Killinger. Do you see that on the right?

Management Control Weaknesses were identified by you at that first bullet point, which is about two-thirds of the way down.

There should be a reasonableness test when these subprime mortgages are originated.

And those were high risk?

So they indicated they would make changes.

And the report said that most of the fraud was due to willful behavior of WaMu employees.

So 132 sampled were identified with red flags, reading from this report, and of that, 115 had confirmed fraud.

Now, specialty lending is what Washington Mutual called its subprime operations after it abolished Long Beach as a separate entity and took over the subprime lending function itself, right?

Did the audit find that Long Beach then was consistently approving poor loans?