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

A lack of controls for fraud, according to this report--this is your own internal report--has existed for some time.

And those were high risk?

Are my numbers accurate?

You changed your strategy.

I do not know how a bank can possibly operate with credibility with this kind of problem, this kind of fraud in its midst.

You are out there selling these securities. Do you not have a responsibility to take steps to make sure that fraud ends?

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

During these years, WaMu cut back on its loan originations overall, but while cutting back, it also changed the mix from lower- to higher-risk loans.

You say you adopted this shift to high-risk strategy in 2004 and 2005. Is that correct?

Did that surprise you? Did that trouble you, that suddenly delinquencies hit very hard?

And when WaMu qualified a borrower for an Option ARM loan, did the bank use the payment that the borrower would have to make at a recast or did they use a lower payment?

You are out there selling these securities. You know there is fraud in some of these securities.

Mr. Schneider was certainly concerned with the issues.

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

You made reference to the subprime market going down. Option ARMs are prime. They are not subprime, right? They are supposed to be prime mortgages. Isn't that correct?

So basically, those----

I just wanted to go over the numbers.

The overall system of credit risk management activities and processes exhibits weakness and/or has deficiencies related to multiple business activities.

And would you say that the criteria were looser as a result of that demand?

This internal investigation found that WaMu loans marked as containing fraudulent information were nonetheless being sold to investors.

Fraud problems resurfacing with a gusto in early 2008.

the events of 2007 were covered in the 2008 report that we are looking at.

the major drop which you and others from WaMu refer to came in the fixed, 30-year loans, and that drop took place when you decided to engage in a higher-risk strategy.

You don't get involved in $3 billion authorizations?