Jack Reed

If they are doing their review, find potential criminal activity, potential failure to disclose material facts that would be subject to reporting by the SEC, are they required to inform you and the SEC of their discoveries?

Do they have the obligation, rather than you have the expectation?

You cannot undermine all of these regulatory structures and then expect to have very low capital levels because there is no protection for the taxpayer.

I think that capital is central here.

If they 'go dark,' bad things happen in the dark.

I am not against raising the level. Maybe it should be adjusted.

To be effective, knowledge of the facts must be actually brought home to the investor.

Eroding investor protections can have a deleterious effect on investor confidence and actually, and ironically, reduce investment in our capital markets.

Bank regulation is looking at the solvency of the bank. SEC regulation is looking at things like conflict of interest.

If it is in order, I would like to speak on the bill. Last evening we passed the Leahy-Graham amendment, which would, by law, make the head of the National Guard Bureau a member of the Joint Chiefs of Staff. As we go forward in our…

We do not want to compromise the independence of FHFA, but we do not want an agency that is paralyzed because of the complexity of the issues they face

You are very clear in your September 23 evaluation that the FHFA has too few examiners.

Are they moving aggressively to fulfill your recommendations and to correct this, and do they have the resources to do it?

But I think, basically, the remaining question rests on this whole topic of how well they are doing maintaining the value as a conservator.

To take all those off the table and just sit pat I think is not the way to minimize losses going forward

I think you will have to, because you have identified this key fault line in the Agency.

I think we all have to be much more creative, and I think you have to be much more demanding in terms of those types of performance ends you expect.

So that there is no legal ability for the Department of Treasury to veto your decision.

The overall health of the housing market, its sort of stabilizing and then beginning to slowly appreciate, is ultimately what will make the balance sheets of Fannie and Freddie look much, much, much, much better.

Just to try to, in my own mind, at least, clarify, these contracts were approved by FHFA, not by the Department of Treasury, is that correct?

There are many who would look at the performance of Fannie and Freddie and say that, frankly, they have not done a very good job in those areas that you have pointed out--loss mitigation, getting people into modifications.

We actually could have force-on-force conflict.

I presume for the record that we are prepared to entertain any of these serious discussions at any time with Prime Minister Maliki and his cabinet.

This notion of who can bestow immunity rests on the SOFA which the Bush administration negotiated and signed.

But as you suggested, going forward we still have a relationship in terms of FMS, in terms of not only our diplomatic presence, but there is always the possibility, because that is not precluded by the 2008 SOFA, of amendments which in the…