Question-and-Answer Session
Operator
(Operator instructions) Our first question comes from Carl Busca [ph] at Busca Family Partners [ph].
Carl Busca - Busca Family Partners
I'd like to revisit the subject of those abysmal Fannie Mae and Freddie Mac purchases. Can you tell us when those were actually purchased?
Jim Giancola
The last of them were purchased in 2004. Most of them purchased before then. At the time that they were purchased, they were very specifically aligned within our policy. They were AAA rated. The credits were downgraded in June to, I believe, a AA rating. We monitored those credits and reported those securities to our OPCO [ph] committee and Board on a regular basis. When they were further downgraded, we took a charge in June. We talked with every significant market maker of those securities to solicit input on whether this was a temporary deterioration of those credits or whether we thought that those credits would rebound. Substantially to a person, the feeling was that the market had overreacted and that these credits would come back, the securities would come back.
Carl Busca - Busca Family Partners
Obviously, those people were wrong as was the bank wrong in continuing to retain them at such a high level of capital.
Jim Giancola
That was a mistake. They were investments grade, on the Friday night before Mr. Paulson put the institution into receivership. And so that’s an unprecedented activity. It never happened before and we made a mistake. We were not the only ones. We don’t take any thaws from the fact that there were several hundred banks that took that loss, but again, it was an unprecedented activity and it happened.
Carl Busca - Busca Family Partners
People responsible for those purchases still employed by the bank?
Jim Giancola
Actually, no they’re not. We have a new Chief Investment Head, but that is not the reason. Those investments were reviewed by the Board of Directors, by the OPCO committee, by me, by other folks. And as I said, we’re talking about AAA investments that have tax advantage yields and we’re certainly not anything that were esoteric or viewed to be esoteric.
Carl Busca - Busca Family Partners
In light of the poor decisions made about loans in the past, the failure on the part of the Board and top management with regard to these preferreds certainly qualifies for something more than an apology. I would think multiple resignations would be more in order.
- To read the full transcript on Seeking Alpha, click here »
