meet or exceed the SEC's requirements and that Freddie Mac was at the vanguard of financial disclosure, accounting practices and risk management and that Freddie's disclosure "met or exceeded SEC requirements."

Based on what you now know about the accounting irregularities, disclosure inadequacies and the poor risk management at Freddie Mac, wouldn't you agree that those claims were simply not true?

Mr. BAUMANN. Freddie Mac has acknowledged that the public disclosures in the past were less than would have been required of an SEC registrant.

Mr. MARKEY. Has Freddie Mac reconsidered its previous opposition to repeal of your exemption from the full compliance with the SEC registration and reporting requirements? Are you now willing to support the Shays-Markey bill or some form of that that would require full disclosure?

Mr. BAUMANN. Congressman, Freddie Mac is committed to complete accurate, reliable, transparent, timely disclosures. We're going to lead the way in the future about the reliability and timeliness of disclosures. We're irrevocably committed to registering under the 1934 Act. With respect to the 1933 Act, as I commented earlier, we don't believe that's in the best interest of consumers. We think the impact of that would be an increase in mortgage costs and a lack of availability of locked in mortgage rates on 30 year mortgages.

Mr. MARKEY. You understand, Mr. Baumann

Mr. BAUMANN. We don't think that's in the best interest

Mr. MARKEY. You understand no one trusts Freddie Mac any more, no one trusts the numbers. They don't trust you saying that you're voluntarily going to do something. Voluntary commitments are like oral commitments. They aren't worth the paper that they aren't printed on.

And we don't trust you. We don't trust your organization. We need you to comply with the law, the same law that everyone else complies with. You're not going to have the trust of the American public, of the investing public, of the Congress, unless and until you fully comply with the same disclosure that other companies do. There's no question that over the years that Freddie has been lying about its full compliance, has been lying about the fact that it's meeting the same standards as every other company in America.

So you're saying that we can't expect Freddie to have final registration statement filed with the SEC and declared effective, that you're not going to do that?

Mr. BAUMANN. Under the 1934 Act

Mr. MARKEY. No, under the 1933 Act, you're not going to do it? Mr. BAUMANN. The SEC has studied this. The Administration has studied this issue just last year and determined that it was their view that it was not necessary for the agencies to register under the 1933 Act and felt that 1934 Act registration was appropriate and we are committed to 1934 Act registration.

Mr. MARKEY. But you do realize that after that, a scandal broke out. They evaluated it. They said it wasn't needed and then one of the hugest scandals in financial history broke out then at your

company. You understand that? You may have made an evaluation, but it's obviously the same kind of erroneous evaluation that was made about weapons of mass destruction in Iran. It turned out that all of the intelligence and analysis up until the point at which that scandal occurred was inaccurate.

So I'm asking you again, knowing what you know how, after the scandal, do you believe that Freddie should have to comply with the 1933 Act requirements?

Mr. BAUMANN. Congressman, again, it's our position that registering under the 1934 Act will have all of the disclosure requirements about our financial condition, the same as any other company in America. However, the 1933 Act registration would not enhance that at all

Mr. MARKEY. Fine.

Mr. BAUMANN. But would be a cost to consumers.

Mr. MARKEY. Several months ago, my staff and the subcommittee staff asked your staff to provide us with copies of the draft registration statement Freddie Mac filed with the Commission in November 2002, along with copies of any comments provided by the SEC staff on this draft registration statement and any related correspondence between Freddie Mac, its legal counsel and the SEC staff related to this draft registration statement.

Mr. Baumann, we haven't received any response to this request and so I would like to ask you if you are willing to commit to providing these documents to the subcommittee?

Mr. BAUMANN. As far as we know, we haven't gotten that request from the committee. We'd be happy to receive that request and do everything we can

Mr. MARKEY. No, you received it. You received that request. You received that request.

Mr. BAUMANN. I'm told by our lawyers, we didn't receive it from the committee, but I'll look into that, Congressman.

Mr. MARKEY. So will we receive the information? I'm asking you now, will you send it to us? You have now received the request. Will you send it to us?

Mr. BAUMANN. We'll be happy to our lawyers meet with your lawyers to discuss that

Mr. MARKEY. No, I'm asking you, Mr. Baumann. You're in charge. Will you give us the information? Not your lawyers talking to my lawyers. I'm talking to you. You're the boss.

Mr. BAUMANN. Right.

Mr. MARKEY. Do you want to give us the information or not? Or are you going to continue to play this hide and seek with us and the public?

Mr. BAUMANN. I will review that and I will get back to you.

Mr. MARKEY. Okay. Again, these voluntary commitments are like oral agreements. Again, they aren't worth the paper that they aren't printed on.

Freddie has been issuing press releases for years, claiming that it meets or exceeds SEC disclosure requirements and that Freddie is in the vanguard of corporate disclosure and we now know that those claims were simply not true. And investors in the financial markets just want you to simply give it up, comply with public disclosure requirements that every other public company also has to

comply with. And let me ask you one final question, if I may, and I appreciate your indulgence, Mr. Chairman.

In your response to Ms. Schakowsky, you said you oppose the Shays-Markey bill because of concerns over the impact that the bill would have on the to be issued market for your mortgage-backed securities.

Are you aware that the bill grants the SEC rulemaking authority so that it can adopt appropriately tailored rules to address this type of situation and in light of that authority, would you be wiling to reconsider your opposition and support the bill? If that issue could be dealt with, would you then support the bill?

Mr. BAUMANN. There are many aspects of registration of the 1933 Act that are problematic, including not just the impact on the TBA market, which could impact the interest rate lock that consumers get. It could greatly increase our costs because of the volume of our security issuances which would have effect, therefore, in the long term of impacting the cost to consumers.

Also, it would have the significant impact on the Securities and Exchange Commission's ability to deal with the volume of securities that the two agencies issue.

A lot of these matters have been studied by the Administration and by the SEC and as a result of that, studies today indicate that that registration is not warranted.

Mr. MARKEY. Again, I think it's just a canard, once again, and I think it's an excuse not to comply. And I think that your maintenance here that the SEC is just stupid or incompetent and can't draft a regulation that would deal with your concerns is just further evidence that you just don't want to comply with the same regulations that every other company does. And your message to the investing public, to the millions of people who put their money in your company is just caveat emptor, it's 1898 at Freddie. And I just think again you're running an ahistorical company in terms of the transparency that should be provided to investors in ensuring that they get the information which they deserve.

Mr. Chairman, I have a UC request as well. I have three press releases issued by Freddie Mac, one dated October 19, 2000; one dated March 16, 2001; and one dated July 12, 2002, that all make claims that Freddie Mac is either in the vanguard of corporate disclosure and risk management or that Freddie Mac meets or exceeds SEC reporting standards and I would like to pass

Mr. STEARNS. By unanimous consent, so ordered. What does 1898 mean to you?

Mr. MARKEY. That's before the Progressive movement began. That was before President McKinley passed away and Teddy Roosevelt took over.

Mr. STEARNS. Okay.

Mr. MARKEY. The Republican Party, by the way.

Mr. STEARNS. Right, that's what I was trying to lead to.

Mr. MARKEY. Thank you.

Mr. STEARNS. I was trying to bring out the Republican Party as being cited here.

The gentleman from Ohio.

Mr. STRICKLAND. Thank you, Mr. Chairman. Mr. Baumann, how long have you been CFO?

Mr. BAUMANN. I was hired by Freddie Mac as Executive Vice President of Finance in April 2003. I received the additional title of Chief Financial Officer in June of 2003.

Mr. STRICKLAND. So would you say you inherited a large headache, so to speak when you assumed these positions?

Mr. BAUMANN. I came into the company with a lot of work to be done in terms of improving the accounting expertise in the company, improving internal controls and getting the company registered under the 1934 Act. There's a lot of work to be done.

Mr. STRICKLAND. And is it your judgment that you made and are making progress?

Mr. BAUMANN. Yes. We are making significant progress. I've hired since I've been here, over 100 people into our accounting functions to build the accounting expertise needed. We've issued, we've completed the restatement of prior years' results. We started to build the infrastructure up. We've greatly improved internal controls and as evidenced by the restatement press release, improved transparency around disclosures in terms of a description of those accounting errors that took place in the past, so we think we're well on our way to meeting the standards that should be expected of Freddie Mac which in my view are the highest standards that we should comply with.

Mr. STRICKLAND. I have one question. Over the last 31⁄2 years, some of your biggest detractors, Freddie Mac's biggest detractors, I'm talking about GE, AIG, for example, have lost billions of dollars of shareholder money. GE has lost, I understand, about $260 bill; AIG about $70 billion. That's since the fall of 2000. These losses have hit the union pension funds particularly hard.

Even with the accounting problems that have existed at Freddie Mac, and the rather tough economic times that we've gone through, you haven't lost value over that same period of time. To what do you attribute Freddie's financial endurance during this period of time, especially when we consider the experience of some of your greatest critics?

Mr. BAUMANN. Well, first of all, understanding investors and the markets is a challenge for anybody to try to say why some companies increase in value and others don't increase or decrease in value, but that's always a challenge. But certainly Freddie Mac, throughout the restatement, the company has had very strong business fundamentals.

The company has fulfilled the mission of putting people in homes. The company has maintained very low interest rate risk measures. It's maintained very low credit risk measures. It's been very prudent in its acquisition of mortgages for the retained portfolio, acquiring mortgages as appropriate in terms of managing that risk and fulfilling its responsibilities.

So I suspect investors are looking at the Agency and saying that we are fulfilling our responsibilities, doing it in a prudent, measured way and the company is safe and sound.

Mr. STRICKLAND. I thank you for the answer. Thank you, Mr. Chairman.

Mr. STEARNS. Thank you. I think we are complete. Mr. Baumann, I just want to reiterate what you said in your opening statement is your mission is to supply low cost mortgage for Amer

ican families wherever and whenever they need them. You're doing that job very well and I think Freddie Mac should be proud of that and as any corporation knows occasionally there's some people that do things that have to be corrected and we're doing that and I encourage you and I want to thank you for testifying and I think you provided enhanced credibility for your corporation by you being here and your forthright presentation and your character and personality I think comes through.

That's why you were hired to be the CFO, so I'm here to thank you and also say that I think overall we had a pretty good hearing, bringing out some of the problems. It doesn't hurt to bring these problems out. If the problems continue, that's a problem, but it looks like you're on top of them. You're trying to correct them and I think that's good for the investors and that's good for America. So with that, the subcommittee is adjourned.

Mr. BAUMANN. Thank you, Mr. Chairman.

[Whereupon, at 11:51 a.m., the hearing was concluded.]

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