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[0] HEARING OF THE HOUSE FINANCIAL SERVICES COMMITTEE SUBJECT: INDUSTRY PERSPECTIVES ON THE OBAMA ADMINISTRATION'S FINANCIAL REGULATORY REFORM PROPOSALS WITNESSES: RICHARD BAKER, PRESIDENT, MANAGED FUNDS ASSOCIATION; WILLIAM BRODSKY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, CHICAGO BOARD OPTIONS EXCHANGE; RANDY SNOOK, EXECUTIVE VICE PRESIDENT, SIFMA; PAUL SCHOTT STEVENS, PRESIDENT, INVESTMENT COMPANY... (Part 7).

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HEARING OF THE HOUSE FINANCIAL SERVICES COMMITTEE SUBJECT: INDUSTRY PERSPECTIVES ON THE OBAMA ADMINISTRATION'S FINANCIAL REGULATORY REFORM PROPOSALS WITNESSES: RICHARD BAKER, PRESIDENT, MANAGED FUNDS ASSOCIATION; WILLIAM BRODSKY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, CHICAGO BOARD OPTIONS EXCHANGE; RANDY SNOOK, EXECUTIVE VICE PRESIDENT, SIFMA; PAUL SCHOTT STEVENS, PRESIDENT, INVESTMENT COMPANY INSTITUTE; DOUGLAS LOWENSTEIN, PRESIDENT, PRIVATE EQUITY COUNCIL; DIAHANN LASSUS, PRESIDENT, LASSUS WHETLEY, ON BEHALF OF THE FINANCIAL PLANNING COALITION; ROB NICHOLS, PRESIDENT AND CHIEF OPERATING OFFICER, FINANCIAL SERVICES FORUM CHAIRED BY: REPRESENTATIVE PAUL KANJORSKI (D-PA) LOCATION: 2128 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C. TIME: 11:08 A.M. EDT DATE: FRIDAY, JULY 17, 2009(Part 7)

I'd like to thank all of our presenters here today, but I especially would like to welcome Mr. Baker to his old committee. You've been talked about a lot since you've been gone, and I know you have just gloated because you feel that we didn't take your advice and your direction -- (inaudible). And because of what has happened, I'm sure you're saying, "I told them so." I'd love to talk about that with you sometime. I can't do it today. But welcome back.

I want to ask you about credit default swaps. I've always appreciated your extreme knowledge of the financial markets. And I think that you could share information that could be very helpful to all of us.

Now, did your members enter into credit default swap contracts with banks and other hedge funds?

MR. BAKER: There is broad utilization of credit default swaps in the investment world, and our members do engage in utilization of those products.

REP. WATERS: Did any of these CDS contracts ensure consumer debt packaged as collateralized debt obligations -- CDOs?

MR. BAKER: If I may separate the collateralized debt obligation from the credit default swap protection, they really run on two separate tracks. Not to avert your question, I can answer it this way. Our members engage in broad investment strategies, and almost every financial product that you would have a concern about, I am sure that some of our members somewhere are engaging in the deployment of those credit risk strategies. But I can give you more...

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