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Page 2 0001 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

IN RE:

FEDERAL NATIONAL

) MDL No:

1668

MORTGAGE ASSOCIATION SECURITIES, DERIVATIVE, AND ERISA LITIGATION

) CONSOLIDATED CIVIL ) ACTION ) 1:04-cv-1639(RLJ)

_________________________ ) IN RE: FANNIE MAE ) )

SECURITIES LITIGATION

VOLUME I HIGHLY CONFIDENTIAL PURSUANT TO PROTECTIVE ORDER

Videotaped Deposition of Stephen A. Blumenthal Washington, D.C. August 31, 2009

Reported by: JOB NO. 21776

Bonnie L. Russo

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Page 362 Page 364

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BY MR. ROMAIN: Q. And that was you? A. That's me. That's right. Q. Was there a war going on? A. There was, yes. Iraq. Q. Who is the war between at OFHEO? Was there a war at OFHEO? A. Was there a war at OFHEO? Q. Yeah, was OFHEO involved in a war? A. No. Q. Okay. I may never get an answer to this question so I will -MR. ARONICA: Well, you've asked it a number of times already. You certainly have an answer in the record. BY MR. ROMAIN: Q. Let's get back to your presentation on September 4th, 2002. Part of what you told the staff on September 4th was that OFHEO could use the enterprises' vulnerability with respect to pronouncements that would be made public in order to force OFHEO to submit to -- I'm
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beforehand? A. What are you -Q. I'm going to -- I'm going to start reading from Page 132 to Line 16. A. I would like a moment to review. MR. ARONICA: Yeah. Go back to 130. THE WITNESS: I want to object to the tones that are being used on the constant repetition of the same question before I have an opportunity to respond to it. This entire deposition has been one big tennis match as to who can speak first. I will apologize to you for those instances when I have begun to play the game with you. But I would like to move to a situation where you ask the questions in their entirety and I am allowed to answer them in their entirety. I have read it, sir. BY MR. ROMAIN: Q. Now, Mr. Medici is asking you about your presentation on September 4th, 2002, correct?
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sorry -- to force the enterprises to submit to OFHEO as well; is that correct? MR. KARAM: Objection. Mischaracterization of his testimony. BY MR. ROMAIN: Q. Is that correct, Mr. Blumenthal? A. Yes. Q. Did I, in fact, mischaracterize your testimony? A. The -- I used that expression. Q. Did I mischaracterize your testimony? A. I think that -Q. Did I mischaracterize -A. Excuse me, sir. You've asked the same question five times. I will respond. Q. Did I mischaracterize your testimony? A. The expression you have accurately quoted my quote. Q. Turn to Page 132. Look at Page 132. Do you want to read a little bit

A. Yes. Q. Starting on line -- Page 0 -- Page 132, Line 16 it reads: "Mr. Medici, now, is it true that you had informed the OFHEO staff as a result of your analysis that such vulnerability on the part of Fannie Mae and Freddie to public pronouncements or to public actions by oversight or government officials could be used or exploited by OFHEO to basically get Fannie and Freddie to do what OFHEO wanted to do?" Mr. Blumenthal: "That's absolutely correct as I stated it, but I think in the context of the presentation I think that actually my exact words was something along the lines of we can impose our will upon them." Do you see that language? A. Yes. Q. Did I read it correctly? A. Yes. Q. Did you, in fact, provide that testimony to the HUD IG? A. Yes.

91 (Pages 362 to 365)

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Q. And was it truthful and accurate at the time you provided it? A. Yes. MR. ARONICA: I assume you intend to continue to read down that page? MR. ROMAIN: No. But you can be allocated -MR. ARONICA: You don't want him to read down the rest of the page where he explains that comment? MR. ROMAIN: You can be allocated some time to ask him questions if you want to put anything on the record. MR. ARONICA: Maybe I will. Go ahead. BY MR. ROMAIN: Q. You also indicated to the staff at OFHEO that it was your goal to have a headline a week, was it not? A. That's a nice mischaracterization. The -- I'll let you ask a question, if you wish.
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correct? A. I have no memory of any statement to that effect. Q. Okay. Why don't you turn to Page 136 and 137 of your HUD IG transcript. A. I have read it. Q. All right. Now, on Pages 136 and 137 you're talking about, again, the September 4th, 2002 presentation, correct? A. Yes. Q. And Mr. -- starting on Page 137 at Line 5 Mr. Medici says: "Mr. Medici, so these public actions or comments you do believe can force Fannie Mae to do what you want it to do?" Mr. Blumenthal: "It's one facet. I don't believe that these public statements themselves are enough, but we're talking about public statements in connection with OFHEO taking regulatory actions. How do we go about getting them to do what we want them to do when we take regulatory action? Well, we send them a formal
Page 369

Q. What did you tell them about having a headline a week? A. I had a meeting with those people who were directly -- to whom I was their immediate supervisor and I told them that we had been aggressive and were producing a good deal of appropriate regulatory actions and that these were being reported in the press, and that I wanted to see us continue to do that kind of work on the regulatory side and it would produce a headline a week. The goal was not a headline a week. The goal was aggressive regulatory action. Q. As a matter of fact, during the -during this presentation on September 4th, 2002, you actually identified all of the major institutional investors in Fannie Mae and Freddie Mac, correct? A. That's correct. Q. All right. And you noted that if OFHEO -- well, if the enterprises didn't comply that the "marketplace" would discipline them,

communication and we expect them to comply. If they don't, we have legal remedies like cease and desist orders and we also have the fact that the marketplace will discipline them." Do you see that? A. Yes. Q. Did you -- did I read that correctly? A. Yes, you did. Q. And did you, in fact, provide that testimony to the HUD IG? A. Yes. Q. And was it truthful and accurate at the time you provided it? A. Yes. MR. ROMAIN: We have to go off the record to change the tape. THE VIDEOGRAPHER: Off the record at 4:29 p.m.. (A short recess was taken.) THE VIDEOGRAPHER: This is the beginning of Tape No. 6.

92 (Pages 366 to 369)

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Page 520 0519 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

IN RE:

FEDERAL NATIONAL

) MDL No:

1668

MORTGAGE ASSOCIATION SECURITIES, DERIVATIVE, AND ERISA LITIGATION

) CONSOLIDATED CIVIL ) ACTION ) 1:04-cv-1639(RLJ)

_________________________ ) IN RE: FANNIE MAE ) )

SECURITIES LITIGATION

VOLUME II HIGHLY CONFIDENTIAL PURSUANT TO PROTECTIVE ORDER

Videotaped Deposition of Stephen A. Blumenthal Washington, D.C. September 1, 2009

Reported by: JOB NO. 50894

Bonnie L. Russo

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Page 1048 Page 1050

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Q. Now, if I could direct your attention to the sentence after the number one which states: "The case against Frank Raines and Tim Howard." Do you see that language? A. Yes. Q. That topic was set forth by you with an eye to potential enforcement actions by the agency against those two individuals, correct? MR. ARONICA: Objection. Lack of foundation. THE WITNESS: As I believe I testified earlier that the imprecision of my memos has apparently misled counsel as to what was trying to happen here. There was an investigation going on and an examination and I wanted a meeting where I wanted to find out what was going on, and notice there is a one, there is no two. The case against Frank Raines and Tim Howard -- the case against -- it would have been better to say the case against any executive at Fannie Mae who is believed to have
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anybody else. We went in to do an examination. At this point there was apparently -- the use of that term "the case against Frank Raines and Tim Howard" is that if there had been sufficient information developed that I wanted a report as to whether or not there was a case against them, what have you found, is there a case, or theoretically they could come back and say no, we looked, and we don't believe there is a case. Q. So at least part of the function of the special examination was to assemble evidence that would inform the agency's decision about whether, and, if so, how to initiate and pursue enforcement actions against members of Fannie Mae management? A. Yes. Q. In response to questions from Mr. Raines you refer to a "Get Steve Meeting"? A. Yes. Q. What do you know about this Get Steve Meeting and how did you find out?
Page 1051

acted improperly. Q. That's a fair point. I am actually not focusing on the names of the individuals. I am more focusing on the term "case." What you are referencing here is the potential, depending on the outcome of the special examination, for enforcement actions against members of senior management at Fannie Mae, correct? A. Yes. Q. And you were proposing as a topic for one of the special examination meetings the status of the agency's efforts to evaluate evidence that might or might not lead to future enforcement actions against these individuals, correct? A. Correct. The decision about whether anyone would be subject ultimately to an enforcement action was something that would come at the end of this process, that we didn't go in with the conclusion that we were going to bring actions against Mr. Howard, Mr. Raines or

A. I received a phone call from my lobbyist who told me he just attended a meeting, a Get Steve Meeting. Q. May I interrupt? A. Yes. Q. Who was the lobbyist? A. Counsel, I need advice of counsel. Am I required to answer that? MR. ARONICA: Let me step outside for a second. MR. DELINSKY: Off the record. THE VIDEOGRAPHER: Off the record at 8:55 p.m.. (A short recess was taken.) THE VIDEOGRAPHER: Back on the record at 8:56 p.m.. BY MR. DELINSKY: Q. Mr. Blumenthal, my question to you prior to that very short recess was who was the lobbyist who advised you of the "Get Steve" Meeting? A. Jack O'Rourke.

133 (Pages 1048 to 1051)