Question-and-Answer Session
Operator
Thank you. (Operator instructions). Our first question today is from Meredith Whitney, you may ask your question and please state your company name.
Meredith Whitney – Oppenheimer & Co.
Hi, good morning, Oppenheimer. You did a great job Erin and I really appreciate the disclosure, I’m sure everyone does. I have a really basic question which is, I appreciate the expanded credit facility by the Fed and how much that helps out broker dealers, but the issue of a permanent buyer still remains, the outstanding issue of this lack of a permanent buyer for so many of these securities, still remains.
And you know you and we don’t know yet what Goldman’s leverage is yet but I imagine throughout the course of this week leverage levels will still be high, so can you comment on what type of, you’re under no pressure to bring those down, but what type of time horizon do you see that coming down and at what pace and then my follow up question is, I know you the brokers have your own internal risk weighted capital models. But the event in February where over $360 billion of securities were downgraded, must have tripped some type of trigger in terms of regulatory capital requirements, could you comment on that as well please?
Erin Callan
Yeah, let me start with the first question, good to talk to you Meredith. The leverage question and the sale of assets, you’re correct for sure with respect to the environment around asset liquidity. So, are there less liquid available buyers today than there were six months ago, nine months ago, yes. And as a result you’ve seen the balance sheet move a bit, not in a substantial way but in a way that reflects as I said some very good profitable trading activity.
We did have a deliberate decision this quarter to take leverage down which I think is more appropriate for the increased illiquidity of the balance sheet and if the environment continues to stay this way, we’ll continue to be focus on that discipline. The real balancing act that I’m sure you can appreciate that we think hard about is the balancing act of our fundamental views of the assets themselves, what we consider to be the loss of P&L associated with selling an asset at a given price today, given what we think its NPB is and the trade off with that with prudent balance sheet management.
- To read the full transcript on Seeking Alpha, click here »
