Key questions and answers from the third quarter earnings call conducted by Bear Stearns Inc. (BSC: chart) on September 20, 2007.

Guy Moszkowski (Merrill Lynch): What is your funded leveraged finance loans as of the end of the period?

Sam Molinaro: Our funded loans are $2 billion.

Guy Moszkowski (Merrill Lynch): On the fixed income and structured product side, you alluded to some liability benefit. Was the mark-to-market on the structured product because of the widening of your credit spreads?

Sam Molinaro: Yes. In our structured equity products business, we are a substantial issuer of structured notes. Structured equity product revenue was up about $225 million quarter to quarter; and all of that was a result of the gains recognized in that structured note portfolio.

James Mitchell (Buckingham Research Group): Given your discussion about the capacity of the fixed income business still intact, if prices were flat, the $700 million goes away and that would be an uptick in fixed income?

Sam Molinaro: It is fair to say so. We are issuing securities to investors, which are marketable securities that get mark-to-market by them and us. They are trading instruments. Customers exit those trades by selling them back to us.

We had a policy of not hedging the credit exposures imbedded in that portfolio given the fact we have been issuing these over the last several years at what were then tight credit spreads for not only us but for the industry. That posture may change going forward, but we think that the gains that are recognized there while it is an accounting change, granted to allow dealers like us to reflect the true economics of this business.

James Mitchell (Buckingham Research Group): Would you expect that level of gains going forward?

Sam Molinaro: You may not see a reversal of it.

James Mitchell (Buckingham Research Group): What was the impact of the commodities acquisitions at Williams?

Sam Molinaro: The Williams asset gives us a much bigger profile in the energy markets which will be additive to our results going forward. We think it is a groundbreaking event in the evolution of our energy business.

James Mitchell (Buckingham Research Group): Is there any timing discussion on the buyback that we should look at that $1 billion in corporate buybacks?

Sam Molinaro: That will begin soon but will be dictated by market conditions.

Glen Schorr (UBS): In asset management, is there a breakdown on what is reversal versus what is charged?

Sam Molinaro: We had $125 million worth of reversals of performance fees and losses. Most of our alternative investment strategies we have seed investments in them, so losses across the board in a variety of different strategies from our own investment.

Glen Schorr (UBS): Looking at these charges, is it far to say that you could be back in the mid-teens ROE in the not too distant future?

Sam Molinaro: The markets are showing some signs of improvement, we think the worst is behind us and the Fed rate cut is definitely a positive step in that direction. When we see some normalized level of liquidity in the market again is probably going to be influenced by what is happening in the asset-backed commercial paper markets.

Some time in 2008, business activity will get back to normal levels where customers can utilize leverage again to buy securities and in that environment, we can earn those kinds of returns. We don't see any permanent damage in our fixed income franchise at all. We think that fundamentally the business is sound.

William Tanona (Goldman Sachs): In the prime brokerage business, why were people leaving and what are you doing to bolster that business once again?

Sam Molinaro: At the height of the crisis, we had a combination of many hedge funds being in money-losing positions, particularly in the quant strategies which suffered significantly. So with the stress at many of the funds themselves, together with the market dislocation that was going on, the noise around us was more than some could handle from the standpoint of dealing with their own investors. We did see some balance migration going to other prime brokers, though this was relatively limited and we saw few situations where clients moved their entire business. What we saw were clients trying to be more defensive and moving balances in many cases into the hands of the banks where they felt there was a stronger hand..