Glenn Schorr ( UBS): On the FICC, give an example of what kind of assets you might hold in the special situations group?
David Viniar: We invest in different types of assets. We invest in distressed debt sometimes that will turn into equity. We''ll invest in other types of debt across the capital structure. We''ll also make small private equity investments into situations that we think are interesting.
And to give you an example of what happened during the quarter, we made two investments where the total investment size between the two was $68 million. Those investments have a life-to-date profit after the fourth quarter of in excess of $300 million.
Now, the companies went public, so part of that was written up, which we do. We''ve been selling some of those but, you know, it takes awhile to get out of those. But we have $300 million of lifetodate P&L, but in the fourth quarter we had over $200 million of losses on those investments.
So terrific investments; we think that there''s still upside in those investments. But in an environment where you have every equity index in the world down between 25% and 35% and you have credit markets down a commensurate amount, investments that you hold on your balance sheet in debt and equity assets are going to be down. And that''s what we saw across FICC, as well.
Meredith Whitney (Oppenheimer & Co.): On the recent downgrade, how do you resolve that if the FDIC doesn''t expend their sort of wrap guarantee beyond June or do you in fact expect them to extend that?
David Viniar: The FDIC guaranteed debt is kind of in a separate category. It''s pari passu to other debt. It, of course, has the government guarantee, so it''s rated AAA. It''s not that the other debt is subordinate.
It''s just that, although we are very confident in our credit, we''re not as good a credit as the U.S. government and we know that. And so it is a better credit and so it prices a lot better.
But the rest of our debt will be at our credit and our senior debt will be our senior debt. We are hopeful that we will start issuing our senior debt on an unguaranteed basis as soon as the markets open. We don''t believe the debt markets will be closed forever, and so we hope to start issuing as soon as it''s open.
Mike Mayo (Deutsche Bank): Is your rightsizing done or do you have more to go?
David Viniar: We have done what we think we need to do right now, but we have to wait and see what happens over the course of the next few months or the next year, and so I can''t promise you that nothing else will happen, either to the downside or the upside.
Our rightsizing has pretty much been level across regions, and our strategy of thinking that over the long term there''s likely to be more growth outside the U.S. than in the U.S., although still growth in the U.S., still hasn''t changed.
Patrick Pinschmidt (Merrill Lynch): Are you comfortable taking incremental risk with your capital to pursue those opportunities?
David Viniar: We are comfortable but careful about taking those risks today because we think there will be great opportunities, but we have to be very cautious because the world is still a very dangerous place. We also think that it is prudent for us to use some of our capital as well as sourcing other capital.
We also think it''s important because we think these opportunities are really good to offer them to our clients as well as our ourselves. That''s what we do. When we raise these funds, we are both in some ways diversifying our risk, but in some ways giving opportunities that we think are very good opportunities to our clients.
James Mitchell (Buckingham Research): On the resi side on the mortgage book, were there any significant net writedowns this quarter and what the remaining exposures are?
David Viniar: Sure. The reason we didn''t mention it is because it wasn''t significant. We had net losses that were pretty immaterial in that book, and part of that is because we''ve gotten those positions down to almost what I would call a trading portfolio, kind of our normal portfolio.
We have a little bit over $5 billion of long resi assets. Obviously, we have some shorts, too, but of long resi assets. And that''s $1.5 billion of prime - round numbers, $1.5 billion of prime, $1.8 of Alt-A, and $1.8 of subprime.
And if you look from last quarter, you see that prime is down some, Alt-A is down a fair amount, and subprime''s actually up a little bit because we bought a portfolio, we sold some, and even within the prime and Alt-A, there were purchases and sales.
James Mitchell (Buckingham Research): Any thoughts on what the Fed''s been doing in terms of adding liquidity to the market?
David Viniar:What the Fed is doing, what the Treasury is doing, what Congress is doing, and what governments around the world are doing, they''re throwing so many resources at the economies around the world and at the credit markets around the world that it unquestionably is going to have a positive effect. The thing that''s unknown is when.
Right now there''s still so much fear and negative sentiment in the market that that has overwhelmed the liquidity that''s been put in and the opportunities that are there, and at some point that''s going to turn around.
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