Ian T. Lowitt: It was a transfer from whole loans to securities but it was to improve the liquidity characteristics, and that was really what drove that. As part of our efforts post Bear, we talked about our efforts to convert unencumbered collateral which was 100% cash capital into securities which were available for financing.
Prashant Bhatia (Citigroup): At the point where you took down quite a bit of exposure there but in not taking down more, was it a decision that there was not enough liquidity in the marketplace? –
Ian T. Lowitt: Around the residentials, broadly we are comfortable with the level that we’ve now got to. We plan to obviously change the composition of it as we trade in and out, but we are comfortable with that level.
With regard to commercials, we still plan to reduce that over the period but we want to do that in a measured way so that we do not affect value.
William Tanona (Goldman Sachs): At the level three assets, how much of that $38 billion is actually going to be mortgage related?
Ian T. Lowitt: We did have $40 billion of level three in the first quarter and if you look at the composition of that, probably about $9.5 billion of that was in corporate equity and about three was in derivatives.
With regard to where mortgage and asset-backed securities is likely to be, it really is too early in this process for me to give you a sense of that, but it’s more likely to be down.
And then with regard to the European portfolio, where we have valued the European mortgages is a 28% decline in housing prices and what we have seen is 7%, so we believe that the marks that we have are conservative.
William Tanona (Goldman Sachs): In terms of the revenue breakdown by region, can you just help me understand exactly why the revenues had changed so dramatically in those specific regions?
Ian T. Lowitt: What we have seen is essentially a very even distribution this quarter. It is followed essentially the same pattern, so we did not see diversification in the form of higher revenues in Europe and Asia and the big losses in the U.S.
The impact of the quarter, which included write-downs but also included principal, included trading, was evenly bad across each of the different regions.
Douglas Sipkin (Wachovia): Comment on the record prime brokerage revenues?
Ian T. Lowitt: Even though there is some modest decline in balances, the business is restructuring. It used to be that the financing was all done essentially at the same price, irrespective of asset class and the term of the financing.
What we have seen, particularly in the post Bear period, is that the prime broker pricing has become much, much closer to the repo pricing and as a result there’s a real curve there now for financing.
It has higher margin because different asset classes have higher haircuts as well as different rates associated with them.
Jeffery Harte (Sandler O’Neill & Partners): Can you talk about how you may be approaching the risk management and kind of hedging process strategically in light of what’s going on?
Ian T. Lowitt: The hedges have performed very well for us over a long period of time and have mitigated the effect of the write-downs very substantially.
Michael Hecht (Banc of America Securities): Are you seeing any impact from the rumors circulating in the marketplace driving a reduction in client activity or counterparties pulling away from Lehman?
Richard S. Fuld Jr.: We have seen nothing significant across prime broker balances, derivatives, secured lending markets, short-end unsecured markets.
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